Capital gains? Bold bid to build new city in the jungle faces big hurdles

As bulldozers and excavators zip back and forth, and cranes tower above, it’s not easy to picture a futuristic new presidential palace emerging from the vast, mostly bare patch of dirt.

Here, on the Indonesian side of jungle-laden Borneo, the country’s hugely ambitious new capital city isn’t quite taking shape yet. But it soon will be.

The site where the new Indonesian presidential palace is being built in East Kalimantan province.Credit: Bloomberg

By Independence Day in August 2024, President Joko Widodo, known as Jokowi, hopes to declare the city as the South-East Asian nation’s administrative centre, replacing Jakarta, a metropolis of more than 10 million that is clogged with traffic, suffering poor air quality and parts of which are forecast to be submerged by 2050.

It is difficult to overestimate how big an undertaking it is.

The $US34 billion ($51 billion) plan goes far beyond picking up the executive functions of government and plonking them across the Java Sea in East Kalimantan province.

Championed by Widodo, the mission is for the new capital to be a smart and sustainable city powered by renewable energy and featuring technology such as autonomous electric vehicles.

A computer-generated image of the new presidential palace and parliament complex.Credit: AFP

It will be called Nusantara, an old Javanese name for the Indonesian archipelago, and by the completion of the final stage of development in 2045 is projected to have a population of 1.9 million.

The first of them will arrive far sooner than that – almost 17,000 public servants and multiple government ministries, as well as military and police, are expected to make the move by the end of next year.

“The city itself will be a self-propelled city, hopefully ... a vibrant city, not just a government city,” said Bambang Susantono, chief of the Nusantara authority, charged with turning the president’s vision into reality.

“It’s going to be a city for 2045, so we have to think what’s beyond what is happening today, trying to tackle all that perhaps are still futuristic things at this moment.”

Nusantara authority head Bambang Susantono speaks to reporters.Credit: Bloomberg

To be set on an overall site of more than 250,000 hectares, the city will feature a nursery capable of growing 15 to 20 million trees every year in a bid to replenish the region, which is rich in biodiversity but has been razed in recent decades for palm oil, timber and mining.

Susantono said the goal was for Nusantara to be a carbon-neutral city by 2030.

“As you see around here, most areas are production forests ... and these production forests will be transformed into tropical forests in the future,” he said.

“They will be acting as the carbon sink not only for Nusantara but for the whole of Borneo as well as for Indonesia.”

The city is being built in stages and won’t be completed until 2045.Credit: Bloomberg

While Widodo’s grand plan is for the new city to showcase the country’s transition to developed economy status, it has not been conceived without controversy, criticism and conjecture about whether it will actually materialise.

At the heart of the site in the region of Penajam Paser Utara there is resistance from members of the indigenous Balik tribe, who have rejected attempts to relocate them from their home in the village of Sepaku.

“This is the land of our ancestors. We must preserve it from generation to generation,” said tribe leader Sibukdin, who like many people in Indonesia goes by one name. He grows lanzones, coffee, mangoes and other plants on his land.

“If we are relocated, our identity as an indigenous people will be gone because we move to another location while our ancestral land is taken over by the government.

“In the beginning, when we learnt that the capital city would move to Sepaku we were happy because this area would be lively. But it does not mean that we have to be removed from the centre of the capital city. We welcome the new capital city, but we want to remain living in our area.”

The construction of a reservoir has already affected the villagers’ ability to access clean water, with the Sepaku river blocked to facilitate building of the dam.

There has been talk of compensation for the approximately 70 families living in the innermost ring of the city site, but it is unclear where they would be moved to.

“The customary communities have not talked about [the amount of compensation],” said Saiduani, the head of AMAN, an alliance of indigenous groups across the country.

“But if we see the ongoing projects, it looks like there is no other scheme but [eviction]. Maybe one day there will be another way out. But today, there is no solution for the people, there is no other choice given.”

