"The burden Jakarta is holding right now is too heavy as the centre of governance, business, finance, trade and services," said Indonesian President Joko Widodo.

By Ian Horswill

Posted on August 27, 2019

Jakarta, Indonesia’s massive capital city, has been the beating heart of the economy, culture and politics of the nation since 1949. It is a melting pot of numerous cultures that boasts at least 10 million people in the city and it is a city that never sleeps.

Financial institutions such as the Bank of Indonesia, Indonesia Stock Exchange, and corporate headquarters of numerous Indonesian companies and multinational corporations are located in the city. It is also home to the Association of Southeast Asian Nations, making it an international meeting place. It is also famous for traffic congestion and pollution.

However, Jakarta, is built largely on a swamp and it is sinking into the Java Sea at the rate of up to 17 cm (6.7 inches) per year. It is becoming increasingly prone to flooding with the sea level rising.

Indonesia’s President Joko Widodo announced on Monday that the capital city is moving to East Kalimantan on the island of Borneo, famous for its orang-utans and home to just over 16 million people.

Widodo estimated the process of moving would cost US$33 billion process with the move by 2024. However, he added that the government only plans to fund 19% of the total – US$6.27 billion. The rest of the money would come from public-private partnerships and private investment. The price tag includes new government offices and homes for about 1.5 million civil servants.

According to the International Monetary Fund database, Indonesia’s general government gross debt is estimated at 29% of its GDP, the second lowest among the 10 member states of ASEAN only after Brunei, but the ratio has risen nearly 5% in the past five years.

Borneo, where the new capital city will be built, is famous for its orang utans.

The proposed location is near the cities of Balikpapan and Samarinda, and Widodo acknowledged that moving the country’s capital to the island will be a mammoth and expensive undertaking.

“It is a strategic location at the centre of Indonesia, close to growing urban area,” Widodo told a news conference at the Jakarta state palace.

Balikpapan is home to oil refineries and a port, making it the economic centre of Kalimantan. Samarinda is the capital of East Kalimantan Province. Compared with other parts of Kalimantan previously considered, much of the necessary infrastructure is already in place. Both cities have an international airport, and they could be connected to the rest of the island via highways and railways, Nikkei Asian Review reported.

“As a large nation that has been independent for 74 years, Indonesia has never chosen its own capital,” Widodo said in a televised address to the nation. “The burden Jakarta is holding right now is too heavy as the centre of governance, business, finance, trade and services.”

Indonesia owns the majority of Borneo, the world’s third-largest island, with Malaysia and Brunei each holding regions in the north. The island is covered in vast rainforests, but it has been hit by rampant deforestation in recent years.

Indonesia’s National Development Planning Minister Bambang Brodjonegoro said that half of the total allotted 180,000 hectares for the new city will be “green space” and that protected rainforests in the areas will stay untouched. He also said the new capital will be concentrated on 40,000 hectares in Bukit Soeharto, a forested area between Panajam Paser Utara and Kutai Kartanegara districts.

Widodo’s announcement comes as Indonesia’s president enters a second term after securing a resounding electoral victory earlier this year.

Indonesia is not the first Southeast Asian country to move its capital. In 2005, Myanmar’s ruling generals moved to Naypyidaw, a town in hills some 320 km (200 miles) away from the colonial era capital, Yangon. In the 1990s, Malaysian leader Mahathir Mohamad built an administrative capital in Putrajaya, about 33 km (20 miles) from Kuala Lumpur.