Becoming Less Java-Centric; Construction Indonesia’s New Capital in East Kalimantan to Start in 2022

Actual physical construction is expected to start in 2022. In the 2022 State Budget, the central government set aside IDR 510.79 billion (approx. USD $35.8 million) for construction of the new capital. This is obviously a very small amount if we consider that the whole project is estimated to require around USD $35 billion in investment.

However, before construction can really take off, it still requires the passing of the Capital City Bill in Indonesia’s House of Representatives (DPR). Ahmad Doli Kurnia, Chairman of the DPR’s Commission II, said in December 2021 that the bill is being discussed, and once it is passed into law, then the project will really become part of the national agenda in line with the new capital city’s master plan. He added that the project will trigger the multiplier effect and is set to become a new center of national economic growth. It is expected that the DPR will have completed deliberations by February 2022 (the bill was sent to the DPR on 29 September 2021).

Meanwhile, on 9 September 2021 President Widodo had already signed Presidential Regulation No. 85 of 2021 on Government Work Plans for Year 2022. This regulation includes appendix I that sets eight strategic steps to accelerate the transformation of Kalimantan:

Build the new capital city complete with supporting infrastructure;
Accelerate investment realization and encourage the optimization of the management of strategic areas, including the Special Economic Zones of Maloy Batuta Trans Kalimantan;
Optimize the development of commodities (palm oil, rubber, and fisheries) by focusing on an increase in productivity and the strengthening of supply chains with processing industries;
Develop urban areas including in or near Banjarmasin (South Kalimantan) and Tanjung Selor (North Kalimantan) as well as the buffer cities near the new capital city (Balikpapan and Samarinda in East Kalimantan), while also encourage supportive industries and tourism around these new urban areas;
Develop food estates supported by farmer cooperatives;
Strengthen coordination and cooperation between regional authorities on Kalimantan, while also improving the investment environment to attract private investment;
Increase legal certainty on land ownership through the issuance of land rights certificates; and
Accelerate the process of formulating and determining spatial plans.

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