Indonesia suffers further setbacks to plan for $30 billion jungle capital

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Indonesia’s first planned multi-billion dollar independence day celebration in its new capital has resulted in an embarrassing backtracking for the government, which was forced to scale back plans and withdraw invitations to foreign dignitaries.

The country was due to hold a grand ceremony on Saturday in Nusantara, the new capital being built in the Borneo jungle at an estimated cost of $30 billion, attended by thousands of officials.

But the ambitious project — a signature legacy of outgoing President Joko Widodo — has been plagued by delays, forcing the government to slash its guest list from 8,000 to 1,300 just days before the Aug. 17 festivities.

The scaled-back ceremony underscores the project’s setbacks in the final months of Widodo’s presidency and raises fresh questions about its fate as he prepares to hand over leadership of Southeast Asia’s largest economy to his successor, Prabowo Subianto, in October.

The Nusantara development has been marred by construction delays, land acquisition problems and the absence of long-awaited foreign investors. Concerns were heightened by the unexpected resignation of the project’s top management in June.

Widodo, popularly known as Jokowi, said the guest list had to be cut because Nusantara did not have adequate facilities. “Accommodation was not sufficient, as was food, as the ecosystem is still to be built here,” the president said this week at a groundbreaking ceremony for a convention center in the new capital.

Indonesia will now hold two independence day ceremonies: one in Nusantara, led by Widodo and Prabowo, and another in Jakarta, with the current and incoming vice presidents.

Foreign diplomats were told they were no longer invited to Nusantara 10 days before the ceremony and asked to attend celebrations at the presidential palace in Jakarta, according to a letter sent by the foreign ministry seen by the Financial Times.

“Previous arrangements made for the ceremony to be attended by heads of mission in the capital city of Nusantara are no longer valid,” the ministry said in the letter, dated August 6.

Widodo first announced plans in 2022 to move Indonesia’s capital to Nusantara from congested Jakarta, which is the world’s fastest sinking city and one of the most polluted.

By moving the capital to an underdeveloped part of Indonesia, Widodo also intended to spread wealth across the archipelagic nation.

But critics say the project has been rushed through and the government has not done enough research into the remote location, more than 1,200 kilometres from the current capital. The site has struggled to provide reliable drinking water and electricity, while an airport, which was supposed to be ready by independence day, remains unfinished, leaving the nearest airport two hours away.

Widodo has said government operations will move in phases to Nusantara, which is expected to be fully completed by 2045. Thousands of officials are due to start moving in from September, but enthusiasm is low. One official told the FT that they do not want to move, citing a lack of infrastructure and high costs of returning to Jakarta.

But Widodo has been quick to put the project on a more solid footing before stepping down this year after a decade-long tenure in which he sought to transform Indonesia’s economy.

To allay concerns following the resignation of the Nusantara leadership, Widodo spent a night at the newly built presidential palace and held cabinet meetings in the capital.

Funding has also fallen short of expectations. Widodo has set a target of securing 80% private sector funding, but little has materialised despite offers of tax breaks and expanded land rights. The Indonesian government is on track to have spent 72.3 trillion rupiah ($4.6 billion) of the state budget on Nusantara from 2022 to the end of 2024.

Despite Prabowo’s assurances that he will continue building Nusantara, economists have warned that his administration will have to prioritise spending among multiple ambitious projects due to already strained public finances.

The FT reported last month that Prabowo’s team was considering cutting Nusantara’s budget to help fund his key campaign promise of providing free meals to schoolchildren and pregnant women across the country, a program aides say would cost $28 billion.

“At the very least, I will continue and, if possible, help complete it, although developing a capital city is not a short-term job, but a long and difficult one,” Prabowo said this week.

Kennedy Muslim, a political analyst at Indikator Politik Indonesia, said the future of Nusantara will depend on Widodo’s influence over the next administration.

“Jokowi is in a race against time before he steps down… to ensure the development of Nusantara,” he said. “The big question remains how Jokowi can maintain his political influence.”