Bloomberg Audio Studios, Podcasts, radio News. Hey, it's wanha Heir from the Big Take team. Today we want to share with you an episode about Indonesia trying to build a new capital city from scratch. Now, this ambitious plan was a crown jewel of former President Joko Wadodo known as Jacobe. This episode was first published in September when Jacob was still in office, and since then Indonesia's got a new president, Proboo Subianto, and he says he's committed to building the
new capital. But how do you replace a century's old capital city and convince millions of people to uproot their lives and start anew Jakarta, Indonesia's biggest city, is in trouble right now.
So many vehicles on the roads at one time. It makes the city overcrowded and congested and polluted.
Forres Mark dar is a Bloomberg government reporter based in Jakarta.
The pollution, or hayes was so bad. It is a very very common sight. If you walk down the streets, there are people wearing masks and traffic is so bad people actually do meetings in cars.
The gridlock costs an estimated six and a half billion US dollars a year in lost productivity for the greater Jakarta area. And on top of that, the city itself is sinking.
I think forty percent of Jakarta the capital is under sea level, and in some parts of northern Jakarta it's sinking eleven inches a year.
Some of the hottest hit areas have really subsided by more than sixteen feet in terms of high that's slightly shorter than a two story apartment if you can visualize it. Experts say the city only has until twenty thirty to figure out how to stop the sinking and breathing, mass flooding, and millions getting displaces.
Jagarta is home to more than ten million people and is the center for the Indonesian government. So what's the country to do when it's capital is overwhelmed by explosive growth. In the case of Indonesia, the world's fourth most populous country, the answer is to build a new one from scratch. The new capital is a huge priority for the country's president, Djokovidodo, better known as Jacoe, who sees it as an opportunity
to help transform Indonesia into a high incomnation. So it's in the same league economically as other countries in the region such as Japan and China.
Under Jakoby's Tenye Tanio, he has gone on this ambitious, massive infrastructure spree, costing hundreds of billions of dollars. He's building the hardware because the unnecessary for Indonesia's long term economic growth, and this new capital is say is not just the crown jewel of Jocoi's ambitious infrastructures free, it is also the centerpiece of his legacy.
Here's President Jacobe talking to Bloomberg about the project in twenty nineteen.
Hopefully few people will drive cars. A green city, a smart city, and a forest.
City for a city.
In August, there was a big party for the new capital city called Nucenthara. Eight thousand people were supposed to cheer the inauguration of the city, but the inauguration that had been planned didn't happen. In the end, the celebration, which was pegged to the country's independence day, was muted. Just thirteen hundred people attended against a backdrop of half completed buildings and construction cranes, and for now Jakarta remains the official capital.
The satellite images that we acquired. I mean you can look that road sustain being laid out. Workers have said that, you know, during rainy season it's tough to construct. The land is a very muddy. The project really is still at its infancy.
Welcome to The Big Take Asia from Bloomberg News. I'm Wanha. Every week we take you inside some of the world's biggest and most powerful economies and the markets, tycoons and businesses that drive this ever shifting region. Today on the show, Indonesia's ambitious project to build a new capital city from the ground up is falling short, and its biggest champion, President Jacoe, is running out of time to track the investment needed to finish it. What's likely to happen next,
and what's at stake if the project fails. The idea of moving Indonesia's capital was brought up by the country's first president way back in nineteen fifty seven, but it wasn't until twenty nineteen that President Djoko Wadodo formally announced the plan to relocate the capitol. He pitched it as a new, green, high tech city that would take pressure
off the sinking and congested capital city of Jakarta. Here he is in twenty nineteen, talking to Bloomberg editor in chief John Michaelswaet about his vision, Hanya.
Go.
We are moving the capitol to Kalimantan because there are no earthquakes, no floods. We want to have an efficient and effective capital where we can walk, we can ride bikes, we can use public transportation. Hopefully few people will drive cars.
Jacobe said he wanted Nucenthara to have an environmentally friendly transportation system and that he wanted the city to achieve net zero carbon emissions. That's a far cry from the crippling traffic, gridlock and air pollution that's challenging the current capital.
The idea is they are learning from the experiences of Jakarta.
Here's Bloomberg's far As Makdar again.
They do not want congestion. They certainly do not want that many cars or bikes on the roads. They definitely do not want to have polluted air. It wants the new capital to be this smart forest city powered by renewables.
And Jacoby and other leaders also see the new capital as a way to spread wealth more evenly across the country instead of it being so concentrated on the island. Of Java where Jakarta is. Here's President Jacobi again.
ATADITOA.
One hundred and fifty million people are in Java, but we have seventeen thousand islands. Fifty eight percent of GDP is concentrated in Java. We need to distribute the population and economy to other islands. Em Gone.
The government said it expects the new capital to create more than four million jobs over the next two decades and to help attract new foreign investment to what is Southeast Asia's largest economy. But building a new city isn't easy, especially when that new capital is more than six hundred miles away on a different island in the Borneo Rainforest. In Indonesia's multi billion dollar new capital has been plagued
with problems from the start. Forrest says the plan to gradually move more than ten thousand civil servants, the president and his cabinet to the new capital has already been postponed twice.
