Indonesia unveils $33bn plan to move 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.

Planning minister Bambang Brodjonegoro said on Monday that the government was considering the eastern part of the country for the move without disclosing a specific city or timeline.

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

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 “there are more important issues the government should resolve”, he added, including boosting annual gross domestic product growth beyond the 5 per cent mark from which Indonesia had been unable to move during Mr Widodo’s first term.

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

For the move to work, he added, government bureaucracy relating to business permits, for instance, would need to be improved to work seamlessly online. Otherwise “this [move] will increase transaction costs”.

Mr Widodo asked his followers on Twitter for advice on where they would like the capital to be located, saying that Jakarta “bears two burdens” as a centre for government and business.

One recurring candidate is Palangka Raya, a city of 200,000 people in Central Kalimantan province on the island of Borneo. It was designed in the 1950s by Sukarno, Indonesia’s founding president and an architect, who intended the city to become the new national capital.

While moving the capital would help broaden growth across the archipelago of about 17,000 islands, some analysts said the plan lacked concrete details. 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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