WEBVTT - Indonesia Is Building a New Capital. It’s Not Going Well 0:00:03.080 --> 0:00:09.640 Bloomberg Audio Studios, Podcasts, radio News. Hey, it's wanha Heir 0:00:09.760 --> 0:00:12.479 from the Big Take team. Today we want to share 0:00:12.520 --> 0:00:15.320 with you an episode about Indonesia trying to build a 0:00:15.400 --> 0:00:19.799 new capital city from scratch. Now, this ambitious plan was 0:00:19.840 --> 0:00:23.400 a crown jewel of former President Joko Wadodo known as Jacobe. 0:00:23.880 --> 0:00:27.160 This episode was first published in September when Jacob was 0:00:27.200 --> 0:00:31.160 still in office, and since then Indonesia's got a new president, 0:00:31.240 --> 0:00:35.280 Proboo Subianto, and he says he's committed to building the 0:00:35.360 --> 0:00:38.880 new capital. But how do you replace a century's old 0:00:38.920 --> 0:00:42.639 capital city and convince millions of people to uproot their 0:00:42.640 --> 0:00:49.839 lives and start anew Jakarta, Indonesia's biggest city, is in 0:00:49.920 --> 0:00:52.200 trouble right now. 0:00:53.280 --> 0:00:56.640 So many vehicles on the roads at one time. It 0:00:56.840 --> 0:01:01.280 makes the city overcrowded and congested and polluted. 0:01:01.320 --> 0:01:05.039 Forres Mark dar is a Bloomberg government reporter based in Jakarta. 0:01:05.800 --> 0:01:09.200 The pollution, or hayes was so bad. It is a 0:01:09.319 --> 0:01:11.880 very very common sight. If you walk down the streets, 0:01:12.000 --> 0:01:15.080 there are people wearing masks and traffic is so bad 0:01:15.240 --> 0:01:18.040 people actually do meetings in cars. 0:01:18.440 --> 0:01:22.120 The gridlock costs an estimated six and a half billion 0:01:22.319 --> 0:01:25.959 US dollars a year in lost productivity for the greater 0:01:26.040 --> 0:01:30.480 Jakarta area. And on top of that, the city itself 0:01:30.880 --> 0:01:31.520 is sinking. 0:01:31.880 --> 0:01:35.120 I think forty percent of Jakarta the capital is under 0:01:35.319 --> 0:01:39.000 sea level, and in some parts of northern Jakarta it's 0:01:39.000 --> 0:01:41.039 sinking eleven inches a year. 0:01:41.400 --> 0:01:44.759 Some of the hottest hit areas have really subsided by 0:01:44.800 --> 0:01:48.800 more than sixteen feet in terms of high that's slightly 0:01:48.840 --> 0:01:52.040 shorter than a two story apartment if you can visualize it. 0:01:52.360 --> 0:01:55.840 Experts say the city only has until twenty thirty to 0:01:55.880 --> 0:01:59.480 figure out how to stop the sinking and breathing, mass flooding, 0:01:59.720 --> 0:02:01.440 and millions getting displaces. 0:02:02.520 --> 0:02:05.840 Jagarta is home to more than ten million people and 0:02:05.960 --> 0:02:10.040 is the center for the Indonesian government. So what's the 0:02:10.080 --> 0:02:14.320 country to do when it's capital is overwhelmed by explosive growth. 0:02:15.240 --> 0:02:18.800 In the case of Indonesia, the world's fourth most populous country, 0:02:19.120 --> 0:02:22.280 the answer is to build a new one from scratch. 0:02:23.760 --> 0:02:28.120 The new capital is a huge priority for the country's president, Djokovidodo, 0:02:28.440 --> 0:02:32.200 better known as Jacoe, who sees it as an opportunity 0:02:32.280 --> 0:02:36.520 to help transform Indonesia into a high incomnation. So it's 0:02:36.520 --> 0:02:39.360 in the same league economically as other countries in the 0:02:39.400 --> 0:02:41.519 region such as Japan and China. 0:02:42.440 --> 0:02:46.600 Under Jakoby's Tenye Tanio, he has gone on this ambitious, 0:02:47.200 --> 0:02:51.880 massive infrastructure spree, costing hundreds of billions of dollars. He's 0:02:51.919 --> 0:02:57.080 building the hardware because the unnecessary for Indonesia's long term 0:02:57.200 --> 0:03:00.919 economic growth, and this new capital is say is not 0:03:01.000 --> 0:03:06.160 just the crown jewel of Jocoi's ambitious infrastructures free, it 0:03:06.280 --> 0:03:09.320 is also the centerpiece of his legacy. 