The relocation plans have definitely been pushed back. They are still testing out the water supply and also to make sure that the water is clean. There's also issue of access to electricity that's still being hashed out, but it's basically far from complete.
Satellite imagery that Bloomberg obtained shows as recently as mid July, nearly one hundred acres of land around the heart of the city. It's just dirt and standing water. Construction is complete at just one office building that will be used by government agencies, and when civil servants do arrive, they may have to share rooms and work from temporary quarters
such as cafeterias. And even the project's champion, President Jakoe, admitted that his first night in the new unfinished presidential palace was rough.
Reporters actually asked him, you know, how is your first night sleeping here? And he was like, it wasn't good. Oh really, yeah, and it will take some time getting used to. And so what you're saying now is a more tempered response. They are essentially walking back on that optimism because it is far from ready, and Jokobi himself said that the project is only fifteen percent complete, so no one is moving there at this point in time.
Well, I guess the bigger question is do people even want to move there even if it's ready.
That is a good question because even when the idea was made public, there was initial skepticism and that skepticism grew over the last couple of years, primarily because this is a near capital that is located in the middle of nowhere. It's in the middle of the jungle in the island of Borneo, far from like you know, the fancy bars and restaurants of Jakarta, far from the shopping madels and all that far It says.
The government has been offering tax incentives to civil servants and even came out with a plan targeting those who were single to move there, but he said the response has been less than enthusiastic.
According to local media reports is that these civil servants didn't want to move. Some of them either resigned from the government, some asked for postings outside of Jakarta in the other provinces, and some of the singles also chose to get married and have kids. They are finding any excuse they can to not move.
Another group of people who've been less than enthusiastic about the new capital are private investors. According to the official estimate, the project is expected to cost roughly twenty nine billion dollars, and the government has said eighty percent of that cost will need to be covered by private investors, both local
and foreign. Initially, foreign investment did look promising. Companies like SoftBank offered to invest up to forty billion US dollars toward the project, but before construction even began in August of twenty twenty two, they pulled out. SoftBank declined to comment on its decision.
They didn't specify why EZACLY or gave any clear reasons or explanation, but that sent the signal that hey, maybe they did not have confidence that Indonesia could pull off this project.
After the break, Can Indonesia raise the money it needs to finish the new capital and what will it mean for the country and the rest of the world if it fails. So far, Indonesia has spent around four point six billion dollars to finance its new capital city, Nucenthara, but it estimates it needs over twenty four billion more to complete the project. The government wants that money to come from local and foreign investors, but so far local
investors haven't seen that interested. Despite incentives like tax breaks and long term property rights, Nucentaura has attracted less than three point two billion dollars in local investments. And as for foreign investors.
What has been happening in the last couple of years is that Indonesia has yet to secure a single foreign private investor in the new capital city, and so the financing is stuck in that sense, and that adds to the complications of building this new capital city.
Back in twenty nineteen, there was serious interest in the project from foreign investors. So why has that interest dwindled?
I think a key part of that is basically because you know, number one, it is really a gargantuan project. It is super ambitious, and you know, there is a concern whether Indonesia can pull it off. Now, another key factor was that this project, you know, the construction started
at the tail end of Djocovi's residency. And so what happened from twenty tweeny two onwards was that a lot of the foreign investor community they adopted a weight and see approach because they did not want to be in a situation where I invest my money right now hundreds of millions or more, only for the project not to advance under a new administration.
The change in leaders comes at a time when Indonesia is under pressure to spur economic growth and forre says the country's next leader, President elect Proboo Subianto, has his own agenda.
His very focused on welfare policies such as distributing females to children, ramping up healthcare infrastructure, boosting the quality of education, making sure that the housing infrastructure for the low income Indonesians are met, and that will require a lot of spending.
Proboo said he's committed to continue and if possible, finish the new capital.
The key question when it comes to the construction of the new capital city will be what is the pace of the construction. So what the analysts have pointed out is that what future administrations can do is perhaps prolong it or delay it.
Plagued by construction delays in financing woes, far says it will take years before Indonesia and the rest of the world will know. If this megaproject ultimately pans.
Out, Indonesia could actually be offering a blueprint and a template for other emerging markets. It will offer the other countries a lot of learning points, a lot of lessons, and it would be Indonesia's great success story if they
can pull it off. Now, there is also the other scenario, which is all doman gloom, that this could end up as a total failure, that this new capital might not actually take off because given that they've already missed the first dateline of construction, that isn't really inspiring confidence that Indonesia can pull off such an ambitious real estate project. And should it really not take off, then Jocob we could end up in the history books for the wrong reasons.
This is the Big Take Asia from Bloomberg News. I'm wan ha. This episode was produced by Young Young Naomi, Jessica Beck, and Adriana Tapia. It was edited by Caitlin Kenny, Jeff Grocott, Lisa Bayer, and Claire Jow. It was mixed by Blake Maples and fact checked by Jessica and Eddie Duane. Our senior editor is Elizabeth Ponzo. Nicole Binksterbower is our executive producer, and Sage Bauman is Bloomberg's head of Podcasts.
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