Construction of Indonesia’s new capital has been hit by a public financing roadblock, with no budget to develop the city this year so far forthcoming, according to local media reports.
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A plan to move Indonesia’s civil servants to Ibu Kota Nusantara (IKN) in East Kalimantan has also been delayed, the latest of several postponements.
Speaking to journalists after a meeting in Jakarta, Indonesia’s current capital, on Thursday, the minister of public works Dody Hanggodo told journalists that the budget for IKN for 2025 had been blocked by the finance ministry.
Dody’s comments came the day after the Nusantara Capital City Authority chairman Basuki Hadimuljono claimed there would not be a budget cut for the second phase of Nusantara’s development.
Confusion over the funding available to build the next phase of city comes amid an efficiency drive initiated by new President Prabowo Subianto, who wants to rein in public spending this year.
Dody said he was working on finalising the public works ministry’s budget, which has already been cut to IDR29.57 trillion ($US1.8 billion) as a result of instructions from Prabowo.
IKN has been estimated to cost in the region of US$35 billion to build.
So far, two palaces, Garuda Palace and the State Palace, in the Central Government Area (KIPP) have been completed, as well as some buildings to house government workers, in the first phase of construction.
According to sources, construction of IKN is likely to focus only on ongoing projects this year, and new infrastructure will be shelved due to budget constraints.
A project conceived under the leadership of previous president Joko Widodo, IKN has been promoted to the world as a “smart forest city” equipped with cutting-edge technology and built with sustainable and inclusive principles.
Though the new capital concept is publicly backed by Prabowo, who has said he wants the new city to be Indonesia’s political capital by 2028, the project has faced financing issues from the beginning.
The Indonesian government is to finance the initial phase of the development, but the rest – 80 per cent of the project’s value – must come from private investment. This funding has been slow to materialise.
Experts have warned that Nusantara could become another Forest City, the $100 billion development project in Malaysia’s Johor state that ran into financial trouble and is now only 10 per cent completed and 1 per cent occupied.
Feelings about the new city are mostly positive among visitors to the site, particularly people from Kalimantan, who are excited to see Indonesia’s centre of political and economic gravity shift eastwards. Revenues from the province’s vast resources of minerals and palm oil have traditionally flowed to Jakarta, the metropolis the new city is being built to replace.
Vast swathes of rainforest have already been cut down to make way for the new capital, which has raised concern among Indigenous groups and local communities who have lost their homes to the development.
