Indonesia's $30 billion purpose-built new capital city is not going to plan

• Indonesia is building a new capital city from scratch to deal with rising sea levels.
• The new city, Nusantara, was set to be operational in October. But things are not going according to plan.
• The estimated $30 billion megaproject is struggling with funding issues and construction delays.

Jakarta, the current capital of Indonesia, is overpopulated and sinking.

Southeast Asia's largest megacity is home to some 10.6 million people. But with 40% of the wider metropolitan area below sea level, the effects of climate change are increasingly causing flooding across the capital.

So, in 2019, Indonesia's government approved an ambitious plan to build a new capital city 100 miles away from Jakarta.

Nusantara, the new capital, is not scheduled to be fully completed until 2045. However, the city was set to be operational as the new seat of government in time for the new president's inauguration in October.

That's now looking increasingly unlikely, according to Bloomberg.

Construction delays, funding concerns, and resignations are casting doubt over whether President Joko Widodo's $30 billion megaproject will be open before his term runs out.

As the nation's new administrative capital, Nusantara requires ministerial offices, a presidential palace, and residential and office space for at least 10,000 civil servants to be built in East Kalimantan, a province on the Indonesian side of the jungle-covered island of Borneo.

Large areas around the government buildings are still under construction. When it rains, the unpaved access roads become muddy and difficult for workers to navigate.

Issues with water and electricity supplies have also delayed plans to relocate civil servants to their new homes multiple times since March. Only one office building, meant to house four government agencies, is currently complete, Bloomberg reported.

The latest estimate is that office and housing complexes will be ready in September. "But if it's not ready, we'll postpone it," President Widodo told reporters.

In June, two senior government officials overseeing the project resigned.

Even plans to celebrate Indonesia's Independence Day in Nusantara on 17 August have been curtailed — the guest list has been cut down from 8,000 to 1,300 because of logistical challenges, the Financial Times reported.

"The accommodation was not enough, as well as food, since the ecosystem has yet to be built here," Widodo said at a press conference, per the FT.

Despite the setbacks, president-elect Prabowo Subianto has pledged to continue the project when he takes office. However, there are rising concerns about how Nusantara will be funded.

The Indonesian government has only committed to covering about 20% of the cost and has struggled to find other sources of cash. In March 2022, Japan's SoftBank pulled out of investing in the project.

Over 400 companies have now signed intent to invest letters, but only around $3.5 billion has been committed so far, Jokowi has said.

Subianto's commitment to the project may increase investor's confidence. The government is also tempting them with land concessions for up to 160 years and generous tax incentives.