Indonesian President, Joko Widodo and Minister of State-Owned Enterprises, Erick Thohir observe construction at Indonesia’s new capital, Nusantara. Photo by Dhemas Reviyanto.

In August 2019, Indonesian President Joko “Jokowi” Widodo first announced his intention to relocate the Indonesian capital from Jakarta to Kalimantan. Indonesia’s new capital city – which will officially be named Nusantara – has been envisioned as a flagship project to encourage economic development outside of Java.

Jokowi has been busy spruiking Nusantara abroad. However, a lack of interest from foreign investors has now forced the government to turn to domestic capital and, in particular, to prominent developers invested in the speculative urban expansion of Jakarta, the current capital.

Curiously, the government’s latest 14 additions to its National Strategic Project (PSN) agenda include two projects earmarked for development within two privately developed township megaprojects located in peri-urban areas of the vast Greater Jakarta metropolitan area (Jabodetabek)—an urban agglomeration that comprises Jakarta plus five satellite cities and three regencies.

The two projects in question, according to the national news agency Antara, are a 1,756-hectare ‘green tourism destination’ called Tropical Coastland in Pantai Indah Kapuk (PIK) 2, and a 59.6-ha special economic zone (SEZ) in Bumi Serpong Damai (BSD) City that is planned to be a hub for education, medical research, digital economy, technological developments and healthcare. Both projects combined are projected to create 30,000 jobs.

Meanwhile, PIK 2 and BSD City are two township megaprojects currently in progress. BSD City, if all of its planned area is fully realised, will be ‘half the size of Paris’, while, PIK 2 is envisioned as the ‘New Jakarta City’.

Presumably, PSN status will hugely assist the future development of these two speculative megaprojects. That, and the fact that the developers behind these huge real estate megaprojects are part of a consortium also backing the development of the forthcoming Nusantara, is suggestive of an emerging political-economic symbiosis between Nusantara and speculative urban expansion in Jabodetabek.

What are National Strategic Projects?

From early on in his presidency, Jokowi has sought to fuel economic growth by fast-tracking priority infrastructure developments – designating certain projects as PSNs has allowed him to do this.

PSNs are governed by Presidential Regulation No. 3 of 2016 on Acceleration of National Strategic Projects Implementation and a number of subsequent supporting statutes. Under these regulations, PSNs are afforded key incentives such as simplified permit and licensing processes, and government assistance with land procurement. Jokowi has previously stated that PSNs must also aim to reduce inequality and he has tried to use them to spread economic growth away from Java, albeit with limited success.

Since the inception of PSNs some 200-plus projects have been listed. Toll roads have encompassed most PSNs, but many other sectors have also been included – Nusantara being a prime example. However, the PIK 2 and BSD City projects do not seem to meet the meet the usual conditions of a PSN and industry experts have voiced concerns about their inclusion.

While the emphasis on tourism or an economic zone shared by PIK 2 and BSD City is not out of the ordinary for a PSN, their Jabodetabek location – an already highly developed area – naturally raises questions. Moreover, the 14 new PSNs – including the two in Jabodetabek – will be fully privately funded unlike previous projects, which have been partly funded by the state budget (APBN).

The property oligarchs buying into Nusantara

The developers of PIK 2 and BSD City, Agung Sedayu Group (ASG) founded by Sugianto “Aguan” Kusuma and Sinar Mas Land (SML) currently led by Franky Oesman Widjaja, respectively, are two of Indonesia’s leading property developers and have extensive portfolios in Jabodetabek. They, and a handful of other prominent developers, arguably make up the current real estate oligopoly that has characterised the sector since the late New Order era.

Back then, systematic political patronage coupled with financial deregulation saw Soeharto’s business cronies engage in extensive land and real estate speculation facilitated by the state that would fundamentally shape patterns of urban development for years to come. PIK 2 and BSD City are legacies of this period.

The current circumstances see an outgoing president seeking to leave his own legacy by establishing a new and ambitious capital city, however, attracting the necessary investment—particularly from abroad—has proven difficult. Politically, Jokowi has likely secured Nusantara’s immediate future through the victory in the recent presidential elections of his preferred candidate pair, Prabowo Subianto and Jokowi’s son, Gibran Rakabuming Raka. However, financially Nusantara is vulnerable, and this has forced him to turn to domestic capital – and, it seems, to the patronage patterns of the past.

Will Nusantara be financed with favours?

Put simply, current state-capital relations concerning Nusantara are reminiscent of Soeharto-era patronage politics: it is difficult to see PIK 2 and BSD City’s prioritisation by the government as anything other than a quid pro quo for ASG and SML’s commitment to developing the new capital. At the very least, these developments show how political-economic interests and patronage models can endure through time, despite political change.

Furthermore, plans to create an agglomeration council to manage Jabodetabek once Jakarta loses its capital city status are of concern. How this body will deal with the plethora of issues the megapolitan is currently experiencing across its multiple jurisdictions remains to be seen, but given the council is overseen by the president and vice president, and PIK 2 and BSD City fall under its purview, this impending arrangement deserves very close scrutiny.

In the absence of international support, Jokowi may only get his new capital city with the help of local developers. After all, property developers are ultimately ‘relational actors’ – they are arguably best placed to connect the domestic political economy to transnational capital and foreign expertise.

However, the cost of the new capital for Jokowi ironically seems to be his support for the consolidation of Jakarta’s extended urban region as the economic centre of Indonesia.

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