Indonesian President Joko Widodo inspects an urban development project in Jakarta in a 2014 file photo. Photo: AFP/Romeo Gacad

JAKARTA – President Joko Widodo has named banker Bambang Susantono as the new head of the Capital City Authority (IKN) charged with moving Indonesia’s center of administration from congested Jakarta to Kalimantan in an effort to re-balance the country’s political and economic development.

Previously a deputy transportation minister and with a doctorate in infrastructure planning, Susantono, 58, has served for the past two years as vice-president for knowledge management and sustainable development at the Asian Development Bank (ADB).

With historic achievements in infrastructure and industrial development already behind him, Widodo’s determination to press ahead with his pandemic-delayed US$32.5 billion plan underlines the value he attaches to making the project his crowning legacy.

As host of October’s Ukraine-threatened G20 Summit in Bali, Widodo clearly has no intention of becoming a lame-duck in his final two years in office. That means his endorsement could be key for whoever succeeds him – perhaps as long as the candidate signs on to the new capital scheme.

Skeptics are already expressing doubt that enough progress can be made in building core infrastructure, including a new presidential palace and parliamentary complex, to get the new capital city of Nusantara to a point of no return.

It will be a major challenge for Susantono, reportedly a second choice behind Basuki “Ahok” Purnama, the ousted Jakarta governor and chairman of the Pertamina state oil company’s board of commissioners who is said to have turned down the job.

Speculation over who would get the post intensified recently after Widodo told editors he was looking for someone with an architectural background – a description fitting that of West Java Governor Ridwan Kamil, a US-trained architect whose term of office ends next year.

Prior to the governorship, the 50-year-old presidential hopeful served for five years as mayor of Bandung, the country’s fourth-biggest city where he introduced a series of modern innovations in health services, transportation and waste disposal.

The IKN is a ministerial-level institution, which will take charge of building and eventually managing the city; the population of East Kalimantan, the province with the highest per capita income outside Jakarta, is expected to surge from 3.7 million to 11 million as a result of the move.

New IKN head Bambang Susantono in a file photo. Image: ADB

Unlike Jakarta and other regions with a district legislative council, the newly-constituted IKN will hold all the political power, formulate policies and govern at the same time. The chairman will answer only to the president, which some legal experts say may be incompatible with the 1945 Constitution.

When the pandemic struck in early 2020, it was assumed the ambitious project was dead in the water. But after a year of delays, the House of Representatives (DPR) passed legislation last month laying down the legal framework for the new administrative center.

That demonstrates Widodo is still very much in charge of his ruling seven-party coalition and determined to overcome opposition from a skeptical political elite and a powerful bureaucracy in fulfilling a dream he first raised during a Cabinet meeting shortly before his re-election in 2019.

What could yet hinder progress is a Constitution Court challenge, similar to that which has delayed the full implementation of the 2020 Job Creation Omnibus Law. Critics claim the new capital law’s swift 40-day passage through Parliament did not allow for sufficient public hearings.

Justices on the country’s highest court are clearly worried that a lack of an effective parliamentary opposition is allowing the ruling coalition to ride roughshod over democratic processes. Only the Justice and Prosperity Party (PKS) is usually a dissenting voice.

Unlike new custom-built capitals in other countries such as Australia, Brazil and Kazakhstan, Nusantara will be in the center of an economically-viable region rich in natural gas, coal and palm oil plantations – and free of natural disasters.

Covering 256,000 hectares, it will cost $32.5 billion spread over at least 15 years. But in a change from the original financing scheme, 53.5% will come from the state budget, a major increase over the original 19.2%, with private-public partnerships, international and domestic investors and state-owned enterprises expected to weigh in with the balance.

Officials say that the first phase of the project carries a price tag of $7.6 billion, with an annual allocation set aside in the state budget for each of the next two years to pay for as much as $3.2 billion in basic infrastructure development in the capital’s core area in Penjaman Paser North district, northwest of the provincial capital of Balikpapan. 

Map: Twitter

Finance Minister Sri Mulyanti Indrawati initially proposed using funds from the national economic recovery program (PEN), allocating $12.6 billion of the $32.3 billion 2022 PEN budget to get the project off the ground.

But that idea was shot down by the DPR, which argued that it violated the State Financial Policy and Financial System Stability Law passed in 2020 to handle the economic fallout from the pandemic.

During the construction phase, funding allocations will be in accordance with the Nusantara Master Plan or the government’s Medium-term Development Plan. The new authority can levy special taxes or other levies, but only after receiving the approval of the DPR.

Widodo wants to move the presidential palace and four ministries – foreign affairs, defense, home affairs and finance – to Kalimantan by 2024, but little has been said about the challenges presented by having to tackle that at the same time as the February 14, 2024, legislative and presidential elections.

Only some of their core functions are expected to move at that time, leaving some departments in Jakarta – at least for the foreseeable future. Even when the capital has been re-located, Jakarta’s status as the main trade and business center means there will still be a substantial government presence.

The government owns the majority of the land set aside for the capital, mostly expanses of plantations and undulating hills covered with acacia trees and secondary growth, which it can take back at any time.

Part of that includes a large tract covering the city’s central zone currently occupied by Singapore-based agribusiness billionaire Sukanto Tanato, who acquired it from Hashim Djojohadikusumo, the younger brother of Defense Minister Prabowo Subianto.

Motorists commute through a traffic jam in Jakarta. Photo: AFP / Bay Ismoyo

Together, the two palm oil tycoons reportedly control 2,179 square kilometers of state-owned concessions in North Penajam Paser, and neighboring Kutai Kartenagara and West Kutai districts.

But there appears to be little substance to media claims that they and other concession holders will make a killing from land speculation, a common practice ahead of major government projects.

Former research and technology and national development planning minister Bambang Brodjonegoro, who played a major role in planning the new capital, has said the government will raise some of the money for the project from “asset management” – the sale and rent of government offices in choice locations across Jakarta where land prices are as high as $5,100 a square meter.