Indonesia’s new capital in the jungle project on the ropes

A worker from the Jakarta Public Order Agency cleans up mud residue on Jl. Jatinegara Barat in East Jakarta on Jan. 2. The Indonesian capital and surrounding areas marked the start of the new year with widespread flooding. (JP/Wendra Ajistyatama). Sketched by the Pan Pacific Agency.

JAKARTA, Jul 17, 2020, SHM. Joko Widodo’s dream of being the Indonesian President who finally builds a new national capital is in doubt, with officials saying the timing of the project is to be “evaluated in the future,” The Sydney Morning Herald reported.

Donny Gahral Adian, a senior adviser in the President’s office, confirmed Joko’s ambitious plan would likely be delayed by the coronavirus pandemic.

The plan to move the capital from Jakarta to an as-yet unnamed and un-built city in the jungle of East Kalimantan province on the island of Borneo was announced in August 2019.

The idea of constructing a purpose-built new capital to replace Jakarta – a crowded, polluted and sinking metropolis of more than 10 million people – was first proposed by the country’s founding president, Soekarno.

The city would be, for Joko, the apogee of his legacy as an infrastructure president.

But there are growing doubts the more-than-$40billion-project will be able to stick to the schedule of the first residents moving to the city in 2024.

Some locals who live at the isolated proposed site, between the cities of Balikpapan and Samarinda, and oppose the project, said rumours of a delay were rife.

“We have heard talk of the project being delayed because of the pandemic, but nothing from official sources,” Menyu, deputy of cultural leader of the local Balik tribe, said.

“Personally I prefer for it to be cancelled all together.”

The President’s senior adviser said “no budget for the new capital project has been disbursed until now”.

“We know that the COVID-19 mitigation needs a lot of financial support and we must reallocate and refocus the budget for it,” Donny said insisting some work on the project was underway.

“Not all works stop. Bappenas [the National Planning and Development Agency] and related ministries are still working on the legal framework of the project,” he said.

“For sure there will be a reschedule in the implementation of the stages. The government will only handle 19 per cent of the whole budget of around Rp400 trillion, the rest will be handled by the private sector. But as we know the private sector is now experiencing difficulties due to the pandemic.

“There will be an evaluation about the project in near future.”

Chief economists from two of Indonesia’s largest banks and senior representatives from the country’s Real Estate Institute and the Chamber of Commerce also said the project should be delayed so the government could focus on the pandemic.

Indonesia has recorded 81,668 cases of coronavirus and 3873 deaths, by far the highest totals in south-east Asia, and the country’s infection rate is growing rather than receding.

Andry Asmoro, chief economist of Bank Mandiri, said the government should spend more of the national budget on mitigating coronavirus.

“The government needs to delay it or find other sources of financing from non-budget sources, for example from foreign or domestic investors,” he said.

He praised Finance Minister Sri Mulyani’s moves to ramp up healthcare spending.

“She has reallocated and reprioritised the budget to be used for more urgent matters.”

David Sumual, chief economist, BCA Bank, said he believed a delay was inevitable.

“I think there will be some delay, though there is no announcement from the government of a delay from the previous road map ,” he said.

Major banks, he said, would respond to demand from the private sector for funds to invest – but to date “the banking sector as a whole is not so involved”.

Real Estate Indonesia deputy chief Hari Ganie said that from the private sector’s point of view, “it is better to be postponed” until Indonesia’s economy begins to recover.

“The impact of the pandemic is not just in the health sector. The sale of commercial property is down by 50 per cent, mall occupancy rates are down by 70 per cent and hotel occupancy rates are down 95 per cent.”

More broadly, in April the IMF slashed Indonesia’s forecast growth rate from 5.1 per cent to 0.5 per cent. Both Andry, from Mandiri, and Sumual, from BCA, said the country’s growth rate could head into negative territory as the pandemic spread.

Sanny Iskandar, the deputy chairman of the Indonesian Chamber of Commerce, said the organisation wanted the government to take “a highly cautious approach” to the new capital and at a minimum, it should be delayed.

James Massola is south-east Asia correspondent based in Jakarta. He was previously chief political correspondent, based in Canberra. He has been a Walkley and Quills finalist on three occasions, won a Kennedy Award for outstanding foreign correspondent and is the author of The Great Cave Rescue. Karuni Rompies is Assistant Indonesia Correspondent for The Sydney Morning Herald and The Age.

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