by Will Duvall
This article was written by an undergraduate student at the University of Hawai‘i at Mānoa as part of their independent research with the Indo-Pacific Policy Lab.
Abstract
This article examines Indonesia’s decision to relocate its capital from Jakarta to East Kalimantan. It argues that the relocation project is an opportunity for Indonesia to strengthen its global image and achieve its vision of becoming a developed nation by 2045. Nusantara (IKN), the envisioned new capital, symbolizes Indonesia’s shift towards modernity while generating equitable economic growth across the archipelago. The article also argues that the relocation project demonstrates Indonesia’s commitment to sustainable development by addressing Jakarta’s overpopulation and environmental challenges. It concludes by examining UN agencies and bilateral partners’ support for the Nusantara project. Nusantara’s status as a forest city aligns with several governments’ Indo-Pacific investment plans to address environmental and climate issues in their own countries, creating new opportunities for international engagement.
Introduction
In late August 2019, the Indonesian government announced plans to move its current capital from Jakarta to the province of East Kalimantan, roughly 800 miles northeast of Jakarta. The capital relocation project will be conducted in 5 phases with a projected cost of 35 billion dollars.[1] Phase 1 began in 2022, and the final phase is planned to be completed in 2045.[2] State funds will pay for roughly a fifth of the project, with the remaining cost funded by public-private investment partnerships and international development investors.
Moving the capital to Borneo is an attempt to redistribute the country’s economic and population center away from the single island of Java. Roughly 56 percent of Indonesia’s total population and 60 percent of Indonesia’s GDP is concentrated on Java, which has led to overpopulated urban areas, creating visible economic inequalities and increasing the risk of environmental catastrophe in flood-prone Jakarta. It is evident that Jakarta’s situation as the nation’s capital is quickly deteriorating.
The decision to construct a new capital city was motivated largely by concerns over Jakarta’s rapidly increasing environmental vulnerabilities. The major benefit of constructing Nusanatra will be the opportunity to establish a green smart capital as a strategic development strategy, which will revolutionize Indonesian society by investing in new technology to promote opportunities for increased equality. This project also aims to reshape Indonesia’s global image, positioning it as an attractive investment destination.
This article argues that by carefully planning and executing the construction of Nusantara, Indonesia can not only assert itself as a leader of sustainable infrastructure within the Indo-Pacific region but also reap significant economic and security benefits. It begins by highlighting environmental and social shortcomings in Jakarta that have influenced Indonesian officials to relocate the nation’s capital to East Kalimantan on the island of Borneo. It then examines the benefits of the new capital city, emphasizing its potential to unlock new economic and security opportunities for Indonesia. The article concludes by highlighting current investment partners in the Nusantara project and the importance of international collaboration for the project to reach its goal of a smart city.
Challenges in Jakarta and the Decision to Relocate the Capital
Since gaining independence from the Netherlands in 1945, Jakarta has served as Indonesia’s capital. Jakarta is located on the west coast of Java island, where the Ciliwung River meets Jakarta Bay. It is the economic and cultural center of the country, and it is the largest city in Indonesia and Southeast Asia. Its population is estimated to be 11.4 million people, while the greater Jakarta metropolitan area has a population of more than 30 million.[3] Due to its size, Jakarta is one of the most densely populated cities in the Indo-Pacific region, with over 16,000 individuals per square kilometer as of 2022. Jakarta’s population is projected to continue to grow steadily over the next ten years.
Jakarta’s dense population has triggered a range of environmental obstacles that Indonesian leaders have struggled to address. For example, traffic congestion in Jakarta consistently ranks among the worst traffic in the world, contributing to high pollution levels throughout the city. Jakarta ranked as the world’s most polluted city throughout the summer of 2023.[4] It was reported that a large percentage of air pollution in Jakarta comes from approximately 3.5 million cars and 14 million motorcycles on the road daily.[5] In 2022, Jakarta was ranked the 29th most congested city in the world.
