Here’s Why Indonesia Desperately Wants To Spend $33 Billion Moving Its Capital Away From Jakarta

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May 03 2019
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Indonesia is the world’s fourth largest country by population, the third biggest democracy and the largest Muslim nation. Its population is estimated to hit 269 million this year. That’s 5 million more people than 2 years ago. Yet, the island of Java, where the capital of Jakarta is located, is where the majority of Indonesians live – a whopping 57% or more than 140 million.


Jakarta, the capital and largest city of Indonesia, is already super crowded with more than 10 million populations. The city is predicted to reach 35.6 million people by 2030 to become the world’s biggest megacity. Any foreigner who has been to Jakarta, whether yesterday or 20 years ago, would agree with one thing – the traffic is such a nightmare that it’s beyond salvation.


There is only one solution – relocate or move the capital. After seven decades serving as the capital, President “Jokowi” Joko Widodo announced on Tuesday that the country plans to move the capital city out of Jakarta – burning a mind-boggling US$33 billion in the process. Three locations are under consideration – Palangka Raya, Tanah Bumbu and Penajam – all on the island of Borneo.

Traffic Congestion - Jakarta Indonesia

The most likely candidate is Palangka Raya, currently the capital of the province of Central Kalimantan. But this is not the first time that this city of 220,000 is being speculated to be the next capital of Indonesia. The proposal to move the capital city from Jakarta to Palangka Raya had been discussed even during the Sukarno presidency, the founding father of the country.


The populations of 10 million may not sound a lot to Jakarta. But there are 3 times as many people who live in the surrounding towns, adding pressure to the city’s severe congestion. According to Reuters, President Jokowi approved the plan to relocate government offices away from Jakarta less than two weeks after private pollsters indicated he had won the April 17 presidential election.


The official results are expected to be known only on May 22. Jokowi’s opponent, former general Prabowo Subianto, has refused to concede defeat, even alleging electoral irregularities and claiming that he has won about 62% of the vote based on his team’s internal counting. However, the counts from the reputable pollsters have have proven to be accurate in previous elections.

Indonesia President Jokowi Joko Widodo - Presidential Election 2019 

Even if President Jokowi miraculously loses despite the reputable pollsters showing him winning the popular vote with about 54%, with a lead of between 7.1 and 11.6 percentage points, the next president will still have to decide whether to move the capital out of Jakarta. Bambang Brodjonegoro, Widodo’s planning minister, has offered some information on the relocation plan.


The new capital will be designed to house 900,000 to 1.5 million people consisting of mostly government employees and their families. In essence, the central bank as well as financial and investment authorities would likely remain in Jakarta. The entire project – planning, designing and construction – would take around 10 years and cost up to US$33 billion.


Mr. Brodjonegoro told reporters – “Creating a new capital is not creating a second Jakarta. This new capital is only for the center of government.” This is similar to neighbouring Malaysia where Putrajaya, an idea of Prime Minister Mahathir Mohamad, became the new federal administrative centre when the seat of government was shifted in 1999 from Kuala Lumpur due to overcrowding and congestion.

Jakarta Indonesia Flooding

But overcrowding and congestion were not the only problems forcing President Jokowi to move the capital away. Jakarta faces the growing challenges of sea level rise, which threatens to submerge entire swathes of the city by 2050. According to the World Economic Forum, the capital of Jakarta sits on a swampy piece of land at just 8 metres above sea level.


What this means is 95% of north Jakarta will be underwater by 2050, thanks to the fact that Jakarta’s land is sinking up to 6.7 inches (17 cm) per year due to excessive groundwater pumping. Yes, only a quarter of Jakarta residents have access to piped water, leaving the rest with no choice but to drill for the commodity underground.


In recent years, floods have devastated homes, vehicles, and businesses, particularly in Jakarta’s poorer neighbourhoods. The Economist Intelligence Unit said migrating the capital made sense for long-term development and sustainability. In addition, Borneo has a lower risk of natural disaster. However, not everyone welcomes the idea of losing the capital to Palangka Raya or somewhere else.

Indonesia Moves Capital From Jakarta To Palangkaraya - Map

Chatib Basri, former finance minister and current lecturer at the University of Indonesia, tells the Financial Times that while there was value in the proposal, there was the question of funding – “How do we finance this?” But Jokowi administration would argue that traffic congestion has cost the government an estimate US$7 billion in economic losses each year.


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