Should Indonesia Move Its Capital?

An aerial view of the Semanggi overpass in Jakarta on Feb. 28. (Antara Photo/Muhammad Adimaja)

By : Tabita Diela | on 11:31 AM April 14, 2017
Category : Business, Economy, Featured

Jakarta. President Joko "Jokowi" Widodo's request to the National Development Planning Agency, or Bappenas, to do a feasibility study on moving the country's capital from Jakarta since the city has grown too overcrowded has received a mixed response from the business community.

Indonesian Chambers of Commerce and Industry, or Kadin, an influential business lobby group, is worried by the idea, arguing that businesses — most with headquarters in Jakarta — need to consult and lobby the government on a regular basis.

"The business community will support the government's program if it benefits the people, but is this the right time to move the capital, when our economy hasn't yet fully recovered?" Sarman Simanjorang, Kadin Jakarta deputy chairman said on Thursday (13/04).

Hariyadi Sukamdani, a veteran businessman and the chairman of the Indonesian Employers Association (Apindo), said he would not object if the government plans to relocate the capital city.

"When that time comes [to move], information technology will already be much better than today. It won't matter that much [to be away from Jakarta]," he said, adding that he doubts the move would happen soon.

Hariyadi said moving the capital is costly, even if one just considers the cost of moving government officials and legislators to the new capital, and there is no guarantee that it will work to even out income inequality across the county.

Andrinof Chaniago, a public policy analyst at the University of Indonesia and a former national development planning minister, said moving the capital may cost about Rp 10 trillion ($754 million) per year — to be paid for by the state budget — over at least 10 years.

The number is relatively small, equivalent to about 0.5 percent of the Rp 2,081 trillion allocated for government spending in the 2017 State Budget and 2.9 percent of the total government budget on payroll at Rp 343 trillion.

"From the fiscal point of view, moving the capital city shouldn't be a problem," Andrinof said, adding that the government already has a program to develop 10 regional cities into megacities.

The former minister was referring to a government plan locally known by its abbreviation RPJMN to develop infrastructure in 10 cities across the archipelago to spur economic growth.

Bambang Brodjonegoro, the Development Planning Minister, said the ministry is studying the benefits of moving the capital city from Jakarta and scouting for a new location. He expects the study to conclude this year.

An older plan to move the capital city was proposed by former President Susilo Bambang Yudhoyono in 2008. Yudhoyono even established a special team called Visi 2033 — led by Andrinof — to prepare the move.

The plan was cooked up by Andrinof until April 2015 when he lost his position in Jokowi's cabinet.

Moving the capital city from Jakarta is not a novel idea. In 1957, President Sukarno had already said Java will suffer from a population boom and that economic growth in the island will be out of control.

Sukarno came up with the idea of relocating Indonesia's capital to Palangkaraya in Central Kalimantan, where there is minimum risk of earthquake and volcanic explosion.

The idea also resurfaced under the rule of Indonesia's next president Suharto who wanted to move the capital 40 kilometers southeast of Jakarta to Jonggol, West Java. The plan never came to fruition as Suharto lost power in 1998.

In the early years of the republic after the Second World War, the capital was moved from Jakarta to Yogyakarta for security reasons. On Jan. 4, 1946, Indonesia's central administration was relocated to the royal city after Dutch forces came back to retake the country. The capital remained in Yogyakarta for more than four years before returning to Jakarta on Aug. 17, 1950.

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