0:03:10.280 --> 0:03:13.840 Here's President Jacobe talking to Bloomberg about the project in 0:03:13.880 --> 0:03:14.600 twenty nineteen. 0:03:16.160 --> 0:03:19.600 Hopefully few people will drive cars. A green city, a 0:03:19.639 --> 0:03:22.000 smart city, and a forest. 0:03:21.760 --> 0:03:23.680 City for a city. 0:03:24.800 --> 0:03:27.240 In August, there was a big party for the new 0:03:27.280 --> 0:03:31.320 capital city called Nucenthara. Eight thousand people were supposed to 0:03:31.400 --> 0:03:34.800 cheer the inauguration of the city, but the inauguration that 0:03:34.960 --> 0:03:38.560 had been planned didn't happen. In the end, the celebration, 0:03:38.720 --> 0:03:41.880 which was pegged to the country's independence day, was muted. 0:03:43.480 --> 0:03:47.280 Just thirteen hundred people attended against a backdrop of half 0:03:47.280 --> 0:03:52.080 completed buildings and construction cranes, and for now Jakarta remains 0:03:52.240 --> 0:03:53.320 the official capital. 0:03:54.040 --> 0:03:57.440 The satellite images that we acquired. I mean you can 0:03:57.480 --> 0:04:01.400 look that road sustain being laid out. Workers have said that, 0:04:01.520 --> 0:04:05.080 you know, during rainy season it's tough to construct. The 0:04:05.200 --> 0:04:09.280 land is a very muddy. The project really is still 0:04:09.320 --> 0:04:13.120 at its infancy. 0:04:14.720 --> 0:04:18.400 Welcome to The Big Take Asia from Bloomberg News. I'm Wanha. 0:04:18.960 --> 0:04:21.440 Every week we take you inside some of the world's 0:04:21.440 --> 0:04:25.840 biggest and most powerful economies and the markets, tycoons and 0:04:25.960 --> 0:04:30.359 businesses that drive this ever shifting region. Today on the show, 0:04:30.800 --> 0:04:35.039 Indonesia's ambitious project to build a new capital city from 0:04:35.040 --> 0:04:39.440 the ground up is falling short, and its biggest champion, 0:04:39.600 --> 0:04:42.919 President Jacoe, is running out of time to track the 0:04:42.960 --> 0:04:46.960 investment needed to finish it. What's likely to happen next, 0:04:47.360 --> 0:04:56.520 and what's at stake if the project fails. The idea 0:04:56.640 --> 0:04:59.679 of moving Indonesia's capital was brought up by the country's 0:04:59.720 --> 0:05:03.360 first president way back in nineteen fifty seven, but it 0:05:03.400 --> 0:05:07.480 wasn't until twenty nineteen that President Djoko Wadodo formally announced 0:05:07.480 --> 0:05:10.640 the plan to relocate the capitol. He pitched it as 0:05:10.680 --> 0:05:13.479 a new, green, high tech city that would take pressure 0:05:13.600 --> 0:05:17.560 off the sinking and congested capital city of Jakarta. Here 0:05:17.600 --> 0:05:20.200 he is in twenty nineteen, talking to Bloomberg editor in 0:05:20.240 --> 0:05:24.640 chief John Michaelswaet about his vision, Hanya. 0:05:25.839 --> 0:05:25.880 Go. 0:05:26.920 --> 0:05:29.640 We are moving the capitol to Kalimantan because there are 0:05:29.680 --> 0:05:33.440 no earthquakes, no floods. We want to have an efficient 0:05:33.760 --> 0:05:37.520 and effective capital where we can walk, we can ride bikes, 0:05:37.640 --> 0:05:44.280 we can use public transportation. Hopefully few people will drive cars. 0:05:45.120 --> 0:05:49.159 Jacobe said he wanted Nucenthara to have an environmentally friendly 0:05:49.279 --> 0:05:52.680 transportation system and that he wanted the city to achieve 0:05:52.800 --> 0:05:56.359 net zero carbon emissions. That's a far cry from the 0:05:56.440 --> 0:06:00.960 crippling traffic, gridlock and air pollution that's challenging the current capital. 0:06:01.320 --> 0:06:05.360 The idea is they are learning from the experiences of Jakarta. 0:06:05.520 --> 0:06:07.479 Here's Bloomberg's far As Makdar again. 0:06:07.800 --> 0:06:11.000 They do not want congestion. They certainly do not want 0:06:11.040 --> 0:06:14.160 that many cars or bikes on the roads. They definitely 0:06:14.160 --> 0:06:16.880 do not want to have polluted air. It wants the 0:06:16.920 --> 0:06:22.279 new capital to be this smart forest city powered by renewables. 