Located between Asia and Oceania, Indonesia has a highly strategic location. The archipelago country, which forms an important part of Southeast Asia, is located at a crossroads between the Western Pacific, the Indian Ocean and the South China Sea. As such, Indonesia has one of the busiest sea lanes in the world. The country is also a country with vast natural resources, especially rich in oil, natural gas, coal and minerals. These resources play an important role in both regional and global energy and trade dynamics.
The project to move Indonesia’s capital from Jakarta to Nusantara in East Kalimantan stands out as one of the most ambitious undertakings in the country’s modern history. The decision is based on Jakarta’s problems that have become insurmountable. These include a population of over 40 million, a sinking rate of up to 25 cm per year, and a crumbling infrastructure due to excessive groundwater withdrawal. This step, which has been discussed since the 1940s but which no leader has dared to do, was formalized by then-President Joko Widodo in 2019. The new capital, Nusantara, is intended to be not only an administrative center but also a “green, smart, and sustainable” model city. However, the project faces risks such as the future of East Kalimantan’s indigenous people, the destruction of rainforests, and financing uncertainties.[1]
The New Capital Administration has announced that it will move to its new office building in Nusantara as of March 2025.[2]The completion of this office is considered the beginning of the process of physical settlement of government institutions on the island. So far, the presidential office, cabinet buildings, basic road networks and housing for 12,000 public employees have been built. However, the slow pace of private sector investment threatens the pace of completion of the project. Only 20% of the government’s targeted $80 billion in private investment has been provided so far, raising concerns that construction of housing and commercial infrastructure could be delayed.[3]
The government’s determination to finance is remarkable. While President Prabowo Subianto’s budget cuts to finance social programs have hit sectors such as education and health, the 35 trillion Indonesian rupiah ($2.3 billion) earmarked for Nusantara has remained untouched.[4]The total cost of the project is estimated at $28.5 billion, with 80% of that expected to come from private investors and public-private partnerships. However, the withdrawal of major companies such as China’s Evergrande from the project has shown that investor confidence is fragile. Despite international support such as infrastructure loans from Japan and China, low profit expectations are causing private capital to be cautious.
The environmental impacts are the most controversial aspect of the project. While the government markets Nusantara as a “Forest City,” the fact that 60% of the 130,000-hectare construction area is covered by tropical forests is not ignored. Environmental groups warn that habitats for Bornean orangutans and endemic plant species could be destroyed, and that risks of soil erosion and river pollution are increasing. Indigenous communities such as the Balik people are also in conflict with the government over land rights.[5]
Economically and geopolitically, the project is critical to Indonesia’s leadership in the Association of Southeast Asian Nations (ASEAN) and integration into the global green economy. However, the deficit in private sector investment could force the state to take on high debt. The ongoing power struggle between China and Japan over infrastructure investment also adds an international dimension to the project. On the other hand, the target of 1.5 million population carries the risk of transferring Jakarta’s overcrowding problem to Borneo. Experts argue that Nusantara’s goal of becoming a “full-fledged capital” by 2028 is unrealistic due to the slow pace of infrastructure investment, and that this process could take until the 2030s. Delays in the airport, water treatment facilities and public services in particular threaten the project’s timeline.[6]
In conclusion, the Nusantara Project aims to be more than just a dream that embodies Indonesia’s 21st century vision. However, uncertainties regarding financial sustainability, ecological balance and social justice represent major obstacles to the project. The race between the threat of Jakarta being submerged in water by 2050 and the speed of Nusantara’s construction is likely to be a major turning point in the country’s future. With continued political will and international support, this project could become one of Asia’s most remarkable examples of urban transformation.
[1]“Nusantara to Be Political Capital City by 2028, Govt Says”, The Jakarta Post, https://www.thejakartapost.com/indonesia/2025/01/23/nusantara-to-be-political-capital-city-by-2028-govt-says.html, (Access Date: 15.02.2025).
[2]“IKN Authority to Move to New Capital in March 2025 as Office Construction Completed”, Tempo, https://en.tempo.co/read/1974487/ikn-authority-to-move-to-new-capital-in-march-2025-as-office-construction-completed, (Access Date: 15.02.2025).
[3]“In Pictures: Indonesia’s New Capital – Futuristic Forest City or White Elephant?”, Eco-Busines, https://www.eco-business.com/news/in-pictures-indonesias-new-capital-futuristic-forest-city-or-white-elephant/, (Access Date: 15.02.2025).
[4]“Indonesia’s New Capital May Be Spared From Prabowo’s Budget Cuts”, Bloomberg, https://www.bloomberg.com/news/articles/2025-02-13/indonesia-s-new-capital-may-be-spared-from-prabowo-s-budget-cuts, (Access Date: 15.02.2025).
[5]“In Pictures: Indonesia’s New Capital – Futuristic Forest City or White Elephant?”, Eco-Busines, https://www.eco-business.com/news/in-pictures-indonesias-new-capital-futuristic-forest-city-or-white-elephant/, (Access Date: 15.02.2025).
[6]“Nusantara to Be Political Capital City by 2028, Govt Says”, The Jakarta Post, https://www.thejakartapost.com/indonesia/2025/01/23/nusantara-to-be-political-capital-city-by-2028-govt-says.html, (Access Date: 15.02.2025).
