Indonesia: Prabowo Hints At Defunding Widodo's New Capital

The current Minister of Finance, Sri Mulyani Indrawati, has since explained that the 143.1 billion rupiah earmark did not necessarily represent the entire allocation for the new capital in 2025.

The national budget outline is designed to allow the incoming government to easily decide its own spending priorities when it comes to office.“Everything has been baselined in order to give the president-elect the authority to determine, to adjust, according to the priorities of his cabinet.”

However, many suspect that Prabowo's own expansive spending plans may leave little space for Nusantara. On the campaign trail, Prabowo repeatedly promised free meals for all Indonesian schoolchildren as well as nutritional support for pregnant women.

The government has budgeted an initial 71 trillion rupiah ($4.7 billion) to start rolling out that social program next year. Prabowo has suggested the total annual cost could eventually rise to 400 trillion rupiah ($26 billion).

Other policy priorities, such as modernizing Indonesia's military and national food estate projects – the costs of which are not yet clear – will also factor largely in the new budget.

Meanwhile, Nusantara may already be nearing a budget crunch. With an estimated total cost of around 466 trillion rupiah ($30 billion), the Indonesian government initially projected that only 20% – 93.2 trillion rupiah ($6 billion) – of the funding would come from the state, with the other 80%
– 372.8 trillion rupiah ($24 billion) – ponied up by private investors.

The government has already sunk 80 trillion rupiah ($5.3 billion) of investment into Nusantara, according to Minister for National Development Planning Suharso Monoarfa, leaving only a slim 13 trillion rupiah ($855 million) left to spend if the original plans are honored.

Meanwhile, private investment has not turned up on the scale required. Exact figures are unclear, but the only major commitments seem to have come from a handful of Indonesian conglomerates. Foreign investors have steered clear despite a concerted push by the Indonesian government to attract them.

A key problem seems to be uncertainty – and not just about Prabowo's intentions. In particular, land acquisition issues continue to plague the mega-development. In May, the government announced plans to resolve issues affecting compensation and relocation of owners of 2,086 ha of land with“unclear status.”

A shake-up in the project's leadership has not helped matters. Bambang Susantono and Dhony Rahajoe, the former head and deputy head of the Secretariat, both resigned in June reportedly due to the presidential dissatisfaction with the project's lack of progress.

However, sources within the body say that decision-making remains slow, speculating that the newly appointed acting head and deputy head are hesitant to commit to anything, not knowing if they will be kept on after October 20 when Prabowo assumes the presidency.

Readers of the Jakarta tea leaves are watching closely for signs of the incoming Prabowo administration's interest, or lack thereof, in Nusantara. Many noted that an article authored by Prabowo in Newsweek failed to mention the new capital when laying out his governing priorities – something which prompted various surrogates to hurriedly reassure the press that their boss remained committed to Widodo's vision.

One factor perhaps weighing in the project's favor is Prabowo's brother, Hashim Djojohadikusumo. Hashim is a major landowner in the area around the proposed new capital via a company known as PT ITCI Kartika Utama.

While Hashim does not seem to be directly involved in the capital's construction, he stands to benefit from rising land prices in the area should the project succeed.

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Companies under Hashim's control are also proposing to construct a reservoir on land owned by Hashim's company to provide Nusantara with fresh water.

Income from such developments would surely be a welcome boon for Hashim, who helped bankroll his brother's election campaigns and reportedly currently owes Switzerland 139 million Swiss Francs in back taxes.

Nusantara is seen as the capstone of the Widodo era, a final audacious project for a president who made the ambitious revamping of Indonesia's infrastructure part of his brand.

Indonesian President Joko Widodo (left) points to where the presidential palace will be in his new capital Nusantara. Photo: Handout

The problems of the current capital Jakarta – congestion, pollution and flooding – are well known and many have long agreed that the location of the mega-city capital helps reinforce the problematic Java-centrism of Indonesia.

However, the president was always the main force behind the project – with apparently limited enthusiasm, even within his own government, for the idea initially. This, many now speculate, makes it vulnerable to political change.

Indonesia has twice contemplated moving the capital before. In the 1960s, Sukarno started construction on Palangkaraya in Central Kalimantan, a few hundred kilometers from Nusanatra, but work ceased after Suharto toppled him in a coup.

In the 1990s, the Suharto government considered a new administrative capital in West Java, but plans were shelved when protests toppled his dictatorship in 1998. Widodo's Nusantara may be just the latest capital dream project that fails to survive a transition of power.

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