The Inclusive Development of Indonesia’s New Capital

Jakarta is home to over ten million people and where the Indonesian government lies. Its large population contributes to more than one-third of the Indonesian economy. In Jakarta, the effects of climate change are felt clearly and tangibly. The city falls victim to floods and extreme weather, such as severe storms yearly. With this increasing impediment to the city’s economic development, Indonesian officials have been looking for an alternate capital for years. Now, this plan has materialized: enter Nusantara.

CITY FOR INCLUSIVE WEALTH

Nusantara situates in the East Kalimantan province of Borneo Island. It will be located roughly between two urban centers in East Kalimantan, Balikpapan, and Samarinda—vital regional areas on the island. According to Prof. Hendricus Andy Simarmata from Universitas Indonesia, this has the benefit of shifting the Indonesian economy away from Java Island (where Jakarta is), which traditionally contributes more than 50% to the Indonesian economy. This means that in the past, infrastructure projects were concentrated on Java and Sumatra. To achieve sustainable and inclusive growth, development must spread out to other areas of the country. It is clear that this capital movement does not just reduce the environmental hazard. It also is a prime example of an inclusive growth creation, where all can benefit from the national economic pie.

MAKING A CITY SUSTAINABLE

As Indonesia has seen its fair share of the result of climate disasters, policymakers have committed to making the new capital as sustainable as possible. The Indonesian President, Joko Widodo, has stated that the government would reserve 70% of Nusantara as green areas. This means that all essential infrastructure development, including green (parks) and blue (water) regions of the city, government complexes, offices, and housing, will be done with sustainability in mind. Ultimately, Indonesian policymakers aim to let the town be one of the critical contributors toward Indonesia’s 2060 Net Zero goal.

WHAT DOES THIS MEAN FOR BUSINESS

This poses tremendous opportunities and support for companies interested in moving to the new capital or building the town itself. Asian Development Bank (ADB) has already pledged support in terms of expertise and funding to the project. This can translate into the Indonesian government spending more with private contractors. More Public-Private Partnerships (PPPs) could arise as the private sector delegates various construction, surveying, and infrastructure building to the private sector. Besides this, the commitment to building a sustainable city will drastically benefit firms specializing in green technology and infrastructure who join the construction process. With the stated goal of bringing wealth to a previously less-tapped areas, businesses will benefit from more regional economic development. This means a higher quality workforce, better infrastructure to sustain business operations, and more economic activities, which could spur companies’ growth.

Building a new capital is a huge endeavor. Therefore, knowing that plans have been laid out to make the city a regional development hub and a sustainable city can bring much confidence to businesses. Companies will find it beneficial to contribute to all the processes of creating Nusantara—from building to operating within. This can serve as one example of effective new city building to public and private sectors worldwide.

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