WEBVTT - Indonesia Is Building a New Capital. It’s Not Going Well 0:00:03.120 --> 0:00:13.800 Bloomberg Audio Studios, podcasts, radio news. Jakarta, Indonesia's biggest city, 0:00:14.000 --> 0:00:16.720 is in trouble right now. 0:00:17.640 --> 0:00:21.080 So many vehicles on the roads at one time it 0:00:21.200 --> 0:00:25.200 makes the city overcrowded, congested, and polluted. 0:00:25.720 --> 0:00:29.400 Forres markdar is a Bloomberg government reporter based in Jakarta. 0:00:30.200 --> 0:00:33.600 The pollution or hayes was so bad. It is a 0:00:33.680 --> 0:00:36.239 very very common sight. If you walk down the streets, 0:00:36.360 --> 0:00:39.440 there are people wearing masks and traffic is so bad 0:00:39.600 --> 0:00:42.199 people actually do meetings in cars. 0:00:42.800 --> 0:00:46.479 The gridlock costs an estimated six and a half billion 0:00:46.720 --> 0:00:50.320 US dollars a year in lost productivity for the greater 0:00:50.440 --> 0:00:54.840 Jakarta area. And on top of that, the city itself 0:00:55.240 --> 0:00:55.880 is sinking. 0:00:56.280 --> 0:00:59.480 I think forty percent of Jakarta, the capital is under 0:00:59.640 --> 0:01:03.360 sea level, and in some parts of northern Jakarta it's 0:01:03.400 --> 0:01:05.440 sinking eleven inches a year. 0:01:05.800 --> 0:01:09.120 Some of the hottest hit areas have really subsided by 0:01:09.160 --> 0:01:13.160 more than sixteen feet in terms of high that's slightly 0:01:13.200 --> 0:01:16.440 shorter than a two story apartment if you can visualize it. 0:01:16.720 --> 0:01:20.200 Experts say the city only has until twenty thirty to 0:01:20.240 --> 0:01:23.400 figure out how to stop the sinking and breathing mass 0:01:23.400 --> 0:01:26.080 flooding and millions getting displays. 0:01:26.880 --> 0:01:30.200 Jakarta is home to more than ten million people and 0:01:30.360 --> 0:01:34.440 is the center for the Indonesian government. So what's the 0:01:34.480 --> 0:01:38.720 country to do when it's capital is overwhelmed by explosive growth. 0:01:39.600 --> 0:01:43.200 In the case of Indonesia, the world's fourth most populous country, 0:01:43.480 --> 0:01:46.679 the answer is to build a new one from scratch. 0:01:48.120 --> 0:01:51.080 The new capital is a huge priority for the country's 0:01:51.120 --> 0:01:55.680 President Jokobidodo, better known as Jacoe, who sees it as 0:01:55.720 --> 0:01:59.920 an opportunity to help transform Indonesia into a high incamnation, 0:02:00.560 --> 0:02:03.520 so it's in the same league economically as other countries 0:02:03.560 --> 0:02:05.920 in the region, such as Japan and China. 0:02:06.800 --> 0:02:11.080 Under Jocobi's Tenye Tanio, he has gone on this ambitious 0:02:11.560 --> 0:02:16.000 massive infrastructures free costing hundreds of billions of dollars. He 0:02:16.280 --> 0:02:21.000 building the hardware because they are necessary for Indonesia's long 0:02:21.080 --> 0:02:25.280 term economic growth, and this new capital city is not 0:02:25.400 --> 0:02:30.560 just the crown jewel of Jacobi's ambitious infrastructures free it 0:02:30.680 --> 0:02:33.600 is also the centerpiece of his legacy. 0:02:34.680 --> 0:02:38.200 Here's President Jacobe talking to Bloomberg about the project in 0:02:38.240 --> 0:02:39.000 twenty nineteen. 0:02:40.520 --> 0:02:43.960 Hopefully few people will drive cars a green city, a 0:02:44.000 --> 0:02:48.079 smart city, and a forest city for a city. 0:02:49.520 --> 0:02:51.960 Last month, there was a big party for the new 0:02:52.000 --> 0:02:56.240 capital city called Nusandara. Eight thousand people were supposed to 0:02:56.280 --> 0:02:59.720 cheer the inauguration of the city, but the inauguration that 0:02:59.800 --> 0:03:03.960 had had been planned didn't happen. In the end, the celebration, 0:03:04.080 --> 0:03:07.320 which was pegged to the country's independence day, was muted. 