US offers Indonesia $2.49M grant for capital city move

The United States on Thursday announced a $2.49 million (38.9 billion rupiah) grant to help Indonesia make its new capital a smart city, marking Washington’s first participation in the project to relocate the Southeast Asian nation’s capital to East Kalimantan from Jakarta. 

Meanwhile, a news report this week noted that China was one of the top four potential foreign investors, with an Indonesian official saying on Thursday that a Chinese consortium would soon be a lead bidder for a large residential project in the new capital. 

The U.S. announcement is seen as an effort to counter the growing regional influence of rival superpower China, which has made significant investments in Indonesia, especially in infrastructure and technology.

The U.S. Trade and Development Agency “is here to support Indonesia’s efforts to build a world-class new capital city,” agency Director Enoh T. Ebong said during a business forum in Jakarta. “This partnership allows us to share cutting-edge technology and expertise to develop sustainable infrastructure that will benefit the people of Indonesia.”

The forum brought together 200 government officials and business leaders from both countries to explore collaboration on the new capital project.

The $33 billion project announced by President Joko “Jokowi” Widodo in 2019 aims to relocate the administrative and political center of the country from Jakarta, a sprawling and congested metropolis of 10 million people, to a new site in East Kalimantan, a province on Borneo island. 

The new capital, which will be called Nusantara, would cover 260,000 hectares, or about 1,000 square miles, and would be designed to be green, resilient and smart by using advanced technologies, according to the government.

Basic infrastructure construction including roads, dams, bridges and government buildings, began in 2021 and is expected to be completed by the end of this year. The government hopes to relocate about 1,800 civil servants to Nusantara by August, two months before Jokowi’s second and final term ends. 

The entire project is expected to be complete by 2045.

The Nusantara Capital Authority, the agency in charge of the project, will also seek international partnerships to support the project’s technological and financial needs, chairman Bambang Susantono said. 

“We need their expertise to develop a smart, resilient, and sustainable capital city. The United States is a champion in technology,” Bambang told reporters.

Last year, Chinese President Xi Jinping signed a memorandum of understanding related to the project. 

Consortiums of Chinese and Malaysian companies are expected to start working on housing projects this year, according to Agung Wicaksono, an authority deputy for funding and investment.

He told BenarNews that the Ministry of Finance was reviewing feasibility studies of investment projects valued at about 40 trillion rupiah ($2.56 billion).

Top four investors

Singapore, Japan, Malaysia and China were the top four countries that had expressed interest in investing in the new city, according to Voice of America, citing the capital authority.

The U.S. Trade and Development agency said it had conducted training workshops for Indonesian officials on best practices in project management and international procurement of goods and services. 

In February, the agency invited a delegation of Indonesian procurement officials to visit and exchange information with their U.S. counterparts about innovative models for city management.

Andry Satrio Nugroho, an analyst at the Institute for Development of Economics and Finance, a Jakarta think-tank, said the U.S. involvement was aimed at countering China’s influence. 

“China not dominating investment would be preferable. I hope the U.S. will also participate,” he said. “China’s investment in Indonesia is much bigger than that of the U.S.” 

The political situation in Indonesia could affect investments, he said, pointing to election results showing that Prabowo Subianto, the defense minister, is expected to succeed Jokowi as president.

“Investors are still watching the policies that may be reviewed, changed or maintained by the new administration,” he said.

Some analysts have questioned the feasibility and rationale for constructing a new capital city, citing the environmental and social impacts along with a lack of public consultation.

Yayat Supriyatna, an urban analyst at Trisakti University in Jakarta, called the 2045 target date unrealistic because the city would lack basic amenities.

“It’s not feasible. The priority is to make the city livable. The first thing to do is to build public transportation, electric buses and highways,” he said.