A Tale of Two Cities – Jakarta is sinking, but funding for Indonesia’s new capital has yet to surface

by Duncan Graham | Dec 17, 2022 | Energy & Environment, Latest Posts

Indonesia’s capital Jakarta is sinking. Indonesia’s President Joko Widodo plans to build a new capital on Borneo. Despite best intentions and offers of tax incentives and other perks, financing of the $33 billion project remains uncertain, reports Duncan Graham.

Jakarta is is sinking by up to 28cm every year. This isn’t just about climate change, many other factors are at play. As less than half the city’s population has access to piped water, the illegal extraction of groundwater has led to subsidence; some parts of Jakarta even sinking four metres over the past two decades.

For Australians in Fremantle, Darwin, Cairns and other coastal towns listed as at risk from rising seas, the response of authorities in Indonesia’s capital has been a what-not-to-do guide.

With 10.6 million people plus the weight of their homes, offices, factories and roads, Jakarta is facing a double-whammy: It’s often swamped by the rising, more turbulent ocean while sinking into the mud of the Ciliwung Estuary.

Major districts will soon be unliveable. About 40 per cent of the 700 square kilometre metropolis is below sea level, turning streets into waterways every wet season.

Indonesian President Joko ‘Jokowi’ Widodo is a can-do guy. His solution is to shift the capital 1,300 km to the north, call it Nusantara (the old name for the archipelago) and fill with two million bureaucrats by 2045.


From Jakarta to Nusantara (Image by ResearchGate – Creatiive Commons License)

This proposed city is on the under-populated island of Borneo. So far it’s little more than one man’s mega-fantasy, a rival to Naypyidaw in Myanmar (2005), Islamabad in Pakistan (1960) and Brasilia in Brazil (1960).

Queensland University planner Dr Dorina Pojani, has tagged these grandiose schemes as:

Great planning disasters …dreary, overpowering, under-serviced, wasteful and unaffordable. In short, they are extremely expensive mistakes.

Nusantara is currently just a toll road snaking into the jungles of East Kalimantan Province. However deep its boosters drill, the foundations of $A33 billion to support the concept have yet to be found.

Widodo’s six predecessors occasionally glanced at a new city model, but he’s the first to put keys in the ignition, wanting to drive through a Candi Bentar (traditional split gateway) by late 2024.

That’s when his second five-year term as leader of the world’s fourth-largest nation ends. The Constitution says a decade’s enough, so his successor will have the job of keeping the Cats dozing and cranes rising.

Even though underwriters have been wooed with tax holidays they’re playing hard to find. In January 2020 Maritime Affairs and Investment Coordinating Minister Luhut Panjaitan trumpeted the Japanese SoftBank Corporation had $A40 billion ready. The company didn’t confirm but sent staff to take a look.

This March it said it was “passing on the project”. Given SoftBank’s reputation for saying yes to risky projects based on questionable due dligence – WeWork and Wirecard to name a couple – it is not a great endorsement.

Minister Luhut then forgot the rule of no spats when wooing money, blaming SoftBank’s indifference on its recent share price slump. The response from SoftBank executives was blunt: “return of investment unlikely”.

Others noticed. This month the US Bloomberg business website reported:

Not one foreign party—state-backed or private—has entered into a binding contract to fund the project.

Tough bankers expect budgets to blow on greenfield constructions as unforeseen problems arise, so pad loan agreements. Unfortunately, in Indonesia the expansion will be gross, inflated by corruption.

The Republic ranks 96 out of 180 nations investigated by Transparency International. That’s an improvement – it was placed 102 the previous year. Failure to take this evil seriously worries ethical foreign funders. Several countries, including Australia, have laws for citizens who bribe overseas to be prosecuted in their homeland.

The best chance of shifting Jakarta came during the economic boom of the 1970s and 80s. The population was half today’s and awash with dollars shoring up capitalism against the feared ‘Red Wave’ supposedly rolling south from the Vietnam War.

Avarice intervened. By the time citizens got fed up with President Soeharto’s kleptocracy and indifference to civil rights, the 1998 Asian financial crisis was already happening.

Image: Nusantara Post

After 32 years, Soeharto quit. He died a decade later. Ironically the estimated sum of public money he allegedly stole is roughly equal to the budget for Nusantara.

Originally named Batavia by the Dutch colonialists, it became Jakarta when “the father of Indonesia”, Soekarno, declared Indonesia’s independence in 1945. This century Jakarta has grown fatter, uglier and more polluted. Solutions driven more by panic than reason have included banning regional citizens from migrating to the capital – a doomed hope in an open city.

Next came sea walls built in 2002. Five years later the worst storm in recent history smashed the concrete. The Java Sea inrush drowned 80, washed away traffic and ruined thousands of homes. The bill topped US $332 million.

Never again, said the residents, but to no effect. Flooding’s now an annual event with warnings in place till next February, stressing yet again the sense in shifting.

In 2019 Widodo said he’d found the perfect place and set about funding grand PR and advisory committees galore. One includes UAE President Mohammad bin Zayed Al Nahyan and former UK PM Tony Blair.

The chainsaws started growling this July, so your correspondent asked if backers were in place. Matey media flacks who’d earlier offered swags of facts and ‘artists’ impressions’ of the splendid new palace in the ‘green, smart city’ started slamming doors and ignoring calls.


Nusantara – a long way to go. Image by Futuresoutheastasia.com

Other journos were spotting the same red flags. Academics publishing overseas raised questions about consultation with locals, damage to the environment and the emergence of a ‘land mafia’ buying big and rigging prices.

Seemingly unfazed, Widodo continues to say all’s well. On 2 December he told a forum of CEOs in Jakarta that “to my surprise, the first market survey (of Nusantara) was already over-subscribed up to 25 times … I want to focus on investment, not depending on the state budget.”

Widodo can be enigmatic and some subtleties may have been lost in translation, but if the President has watertight contracts tucked into his sarong he’d be naming names and sums with the same energy he’s using to sell ‘the pride of the nation’.

If Indonesians believe the new city will be a goer they’d be asking about compensation for movers, the cost of relocating and a thousand other questions.

They don’t, suggesting Nusantara has only one true believer.

Meanwhile, the sea rises, the rain falls and Jakarta sinks. If it’s on your bucket list, you may want to go there soon.

Rex Patrick: will Timor-Leste become China’s latest aircraft carrier?

Duncan Graham has a Walkley Award, two Human Rights Commission awards and other prizes for his radio, TV and print journalism in Australia. He now lives in Indonesia.

Don't pay so you can read it.

Pay so everyone can.

Pin It on Pinterest

Share This