0:03:08.080 --> 0:03:12.000 Just thirteen hundred people attended against a backdrop of half 0:03:12.040 --> 0:03:17.080 completed buildings and construction cranes, and for now Jakarta remains 0:03:17.120 --> 0:03:18.120 the official capital. 0:03:18.440 --> 0:03:21.480 The satellite images that you know we acquired, I mean 0:03:21.560 --> 0:03:25.080 you can look that road sustinding laid out. Workers have 0:03:25.240 --> 0:03:29.160 said that, you know, during rainy season it's tough to construct. 0:03:29.360 --> 0:03:33.320 The land is a very muddy. The project really is 0:03:33.360 --> 0:03:37.480 still at its infancy. 0:03:39.080 --> 0:03:42.960 Welcome to The Big Take Asia from Bloomberg News. I'm Wanha. 0:03:43.360 --> 0:03:45.760 Every week we take you inside some of the world's 0:03:45.800 --> 0:03:50.200 biggest and most powerful economies and the markets, tycoons and 0:03:50.360 --> 0:03:54.640 businesses that drive this ever shifting region. Today on the show, 0:03:55.200 --> 0:03:59.400 Indonesia's ambitious project to build a new capital city from 0:03:59.400 --> 0:04:03.800 the ground up is falling short, and its biggest champion, 0:04:04.000 --> 0:04:07.280 President Jacobe is running out of time to track the 0:04:07.320 --> 0:04:11.320 investment needed to finish it, what's likely to happen next, 0:04:11.720 --> 0:04:20.919 and what's at stake if the project fails. The idea 0:04:21.000 --> 0:04:24.080 of moving Indonesia's capital was brought up by the country's 0:04:24.120 --> 0:04:27.680 first president way back in nineteen fifty seven, but it 0:04:27.760 --> 0:04:31.839 wasn't until twenty nineteen that President Joko Widodo formally announced 0:04:31.880 --> 0:04:35.000 the plan to relocate the capitol. He pitched it as 0:04:35.040 --> 0:04:37.839 a new, green, high tech city that would take pressure 0:04:37.960 --> 0:04:41.920 off the sinking and congested capital city of Jagata. Here 0:04:41.960 --> 0:04:44.560 he is in twenty nineteen talking to Bloomberg editor in 0:04:44.640 --> 0:04:46.839 chief John Michelsweet about his vision. 0:04:48.240 --> 0:04:51.200 Heynya you put uphan go Galiman. 0:04:51.320 --> 0:04:54.040 We are moving the capitol to Kalimantan because there are 0:04:54.080 --> 0:04:57.839 no earthquakes, no floods. We want to have an efficient 0:04:58.160 --> 0:05:01.920 and effective capital where we can we can ride bikes, 0:05:02.040 --> 0:05:08.440 we can use public transportation. Hopefully few people will drive cars. 0:05:09.480 --> 0:05:13.560 Jacoby said he wanted Nusandara to have an environmentally friendly 0:05:13.640 --> 0:05:17.039 transportation system and that he wanted the city to achieve 0:05:17.160 --> 0:05:20.719 net zero carbon emissions. That's a far cry from the 0:05:20.800 --> 0:05:25.320 crippling traffic, gridlock, and air pollution that's challenging the current capital. 0:05:25.680 --> 0:05:29.760 The idea is they are learning from the experiences of Jakarta. 0:05:29.880 --> 0:05:31.840 Here's Bloomberg's far As Makdar again. 0:05:32.160 --> 0:05:35.360 They do not want congestion. They certainly do not want 0:05:35.440 --> 0:05:38.560 that many cars or bikes on the roads. They definitely 0:05:38.560 --> 0:05:41.240 do not want to have polluted air. It wants the 0:05:41.320 --> 0:05:45.920 new capital to be this smart forest city powered by renewables. 0:05:46.279 --> 0:05:49.279 And Jacoby and other leaders also see the new capital 0:05:49.400 --> 0:05:52.200 as a way to spread wealth more evenly across the 0:05:52.200 --> 0:05:55.480 country instead of it being so concentrated on the island 0:05:55.480 --> 0:05:59.200 of Java, where Jakarta is. Here's President Jacobe again. 