In addition, Jakarta has outstretched its groundwater supply. The city’s fragmented and unequally distributed piped water connections have forced millions of residents to use various alternative sources such as bottled water, illegal wells, and public hydrants. Community leaders in Jakarta’s low-income neighborhoods along the city’s northern coastline have long demanded piped water; however, little is known about when piped-water projects will start, if ever. In the meantime, residents in low-income communities continue to spend large portions of their small salaries on clean drinking water, adding to existing socio-economic challenges.[6]One in three Jakartans does not have access to piped water, forcing thousands of residents to drill illegal wells that deplete the aquifers and weaken the ground.[7] This has caused the land below to sink at a rate of 11 inches a year in the city’s northern areas.[8] At this rate, experts predict that 33% of the city could be submerged by 2050. Even though heavy rainfall during Jakarta’s monsoon season (November-March) should recharge underground aquifers and stabilize Jakarta’s infrastructure, the expansion of urban areas and elimination of vegetation acts as a cement obstacle, impeding the replenishment of aquifers.
Flooding is another major problem. Jakarta is built along a low-lying plain, crisscrossed by 13 low-lying rivers that swell during monsoon season. It is estimated that 40% of Jakarta now sits below sea level, amplifying Jakarta’s flood-prone regions.[9] Jakarta’s poor urban infrastructure, coupled with the effects of climate change, such as increased rainfall and rising sea levels, has caused city flooding to shift from an annual event during monsoon season to a monthly occurrence. Indonesia’s Natural Disaster Agency reported that flooding was the most frequent disaster in the country in 2022, resulting in 188 deaths and over a million homes destroyed.[10] As floods continue to ravage homes and businesses, the government is left with limited options to ensure the safety of millions of residents. Jakarta’s provincial government has preached the need to extend coastal walls and dredge the city’s rivers, but more is needed to help the city’s ongoing sinking problem. Coastal walls proved ineffective in 2007 when flood waters crashed through coastal communities and are even less effective now as the land continues to subside.[11]
The following sections will discuss the economic, security, environmental, and technological benefits of building a new capital city in East Kalimantan. The Nusantara project is a multifunctional initiative that will create infrastructure for the future while simultaneously alleviating Jakarta’s problems such as overcrowding, pollution, and the demand on Jakarta’s fragile water supply system. By relocating public and private entities to Nusantara, Jakarta can replace unnecessary cement spaces with green spaces that can help improve Jakarta’s water system and slow down land subsidence, extending the city’s lifespan.
Economic Benefits
The decision to relocate the capital to Kalimantan reflects the government’s ambition of creating a new economic hub in the geographical heart of Indonesia. The decision to build Nusantara in East Kalimantan was based on the province’s high accessibility and proximity to the two major cities in Kalimantan, Balikpapan and Samarinda. The province already has existing infrastructure, such as the Balikpapan-Samarinda Toll Roads, Trans Kalimantan, airports, and seaports, which serve as access points to the new capital. The plan to construct Nusantara includes a tri-city model with Balikpapan and Samarinda, focusing on critical economic sectors to become one of Southeast Asia’s leading urban areas. The objective is to boost the regional economy by four to five times and create 4.3-4.8 million jobs in East Kalimantan by 2045.[12] The move will enhance communication and connectivity across various economic sectors, offering increased protection and access to Indonesia’s valuable commodities while welcoming cutting-edge smart investment opportunities. Confidence in the project has grown, fueled by growing international support and funding, resulting in early success in first-stage construction. According to NCA chairman Bambang Susantono, in early 2024, investments for phase 1 of Nusantara development totaled IDR 47.5 trillion, with private investment contributing IDR 35.9 trillion.
Due to its strategic location, Nusantara offers Indonesian leaders a unique opportunity to be close to a rapidly growing sector of the economy, as global markets shift towards sustainable energy sources. Indonesia is home to the world’s largest nickel reserves, estimated at 21 million tons, which makes up 22 percent of the world’s total reserves.[13] Nickel is a critical material used in the production of electric vehicle batteries. In 2020, the Indonesian government implemented a ban on the export of nickel ore, which requires companies to refine nickel domestically.[14] This regulation aims to increase Indonesia’s economic gains from its abundant nickel reserves. China has invested in nickel plants in Indonesia to meet the increasing demand for nickel in the production of electric vehicles. The majority of these reserves are located on the island of Sulawesi, which is directly across from Nusantara.
In addition, the capital’s proximity to Balikpapan Bay and the government’s plans to develop new ports and upgrade existing ones will enhance logistical trade networks in East Kalimantan.[15] This network will evolve into a regional economic hub to help strengthen Nusantara’s economic activity and serve as an investment opportunity for private and public sectors around the globe. The Makassar Strait will experience significant growth in economic and security importance in the coming decades as Nusantara emerges as Indonesia’s next economic hub for trade and investment. Currently, the Makassar Strait is primarily regarded as a less desirable trade route than other global routes like the Malacca Strait due to its inconvenient geographical location with minimal port cities. However, Nusantara will rearrange shipping routes as it becomes influential in global markets, making the Makassar Strait a more active multifunctional sea route.
