Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Jakarta, Indonesia's biggest city,
Speaker 1: is in trouble right now.
Speaker 2: So many vehicles on the roads at one time it
Speaker 2: makes the city overcrowded, congested, and polluted.
Speaker 1: Forres markdar is a Bloomberg government reporter based in Jakarta.
Speaker 2: The pollution or hayes was so bad. It is a
Speaker 2: very very common sight. If you walk down the streets,
Speaker 2: there are people wearing masks and traffic is so bad
Speaker 2: people actually do meetings in cars.
Speaker 1: The gridlock costs an estimated six and a half billion
Speaker 1: US dollars a year in lost productivity for the greater
Speaker 1: Jakarta area. And on top of that, the city itself
Speaker 1: is sinking.
Speaker 3: I think forty percent of Jakarta, the capital is under
Speaker 3: sea level, and in some parts of northern Jakarta it's
Speaker 3: sinking eleven inches a year.
Speaker 2: Some of the hottest hit areas have really subsided by
Speaker 2: more than sixteen feet in terms of high that's slightly
Speaker 2: shorter than a two story apartment if you can visualize it.
Speaker 2: Experts say the city only has until twenty thirty to
Speaker 2: figure out how to stop the sinking and breathing mass
Speaker 2: flooding and millions getting displays.
Speaker 1: Jakarta is home to more than ten million people and
Speaker 1: is the center for the Indonesian government. So what's the
Speaker 1: country to do when it's capital is overwhelmed by explosive growth.
Speaker 1: In the case of Indonesia, the world's fourth most populous country,
Speaker 1: the answer is to build a new one from scratch.
Speaker 1: The new capital is a huge priority for the country's
Speaker 1: President Jokobidodo, better known as Jacoe, who sees it as
Speaker 1: an opportunity to help transform Indonesia into a high incamnation,
Speaker 1: so it's in the same league economically as other countries
Speaker 1: in the region, such as Japan and China.
Speaker 2: Under Jocobi's Tenye Tanio, he has gone on this ambitious
Speaker 2: massive infrastructures free costing hundreds of billions of dollars. He
Speaker 2: building the hardware because they are necessary for Indonesia's long
Speaker 2: term economic growth, and this new capital city is not
Speaker 2: just the crown jewel of Jacobi's ambitious infrastructures free it
Speaker 2: is also the centerpiece of his legacy.
Speaker 1: Here's President Jacobe talking to Bloomberg about the project in
Speaker 1: twenty nineteen.
Speaker 3: Hopefully few people will drive cars a green city, a
Speaker 3: smart city, and a forest city for a city.
Speaker 1: Last month, there was a big party for the new
Speaker 1: capital city called Nusandara. Eight thousand people were supposed to
Speaker 1: cheer the inauguration of the city, but the inauguration that
Speaker 1: had had been planned didn't happen. In the end, the celebration,
Speaker 1: which was pegged to the country's independence day, was muted.
Speaker 1: Just thirteen hundred people attended against a backdrop of half
Speaker 1: completed buildings and construction cranes, and for now Jakarta remains
Speaker 1: the official capital.
Speaker 2: The satellite images that you know we acquired, I mean
Speaker 2: you can look that road sustinding laid out. Workers have
Speaker 2: said that, you know, during rainy season it's tough to construct.
Speaker 2: The land is a very muddy. The project really is
Speaker 2: still at its infancy.
Speaker 1: Welcome to The Big Take Asia from Bloomberg News. I'm Wanha.
Speaker 1: Every week we take you inside some of the world's
Speaker 1: biggest and most powerful economies and the markets, tycoons and
Speaker 1: businesses that drive this ever shifting region. Today on the show,
Speaker 1: Indonesia's ambitious project to build a new capital city from
Speaker 1: the ground up is falling short, and its biggest champion,
Speaker 1: President Jacobe is running out of time to track the
Speaker 1: investment needed to finish it, what's likely to happen next,
Speaker 1: and what's at stake if the project fails. The idea
Speaker 1: of moving Indonesia's capital was brought up by the country's
Speaker 1: first president way back in nineteen fifty seven, but it
Speaker 1: wasn't until twenty nineteen that President Joko Widodo formally announced
Speaker 1: the plan to relocate the capitol. He pitched it as
Speaker 1: a new, green, high tech city that would take pressure
Speaker 1: off the sinking and congested capital city of Jagata. Here
Speaker 1: he is in twenty nineteen talking to Bloomberg editor in
Speaker 1: chief John Michelsweet about his vision.
Speaker 2: Heynya you put uphan go Galiman.
Speaker 3: We are moving the capitol to Kalimantan because there are
Speaker 3: no earthquakes, no floods. We want to have an efficient
Speaker 3: and effective capital where we can we can ride bikes,
Speaker 3: we can use public transportation. Hopefully few people will drive cars.
