In 2023, the infrastructure budget hit Rp392 trillion, of which Rp23.9 trillion was earmarked for the development of the new capital city. While the proposed infrastructure budget for 2024 is Rp447 trillion, no official announcement has yet been made on how much of that will be directed to the new capital city project. (FIGURE-4)
Given that investors are apparently still reluctant to invest in Nusantara, the Government will face difficulty in minimizing the use of the state budget. If things stay as they are, the proportion of state budget in the funding scheme is likely to keep swelling, going forward.
On the other hand, there are other, more urgent development programs, ones that will demand massive funding: extreme poverty eradication, accessible health and education, etc.
If we view the construction of the Jakarta-Bandung high-speed railway as a lesson learned, one which eventually demanded substantial state funding, a similar scenario could play out in the development of Nusantara, particularly alarming in the face of soaring public debt. The construction of Nusantara is bound to propel the national debt higher, a burden which eventually will have to be repaid by future generations.
Leaving a legacy?
Given its hasty planning and the sluggish commitment of private investment, the grand project already risks becoming a failure – an unfortunate legacy of the Jokowi administration. The public still vividly remembers the “white elephant” of a stalled and near-derelict Hambalang Sports Complex. Nusantara may suffer the same fate, albeit on a far more monumental scale.
To date, there has been no meaningful new investment in Nusantara. The Government’s claim that there are already many investors queueing up to participate turned out to be just a pack of letters of intent. Even worldclass investors such as Softbank have pulled out of the project.
The use of a state budget has created a nightmare for the next administration, one that is compelled to allocate more funds to ensure the continuity of the project, while at the same time having to deal with such pressing issues as extreme poverty, youth unemployment, food and energy security, climate change, etc.
If the project does eventually stall, the loss will be colossal.
First, the state budget could be put to better use. Second, Jakarta loses its multiplier effect, which in turn negatively affects the economies of other regions. Third, the disruption of massive land clearance, resulting in the irreversible loss of virgin forest in East Kalimantan.
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In the end, future administrations will have to shoulder the burden of the project. As a result, the fiscal space for other critical development programs will become increasingly tight. Future leaders will find it hard to realize their campaign promises.
The Jokowi administration risks leaving a troubled legacy, one that will historically define his presidency. The relocation of the national capital is a hugely ambitious project – but one that can potentially fail. It will thus require careful planning and active public participation. The Government’s seemingly unilateral decision can whip up public distrust and skepticism of the practicality of Nusantara. Public and future leaders should thus draw lessons from current administration in terms of openness, transparency and inclusion of the public in government affairs. The hope is that coming administrations will not be bound to repeat the same mistakes.