Improving trade and logistical infrastructure will create new opportunities for investment into various sectors in Indonesia. Improved port facilities will act as multi-use entry points to Nusantara, functioning as trade, security, and tourism infrastructure. International travelers demonstrate year after year that Indonesia is a desirable travel destination. In 2023, there were about 11.68 million international visitor arrivals in Indonesia. The number significantly increased in comparison to the previous year. Visitor arrivals were distributed among Indonesia’s various ports of entry.[16] Promoting Nusantara and East Kalimantan as unique destinations for international travelers bound for Indonesia will stimulate and expand the local and national economies.
Government officials and local supporters of the capital project have emphasized that the new city will not only be for Indonesians but also an innovative international city where individuals worldwide can meet and exchange ideas. International support is essential to enhance the project’s credibility and confidence so investors can gain greater confidence in the project. By securing backing from reputable international entities, Nusantara will gain increased recognition on the global stage. Indonesian authorities highlight support from 13 UN agencies, endorsing development in their respective fields of expertise, such as UN-HABITAT, UNDP, UNICEF, UNESCAP, and UN Women.[17] The Nusantara Capital Authority (NCA) has also received around 350 Letters of intent from companies in Indonesia and partner countries such as Japan, Korea, Singapore, and Malaysia, covering goods and services in diverse sectors such as energy, technology, infrastructure, housing, and industrial zones.[18] Developing a new city provides a unique opportunity for international public and private stakeholders to discuss how to implement the latest thinking and technological innovations to create an equitable environment for all world citizens to thrive.
Security Benefits
Moving the capital to a centralized location will offer significant strategic security advantages for Indonesia and its partners. The new capital will be surrounded by thick jungles, mountains, and rivers, providing natural protection to Indonesia’s critical government infrastructure in the event of a conventional attack. Moreover, the central positioning of Nusantara within the archipelago minimizes the risk of natural disasters. This is important because it protects Indonesia’s government infrastructure from unpredictable setbacks, allowing Indonesian leadership to work efficiently year-round.
The capital’s strategic location will also enable Indonesia’s military to exert direct influence in the Celebes Sea, Arafura Sea, and the Pacific Ocean. Relocating the capital to East Kalimantan will situate Indonesian military leadership roughly 20 miles from the Makassar Strait, which is crucial, especially given the rising tensions in the South China Sea. The Lombok-Makassar route will be significant to Indonesia and its partners like the United States and Australia if maritime hostilities in the South China Sea increase or the Malacca strait becomes unavailable because it provides direct access to the South China Sea, making it a convenient maritime route for international warships and submarines to meet in Nusantara to discuss military or humanitarian goals.
In addition, the capital relocation positions Indonesia to better address security concerns of maritime piracy and illegal trafficking in the surrounding seas. Relocating military personnel to East Kalimantan to protect the capital city will increase security missions in the Sulu and Celebes seas and strengthen Indonesia’s role within the Trilateral Cooperation Agreement (TCA) between Malaysia, the Philippines, and Indonesia. Indonesia’s improved security measures will better assist Malaysia and the Philippines in tackling their respective domestic security issues, which frequently intersect, such as human and drug smuggling and illegal immigration.[19]
China and Indonesia hold irreconcilable disputes regarding the nine-dash line and China’s uptick in maritime aggression in the South China Sea. Relocating land, air, and sea military assets to the new city presents Indonesia with a strategic opportunity to expand its military presence throughout the archipelago. Repositioning military assets to address potential threats would facilitate enhanced cooperation between Indonesia and its partners, allowing for more effective intelligence sharing to address common security challenges.