0:06:00.040 --> 0:06:04.720 Flag ANTATITOA. One hundred and fifty million people are in Java, 0:06:04.760 --> 0:06:08.919 but we have seventeen thousand islands. Fifty eight percent of 0:06:09.000 --> 0:06:13.200 GDP is concentrated in Java. We need to distribute the 0:06:13.240 --> 0:06:19.000 population and economy to other islandsban Ekonomi gone. 0:06:19.160 --> 0:06:22.000 The government said it expects the new capital to create 0:06:22.040 --> 0:06:24.839 more than four million jobs over the next two decades 0:06:25.320 --> 0:06:28.080 and to help attract new foreign investment to what is 0:06:28.120 --> 0:06:34.080 Southeast Asia's largest economy. But building a new city isn't easy, 0:06:34.520 --> 0:06:37.440 especially when that new capital is more than six hundred 0:06:37.480 --> 0:06:41.440 miles away on a different island in the Borneo Rainforest. 0:06:42.440 --> 0:06:46.120 In Indonesia's multi billion dollar new capital has been plagued 0:06:46.160 --> 0:06:50.039 with problems from the start. Forrest says the plan to 0:06:50.120 --> 0:06:53.880 gradually move more than ten thousand civil servants, the president 0:06:53.920 --> 0:06:56.920 and his cabinet to the new capital has already been 0:06:57.000 --> 0:07:00.680 postponed twice, and it's unclear if they'll be able to 0:07:00.680 --> 0:07:02.320 meet the new deadline this month. 0:07:02.760 --> 0:07:06.159 The relocation plans have definitely been pushed back. They are 0:07:06.200 --> 0:07:09.440 still testing out the water supply and also to make 0:07:09.480 --> 0:07:12.680 sure that the water is clean. There's also issue of 0:07:12.880 --> 0:07:17.440 access to electricity that's still being hashed out, but it's 0:07:17.480 --> 0:07:19.600 basically far from complete. 0:07:19.840 --> 0:07:23.720 Satellite imagery that Bloomberg obtained shows as recently as mid July, 0:07:24.080 --> 0:07:27.160 nearly one hundred acres of land around the heart of 0:07:27.200 --> 0:07:31.960 the city is just dirt and standing water. Construction is 0:07:31.960 --> 0:07:34.800 complete at just one office building that will be used 0:07:34.800 --> 0:07:38.760 by government agencies, and when civil servants do arrive, they 0:07:38.760 --> 0:07:42.000 may have to share rooms and work from temporary quarters 0:07:42.040 --> 0:07:46.960 such as cafeterias, and even the project's champion, President Jacoe, 0:07:47.080 --> 0:07:50.680 admitted that his first night in the new unfinished presidential 0:07:50.720 --> 0:07:52.280 palace was rough. 0:07:52.880 --> 0:07:55.480 Reporters actually asked him, you know, how is your first 0:07:55.560 --> 0:07:58.040 night sleeping here, and he was like, it wasn't good. 0:07:58.200 --> 0:08:01.120 Oh really, yeah, and it will take some time getting 0:08:01.200 --> 0:08:05.320 used to. And so what you're saying now is a 0:08:05.440 --> 0:08:10.480 more tempered response. They are essentially walking back on that 0:08:10.640 --> 0:08:15.400 optimism because it is far from Radi and Djokowi himself 0:08:15.440 --> 0:08:19.000 said that the project is only fifteen percent complete, so 0:08:19.880 --> 0:08:22.080 no one is moving there at this point in time. 0:08:22.560 --> 0:08:25.320 Well, I guess the bigger question is do people even 0:08:25.400 --> 0:08:27.640 want to move there even if it's ready. 0:08:28.080 --> 0:08:32.360 That is a good question because even when the idea 0:08:32.960 --> 0:08:37.800 was made public, there was initial skepticism, and that skepticism 0:08:37.920 --> 0:08:42.040 grew over the last couple of years, primarily because this 0:08:42.080 --> 0:08:44.400 is a near capital that is located in the middle 0:08:44.440 --> 0:08:47.080 of nowhere. It's in the middle of the jungle in 0:08:47.120 --> 0:08:50.120 the island of Borneo, far from like, you know, the 0:08:50.280 --> 0:08:54.199 fancy bars and restaurants of Jakarta, far from the shopping 0:08:54.240 --> 0:08:56.120 madels and all that far. 0:08:56.200 --> 0:08:59.640 It says the government has been offering tax incentives to 0:08:59.679 --> 0:09:03.080 civil servants and even came out with a plan targeting 0:09:03.120 --> 0:09:06.040 those who are single to move there. But he said 0:09:06.040 --> 0:09:08.880 the response has been less than enthusiastic. 