0:06:21.880 --> 0:06:24.880 And Jacoby and other leaders also see the new capital 0:06:25.000 --> 0:06:27.800 as a way to spread wealth more evenly across the 0:06:27.839 --> 0:06:31.080 country instead of it being so concentrated on the island. 0:06:31.120 --> 0:06:34.839 Of Java where Jakarta is. Here's President Jacobi again. 0:06:36.720 --> 0:06:37.560 ATADITOA. 0:06:37.560 --> 0:06:40.479 One hundred and fifty million people are in Java, but 0:06:40.600 --> 0:06:45.040 we have seventeen thousand islands. Fifty eight percent of GDP 0:06:45.320 --> 0:06:49.400 is concentrated in Java. We need to distribute the population 0:06:49.600 --> 0:06:54.400 and economy to other islands. Em Gone. 0:06:54.800 --> 0:06:57.599 The government said it expects the new capital to create 0:06:57.640 --> 0:07:00.480 more than four million jobs over the next two decades 0:07:00.960 --> 0:07:03.680 and to help attract new foreign investment to what is 0:07:03.720 --> 0:07:09.679 Southeast Asia's largest economy. But building a new city isn't easy, 0:07:10.160 --> 0:07:13.080 especially when that new capital is more than six hundred 0:07:13.080 --> 0:07:17.080 miles away on a different island in the Borneo Rainforest. 0:07:18.080 --> 0:07:21.760 In Indonesia's multi billion dollar new capital has been plagued 0:07:21.800 --> 0:07:25.640 with problems from the start. Forrest says the plan to 0:07:25.720 --> 0:07:29.480 gradually move more than ten thousand civil servants, the president 0:07:29.520 --> 0:07:32.560 and his cabinet to the new capital has already been 0:07:32.600 --> 0:07:34.040 postponed twice. 0:07:35.120 --> 0:07:38.560 The relocation plans have definitely been pushed back. They are 0:07:38.600 --> 0:07:41.840 still testing out the water supply and also to make 0:07:41.840 --> 0:07:45.040 sure that the water is clean. There's also issue of 0:07:45.240 --> 0:07:49.760 access to electricity that's still being hashed out, but it's 0:07:49.880 --> 0:07:52.640 basically far from complete. 0:07:52.200 --> 0:07:56.080 Satellite imagery that Bloomberg obtained shows as recently as mid July, 0:07:56.480 --> 0:07:59.520 nearly one hundred acres of land around the heart of 0:07:59.560 --> 0:08:04.320 the city. It's just dirt and standing water. Construction is 0:08:04.360 --> 0:08:07.200 complete at just one office building that will be used 0:08:07.200 --> 0:08:11.120 by government agencies, and when civil servants do arrive, they 0:08:11.160 --> 0:08:14.400 may have to share rooms and work from temporary quarters 0:08:14.400 --> 0:08:19.320 such as cafeterias. And even the project's champion, President Jakoe, 0:08:19.480 --> 0:08:23.040 admitted that his first night in the new unfinished presidential 0:08:23.120 --> 0:08:24.679 palace was rough. 0:08:25.280 --> 0:08:27.840 Reporters actually asked him, you know, how is your first 0:08:27.960 --> 0:08:30.440 night sleeping here? And he was like, it wasn't good. 0:08:30.560 --> 0:08:33.520 Oh really, yeah, and it will take some time getting 0:08:33.600 --> 0:08:37.720 used to. And so what you're saying now is a 0:08:37.840 --> 0:08:42.880 more tempered response. They are essentially walking back on that 0:08:43.040 --> 0:08:47.760 optimism because it is far from ready, and Jokobi himself 0:08:47.840 --> 0:08:51.360 said that the project is only fifteen percent complete, so 0:08:52.240 --> 0:08:54.440 no one is moving there at this point in time. 0:08:54.920 --> 0:08:57.680 Well, I guess the bigger question is do people even 0:08:57.760 --> 0:08:59.959 want to move there even if it's ready. 