State Secretary Pratikno revealed on June 3 that Bambang and Dhony had submitted their resignation letters some time ago, and that President Joko “Jokowi” Widodo formalized their resignation through a presidential decree issued that same day, ahead of breaking ground on the sixth phase of the IKN project. The President also appointed Public Works and Housing Minister Basuki Hadimuljo and Agrarian Affairs and Deputy Spatial Planning (ATR) Minister Raja Juli Antoni as the IKN Authority’s interim head and deputy head, respectively.

Indonesian Chamber of Commerce and Industry (Kadin) Deputy Chairman Sanny Iskandar remarked that the sudden departure of both IKN Authority leaders exacerbated the current political uncertainty stemming from the upcoming government transition, which had made investors hesitant. Ajib Hamdani, a policy analyst at the Indonesian Employers Association (Apindo), pointed out that investor enthusiasm for the IKN project remained uncertain due to the upcoming regional head elections and the unclear status of land ownership related to the project.

Institute for Demographic and Poverty Studies (IDEAS) director Yusuf Wibisono suggested that the twin departure of Bambang and Dhony might have been influenced by a perception of reduced commitment in the IKN project from president-elect Prabowo Subianto. Wibisono said the incoming administration’s priority to fund the costly free school lunch program, Prabowo’s key campaign promise, also could be a contributing factor. He added that most private investments in the project came from domestic investors driven by noncommercial considerations.

The new capitals development is heavily reliant on private sector investment. The first phase of its construction from 2022 to 2024 requires between Rp 466 trillion (US$28.67 billion) and Rp 486 trillion in funding. The private sector is expected to contribute 81 percent of the funds, or between Rp 377.46 trillion and Rp 393.66 trillion. However, the project has received only Rp 49.6 trillion since the first phase broke ground on Aug. 19, 2023. The new capital is projected for completion by 2045, in line with the Indonesia Gold 2045 vision.

The dual resignation of Bambang and Dhony has intensified pressure on President Jokowi to address the low level of investment commitments, particularly from foreign investors. In an apparent effort to alleviate investor concerns following their exit, Jokowi, who will himself leave office in October, revealed that he had secured an investment commitment from UAE-based real estate developer Emaar Properties. The President described the planned investment as substantial, but did not disclose an actual figure.

The unexpected resignation of Bambang and Dhony might have been driven by the significant challenges in meeting IKN project's targets, particularly the government's aim to inaugurate the new capital and hold the 79th Independence Day celebrations in Nusantara. Additional issues, such as unpaid workers and local protests, have further complicated the situation, possibly making leadership positions at the IKN Authority politically untenable.

What we’ve heard

A source told us that the government was disappointed with the performance of the Nusantara Capital City (IKN) Authority, which underlies the recent resignation of Bambang Susantono and Donny Rahajoe, formerly the head and deputy respectively of the IKN Authority. The government believes that the authority has underperformed in handling various issues related to the IKN program, including, among other things, land acquisition. "The Palace considers the performance of the authority leadership off-target," said the source.

This statement was reinforced by Coordinating Maritime Affairs and Investment Minister Luhut Pandjaitan’s statement, who said the problems of Nusantara’s development lay with the leadership of the IKN Authority. Luhut believes that the IKN Authority leadership was unwilling to make decisions even though it had been equipped with much authority.

However, the source also added that the former authority leaders believed the targets set by the government were often unrealistic. Furthermore, the source also mentioned that the leadership of the authority felt it was not being fully supported in terms of logistics and authority. "So the targets didn’t make sense," said the source.

Another source said the IKN Authority once conveyed to President Joko “Jokowi” Widodo that holding the large-scale Independence Day celebration in Nusantara this year would be difficult on account of construction progress being slower than estimated. According to this source, the leadership of the new capital agency doubted it could complete the work on time. Moreover, the sources also said that the authority was potentially unable to accommodate the large number of planned state guests that would be attending the ceremony.

Disclaimer

This content is provided by Tenggara Strategics in collaboration with The Jakarta Post to serve the latest comprehensive and reliable analysis on Indonesia’s political and business landscape. Access the latest edition of Tenggara Backgrounder to read the articles listed below:

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