Indonesia plans $33bn move of capital from Jakarta

What is a government to do if its capital city has been brought to a standstill by traffic and is sinking? Indonesia’s answer: move it.

President Joko Widodo said on Tuesday that the country is considering spending $33bn to move its seat of government out of Jakarta, examining three cities away from the archipelago’s main island of Java as alternatives.

“These past three years, we have been going there continuously,” Mr Widodo said on Tuesday, referring to the three cities that he did not name.

“In Java, the population is 57 per cent of the total for Indonesia, or more than 140m people, to the point that the ability to support this, whether in terms of the environment, water or traffic in the future, will no longer be possible so I decided to move outside Java,” he told local media.

The capital also sits on a swampy piece of land at just 8 metres above sea level, with parts of it sinking fast, according to the World Economic Forum. At the current rate, 95 per cent of north Jakarta will be underwater by 2050, impacting 1.8m people.

The proposal comes almost two weeks after Indonesia, the fourth most populous country in the world and south-east Asia’s largest economy, went to the polls for presidential and parliamentary elections. Indonesia’s electoral commission will announce official results on May 22. 

But unofficial counts by mainstream pollsters show Mr Widodo is set to beat former general Prabowo Subianto by about 10 percentage points. Mr Prabowo has refused to concede defeat, alleging electoral irregularities and arguing that he has won about 62 per cent of the vote based on his team’s internal counting.

This is not the first time Mr Widodo or former presidents have hinted at moving government functions away from Jakarta, home to more than 10m and a metropolitan area that is three times bigger.

The three likely candidates are Palangka Raya, Tanah Bumbu and Penajam, all on the island of Borneo, according to a government official. The person added more details could be disclosed in a development plan once the election results were announced.

Palangka Raya, a city of 200,000 people, has been named in the past as a potential alternative to Jakarta. It was designed in the 1950s by Sukarno, Indonesia’s founding president and an architect, who intended it to become the new national capital.

But the announcement was met with scepticism, with critics questioning whether such a move should be an urgent priority for Indonesia.

While moving the capital would help broaden growth across the archipelago of about 17,000 islands, analysts said the plan lacked enough concrete details to be taken seriously yet.

Chatib Basri, former finance minister and now lecturer at the University of Indonesia, said there was value in the idea, considering that a number of countries had split government and business capitals, such as Australia, the US and Kazakhstan.

But he pointed to more pressing challenges, such as boosting annual gross domestic product growth — during Mr Widodo’s first term it was largely stuck at about 5 per cent.

There was also the question of cost. “How do we finance this?” he asked, saying it was unrealistic to expect the private sector to step in given companies were unlikely to move their headquarters away from Jakarta.

Douglas Ramage, managing director at consultancy Bower Group Asia in Jakarta, said such a move was more “aspirational” than realistic.

“We are years if not decades away from having the right infrastructure and the right legislative and regulatory changes that would be necessary to support a serious move of the capital,” he said.

There needs to be “more evidence of serious intent and planning” before the proposal is taken seriously, said Ben Bland, director of the south-east Asia project at the Lowy Institute, a Sydney-based think-tank. 

“It looks like it’s a distraction from the debate about the election results and an attempt to reassert presidential authority,” he added.




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