A white elephant in the jungle needs a diet of dollars
Joko ‘Jokowi’ Widodo is scheduled to visit Australia next month, his fifth and likely last trip south as Indonesian President. He’ll be talking trade, querying the AUKUS deal and again urging better visa access for his citizens. However, there’s an extra item in his baggage.
The word from Canberra is that Jokowi will be shopping for lithium for his nation’s Chinese-brand electric vehicle factories in a bid to export cars to Australia. But the leader of 275 million people in his second and final five-year term will be driving another agenda, as he does at every opportunity.
He wants foreign investors to back a project which he hopes will define his legacy after a decade of running the world’s fourth most populous nation. His idea is big, ambitious and risky - shifting the overcrowded, over-polluted and over-stressed capital from Java 1,300 km north to Borneo.
Indonesia holds 73 per cent of the island which it calls Kalimantan. The rest belongs to Malaysia and Brunei.
Jakarta’s population is 11 million, triple that number if the greater metro area is included. Java has 145 million, Kalimantan 17.5. Indonesia’s population growth rate is 1.1 per cent.
The case for taking the weight off Jakarta - literally because it’s sinking in parts at 25 cm a year - is watertight. But why not build new in Java, particularly as it’s reported Jakarta will remain the nation’s commercial and financial centre?
The resolute president explained the selection was not by geography but geometry: ‘We want the relocation to demonstrate the idea of Indonesia-centric instead of Java-centric. We have drawn a line from west to east, north to south, and found the centre at East Kalimantan province.’ That’s a short walk from the equator.
Maybe he should have checked next door in more practical Malaysia where the administrative and judicial centre is Putrajaya. It’s only 32 klicks south of Kuala Lumpur which remains the nation’s capital. The 1999 shift was pushed by some of the same factors now threatening Jakarta.
Jokowi consulted many about his vision but Queensland University planner Dr Dorina Pojani, author of Trophy Cities, was not among them:
‘The new capitals created since 1900 have been, for the most part, great planning disasters. They are dreary, overpowering, under-serviced, wasteful and unaffordable. In short, they are extremely expensive mistakes.’
Her book claims that in 1900, the world had only around 40 capitals; now there are nearly 200 with five more planned.
Work on the new city of Nusantara (‘archipelago’ in Sanskrit) has so far been funded by the State. But if the US $ 35 billion-plus project is to rise from a 56,000-hectare site in the jungle by next year it will need megatonnes of foreign fiscal fertilisers.
Through past visits by Australian bankers Jokowi knows of his southern neighbour’s cashed-up super funds (currently holding $ 3.5 trillion), so is offering tax holidays, deductions, zero withholding tax and many other goodies. There are reports that the project already has ‘commitments’ from investors in UAE, China, South Korea, and Taiwan and ‘offers’ from European countries.
However no independent verifiable details from the Ibu Kota Nusantara (capital city authority) as the agency refuses to respond to inquiries by this correspondent or allow a site visit.
So we don’t know whether these are hard deals or daydreams. Probably the latter; if ink had dried on watertight contracts then Jakarta would be crowing loud so others would dash to the trough.
In January 2020 the public was told Japan’s SoftBank Corporation had US $40 billion ready to lend. Staff were sent to peer and ponder before saying no thanks.
Late last year the US Bloomberg business website reported: ‘Not one foreign party—state-backed or private—has entered into a binding contract to fund the project.’
Potential investors may see a chance to earn hefty returns from building infrastructure and, of course, a grand palace for the next president, but will the elected one maintain Jokowi’s enthusiasm?
There are currently three contenders for the top job. The present leader is Central Java Governor Ganjar Pranowo, a member of Jokowi’s party and said to be in favour of Nusantara. Likewise his rivals, disgraced former general Prabowo Subianto and former Jakarta Governor Anies Baswedan.
Building the new capital is now law so the project must proceed. But there’s nothing in the legislation about pace, or a clause stating that if money can’t be prised out of foreigners, the ‘city of tomorrow’ has to be given priority over health, education and other demands on the national budget
In any future financial crisis Nusantara would be an early sacrifice. The public servants scheduled to move from their homes, families and friends in Jakarta are not as keen on Nusantara as their boss.
Once he’s gone back to his home in Solo, Central Java next year, their opposition will be easier to express. Unlike Australians, Indonesians are reluctant re-locators.
The present schedule has 17,000 government workers moving north in 2024 with 60,000 more shifting a year later. All will require homes, schools, hospitals and all the other necessary facilities and services for a modern metropolis.
Also needed will be squadrons of small entrepreneurs to care for householders’ needs as they do in Java; they’ll probably seek help to try their luck in a new and uncertain market - an expense outside the present budget.
China has been the major investor during Jokowi’s rule, tipping billions of renminbi into toll roads and nickel smelters. These cash generators offer more certain dividends than a possible white elephant.
The other worries for Western investors are corruption (Indonesia ranks 110 / 180 on Transparency International’s World Scale where zero is pure) and the reported shrinking of democracy which includes adherence to the rule of law.
All investments in dreams are perilous, but Nusantara looks more disturbing than most. In the July chill of Canberra the normally reserved President will be hard pressed to energise the enthusiasm of Australian fund managers.
First published in Indonesia at Melbourne, 13 June 2023: https://indonesiaatmelbourne.unimelb.edu.au/indonesias-white-elephant-in-the-jungle-will-be-reared-on-foreign-capital-or-will-it/
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