Speaker 1: Jacoby said he wanted Nusandara to have an environmentally friendly
Speaker 1: transportation system and that he wanted the city to achieve
Speaker 1: net zero carbon emissions. That's a far cry from the
Speaker 1: crippling traffic, gridlock, and air pollution that's challenging the current capital.
Speaker 2: The idea is they are learning from the experiences of Jakarta.
Speaker 1: Here's Bloomberg's far As Makdar again.
Speaker 2: They do not want congestion. They certainly do not want
Speaker 2: that many cars or bikes on the roads. They definitely
Speaker 2: do not want to have polluted air. It wants the
Speaker 2: new capital to be this smart forest city powered by renewables.
Speaker 1: And Jacoby and other leaders also see the new capital
Speaker 1: as a way to spread wealth more evenly across the
Speaker 1: country instead of it being so concentrated on the island
Speaker 1: of Java, where Jakarta is. Here's President Jacobe again.
Speaker 3: Flag ANTATITOA. One hundred and fifty million people are in Java,
Speaker 3: but we have seventeen thousand islands. Fifty eight percent of
Speaker 3: GDP is concentrated in Java. We need to distribute the
Speaker 3: population and economy to other islandsban Ekonomi gone.
Speaker 1: The government said it expects the new capital to create
Speaker 1: more than four million jobs over the next two decades
Speaker 1: and to help attract new foreign investment to what is
Speaker 1: Southeast Asia's largest economy. But building a new city isn't easy,
Speaker 1: especially when that new capital is more than six hundred
Speaker 1: miles away on a different island in the Borneo Rainforest.
Speaker 1: In Indonesia's multi billion dollar new capital has been plagued
Speaker 1: with problems from the start. Forrest says the plan to
Speaker 1: gradually move more than ten thousand civil servants, the president
Speaker 1: and his cabinet to the new capital has already been
Speaker 1: postponed twice, and it's unclear if they'll be able to
Speaker 1: meet the new deadline this month.
Speaker 2: The relocation plans have definitely been pushed back. They are
Speaker 2: still testing out the water supply and also to make
Speaker 2: sure that the water is clean. There's also issue of
Speaker 2: access to electricity that's still being hashed out, but it's
Speaker 2: basically far from complete.
Speaker 1: Satellite imagery that Bloomberg obtained shows as recently as mid July,
Speaker 1: nearly one hundred acres of land around the heart of
Speaker 1: the city is just dirt and standing water. Construction is
Speaker 1: complete at just one office building that will be used
Speaker 1: by government agencies, and when civil servants do arrive, they
Speaker 1: may have to share rooms and work from temporary quarters
Speaker 1: such as cafeterias, and even the project's champion, President Jacoe,
Speaker 1: admitted that his first night in the new unfinished presidential
Speaker 1: palace was rough.
Speaker 2: Reporters actually asked him, you know, how is your first
Speaker 2: night sleeping here, and he was like, it wasn't good.
Speaker 2: Oh really, yeah, and it will take some time getting
Speaker 2: used to. And so what you're saying now is a
Speaker 2: more tempered response. They are essentially walking back on that
Speaker 2: optimism because it is far from Radi and Djokowi himself
Speaker 2: said that the project is only fifteen percent complete, so
Speaker 2: no one is moving there at this point in time.
Speaker 1: Well, I guess the bigger question is do people even
Speaker 1: want to move there even if it's ready.
Speaker 2: That is a good question because even when the idea
Speaker 2: was made public, there was initial skepticism, and that skepticism
Speaker 2: grew over the last couple of years, primarily because this
Speaker 2: is a near capital that is located in the middle
Speaker 2: of nowhere. It's in the middle of the jungle in
Speaker 2: the island of Borneo, far from like, you know, the
Speaker 2: fancy bars and restaurants of Jakarta, far from the shopping
Speaker 2: madels and all that far.
Speaker 1: It says the government has been offering tax incentives to
Speaker 1: civil servants and even came out with a plan targeting
Speaker 1: those who are single to move there. But he said
Speaker 1: the response has been less than enthusiastic.
Speaker 2: According to local media, repauts is that these civil servants
Speaker 2: didn't want to move. Some of them either resign from
Speaker 2: the government, some asked for postings outside of Jakarta in
Speaker 2: the other provinces, and some of the singles also chose
Speaker 2: to get married and to have kids. They are finding
Speaker 2: any excuse they can to not move.
Speaker 1: Another group of people who've been less than enthusiastic about
Speaker 1: the new capital are private investors. According to the official estimate,
Speaker 1: the project is expected to cost roughly twenty nine billion dollars,
Speaker 1: and the government has said eighty percent of that cost
Speaker 1: will need to be covered by private investors, both local
Speaker 1: and foreign. Initially, foreign investment did look promising. Companies like
Speaker 1: SoftBank offered invest up to forty billion US dollars toward
Speaker 1: the project, but before construction even began in August of
Speaker 1: twenty twenty two, they pulled out. SoftBank declined to comment
Speaker 1: on its decision.
