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Five things to know about Indonesia's $33bn capital relocation plan

President Widodo reveals plans to move nation's capital to East Kalimantan

JAKARTA -- Indonesia's plan to relocate the country's capital from Jakarta dates back to the 1940s, when it was pitched by the country's first president, Sukarno, who was eager to move the nation forward from its colonial past. The idea was revived by several of his successors, but only actually put into motion by Indonesia's seventh president, Joko "Jokowi" Widodo.

On Monday, Widodo put an end to speculation when he announced the location of Indonesia's future capital -- in the Penajam Paser Utara and Kutai Kartanegara districts of East Kalimantan province in the Indonesian part of Borneo island.

Here are five things to know about the capital relocation plan.

Why East Kalimantan?

Kalimantan has long been the top candidate to host the nation's capital, due to its relative safety from earthquakes, tsunamis and volcanic eruptions compared with the other major islands of Indonesia. Geographically, it is located at the center of the archipelago and would support Widodo's intention to move the concentration of economic activity away from Java, where Jakarta is situated.

Two other provinces, Central and South Kalimantan, had also been considered. But the two East Kalimantan districts were chosen as the government already owns 180,000 hectares of land in the area, much of which are still forested, therefore minimizing land acquisition costs. The location sits between East Kalimantan's two largest cities -- provincial capital Samarinda and the economic hub and port city of Balikpapan -- meaning that much of the necessary infrastructure is already in place, including an international airport in both cities.

Additionally, East Kalimantan is less affected by the seasonal forest fires that regularly afflict other parts of Kalimantan and Sumatra islands. Some government officials also cited its heterogenous population, which minimizes potential conflicts between local residents and newcomers.

How much will it cost?

The government has set a cost of 466 trillion rupiah ($32.8 billion) for the relocation -- with construction of offices for government and other state institutions estimated at 33 trillion rupiah. These include a presidential palace, a House of Representatives building and new national police and military headquarters.

The construction of supporting facilities including housing, schools and hospitals is estimated to take up the bulk of the cost, at 265 trillion rupiah. Construction of infrastructure such as roads, power grids, drinking water and telecommunication services is estimated at 156 trillion rupiah.

Of the total funding needs, 19% will be covered by the state budget. The government wants to involve the private sector as much as possible, with around 55% of the funding expected to come from public-private partnerships and 26% from direct investment by state-owned enterprises and the private sector.

The relocation is targeted to start in 2024. Is this feasible?

The government is hoping to obtain parliamentary approval, complete the regulatory framework and the city's new design this year. Public works are expected to start next year and complete in 2023, when construction of government offices and other supporting facilities is set to begin. The actual move is slated to start in 2024.

Despite sounding ambitious, the plan is fairly realistic -- as long as the government does the relocation in stages, according to Yayat Supriatna, an urban planning expert at Trisakti University in Jakarta. It should start with the offices of technical ministries that will be pivotal in ensuring progress of the relocation, such as the public works and transportation ministries. Indonesian construction companies were capable of building quality roads, office towers and apartment blocks at speed, but good planning would be needed regarding the relocation of people -- namely civil servants -- and goods, Supriatna said.

Will the relocation alleviate Jakarta's traffic and pollution problems?

Critics of the plan believe moving the capital to East Kalimantan will do nothing to alleviate Jakarta's traffic and pollution burden and that the government should focus on fixing the city instead of running away from its problems. A recent survey by local pollster KedaiKOPI said 96% of respondents in Jakarta disapproved of the plan, with residents of Kalimantan and Sulawesi islands showing much more enthusiasm.

Supriatna thinks that Jakarta's traffic problems and air pollution will at least be reduced, if only slightly at the start. Traffic-related issues in Jakarta are estimated to equate to economic losses of 50-60 trillion rupiah per year.

An estimated 200,000 civil servants from Jakarta will move in the first relocation phase. "If, say, half of them commonly go to work in their own vehicles, there will be less 100,000 vehicles in Jakarta," said Supriatna. Nevertheless, this will only make a small dent in the estimated 20 million vehicles commuting in Jakarta every day.

What is in it for Jokowi?

Those skeptical about the urgency of the relocation plan think Widodo -- who has won the heart of many Indonesians with his trademark infrastructure push during the first term -- is doing this to build a legacy by the end of his second five-year term in office in 2024. But others believe the capital relocation is long overdue and that Widodo is only doing what his predecessors should have done earlier.

"The capital relocation ... is needed [in order] to boost economic distribution ... dominated by Java, which contributes 58.5% of the national growth," Bank Permata Vice President and Economist Josua Pardede said.

Whether it moves or not, managing the country's capital will be very costly for Indonesia, Supriatna added. "Jakarta's structure is such that people waste a lot of time and money to live and work here. There is nothing else we can do with the spatial planning of this capital that was designed [long ago]."

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