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Jakarta Post

Jokowi's capital relocation dream faces COVID-19 hurdle

  • Marchio Irfan Gorbiano and Dzulfiqar Fathur Rahman

    The Jakarta Post

Jakarta   /   Tue, April 14, 2020   /   07:29 pm
Jokowi's capital relocation dream faces COVID-19 hurdle One of the biggest challenges in relocating the capital is financing. The National Development Planning Agency (Bappenas) predicts that the relocation of the capital will cost at least Rp 466 trillion (US$29.73 billion). (Antara/Akbar Nugroho Gumay)

It is looking more and more likely the COVID-19 outbreak will derail President Joko “Jokowi” Widodo’s ambitions to move the capital from densely-populated Jakarta, with most of the preparatory work delayed as the government’s shifts its focus to tackling the pandemic.

The disease has severely affected economies around the world and forced most into austerity mode to avoid a recession. Public spending has been shaved and high-cost infrastructure projects have been shelved as a result, with more likely to come.

Coordinating Maritime Affairs and Investments Minister Luhut Pandjaitan said on Tuesday that the government was currently not in the position to say whether or not it would go ahead with the capital relocation project, as it was busy handling the coronavirus outbreak in the country.

Deflecting previous criticism painting him as a money-hungry power broker, Luhut said the President Jokowi did not even have any opportunity to evaluate the project. “We haven’t done anything on that front because the President is focused on the COVID-19 problem,” Luhut told reporters in a virtual interview from Jakarta on Tuesday.

Last week, Public Works and Housing Minister Basuki Hadimuljono said that his office was not allocating part of its 2020 budget for preliminary construction work on the site of the new capital, adding that Jokowi would have the final say over the matter.

“The authority to cancel, delay or continue construction of the new capital rests in the hands of the President,” Basuki said in a video conference last week, as quoted by kompas.com.

As of Tuesday, Indonesia had recorded 4,839 confirmed COVID-19 cases across the country, with 2,335 recorded in Jakarta. The disease has claimed 241 lives in the capital city alone, with 163 people having recovered, according to official Health Ministry data.

The government had initially planned early this year to fast-track construction of the new capital, with a “soft groundbreaking” event planned for July before the next phase of development begins in 2021. It also planned to finalize the city’s master plan and pass a new law to consolidate the process following deliberations with House of Representatives lawmakers.

The public works ministry’s Cipta Karya (human settlements development) director general, Danis Sumadilaga, refused to comment when asked whether the government was still on target to carry out the groundbreaking amid the COVID-19 outbreak, referring queries to the minister.

The National Planning Agency’s (Bappenas) regional development deputy Rudy Soeprihadi Prawiradinata said separately that some activities relating to the new capital’s preparatory work, including field surveys, would have to be postponed due to the government’s focus on combating the virus outbreak.

Rudy has, however, offered an assurance that the agency would continue its work to prepare the necessary regulatory framework for the capital relocation project, in which Bappenas has been involved since the early stages of planning after Jokowi commissioned a feasibility study in 2017.

“We are working to ensure preparatory work goes ahead. We will do what can be done with all the challenges because we are also focusing on tackling the COVID-19 [crisis], which is our main problem [right now],” said Rudy.

A draft bill on construction of the new capital has already been submitted to the State Secretariat. A presidential regulation (Perpres) to set up an authority to oversee the relocation requires Jokowi’s signature to be passed, Rudy said.

Jokowi announced in early March four candidates to head the new capital authority: PT Pertamina president commissioner and former Jakarta governor Basuki Tjahaja Purnama, Research and Technology Minister Bambang Brodjonegoro, PT Wijaya Karya president director Tumiyana and the regent of Banyuwangi, East Java, Azwar Anas.

The new capital will be situated in a 256,000-hectare area in the regencies of North Penajam Paser and Kutai Kartanegara in East Kalimantan, with officials arguing the plan will help promote equitable economic development throughout the archipelago.

As it will sit on island of Borneo, the new capital also will be linked by land to Malaysia and Brunei, offering greater connectivity with neighboring countries.

The project is expected to cost an estimated Rp 466 trillion (US$29.73 billion), with the government set to finance 19.2 percent (Rp 89.4 trillion), while the private sector will provide an additional Rp 253.4 trillion, equal to 54.4 percent of the total cost. The remaining Rp 123.2 trillion is expected to be financed by state-owned enterprises (SOEs).

The government is also looking to other countries for funding, most notably from the United Arab Emirates, Japan-based diversified conglomerate Softbank Group and the United States International Development Finance Corporation (IDFC). Jokowi appointed former British prime minister Tony Blair, Softbank CEO Masayoshi Son and UAE Crown Prince Sheikh Mohammad bin Zayed Al Nahyan to the project’s steering committee.

The government has maintained communication with potential investors amid the COVID-19 pandemic, and is not aware of any investors expressing a desire to pull out of the project, said Septian Hario Seto, the Office of the Coordinating Maritime Affairs and Investment Minister’s acting deputy head for investment coordination and mining.

“Discussions are still ongoing, although we are aware there is a possibility the project will be postponed,” Septian said.

Luhut said the UAE still viewed the project as an "investment opportunity".