Indonesia’s $33B Capital Relocation Plan Is Imploding | WSJ Breaking Ground

Summary

Jakarta, facing the threat of being submerged by 2050, prompts Indonesia to plan a $33 billion capital relocation to Nusantara on Borneo. Aiming to modernize and reduce inequalities, the project faces challenges with investor withdrawals, construction delays, and environmental concerns. Despite the promise of a high-tech, renewable energy-powered smart city, the project's viability hinges on securing funding, political support, and public belief in its necessity.

Takeaways

• 🌊 Jakarta is facing an existential crisis with about 1/3 of the city expected to be underwater by 2050 due to being the fastest sinking city in the world.
• 🗺️ The Indonesian government plans to move the capital from Jakarta to Nusantara on the island of Borneo to modernize the country and promote environmental sustainability.
• 💰 The project in Nusantara is budgeted at $33 billion, with an initial goal to be completed by 2045, but it faces challenges with investor withdrawal and slow progress.
• 🏙️ Nusantara is strategically located in East Kalimantan on Borneo for its lower risk of natural disasters and central location, aiming to redistribute wealth and resources from Java.
• 📈 Java currently dominates the national economy, accounting for around 60%, and Jakarta has been the capital since Dutch colonial times.
• 💡 Nusantara is promoted as a high-tech, smart city powered by renewable energy, with plans for housing and infrastructure to support 2 million people.
• 🚢 The new capital's central location is key for improving shipping and connectivity between islands, potentially enhancing Indonesia's role in global trade.
• 🤔 Public opinion on Nusantara is divided, with some viewing it as an enlightened step and others as a vanity project with unclear benefits.
• 🏗️ The first phase of construction, focusing on the governmental zone, is set to complete in 2024, but is facing delays due to severe weather and logistical issues.
• 💼 The Indonesian government has only pledged 20% of the total budget, struggling to secure the rest through investments, with SoftBank withdrawing from negotiations in 2022.
• ♻️ Critics argue that the promises of Nusantara running on renewable energy are at risk, as Indonesia lacks sufficient renewable sources, and the project could accelerate deforestation and displace indigenous people.

Q & A

Why is Jakarta facing an existential crisis?

Jakarta is facing an existential crisis due to its rapid sinking, with about 40% of its area already below sea level, and it is predicted that one-third of the city will be underwater by 2050.

What is the Indonesian government's solution to Jakarta's crisis?

The Indonesian government plans to move the capital from Jakarta to Nusantara on the island of Borneo to address the crisis.

What are the goals of the Nusantara project?

The Nusantara project aims to modernize Indonesia, reduce regional inequalities, promote environmental sustainability, and redistribute wealth and resources from Java.

What are the challenges faced by the Nusantara project?

Challenges include investors pulling out, project heads resigning, construction delays due to severe weather and logistical difficulties, and concerns about meeting deadlines.

How much is the Nusantara project budgeted to cost, and what is the current funding situation?

The Nusantara project is budgeted at $33 billion, but the Indonesian government has only pledged 20% of that and is struggling to acquire the rest through domestic and foreign investments.

What is the strategic location of Nusantara and why was it chosen?

Nusantara is strategically located in East Kalimantan on Borneo due to its lower risk of natural disasters and its central location within Indonesia, which is beneficial for better connectivity between islands and international shipping trade.

What is the initial goal of the Nusantara project, and has it been achieved?

The initial goal of the Nusantara project was to be completed by 2045, but with various setbacks, it is uncertain if this timeline can be met.

How does the Nusantara project plan to address environmental concerns?

Nusantara is promoted as a high-tech city powered entirely by renewable energy, with plans to be a smart city and to run entirely on renewable energy, although there are concerns about Indonesia's capacity to meet this goal.

What is the public opinion on the Nusantara project?

Public opinion is split, with some seeing it as an enlightened step by President Joko Widodo and others viewing it as a vanity project with unclear benefits for Indonesia.

What are the potential consequences if the Nusantara project fails?

If the Nusantara project fails, it could lead to a waste of billions of dollars that could have been better spent elsewhere, damage to Indonesia's reputation, and a disconnection between the majority of Indonesians and their government.

How does the Nusantara project plan to impact the Indonesian economy and regional development?

The project aims to redistribute wealth and resources from the Java-centric development model to other regions, establishing new port infrastructure to improve connectivity and potentially allowing Indonesia to play a greater role in global shipping trade.