Malaysian PM backs Indonesia’s new capital, pledges investment

Malaysia’s Prime Minister Anwar Ibrahim said his country supports investment in Indonesia’s new capital in East Kalimantan because it would spur growth in the Malaysian Bornean states of Sabah and Sarawak. 

Anwar was speaking during his first state visit to Indonesia as PM, during which at least 10 Malaysian companies expressed commitments to investing in their neighbor’s new capital, which has been struggling to attract investments.

“[I] hope that the growth of the national capital Nusantara will also benefit Sarawak and Sabah, more than what I can do for [them],” Anwar said after talks with Indonesian President Joko “Jokowi” Widodo at the Bogor presidential palace.

“Its proximity and economic interests are significant. My colleagues in Sarawak and Sabah applaud this initiative,” said Anwar, who was on his first overseas trip since being sworn in as prime minister in November. 

A new law passed in January 2022 named the new Indonesian capital “Nusantara,” which broadly means “archipelago.”

Anwar said potential investment pledged by Malaysian companies in Nusantara was valued at 1.66 billion ringgit (U.S. $379 million).

In addition, businesses from the two countries signed memoranda of understanding on cooperation in the fields of shipping, green industry financing and development of batteries for electric vehicles.

Jokowi said Malaysian businesses were looking at investments in sectors including electronics, health, waste management, construction and property.

“I warmly welcome the interest of investors in the construction of the new national capital Nusantara,” Jokowi said. 

In August 2019, Jokowi announced that the country would move the capital from crowded and partially sinking Jakarta, on Java Island, to East Kalimantan, a densely forested and thinly populated province in the Indonesian part of Borneo. 

The government has struggled to attract investment for its construction since Japanese tech conglomerate Softbank last year withdrew its plans to invest.

In December, Investment Minister Bahlil Lahadalia said Softbank withdrew because the Indonesian government deemed its proposal was unfair. 

“The proposal submitted [by Softbank], in our opinion, only benefits them, not the state. And we don’t want to be dictated to,” Bahlil told state news agency Antara.

Nevertheless, the government says it has started constructing roads, bridges and drainage at the new capital’s site.

Covering ​​256,142 hectares (632,940 acres), the capital’s cost is estimated by the government to be U.S. $32.5 billion, 53 percent of which will be covered by the country’s budget.

The National Development Planning Agency projected that by 2045, Nusantara would have a population of 1.9 million – about 10 times the area’s current number. North Penajam Paser, the regency where the future seat of government will be constructed, is home to about 180,000 people.

The population of East Kalimantan is expected to grow to 11 million, from 3.7 million today, according to the agency.

But environmentalists have warned that clearing a forest and turning it into the national capital could potentially be an ecological disaster.

ASEAN ‘central’ to Indo-Pacific peace

Indonesia and Malaysia also agreed Monday that the Association of Southeast Asian Nations must play a central role in ensuring peace in the Indo-Pacific, Jokowi said, amid rising U.S.-China tensions in the region. 

After talks with Anwar, Jokowi said the two countries agreed to strengthen ASEAN to ensure stability in what has become the geopolitical theater for Sino-U.S. rivalry. Indonesia will chair the 10-nation regional bloc in 2023.

“ASEAN must be able to play a central role in creating a peaceful and stable Indo-Pacific,” Jokowi said. 

The two leaders also urged the Myanmar junta to implement ASEAN’s so-called five-point consensus aimed at restoring peace and democracy in the country after the military toppled a civilian government in February 2021.  

The Myanmar junta “agreed to” the consensus with ASEAN in April 2021, but has reneged on the agreement. 

That country has since descended into a bloody civil conflict, with many analysts saying the violence only increased in the second half of 2022. More than 2,700 people have been killed and more than 17,000 have been arrested in Myanmar, according to the Thailand-based Assistance Association for Political Prisoners.

Jokowi also said Malaysia was committed to providing protection for Indonesian migrant workers and the rights of their children.

In other action, Indonesia and Malaysia agreed to jointly fight what Jokowi called “discrimination” against palm oil through the Council of Palm Oil Producing Countries (CPOPC). The two countries are the biggest producers of the commodity.

The European Commission has approved a measure to phase out palm oil-based biofuel by 2030, amid accusations it is linked to deforestation, angering palm oil producers such as the two Southeast Asian nations.

Welcome progress

Teuku Rezasyah, international relations lecturer at Padjadjaran University in Bandung, said Malaysia’s interest in investing in the new capital marked welcome progress at a time when Indonesia was seeking to attract foreign money.

With Malaysia under Anwar’s leadership, relations between Jakarta and Kuala Lumpur are expected to become even closer, given his affinity to Indonesia when he was young, Teuku said.

“Indonesia for him is a reference for development,” he said.

Azmi Hassan, a senior fellow at the Nusantara Academy for Strategic Research, called Anwar’s visit to Indonesia “special” because “the plight of the Muslim world is close to his heart.” 

“Anwar has been very active in communicating with Indonesian leaders and has great relationships with the top leaders of the country and its religious leaders as well,” he said 

“I guess Malaysia and Indonesia can play a critical role in discussing and finding solutions to issues which include the Rohingya, the Uyghur in Xinjiang, Palestine, the Middle East and the Kashmir region,” he said.

Iman Muttaqin Yusof in Kuala Lumpur contributed to the report.