Business & Economy

Indonesia bets on greater private investment for new capital after COVID-19

Jakarta, Jul 29 (efe-epa).- The Indonesian government remains committed to the construction of a new national capital, which will replace the overcrowded Jakarta, despite the negative impact of the ongoing COVID-19 pandemic on its economy and with hopes pinned on greater private investment.

The new capital, which has not been named yet and is projected as a green city on the island of Borneo, has an estimated budget of some IDR 466 billion ($31.8 billion) financed by the country’s budget, funds from regional governments, contributions by large enterprises and private direct investment.

“From this funding scheme, we can see that funding from the national budget is being minimized and we hope to obtain a bigger investment from private entities,” said Tri Dewi Virgiyanti, Director of Urban Housing and Settlement at Bappenas, the body in charge of the macro-project.

According to the latest data provided by the government representative, funds from the national budget represent 19.4 percent of the estimated total, compared with 54.2 percent paid by regional governments and large companies and 26.4 percent financed by private direct investment.

The Ministry of National Development has created several working groups that are currently focused on planning and writing a legal framework with the aim that the first inhabitants begin relocating to the new capital in 2024.

“The COVID-19 pandemic has impacted the implementation and development target, including capital relocation plan,” Virgiyanti said.

According to the official timetable, construction of the new capital city will begin next year and the first phase, where government buildings, housing for officials and infrastructure connecting the city with the region, will be completed and be available for use within four years.

The later stages of development will be completed until 2045.

In August 2019, President Joko Widodo announced that the government will begin constructing its new capital in the eastern part of the Borneo island to move away from an overpopulated Jakarta, which has congested roads and is prone to flooding.

A large part of Jakarta is sinking mainly due to the extraction of underground water while its pollution and traffic ranks among the worst in the world. Nearly 30 million people live in the metropolitan area that makes up the capital and its satellite cities.

The Indonesian government has approved multi-million dollar funds to combat the COVID-19 epidemic, which has left more than 102,000 infected in the country – including 4,900 deaths – and to mitigate the economic crisis caused by the virus.

The smallest contribution to the new capital coming from the budget also means opening the door to greater participation of private companies at a time when many countries have stalled their infrastructure and development projects to tackle the crisis.

“The problem with finding investors is finding one that has the same vision in building the new capital that is smart, green, beautiful and sustainable,” the Indonesian official concluded. EFE-EPA


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