0:09:00.480 --> 0:09:04.760 That is a good question because even when the idea 0:09:05.320 --> 0:09:10.160 was made public, there was initial skepticism and that skepticism 0:09:10.280 --> 0:09:14.400 grew over the last couple of years, primarily because this 0:09:14.480 --> 0:09:16.760 is a near capital that is located in the middle 0:09:16.800 --> 0:09:19.440 of nowhere. It's in the middle of the jungle in 0:09:19.520 --> 0:09:22.520 the island of Borneo, far from like you know, the 0:09:22.679 --> 0:09:26.600 fancy bars and restaurants of Jakarta, far from the shopping 0:09:26.640 --> 0:09:29.080 madels and all that far It says. 0:09:29.120 --> 0:09:32.960 The government has been offering tax incentives to civil servants 0:09:33.400 --> 0:09:35.920 and even came out with a plan targeting those who 0:09:35.960 --> 0:09:39.119 were single to move there, but he said the response 0:09:39.320 --> 0:09:41.280 has been less than enthusiastic. 0:09:42.440 --> 0:09:46.040 According to local media reports is that these civil servants 0:09:46.080 --> 0:09:49.880 didn't want to move. Some of them either resigned from 0:09:49.880 --> 0:09:54.680 the government, some asked for postings outside of Jakarta in 0:09:54.800 --> 0:09:58.200 the other provinces, and some of the singles also chose 0:09:58.320 --> 0:10:02.880 to get married and have kids. They are finding any 0:10:02.960 --> 0:10:05.559 excuse they can to not move. 0:10:06.400 --> 0:10:09.800 Another group of people who've been less than enthusiastic about 0:10:09.840 --> 0:10:14.680 the new capital are private investors. According to the official estimate, 0:10:14.840 --> 0:10:19.000 the project is expected to cost roughly twenty nine billion dollars, 0:10:19.320 --> 0:10:22.080 and the government has said eighty percent of that cost 0:10:22.200 --> 0:10:25.800 will need to be covered by private investors, both local 0:10:25.960 --> 0:10:31.120 and foreign. Initially, foreign investment did look promising. Companies like 0:10:31.200 --> 0:10:34.720 SoftBank offered to invest up to forty billion US dollars 0:10:34.760 --> 0:10:38.520 toward the project, but before construction even began in August 0:10:38.520 --> 0:10:43.640 of twenty twenty two, they pulled out. SoftBank declined to 0:10:43.679 --> 0:10:44.880 comment on its decision. 0:10:45.120 --> 0:10:49.079 They didn't specify why EZACLY or gave any clear reasons 0:10:49.160 --> 0:10:53.560 or explanation, but that sent the signal that hey, maybe 0:10:53.600 --> 0:10:57.240 they did not have confidence that Indonesia could pull off 0:10:57.280 --> 0:10:58.439 this project. 0:11:00.840 --> 0:11:04.600 After the break, Can Indonesia raise the money it needs 0:11:04.720 --> 0:11:07.760 to finish the new capital and what will it mean 0:11:07.840 --> 0:11:10.720 for the country and the rest of the world if 0:11:10.720 --> 0:11:24.679 it fails. So far, Indonesia has spent around four point 0:11:24.720 --> 0:11:28.960 six billion dollars to finance its new capital city, Nucenthara, 0:11:29.480 --> 0:11:32.760 but it estimates it needs over twenty four billion more 0:11:32.960 --> 0:11:36.560 to complete the project. The government wants that money to 0:11:36.600 --> 0:11:40.520 come from local and foreign investors, but so far local 0:11:40.520 --> 0:11:45.480 investors haven't seen that interested. Despite incentives like tax breaks 0:11:45.520 --> 0:11:49.600 and long term property rights, Nucentaura has attracted less than 0:11:49.679 --> 0:11:53.559 three point two billion dollars in local investments. And as 0:11:53.600 --> 0:11:55.880 for foreign investors. 0:11:55.400 --> 0:11:58.040 What has been happening in the last couple of years 0:11:58.120 --> 0:12:02.560 is that Indonesia has yet to secure a single foreign 0:12:02.800 --> 0:12:06.880 private investor in the new capital city, and so the 0:12:06.960 --> 0:12:11.200 financing is stuck in that sense, and that adds to 0:12:11.240 --> 0:12:14.600 the complications of building this new capital city. 0:12:15.040 --> 0:12:18.440 Back in twenty nineteen, there was serious interest in the 0:12:18.480 --> 0:12:22.960 project from foreign investors. So why has that interest dwindled? 0:12:23.360 --> 0:12:26.079 I think a key part of that is basically because 0:12:26.280 --> 0:12:30.400 you know, number one, it is really a gargantuan project. 