Indonesia’s faltering, $35bn plan to build a brand new capital city on the island of Borneo started 2025 with a reduction in government funding and a snub from the country’s new sovereign wealth fund.
In January, the country’s new president, Prabowo Subianto, allocated 48.8 trillion rupiah, or $2.98bn, for housing and government offices through 2029 in Nusantara, as the city in East Kalimantan province is known, Reuters reported.
That’s a significant reduction on the 75.8 trillion rupiah – $4.63bn – his predecessor Joko Widodo, who championed the project, spent between 2022 and 2024, Reuters notes.
While in office, Joko held to his goal of moving the government to a 6.6-hectare zone with new ministry buildings, the State Palace, the House of Representatives, and housing for some 50,000 civil servants by 2024.
Now, that target has been pushed back to 2028, Reuters reported.
Just Google it
Amid tightening fiscal constraints, the ministry of public works on Friday cancelled a design team’s mission to travel to Turkey, India and Egypt to study the designs of their judicial and legislative buildings, saying the research could be done online.
“Due to budget constraints, the comparative studies may not be necessary. We can access the information through Google,” said public works minister Dody Hanggodo, Jakarta Globe reports.
Wealth fund snub
Nusantara proponents were further disappointed this week when it emerged that Indonesia’s new sovereign wealth fund, called Danantara, would not prioritise funding the new city.
On Monday, presidential spokesman Hasan Nasbi said the fund’s initial capital of $20bn would prioritise industrial sectors such as nickel, bauxite and copper mining, data centres, oil refineries, aquaculture and renewable energy, reports The Jakarta Post.
It noted that the Nusantara Capital City Authority had hoped for some of that money.
“If I’m not mistaken, Danantara is meant to invest using dividends from state-owned enterprises,” said the authority’s head, Basuki Hadimuljono.
“I’d love for [Nusantara] to get a small cut. Hopefully, we get a share of the program.”
Trickle of investment
When Joko Widodo launched the plan for a new capital in 2019 – on grounds that subsidence would make Jakarta unfeasible – the idea was that private investment would cover around 80% of its projected cost.
But despite offering lavish tax incentives, there has only been a trickle of foreign investment so far.
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