Indonesia’s ambitious plan to develop Nusantara Capital City as the new capital city alongside Jakarta represents a transformative vision for the country’s future. This strategy envisions Jakarta and Nusantara Capital City functioning as “twin cities,” each playing complementary roles in governance and economic development. The shift aims to address various socio-economic challenges, from overpopulation in Jakarta to the need for more balanced national development. This article delves into the twin city concept, exploring its implications for Indonesia’s economy, governance, and regional growth.
Concept of Jakarta and Nusantara Capital City as Twin Cities
Jakarta, the capital since independence, has become a densely populated metropolis. However, years of unregulated development, flooding, pollution, and land subsidence have made it necessary to explore alternative urban solutions (Lowy Institute, 2024). The creation of Nusantara Capital City, in East Kalimantan on the island of Borneo, is expected to shift some of the administrative functions away from Jakarta. Rather than replacing Jakarta, the plan is to allow both cities to evolve as twin hubs, Jakarta being still the economic center while Nusantara Capital City takes on the role of the political and administrative capital.
This twin-city model mirrors other countries’ strategies, such as Malaysia’s Kuala Lumpur-Putrajaya and Brazil’s São Paulo-Brasilia setups, designed to decentralize governance and reduce urban congestion (Credit Agricole, 2024). For Indonesia, this dual-capital framework represents a significant shift aimed at achieving long-term national unity and addressing regional inequalities.
Economic Implications
1. Economic Decentralization and Growth Opportunities
Nusantara Capital City is intended to catalyze regional development, particularly in Kalimantan, shifting the economic center of gravity away from Java, which currently accounts for 58% of Indonesia’s GDP (Credit Agricole, 2024). The relocation aims to boost economic activities in the underdeveloped eastern regions by attracting investments, creating jobs, and establishing new industries around the new capital.
The twin city model also offers opportunities for enhancing trade. Nusantara’s Capital City strategic location near the Celebes and Arafura seas makes it well-positioned to become a maritime hub, complementing Jakarta’s role in the Strait of Malacca. This shift could unlock new markets and foster economic integration within the East ASEAN Growth Area (BIMP-EAGA), a regional
cooperation initiative involving Brunei, Malaysia, Indonesia, and the Philippines (Lowy Institute, 2024).
2. Private Sector Investment and Infrastructure Development
Financing Nusantara Capital City remains a critical challenge. The Indonesian government has committed to covering 20% of the costs, leaving the private sector to fund the remainder. Despite initial hesitation from foreign investors, the government hopes to secure substantial private investment by 2024 (Credit Agricole, 2024). To attract investors, Indonesia offers incentives and seeks partnerships with nations such as Saudi Arabia and China, focusing on infrastructure development (Jakarta Globe, 2024).
The twin cities will also benefit from improved connectivity, with new ports planned around Nusantara Capital City. Enhanced logistics networks are essential to supporting industries in both cities, promoting smoother flows of goods and services between Java and Kalimantan.
Challenges and Risks
1. Environmental and Social Concerns
While the new capital is designed as a sustainable, eco-friendly city, its development has raised environmental concerns. Nusantara Capital City is situated in a rainforest region, home to endangered species like orangutans. The construction has already led to significant deforestation, threatening biodiversity and displacing indigenous communities (Credit Agricole, 2024). Managing environmental sustainability while promoting economic growth remains a delicate balancing act.
2. Governance and Administrative Transitions
Transitioning Indonesia’s political and administrative functions to Nusantara Capital City poses governance challenges. Civil servants, many of whom are reluctant to relocate, are being offered incentives to make the move. The shift also risks creating temporary inefficiencies as the government adapts to its new operational structure (Lowy Institute, 2024).
There are also concerns that Nusantara Capital City development will not fully alleviate Jakarta’s problems. Jakarta will remain a megacity, grappling with issues such as flooding, pollution, and overcrowding. The twin-city approach must ensure that investments in Nusantara Capital City do not come at the expense of solutions for Jakarta’s ongoing urban challenges (Jakarta Post, 2024).
Strategic and Regional Implications
1. Regional Stability and Security
The strategic location of Nusantara Capital City enhances Indonesia’s position as a maritime power in the Indo-Pacific region. The capital’s proximity to key maritime routes and its role in regional cooperation initiatives such as the Trilateral Cooperation Agreement (TCA) with Malaysia and the Philippines offer opportunities to strengthen security in surrounding waters (Lowy Institute, 2024). These efforts will also promote economic integration across the region, enhancing Indonesia’s influence within ASEAN.
2. Impact on Regional Economic Hubs
The development of Nusantara Capital City could shift regional economic dynamics. Malaysian states like Sabah and Sarawak are expected to benefit from their proximity to the new capital, creating new opportunities for trade and investment (Lowy Institute, 2024). However, these changes may also alter existing trade patterns, requiring adjustments from both domestic and regional stakeholders.
Conclusion
The concept of Jakarta and Nusantara Capital City as twin cities represents a bold vision for Indonesia’s future. By complementing each other, the two cities are expected to promote economic decentralization, strengthen governance, and enhance Indonesia’s regional influence. However, achieving these goals will require overcoming significant challenges, including securing investment, managing environmental risks, and ensuring smooth administrative transitions.
If successfully implemented, this dual-capital strategy could mark a new chapter in Indonesia’s development, fostering greater regional equity and positioning the country as a leading player in the Indo-Pacific region. However, the government must ensure that the focus on Nusantara Capital City does not detract from addressing Jakarta’s pressing urban challenges. Balancing the needs of both cities will be critical to the long-term success of this ambitious endeavor.