Environment and Smart Technology
Moving the capital to East Kalimantan allows government officials to enact effective environmental policies, learning from Jakarta’s infrastructure challenges. Of the 252,000 hectares of Nusantara’s area, only 25% will be allocated for buildings, significantly contrasting with Jakarta’s concrete jungle. The green space target will be met by allocating 65% of the city’s area to forest area and 10% to agricultural area.[20]
The Indonesian government claims that Nusantara will be the first city in Indonesia to adopt 100% renewable energy by 2045.[21] The 2022 Indonesian Law of New Capital outlines the goals for Nusantara, which encompass showcasing the distinctiveness and variety of the Republic of Indonesia, establishing an innovative, environmentally friendly, and sustainable urban center, achieving modernity aligned with international standards, efficient governance, and ensuring economic equality in the Eastern Region through the advancement of clean, high-tech industries and the promotion of a globally competitive economic sector.[22] Transitioning to renewable energy will be less challenging for a brand-new city starting from scratch compared to the obstacles faced by older cities striving to achieve net-zero emissions.
Emphasis on green development will support Nusantara’s water management, enabling sustained rainwater collection and groundwater replenishment. The city’s water management system will include “sponge city” features first pioneered in Rotterdam and Shanghai that reduce the risk of flooding by creating water-catchment reservoirs to absorb excess rainwater.[23] The government has also unveiled initiatives to introduce environmentally friendly transportation options, such as electric vehicles, dedicated bike lanes, and pedestrian-friendly infrastructure. Indonesian leaders expect that 80% of cross-city journeys will be via public transportation. These measures aim to mitigate air pollution and alleviate traffic congestion, addressing pressing issues learned in Jakarta. The city’s environmental blueprint highlights serious devotion to improving residents’ quality of life.
The development of Nusantara as a forest city aligns with several governments’ Indo-Pacific investment plans and overall emphasis on addressing environmental and climate issues in their own country, creating new opportunities for international engagement. Nusantara is positioned to become a global investment and collaboration arena in sustainable development construction strategies. During a visit to Nusantara in February 2024, British Ambassador Dominic Jermey expressed optimism in the project, stating, “Hopefully, with this visit, Indonesia and the U.K. can collaborate to establish IKN as a carbon-neutral city that not only showcases Indonesia but also contributes to the global community.”[24]
Global support for the Nusantara project has been demonstrated through recent bilateral agreements, highlighting its importance. In late February 2024, the Nusantara Capital Authority (NCA) signed a Memorandum of Understanding with the Canberra Capital City Authority of Australia focusing on developing, promoting, and fostering mutually beneficial cooperation between the two parties. With its urban planning and management expertise, Canberra is a crucial development partner for Nusantara.[25] On March 7th, Enoh T. Ebong, Director of the United States Trade and Development Agency (USTDA), announced renewed American support for Nusantara’s sustainable growth. USTDA approved a grant of USD 2,495,000 to the NCA.[26] This funding will facilitate technical assistance in developing detailed designs, technical specifications, procurement documents, and a capacity-building strategy and open up new opportunities for the U.S. to support Nusantara’s priority smart city infrastructure initiatives.
Conclusion
The decision to move Indonesia’s capital from Jakarta to East Kalimantan is a strategic step towards addressing Jakarta’s environmental challenges while also advancing Indonesia’s global standing and economic development goals towards achieving developed status by 2045. By redistributing economic activity away from Java and investing in green infrastructure, the project aims to advance equitable economic growth across the archipelago. The Nusantara (IKN) project symbolizes Indonesia’s shift towards modernity, inclusivity, and sustainability. It provides an opportunity for governments to collaborate and achieve sustainable success, marking an important milestone for sustainability projects on an international level.
The capital relocation provides a unique opportunity to tackle the longstanding social issues in Jakarta. Viewing the capital relocation project as a multifaceted opportunity for Jakarta also to improve is vital. The focus of Jakarta’s redevelopment efforts should be improving ordinary citizens’ quality of life. One way to achieve this is by transforming old government infrastructure and unused spaces left behind in Jakarta into affordable housing or community green spaces. By repurposing the unused infrastructure, Jakarta can establish a renewed standard of living for its people and enhance the overall quality of life for those who stay in Jakarta.
Nusantara is not just Indonesia’s new capital city. It is a symbol of the country’s aspirations for the future and serves as a means to enhance diplomatic relations with the world. By leveraging the opportunities that Nusantara provides, Indonesia can deepen its integration into the global economy and strengthen its position as a crucial player in regional and international affairs. As the new capital city establishes itself as a hub for trade, investment, and innovation, it will attract businesses and investors from around the world, promoting economic growth and creating new avenues for collaboration. This surge of economic activity will benefit Indonesia’s economy and open up opportunities for international companies to invest in the country’s economy, paving the way for greater economic cooperation. This will lead to investment, stability, and prosperity in the Indo-Pacific region.
