Indonesia Is Building a New Capital. It’s Not Going Well
Dec 30, 2024
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Faris Mokhtar, a Bloomberg government reporter based in Jakarta, discusses Indonesia's ambitious plan to build a new capital city, Nusantara, to alleviate Jakarta's overcrowding and pollution. He highlights the formidable challenges, including financial hurdles and skepticism surrounding the project. Mokhtar details the significant costs incurred—over $4.6 billion—and the lack of investor interest, which threatens the project's viability. The conversation delves into the implications for Southeast Asia's largest economy if Nusantara fails to materialize.
The ambitious Nusantara project aims to address Jakarta's overcrowding and environmental issues but faces significant financial and administrative hurdles.
The success of Nusantara could either elevate Indonesia as a model for national development in emerging markets or reflect a costly failure.
Deep dives
Indonesia's New Capital: An Ambitious Vision
Indonesia is embarking on a monumental project to establish a new capital city, Nusantara, as a solution to the challenges faced by Jakarta. The current capital suffers from severe congestion, pollution, and sinking due to rising sea levels, compelling the government to take action to relocate the nation's administrative center. Former President Jokowi emphasizes that Nusantara is more than just a relocation; it's a chance to create a green, high-tech city designed for efficiency and sustainability. He envisions a smart city with minimal reliance on cars, highlighting plans for a public transportation system and a focus on environmental conservation.
Challenges in Financing and Construction
As of now, Indonesia has invested approximately $4.6 billion in the new capital project but requires over $24 billion to complete it, primarily relying on private investment. Local and foreign investor interest has sharply declined, as initial enthusiasm has transformed into skepticism about the project's feasibility, especially considering the transition to a new administration. Construction has faced significant delays, and many civil servants have expressed reluctance to move to a city that remains under construction, leading to postponed relocation plans. The uncertainty surrounding financing and commitments raises concerns about whether Indonesia can deliver on this ambitious project.
Potential Impact and Future Considerations
The success or failure of the new capital project could serve as a critical case study for similar endeavors in emerging markets worldwide. While a successful transition could showcase Indonesia as a model for national development, the possibility of failure looms large as deadlines have been missed and investor confidence wanes. Critics argue that the project could burden future administrations, particularly as the new president focuses on social welfare policies and infrastructure needs in other areas. This multifaceted scenario will determine not only the fate of Nusantara but also Indonesia's economic trajectory and international standing in the years to come.
Indonesia has embarked on an ambitious project to build a new capital city from scratch because Jakarta is overcrowded, polluted and sinking, fast.
But the multibillion dollar new city, Nusantara, was plagued with problems from the very start. On today’s Big Take Asia Podcast, host K. Oanh Ha talks to Bloomberg’s Faris Mokhtar about what went wrong, and what’s at stake for Southeast Asia’s largest economy if it fails.