Covid-19 Pandemic Likely to Delay Construction of Indonesia's New Capital

Jakarta. A government official revealed on Monday that the project to move the Indonesian capital from Jakarta to North Penajam Paser in East Kalimantan, which was expected to be completed in 2024, might be delayed by the coronavirus pandemic as the government shifted some of its budget to pandemic relief efforts.

The statement marked a change of mood among the country's top officials who were still adamant as recent as three weeks ago that the project would continue despite the pandemic, which already infected close to 2,500 people and killed more than 200 in Indonesia.

The Coordinating Ministry for Maritime Affairs and Investment's spokesman, Jodi Mahardi, said there had been no further talks on the budget for the project as the ministry is following orders from President Joko "Jokowi" Widodo to concentrate on Covid-19 outbreak relief efforts.

"Our focus now is to find the right measures to handle the Covid-19 pandemic, as instructed by the president," Jodi said. 

The government has been reallocating spending in non-critical and nonurgent posts to Covid-19 mitigation programs, Jodi said.

"It's possible that several development projects, including the new capital city project, would be postponed until the situation returns to normal," Jodi said in a statement on Monday.

Although a lion's share of the investment in the new capital development is expected to come from private investors, the government has also allocated around $6.3 billion from the state budget for the project over the next five years.

Most of the government money was supposed to be spent on breaking the ground and laying down basic infrastructures in North Penajam Paser, scheduled for later this year. 

But now the president has instructed the ministry to tell potential investors in the megaproject that Indonesia remains committed to it and will see it through to completion once the pandemic is over, Jodi said.

Jodi said the government had also approached the investors to see if they would be willing to provide aid for Covid-19 mitigation. 

Just recently, investors in the downstream nickel sector in Indonesia donated several tons of medical equipment to the Indonesian government.

Jodi said ministries and state agencies have been cooperating closely to minimize the economic impact of the Covid-19 outbreak.

Jokowi last week signed a government regulation-in-lieu-of-law (Perppu) that would add more than Rp 405 trillion ($24.7 billion) in spending and debts to the 2020 state budget.

Finance Minister Sri Mulyani said the government would focus its relief efforts on three sectors: health, social safety net and incentives for businesses and small and medium enterprises (SMEs).