Will Duval is an undergraduate student and a member of the Indo-Pacific Policy Lab at the University of Hawai‘i at Mānoa.
The views expressed in this publication are those of the author and do not necessarily reflect the position of the Center for Indo-Pacific Affairs or any organization with which the author is affiliated.
© 2024 University of Hawai‘i at Mānoa Center for Indo-Pacific Affairs. All rights reserved.
[1] Ayman Falak Medina, “Indonesia Passes Bill to Build New Capital City: Deadline 2024,” ASEAN Briefing, January 25, 2022.
[2] Government of Indonesia, “Nusantara Capital Authority,” retrieved April 19, 2024.
[3] World Population Overview, “Jakarta Population 2024,” retrieved April 30, 2024.
[4] Edna Tarigan, “Jakarta is the World’s Most Polluted City. Blame the Dry Season and Vehicles for the Gray Skies,” Associated Press, August 11, 2023.
[5] Tomoo Kikuchi and Shunta Hayashi, Traffic Congestion in Jakarta and the Japanese Experience of Transit-Oriented Development, S. Rajaratnam School of International Studies, August 2020, 4.
[6] Adi Renaldi, “Indonesia’s Giant Capital City is Sinking. Can the Government’s Plan Save It?,” National Geographic, July 29, 2022.
[7] Sheryl Tian Tong Lee and Grace Sihombing, “The World’s Fastest-Sinking Megacity Has One Last Chance to Save Itself,” Bloomberg, December 6, 2023.
[8] Renaldi, “Indonesia’s Giant Capital City is Sinking.”
[9] Adam Voiland, “As Jakarta Grows, So Do the Water Issues,” NASA Earth Observatory, September 11, 2019.
[10] Sharah Yunihar Saputra, “Flooding in Jakarta: A Call to Increase Climate Change Awareness,” State of the Planet, Columbia Climate School, March 3, 2023.
[11] Renaldi, “Indonesia’s Giant Capital City is Sinking.”
[12] Alfath Satria Negara Syaban and Seth Appiah-Opoku, “Building Indonesia’s New Capital City: An In-Depth Analysis of Prospects and Challenges from Current Capital City of Jakarta to Kalimantan,” Urban, Planning and Transport Research 11 (1), 2023, 14.
[13] Ayman Falak Medina, “Unleashing Nickel’s Potential: Indonesia’s Journey to Global Prominence,” ASEAN Briefing, May 30, 2023.
[14] Wall Street Journal Business, Nusantara: Indonesia’s New Capital City Spearheads Quest for Sustainable and Inclusive Development, August 28, 2022.
[15] Ahmad Rizky M. Umar, “What are the Regional Security Implications of Indonesia’s Capital Relocation?,” New Mandala, March 18, 2022.
[16] Hanadian Nurhayati-Wolff, “Number of International Visitor Arrivals in Indonesia from 2014 to 2023,” Statista, March 20, 2024.
[17] Nusantara Capital Authority, Government of Indonesia, “13 UN Special Agencies Support Nusantara Development,” October 17, 2023.
[18] Nusantara Capital Authority, Government of Indonesia, “Nusantara Development on Target, Total Investment Reaches IDR 47.5 Trillion,” January 30, 2024.
[19] Rahul Mishra and Peter Brian M. Wang, “From Jakarta to Nusantara: Making Sense of Indonesia’s Capital Shift,” The Interpreter, Lowy Institute, October 31, 2022.
[20] USAID, “‘Ibu Kota Nusantara’ Forest City Planning,” 2023.
[21] Charmaine Jacob, “Indonesia is Moving its Capital from Jakarta to Nusantara. Here’s Why It Won’t Be so Easy,” CNBC, August 27, 2023.
[22] Satria Negara Syaban and Appiah-Opoku, “Building Indonesia’s New Capital City,” 15.
[23] Wall Street Journal Business, “Nusantara.”
[24] Nusantara Capital Authority, Government of Indonesia, “The UK Government Expresses Interest in Supporting Nusantara as a Carbon-Neutral City,” February 21, 2024.
[25] Nusantara Capital Authority, Government of Indonesia, “NCA Establishes Collaboration with Canberra Authority, Agrees on Commitment for Capital Development Cooperation,” February 27th, 2024.
[26] US Embassy Jakarta, Government of the United States, “United States Announces New Support for Sustainable Development of Nusantara,” March 7, 2024.