0:09:10.080 --> 0:09:13.679 According to local media, repauts is that these civil servants 0:09:13.720 --> 0:09:17.480 didn't want to move. Some of them either resign from 0:09:17.520 --> 0:09:22.280 the government, some asked for postings outside of Jakarta in 0:09:22.400 --> 0:09:25.800 the other provinces, and some of the singles also chose 0:09:25.960 --> 0:09:29.920 to get married and to have kids. They are finding 0:09:30.200 --> 0:09:33.160 any excuse they can to not move. 0:09:34.040 --> 0:09:37.480 Another group of people who've been less than enthusiastic about 0:09:37.480 --> 0:09:42.320 the new capital are private investors. According to the official estimate, 0:09:42.480 --> 0:09:46.640 the project is expected to cost roughly twenty nine billion dollars, 0:09:46.960 --> 0:09:49.680 and the government has said eighty percent of that cost 0:09:49.800 --> 0:09:53.400 will need to be covered by private investors, both local 0:09:53.559 --> 0:09:58.760 and foreign. Initially, foreign investment did look promising. Companies like 0:09:58.800 --> 0:10:02.640 SoftBank offered invest up to forty billion US dollars toward 0:10:02.679 --> 0:10:06.240 the project, but before construction even began in August of 0:10:06.240 --> 0:10:11.680 twenty twenty two, they pulled out. SoftBank declined to comment 0:10:11.720 --> 0:10:12.480 on its decision. 0:10:12.760 --> 0:10:16.680 They didn't specify why EZACLY or gave any clear reasons 0:10:16.760 --> 0:10:21.200 or explanation, but that sent the signal that hey, maybe 0:10:21.240 --> 0:10:24.840 they did not have confidence that Indonesia could pull off 0:10:24.880 --> 0:10:26.040 this project. 0:10:28.400 --> 0:10:32.200 After the break can Indonesia raise the money it needs 0:10:32.320 --> 0:10:35.360 to finish the new capital and what will it mean 0:10:35.400 --> 0:10:38.280 for the country and the rest of the world if 0:10:38.320 --> 0:10:52.240 it fails. So far, Indonesia has spent around four point 0:10:52.320 --> 0:10:56.520 six billion dollars to finance its new capital city, Nucenthara, 0:10:57.080 --> 0:11:00.400 but it estimates it needs over twenty four billion more 0:11:00.520 --> 0:11:04.160 to complete the project. The government wants that money to 0:11:04.160 --> 0:11:08.080 come from local and foreign investors, but so far, local 0:11:08.120 --> 0:11:13.080 investors haven't seen that interested. Despite incentives like tax breaks 0:11:13.080 --> 0:11:17.080 and long term property rights, Nu Cindaara has attracted less 0:11:17.080 --> 0:11:20.920 than three point two billion dollars in local investments. And 0:11:20.960 --> 0:11:23.479 as for foreign investors. 0:11:23.000 --> 0:11:25.600 What has been happening in the last couple of years 0:11:25.679 --> 0:11:30.160 is that Indonesia has yet to secure a single foreign 0:11:30.400 --> 0:11:34.480 private investor in the new capital city, and so the 0:11:34.520 --> 0:11:38.760 financing is stuck in that sense, and that adds to 0:11:38.840 --> 0:11:42.160 the complications of building this new capital city. 0:11:42.640 --> 0:11:46.040 Back in twenty nineteen, there was serious interest in the 0:11:46.080 --> 0:11:50.559 project from foreign investors. So why has that interest dwindled? 0:11:50.960 --> 0:11:53.679 I think a key part of that is basically because 0:11:53.880 --> 0:11:58.000 you know, number one, it is really a gargantuin project. 