President Joko Widodo, center, looks at a map during his visit to Central Kalimantan in May to search for the location of Indonesia's new capital. (Antara Photo/Akbar Nugroho Gumay)

Businesses Demand Assurance From Gov't on Capital Move


OCTOBER 10, 2019

Jakarta. The Indonesian Employers Association, or Apindo, has welcomed the government's plan to move the Indonesian capital to East Kalimantan while retaining Jakarta as the country's commercial and financial center, but they demand a formal assurance about the move as soon as possible.

"Businesses need a lawful assurance that the move is going to happen. The sooner we get it, the better it is for us. It will allow us to avoid wasting our resources," Sany Iskandar, Apindo's industrial area head, said during a discussion in Jakarta on Wednesday.

Sany proposed the government should establish a special agency to deal exclusively with preparations for the capital relocation and centralize all administrative tasks to make it easier for businesses to obtain licenses if they desire to take part in building the new city.

"The development concept [for the new capital] should be clear and offer opportunities for the private sector to participate. We hope this process can start immediately to prevent speculations," Sany said.

Separating the new administrative center from the financial center in Jakarta will benefit businesses, he said, as they will likely enjoy a relatively more peaceful environment free from political rallies.

"Chaotic [political] rallies disrupt businesses, especially when they happen in the central business districts in big cities. Separating [the country's] business center from the administrative center will reduce that risk," he said.

Veteran economist Christianto Wibisono said the capital move would take a very long time and a huge budget to accomplish.

"Hopefully changes in the government will not change the plan," the founder of the Indonesian Business Data Center said.

$33 Billion Project

Imron Bulkin, who heads the government preparation team for the capital move, said the government is preparing a bill for the development of the new capital city to be submitted to the House of Representatives by the end of the year.

"We have been drafting the bill to be completed by the end of the year," Imron said. 

The government expects the bill to be passed next year. Construction on the new capital can only start after the bill becomes law.

The new capital city will be built in a new area that traverses the North Penajam Paser and Kutai Kartanegara districts in East Kalimantan.

The government has opened a competition to design the new capital with Rp 5 billion ($353,000) in prize money.

Imron said the capital relocation would need a budget of Rp 466 trillion. The state budget will pay for the smallest portion of that estimated cost, around Rp 89.4 trillion or 19.2 percent.

The majority of the funding is expected to come from a mutual cooperation scheme between the government and businesses, targeted at Rp 253.4 trillion or 54.4 percent of the total cost.

The rest is expected to come from investment by private and state-owned companies totaling Rp 123.2 trillion.

More funding might come from renting out government properties in Jakarta, including offices and accommodations, valued at Rp 1,123 trillion.

The new capital will occupy a total area of around 180,000 hectares in East Kalimantan.