Speaker 2: They didn't specify why EZACLY or gave any clear reasons
Speaker 2: or explanation, but that sent the signal that hey, maybe
Speaker 2: they did not have confidence that Indonesia could pull off
Speaker 2: this project.
Speaker 1: After the break can Indonesia raise the money it needs
Speaker 1: to finish the new capital and what will it mean
Speaker 1: for the country and the rest of the world if
Speaker 1: it fails. So far, Indonesia has spent around four point
Speaker 1: six billion dollars to finance its new capital city, Nucenthara,
Speaker 1: but it estimates it needs over twenty four billion more
Speaker 1: to complete the project. The government wants that money to
Speaker 1: come from local and foreign investors, but so far, local
Speaker 1: investors haven't seen that interested. Despite incentives like tax breaks
Speaker 1: and long term property rights, Nu Cindaara has attracted less
Speaker 1: than three point two billion dollars in local investments. And
Speaker 1: as for foreign investors.
Speaker 2: What has been happening in the last couple of years
Speaker 2: is that Indonesia has yet to secure a single foreign
Speaker 2: private investor in the new capital city, and so the
Speaker 2: financing is stuck in that sense, and that adds to
Speaker 2: the complications of building this new capital city.
Speaker 1: Back in twenty nineteen, there was serious interest in the
Speaker 1: project from foreign investors. So why has that interest dwindled?
Speaker 2: I think a key part of that is basically because
Speaker 2: you know, number one, it is really a gargantuin project.
Speaker 2: It is so ambitious, and you know, there is a
Speaker 2: concern whether Indonesia can pull it off now. Another key
Speaker 2: factor was that this project, you know, the construction started
Speaker 2: at the tail end of Jacobi's residency. Jakobe is set
Speaker 2: to actually step down from his presidential position in October
Speaker 2: this year. And so what happened from twenty twenty two
Speaker 2: onwards was that a lot of the foreign investor community
Speaker 2: they adopted a weight and see approach because they did
Speaker 2: not want to be in a situation where I invest
Speaker 2: my money right now hundreds of millions or more, only
Speaker 2: for the project not to advance under a new administration.
Speaker 1: The change in leaders comes at a time when Indonesia
Speaker 1: is under pressure to spur economic growth and for says
Speaker 1: the country's next leader, President elect Proboo Subianto, has his
Speaker 1: own agenda.
Speaker 2: It's very focused on welfare policies such as distributing females
Speaker 2: to children, ramping up healthcare infrastructure, boosting the quality of education,
Speaker 2: making sure that the housing infrastructure for the low income
Speaker 2: Indonesians are met, and that will require a lot of spending.
Speaker 1: Last month, Proboo said he's committed to continue and if possible,
Speaker 1: finish the new capital.
Speaker 2: The key question when it comes to the construction of
Speaker 2: the new capital city will be what is the pace
Speaker 2: of the construction, So what analyst had pointed out is
Speaker 2: that what future administrations can do is perhaps prolong it
Speaker 2: or delay it.
Speaker 1: Plagued by construction delays and financing woes. Far says it
Speaker 1: will take years before Indonesia and the rest of the
Speaker 1: world will know If this megaproject ultimately pans.
Speaker 2: Out, Indonesia could actually be offering a blueprint and a
Speaker 2: template for other emerging markets. It will offer the other
Speaker 2: countries a lot of learning points, a lot of lessons,
Speaker 2: and it would be Indonesia's great success story if they
Speaker 2: can pull it off. Now, there is also the other scenario,
Speaker 2: which is all doman gloom, that this could end up
Speaker 2: as a total failure, that this new capital might not
Speaker 2: actually take off because given that they've already missed the
Speaker 2: first dateline of construction, that isn't really inspiring confidence that
Speaker 2: Indonesia can pull off such an ambitious real estate project.
Speaker 2: And should it really not take off, then Jokobi could
Speaker 2: end up in the history books for the wrong reasons.
Speaker 1: This is the big take Asia from Bloomberg News. I'm Wanha.
Speaker 1: This episode was produced by Young Young Naomi, Jessica Beck,
Speaker 1: and Adriana Tapia. It was edited by Kaitlin Kenny, Jeff Crocott,
Speaker 1: Lisa Bayer, and Claire Jow. It was mixed by Blake
Speaker 1: Maples and fact checked by Jessica and Eddie Duane. Our
Speaker 1: senior editor is Elizabeth Ponso, Nicole Binster Bower is our
Speaker 1: executive producer, and Sage Bauman is Bloomberg's head of podcasts.
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