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Jokowi Picks Borneo for New Indonesia Capital

Arys Aditya, Tassia Sipahutar and Rieka Rahadiana
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Jokowi Picks Borneo for New Indonesia Capital

(Bloomberg) -- Indonesia will build a new capital city on the island of Borneo, home to some of the world’s biggest coal reserves and orangutan habitats, as President Joko Widodo seeks to ease pressure on congested and sinking Jakarta.

The new administrative headquarters will be located between North Penajam Paser and Kutai Kartanegara in East Kalimantan, Jokowi, as the president is commonly known, told reporters in Jakarta on Monday. The relocation of the capital, some 1,400 kilometers away from Jakarta, will help spread economic activity outside the nation’s most-populous island of Java, the president said.

Jokowi has displayed an urgency not shown by his predecessors in pressing on with the capital relocation plan, which has been periodically discussed for decades. With the greater Jakarta area, home to about 30 million people, nearing a gridlock and pollution levels reaching unhealthy levels, efforts to decongest the city have made little progress with tens of thousands of cars getting added to the roads every year.

With more than 15,000 people per square kilometer in Jakarta-- twice the density of Singapore -- there’s little space to build more without rehousing thousands of families. To make matters worse, two-fifths of the city is below sea level and parts of it are sinking at 20 centimeters a year.

“We cannot continue to burden Jakarta and Java any more in terms of population density, congestion, pollution and water resources,” Jokowi said. “Jakarta will remain as the center of business, trade and services” and the government is finalizing a 571 trillion rupiah ($40 billion) plan for the city’s development, he said.

Economic Losses

Jakarta’s miserable traffic is a result of the city’s overwhelming importance in the nation’s economy. The metropolitan area generates almost a fifth of Indonesia’s annual gross domestic product. Gridlocks and public transport woes cost the city about 100 trillion rupiah a year in economic losses, according to official estimates.

The cost of moving the capital is estimated at 466 trillion rupiah if it involved development of 40,000 hectares of land for an estimated 1.5 million residents, according to Planning Ministry estimates. The cost could be whittled down to 323 trillion rupiah if only part of the state apparatus was shifted to an area of 30,000 hectares, it said in April.

Jokowi has argued shifting the capital will help address income disparity in the archipelago of more than 17,000 islands. While Java accounts for almost 60% of Indonesia’s population and contributes about 58% of its gross domestic product, Kalimantan accounts for 5.8% of the population and contributes 8.2% of GDP.

With Jokowi pitching the new capital as a symbol of Indonesian identity and progress, the project will be a significant part of his legacy. Authorities have talked about building a modern, smart and green city which can serve as the capital for a century.

The area chosen for the new capital and yet to be named is free from risks of natural disasters and is close to cities such as Balikpapan and Samarinda, Jokowi said. The government controls about 180,000 hectares of land in the area, he said.

Rainforests

The building of the capital and transportation infrastructure in a region known for its tropical rainforests may lead to loss of green cover in the area, said Petr Matous, a lecturer at the University of Sydney’s Faculty of Engineering.

“New roads cutting through forest areas break the continuity of the forest cover and typically more slash and burn deforestation happens in their vicinity,” Matous said. “Once a tropical forest canopy is broken and the local micro-climate changed, more fires are likely to occur, which would have of course a further very negative on precious fauna of East Kalimantan.”

The government plans to begin construction of the new city by the end of 2020 and relocate the capital in phases from 2024, according to Planning Minister Bambang Brodjonegoro. The project will be financed by the government as well as through private-public partnerships.

(Updates with comment from analyst in 11th paragraph.)

--With assistance from Hannah Dormido and Adrian Leung.

To contact the reporters on this story: Arys Aditya in Jakarta at aaditya5@bloomberg.net;Tassia Sipahutar in Jakarta at ssipahutar@bloomberg.net;Rieka Rahadiana in Jakarta at rrahadiana@bloomberg.net

To contact the editors responsible for this story: Thomas Kutty Abraham at tabraham4@bloomberg.net, Karlis Salna

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