0:11:59.160 --> 0:12:02.880 It is so ambitious, and you know, there is a 0:12:02.920 --> 0:12:07.320 concern whether Indonesia can pull it off now. Another key 0:12:07.320 --> 0:12:10.960 factor was that this project, you know, the construction started 0:12:11.120 --> 0:12:15.320 at the tail end of Jacobi's residency. Jakobe is set 0:12:15.480 --> 0:12:19.559 to actually step down from his presidential position in October 0:12:19.600 --> 0:12:23.160 this year. And so what happened from twenty twenty two 0:12:23.240 --> 0:12:27.239 onwards was that a lot of the foreign investor community 0:12:28.120 --> 0:12:31.960 they adopted a weight and see approach because they did 0:12:32.000 --> 0:12:34.600 not want to be in a situation where I invest 0:12:35.160 --> 0:12:39.679 my money right now hundreds of millions or more, only 0:12:40.000 --> 0:12:43.120 for the project not to advance under a new administration. 0:12:45.160 --> 0:12:48.200 The change in leaders comes at a time when Indonesia 0:12:48.320 --> 0:12:52.560 is under pressure to spur economic growth and for says 0:12:52.600 --> 0:12:56.599 the country's next leader, President elect Proboo Subianto, has his 0:12:56.800 --> 0:12:57.520 own agenda. 0:12:58.280 --> 0:13:03.239 It's very focused on welfare policies such as distributing females 0:13:03.280 --> 0:13:08.400 to children, ramping up healthcare infrastructure, boosting the quality of education, 0:13:08.640 --> 0:13:13.240 making sure that the housing infrastructure for the low income 0:13:13.400 --> 0:13:17.760 Indonesians are met, and that will require a lot of spending. 0:13:18.200 --> 0:13:22.600 Last month, Proboo said he's committed to continue and if possible, 0:13:22.840 --> 0:13:24.240 finish the new capital. 0:13:25.120 --> 0:13:27.440 The key question when it comes to the construction of 0:13:27.440 --> 0:13:30.640 the new capital city will be what is the pace 0:13:30.760 --> 0:13:34.720 of the construction, So what analyst had pointed out is 0:13:34.760 --> 0:13:38.920 that what future administrations can do is perhaps prolong it 0:13:39.440 --> 0:13:40.200 or delay it. 0:13:40.679 --> 0:13:45.040 Plagued by construction delays and financing woes. Far says it 0:13:45.080 --> 0:13:48.440 will take years before Indonesia and the rest of the 0:13:48.480 --> 0:13:53.120 world will know If this megaproject ultimately pans. 0:13:52.760 --> 0:13:56.200 Out, Indonesia could actually be offering a blueprint and a 0:13:56.280 --> 0:14:00.400 template for other emerging markets. It will offer the other 0:14:00.440 --> 0:14:03.719 countries a lot of learning points, a lot of lessons, 0:14:04.120 --> 0:14:08.160 and it would be Indonesia's great success story if they 0:14:08.160 --> 0:14:13.679 can pull it off. Now, there is also the other scenario, 0:14:13.800 --> 0:14:17.320 which is all doman gloom, that this could end up 0:14:17.400 --> 0:14:21.720 as a total failure, that this new capital might not 0:14:21.920 --> 0:14:25.960 actually take off because given that they've already missed the 0:14:26.080 --> 0:14:31.200 first dateline of construction, that isn't really inspiring confidence that 0:14:31.360 --> 0:14:36.080 Indonesia can pull off such an ambitious real estate project. 0:14:36.640 --> 0:14:42.760 And should it really not take off, then Jokobi could 0:14:42.920 --> 0:14:45.720 end up in the history books for the wrong reasons. 0:14:48.720 --> 0:14:52.000 This is the big take Asia from Bloomberg News. I'm Wanha. 0:14:52.760 --> 0:14:57.080 This episode was produced by Young Young Naomi, Jessica Beck, 0:14:57.320 --> 0:15:01.720 and Adriana Tapia. It was edited by Kaitlin Kenny, Jeff Crocott, 0:15:01.880 --> 0:15:05.120 Lisa Bayer, and Claire Jow. It was mixed by Blake 0:15:05.200 --> 0:15:08.640 Maples and fact checked by Jessica and Eddie Duane. Our 0:15:08.720 --> 0:15:12.320 senior editor is Elizabeth Ponso, Nicole Binster Bower is our 0:15:12.320 --> 0:15:15.920 executive producer, and Sage Bauman is Bloomberg's head of podcasts. 0:15:16.400 --> 0:15:18.640 If you like our show, please leave us a review 0:15:18.720 --> 0:15:21.720 wherever you listen to podcasts, and please tell your friends 0:15:21.800 --> 0:15:25.160 it makes a huge difference. Thanks and see you next time.