Nusantara is being constructed on the eastern side of the island of Borneo.Credit: Bloomberg

Beyond the impact on the area’s existing inhabitants, there are concerns from environmentalists about the consequences of such a development in a province where huge swathes of tropical rainforest have already been destroyed.

The existence of dozens of coal mining and forestry concessions within what will be the city’s outer limits has also led to questions about just how green it will be.

“[We are] of the opinion that the moving of the capital is not a right decision given the current conditions in East Kalimantan itself. It suffers [from] ecological crisis,” said Puspa Dewy, campaign manager for prominent environmental activism group Wahli.

“Many extractive industries are located there, from mining to big-scale plantations and forestry-related projects.”

The new capital also faces significant economic and political hurdles.

Widodo, who has staked a great deal of his legacy on his flagship project and even camped out at the site, has hopes of private investment covering 80 per cent of the costs, with the remaining 20 per cent paid by the state.

There has been hesitation, however, from foreign investors and the one that was on board – Japanese technology giant SoftBank Group – pulled out last year.

Balik tribe leader Sibukdin stands outside his house in Penajam Paser Utara near where construction has begun on Indonesia’s new capital city.Credit: AP

While the establishment of Nusantara has effectively been written into law with a bill passed through the House of Representatives in February 2022, the question of how committed Widodo’s successor might be to the switch from Jakarta has created uncertainty. Indonesians are due to elect a new president next February and Widodo, whose constitutionally limited two five-year terms will be up, is scheduled to pass the baton to the victor eight months later.

“Political risk is indeed still the main factor,” said Bhima Yudhistira Adhinegara, director of the Centre of Economic and Law Studies in Jakarta. “The next president may issue another perppu to cancel it,” he said, referring to a regulation akin to an executive order.

As it stands, none of the three likely contenders have indicated they would do that. Two of them, Defence Minister Prabowo Subianto and Central Java Governor Ganjar Pranowo, have expressed support for the relocation and the third, former Jakarta governor Anies Baswedan, has vowed to see it through if elected.

The extent to which the next leader shares Widodo’s zeal for the concept may end up determining its future.

Heavy afternoon traffic in Jakarta, which will remain Indonesia’s main commercial centre.Credit: International Herald Tribune

“In my opinion, since the policy is in the form of a law, it means the project should be carried out,” said Noory Okthariza, a political researcher at the Centre for Strategic and International Studies in Jakarta.

“So, I think, whoever becomes president, he or she must do it. The level of seriousness in carrying it out may be varied. If the president is someone who is endorsed by Jokowi, he or she will work all out. But if he is not, the progress will be slow.”

On the investor front, there was some good news for Widodo as new Malaysian Prime Minister Anwar Ibrahim brought letters of intent from 10 Malaysian firms when he paid him a visit in January.

Indonesia this week intensified efforts to lure more backers, unveiling generous tax incentives for companies that do throw their weight behind the capital.

It is uncertain if any Australian companies will invest, but there is some involvement already.

British company Arup’s Australian arm is working on the city’s design and the Nusantara authority is in talks with the CSIRO as it explores the establishment of a life science centre. It hopes Australian links will extend further.

“We are in the middle of discussing with the Australian government about Canberra and Nusantara becoming sister cities,” Susantono said.

“With that we’ll open up some possibilities for more cooperation not only on the government side but also on the investment side and on the knowledge side.

“I believe there will be a lot of foreign investors who will come. We have received more than 100 letters of interest. Some of them are serious for the next couple of years, some of them are still ‘wait and see’. But it’s safe to say the appetite is there.”

As for the Balik tribe, Susantono said the authority was engaging with its leaders.

“There are a couple of options,” he said. “One is compensation, another is relocation, another is about shared ownership, if there is a plan to have a department store or [business where their village is]. They may be part of the ownership. We do our best to involve them in the development process.

“It is a very high concern how we will try to have harmony between people, nature and culture in this area. It is the soul of the city.”

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