0:12:31.559 --> 0:12:35.280 It is super ambitious, and you know, there is a 0:12:35.360 --> 0:12:39.640 concern whether Indonesia can pull it off. Now, another key 0:12:39.760 --> 0:12:43.360 factor was that this project, you know, the construction started 0:12:43.520 --> 0:12:47.440 at the tail end of Djocovi's residency. And so what 0:12:47.679 --> 0:12:51.240 happened from twenty tweeny two onwards was that a lot 0:12:51.280 --> 0:12:55.600 of the foreign investor community they adopted a weight and 0:12:55.679 --> 0:12:58.880 see approach because they did not want to be in 0:12:58.880 --> 0:13:03.559 a situation where I invest my money right now hundreds 0:13:03.600 --> 0:13:07.200 of millions or more, only for the project not to 0:13:07.280 --> 0:13:09.240 advance under a new administration. 0:13:11.280 --> 0:13:14.320 The change in leaders comes at a time when Indonesia 0:13:14.440 --> 0:13:18.680 is under pressure to spur economic growth and forre says 0:13:18.720 --> 0:13:22.760 the country's next leader, President elect Proboo Subianto, has his 0:13:22.920 --> 0:13:23.640 own agenda. 0:13:24.400 --> 0:13:29.359 His very focused on welfare policies such as distributing females 0:13:29.400 --> 0:13:34.520 to children, ramping up healthcare infrastructure, boosting the quality of education, 0:13:34.760 --> 0:13:39.360 making sure that the housing infrastructure for the low income 0:13:39.520 --> 0:13:43.880 Indonesians are met, and that will require a lot of spending. 0:13:44.240 --> 0:13:48.520 Proboo said he's committed to continue and if possible, finish 0:13:48.760 --> 0:13:49.920 the new capital. 0:13:50.400 --> 0:13:52.679 The key question when it comes to the construction of 0:13:52.720 --> 0:13:55.880 the new capital city will be what is the pace 0:13:56.040 --> 0:13:59.760 of the construction. So what the analysts have pointed out 0:13:59.840 --> 0:14:04.000 is that what future administrations can do is perhaps prolong 0:14:04.080 --> 0:14:05.480 it or delay it. 0:14:05.920 --> 0:14:10.320 Plagued by construction delays in financing woes, far says it 0:14:10.360 --> 0:14:13.680 will take years before Indonesia and the rest of the 0:14:13.720 --> 0:14:18.400 world will know. If this megaproject ultimately pans. 0:14:18.040 --> 0:14:21.440 Out, Indonesia could actually be offering a blueprint and a 0:14:21.520 --> 0:14:25.640 template for other emerging markets. It will offer the other 0:14:25.720 --> 0:14:28.960 countries a lot of learning points, a lot of lessons, 0:14:29.400 --> 0:14:33.400 and it would be Indonesia's great success story if they 0:14:33.440 --> 0:14:38.920 can pull it off. Now, there is also the other scenario, 0:14:39.040 --> 0:14:42.560 which is all doman gloom, that this could end up 0:14:42.680 --> 0:14:47.000 as a total failure, that this new capital might not 0:14:47.160 --> 0:14:51.240 actually take off because given that they've already missed the 0:14:51.360 --> 0:14:56.520 first dateline of construction, that isn't really inspiring confidence that 0:14:56.640 --> 0:15:01.320 Indonesia can pull off such an ambitious real estate project. 0:15:01.920 --> 0:15:07.720 And should it really not take off, then Jocob we 0:15:07.840 --> 0:15:11.200 could end up in the history books for the wrong reasons. 0:15:13.960 --> 0:15:16.880 This is the Big Take Asia from Bloomberg News. I'm 0:15:16.920 --> 0:15:20.920 wan ha. This episode was produced by Young Young Naomi, 0:15:21.640 --> 0:15:26.040 Jessica Beck, and Adriana Tapia. It was edited by Caitlin Kenny, 0:15:26.120 --> 0:15:30.000 Jeff Grocott, Lisa Bayer, and Claire Jow. It was mixed 0:15:30.000 --> 0:15:33.080 by Blake Maples and fact checked by Jessica and Eddie Duane. 0:15:33.760 --> 0:15:37.560 Our senior editor is Elizabeth Ponzo. Nicole Binksterbower is our 0:15:37.600 --> 0:15:41.160 executive producer, and Sage Bauman is Bloomberg's head of Podcasts. 0:15:41.680 --> 0:15:43.880 If you like our show, please leave us a review 0:15:44.000 --> 0:15:46.960 wherever you listen to podcasts, and please tell your friends 0:15:47.040 --> 0:15:50.480 it makes a huge difference. Thanks and see you next time.