Indonesia is celebrating a new capital that is striving for development.

JAKARTA - Indonesia is preparing to inaugurate its still unfinished new capital, located in the remote jungles of Borneo, despite financial difficulties, missed deadlines, and changes in the country's leadership that are putting pressure on this billion-dollar project. President Joko Widodo will announce the launch of Nusantara on Saturday, on the country's Independence Day. However, this grand project is still in the active construction phase, and most roads and buildings are far from completion. Joko Widodo has already stated that Jakarta will remain the official capital even after he leaves office in October.

The celebrations are taking place in a subdued atmosphere, as thousands of invitations had to be canceled due to a lack of hotel rooms, and the president barely mentioned Nusantara in his recent addresses to parliament, only noting that funding will continue. Let me remind you that the president announced the creation of this project just five years ago, and construction only began two years ago due to the pandemic.

Reasons for creating a new capital

Among the reasons for creating a new capital for the largest economy in Southeast Asia are population growth and rapid urbanization, which have overloaded the infrastructure in the aging commercial and political capital of the country. Jakarta currently has about 30 million residents. In addition to addressing issues related to traffic congestion and environmental pollution, Widodo hopes that Nusantara will help distribute the country's wealth, which is currently concentrated on the island of Java, more evenly among the over 278 million citizens. The new megacity is also expected to be an important part of Widodo's legacy.

Construction work in Nusantara

Workers are standing at the construction site of a memorial park a day before the 79th anniversary of the country's independence in the new capital Nusantara, located in East Kalimantan province, Indonesia. The new city is situated about 800 miles (1287 kilometers) northeast of Jakarta and includes five phases of construction that are expected to be completed by 2045. The plan involves relocating around 1.9 million people from Jakarta to reduce congestion levels. However, the project, estimated to cost around $29 billion, has faced numerous challenges from the very beginning.

• Even before the construction began in August 2022, the government was unable to secure private funding.
• The administration intends to cover only 20% of all expenses, while the remaining portion will need to be invested by private investors.
• In the budget for 2024, 42.5 trillion rupees have been allocated, which is more than the 26.7 trillion rupees in 2023.
• For a long time, the new capital was essentially experiencing a lack of major investments until a group of local magnates decided to invest funds.
• Nevertheless, this is still not enough, and the project has not yet secured the required foreign private investments.

Delays in construction have resulted in the government missing the deadlines for the first phase of the project, during which the president, his cabinet, and a group of civil servants were supposed to move to the new capital this month. The sudden resignations of the head and his deputy from the agency responsible for development have only added uncertainty to the project's implementation, and the government has not yet explained the reasons for their removal.

The process of issuing the presidential decree to designate Nusantara as the new capital is also in limbo, and Joko Widodo - just a few months before the end of his second and final term - stated that his successor Prabowo Subianto could take care of it after taking office at the end of October. The new head of state promised to continue Widodo's policies, including the new capital project.

However, the business community is still uncertain whether this will take center stage, considering that the new leader has his own ambitious funding plans on the agenda, including a free lunch program for students and improvements in healthcare and education. In July, Prabowo's brother, Sederajjad Jiwandono, a former central bank governor and one of the advisors to the new leader's economic team, noted that he would rather implement the free lunch program, which can be quickly executed, than the new capital project. This signaled to observers that the construction of the new city project may lose its significance under the new administration.