Shifting the centre

Shifting the centre

Indonesian government hopes moving capital away from Jakarta will spread economic development more evenly beyond Java.

After months of hype about a proposal to move Indonesia's capital, President Joko Widodo has confirmed the choice of a site in East Kalimantan, 1,900 kilometres northeast of overcrowded and rapidly sinking Jakarta.

The island of Kalimantan, also known as Borneo which Indonesia shares with Malaysia and Brunei, is home to only 6% of Indonesia's population.

Mr Widodo, who first floated the idea in mid-2017, said the government had conducted a three-year study to find the ideal location for a new seat of government.

"Those studies concluded that the most ideal location of the new capital is in some parts of North Penajam Paser and Kutai Kartanegara districts of East Kalimantan province," he said in a news conference broadcast live on national television on Aug 26.

He did not reveal the new capital's name, though the internet quickly lit up with suggestions both serious and fanciful, ranging from "Mandalanusa" (centre of the archipelago) to "Jokograd".

The president said the relocation would have a development budget of 466 trillion rupiah (US$32.7 billion), with the state to shoulder 19% of the cost and the rest expected to come from private investment and public-private partnership schemes.

One of the reasons authorities chose the location, he said, was that it is close to two cities that are already quite developed: Samarinda and Balikpapan.

Samarinda is the provincial capital and is located on the banks of the Mahakam River, one of Indonesia's longest rivers, while neighbouring Balikpapan is an oil and mining hub on the resource-rich island. Both cities have international airports and Balikpapan has a big seaport.

It didn't take long for big developers to jump on the bandwagon of opportunity. The day after the announcement, a full-page advertisement by Agung Podomoro Land promoting its Borneo Bay City project in Balikpapan appeared in a leading newspaper, with the catchphrase "the best investment in the nation's capital".

Mr Widodo also noted that the island has minimum risks of natural disasters such as volcanic eruptions, earthquakes and tsunami because it is not part of the Pacific Ring of Fire that makes most parts of Indonesia, including the heavily populated island of Java where Jakarta is located, very vulnerable.

Java is also home to about 149 million people, or 57% of the country's total population, and almost 60% of all economic activity. Moving the capital is expected to provide greater distribution of development to other parts of Indonesia.

"Java is heavily burdened and the burden will be even more heavier if we move the new capital to a location that is still in Java," the president said.

The site straddling North Penajam Paser and Kutai Kartanegara includes 180,000 hectares of government-controlled land, which will minimise land acquisition costs.

Sofyan Djalil, the agrarian and spatial planing minister, said a freeze on land sales would be put in place to prevent speculation.

"Meanwhile, Jakarta will be developed as an international and regional economic, business, service and trade centre," he said, adding that the Jakarta city administration would be given a budget of 571 trillion rupiah ($40.1 billion) for urban regeneration in the traffic-choked city, which has become among the most polluted in the world.

The Widodo administration has prepared a bill that will form the legal basis for moving the capital and has submitted it to parliament.

Bambang Brodjonegoro, the minister of national development planning, said the government hoped to start construction next year when the new capital's design and master plan are expected to be finalised.

The work will include a new presidential residence, ministry buildings, highways and housing for thousands of government workers. He said the move to the new capital would take place by 2024 "at the latest", just as Mr Widodo's second term is ending.

Other areas in Central and South Kalimantan provinces were also on the government's shortlist, but it is hoped that the island as a whole will have a brighter future once the move takes place.

Handoko, a resident of Sumber Alaska village of Kapuas district in Central Kalimantan, said he believes the move will encourage more development on the island and reduce the economic gap with Java.

"When Palangkaraya was said to be one of the candidates and the president visited the province, there were people from Jakarta who came looking to buy plots of land here, even though it's not too close to the city," he told Asia Focus.

His village is about a four-hour drive from Palangkaraya and close to the border with South Kalimantan.

"I am disappointed that Palangkaraya was not named. We hoped it would affect this area with new road developments that would shorten the travel time. I was hoping it would open new job opportunities for local people here," said Handoko, who works in the palm oil plantation business.

But critics say moving the capital will not fix the government's problem, or even the problems of Jakarta and Java, as the government has repeatedly said.

"Our government's problem is actually governance. There are government institutions with overlapping duties with inefficient and complex structures," said Eko Prasojo, dean of the school of administration at Universitas Indonesia.

"We need to have more consolidated government institutions which could potentially save more than 300 trillion rupiah from the state budget every year," he said at a forum on the merits of a new capital.

Fadhil Hasan, a senior economist at the Institute for Development of Economics and Finance (Indef), said arguments about reducing the economic disparity between Java and other islands and regions is "debatable and unconvincing".

"Why not choose one of the least developed regions to be the new capital, if it is meant to distribute development more evenly," he said, adding that there is also a risk of a rise in the country's debt-to-GDP ratio, with 38% of government bonds currently held by foreign investors.

"If the aim is to evenly distribute development, it would be better to develop new economic zones, airports and seaports in the regions, and build a transport network to make logistics easier and to prevent urbanisation," Mr Hasan said.

Former environment minister and senior economist Emil Salim also criticised the capital move, saying that "physically, there is no requirement that the nation's capital should be in the middle (of the country)."

A hub is not defined by its physical location, he said, but more by traits such as human resources and communications networks.

"If the reason is to deconstruct Java-centric development, we need to remember also that being the most populated island, this is where the poor are also concentrated. Are we going to just leave them?" he said.

"Jakarta is not the only city sinking, but also other cities and many parts along Java's northern coast. Moving away from Java is not how we respond to the threat of the rising sea level. We should face it using technology and solutions such as renewable energy to address problems like water scarcity."

Given that Indonesia will have a demographic bonus in the next few decades, he said, it would be more beneficial for the government to spend more on developing human resources.

"Otherwise we would lose the opportunity to become a developed country. Asia's economic powerhouses such as Japan and South Korea invested a lot in developing their human resources to speed up development, not by physical development such as building a new capital," he added.

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