Indonesia’s new $30 billion capital city is hit by 'delays'

A general view shows under-construction buildings that will be used by the Indonesian government in the future capital Nusantara

(Image credit: BAY ISMOYO / Contributor)

published 27 August 2024

Indonesia’s first planned independence day celebrations at its multi-billion-dollar new capital city were a damp squib, say A. Anantha Lakshmi and Diana Mariska in the Financial Times. The government was forced into an “embarrassing climbdown” and had to scale back plans and withdraw invitations to foreign dignitaries as it became obvious the new city would not be ready on time.

What's causing Indonesia's new capital to be delayed?

Nusantara, a “legacy project” of the outgoing president Joko Widodo (known as Jokowi), is being carved out of the jungle in Borneo at an estimated cost of $30 billion, but has been “beset by delays, land acquisition problems and an absence of foreign investors”. That shouldn’t be a surprise, says Daniel Moss on Bloomberg.

Capital cities develop slowly over decades, perhaps centuries, and “economics has an annoying habit of intruding” on the dreams of those in a rush to create them. Erecting a city from scratch in an equatorial forest was “always going to be arduous”.

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During a visit 18 months ago, actual construction work was not much in evidence. The roads leading to the nearest urban area, Balikpapan, were narrow. And “looming over the project” is the approaching end of Jokowi’s second term in October. His successor, Prabowo Subianto, says he is committed to Nusantara. But the capital “isn’t coming cheap and Prabowo has plenty of his own grand plans”.

Meanwhile, Jakarta, the current capital, is sinking, says The Economist. No big city in the world faces more climate-related threats and some parts could be submerged by 2050.

But Nusantara’s triumph is far from inevitable. The distance between the two cities is about 800 miles and it will be a big ask for people to up sticks and move there. When fully completed in 2045, Nusantara was supposed to mark Indonesia’s arrival as a developed country. For now, it remains an open question whether Nusantara is “a giant vanity project doomed to fail”.

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Stuart graduated from the University of Leeds with an honours degree in biochemistry and molecular biology, and from Bath Spa University College with a postgraduate diploma in creative writing.

He started his career in journalism working on newspapers and magazines for the medical profession before joining MoneyWeek shortly after its first issue appeared in November 2000. He has worked for the magazine ever since, and is now the comment editor.

He has long had an interest in political economy and philosophy and writes occasional think pieces on this theme for the magazine, as well as a weekly round up of the best blogs in finance.

His work has appeared in The Lancet and The Idler and in numerous other small-press and online publications.