Indonesia starts building its new capital

Indonesia has eventually broken ground on its new capital Nusantara to be constructed in East Kalimantan on Borneo Island with plans to complete the city’s first phase of development by 2024 with government funding, Bloomberg News cited Bambang Susantono, head of the newly inaugurated Nusantara Capital City Authority, as saying. Phase one of the project is costing about 50 trillion rupiah ($3.36 billion) which will be funded completely by Indonesia’s 2022-2024 state budget, Susantono said. It will comprise largely government buildings, as well as schools, hospitals and entertainment amenities such as shopping malls. Work has eventually begun, including clearing land…

Indonesia has eventually broken ground on its new capital Nusantara to be constructed in East Kalimantan on Borneo Island with plans to complete the city’s first phase of development by 2024 with government funding, Bloomberg News cited Bambang Susantono, head of the newly inaugurated Nusantara Capital City Authority, as saying.

Phase one of the project is costing about 50 trillion rupiah ($3.36 billion) which will be funded completely by Indonesia’s 2022-2024 state budget, Susantono said. It will comprise largely government buildings, as well as schools, hospitals and entertainment amenities such as shopping malls. Work has eventually begun, including clearing land and creating access roads for workers. 

Overall, 80 per cent of financing for the $34-billion project will come from the private sector, he added, noting that discussions with investors are ongoing and Indonesia is likely to consider a bond issuance later on.

In line with plans

The planning for the city is “on track,” Susantono further said. The target is to have around 1.7 million to 1.9 million people residing in Nusantara by 2045.

Authorities earlier said the city is set to derive all its energy from renewable sources, dedicate ten per cent of its area to produce food and ensure 80 per cent of mobility is supported by public transport, cycling or walking.

Private investors sought

To achieve all those long-term goals, Indonesia will rely heavily on the private sector and community fundraising, Susantono said. But efforts to raise funding for the new capital were dealt a blow after SoftBank Group founder Masayoshi Son decided to withdraw from the project.

However, there is still interest among a range of small, medium and large-sized companies, Susantono said, without providing details.

Indonesia has also been courting foreign investors — from Saudi Arabia to China — and in July, Russia’s President Vladimir Putin offered to have Russian Railways invest in Nusantara.

Tax incentives to attract residents and companies

To encourage domestic migration to the new capital, Indonesia will offer lower income taxes to Nusantara residents and a special tax holiday for companies that move their headquarters there.

“But I do believe that if this is a city for the people, this is a city for all and it is not for a particular government administration, then it will be self-programmed,” Susantono said. “Then it will be unstoppable.”