• Bloomberg


Indonesia will build a new capital city on the island of Borneo, home to some of the world’s biggest coal reserves and orangutan habitats, as President Joko Widodo seeks to ease pressure on congested and sinking Jakarta.

The new administrative headquarters will be situated between North Penajam Paser and Kutai Kartanegara in East Kalimantan, Jokowi, as the president is commonly known, told reporters in Jakarta on Monday. The relocation of the capital, some 1,400 km from Jakarta, will help spread economic activity outside Java, the nation’s most populous island, the president said.

Jokowi has displayed an urgency not shown by his predecessors in pressing on with the capital relocation plan, which has been periodically discussed for decades. With the greater Jakarta area, home to about 30 million people, nearing gridlock and pollution levels reaching unhealthy levels, efforts to decongest the city have made little progress with tens of thousands of cars getting added to the roads every year.

With more than 15,000 people per square kilometer in Jakarta — twice the density of Singapore — there’s little space to build more without rehousing thousands of families. To make matters worse, two-fifths of the city is below sea level and parts of it are sinking at 20 cm a year.

“We cannot continue to burden Jakarta and Java any more in terms of population density, congestion, pollution and water resources,” Jokowi said. “Jakarta will remain as the center of business, trade and services” and the government is finalizing a 571 trillion rupiah ($40 billion) plan for the city’s development, he said.

Jakarta’s miserable traffic is a result of the city’s overwhelming importance in the nation’s economy. The metropolitan area generates almost a fifth of Indonesia’s annual gross domestic product. Gridlock and public transport woes cost the city about 100 trillion rupiah a year in economic losses, according to official estimates.

The cost of moving the capital is estimated at 466 trillion rupiah if it involves the development of 40,000 hectares of land for an estimated 1.5 million residents, according to Planning Ministry estimates. The cost could be whittled down to 323 trillion rupiah if only part of the state apparatus was shifted to an area of 30,000 hectares, it said in April.

Jokowi has argued shifting the capital will help address income disparity in the archipelago of more than 17,000 islands. While Java accounts for almost 60 percent of Indonesia’s population and contributes about 58 percent of its gross domestic product, Kalimantan accounts for 5.8 percent of the population and contributes 8.2 percent of GDP.

With Jokowi pitching the new capital as a symbol of Indonesian identity and progress, the project will be a significant part of his legacy. Authorities have talked about building a modern, smart and green city that can serve as the capital for a century.

The area chosen for the new capital and yet to be named is free from risks of natural disasters and is close to cities such as Balikpapan and Samarinda, Jokowi said. The government controls about 180,000 hectares of land in the area, he said.

The government plans to begin construction of the city by the end of 2020 and relocate the capital in phases from 2024, according to Planning Minister Bambang Brodjonegoro. The project will be financed by the government as well as through private-public partnerships.

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