Is Jakarta being abandoned?

Jakarta is one of the great cities of the world. It is home to almost 10 million people and is the capital of Indonesia, making it the heart of the most populous Muslim nation on the planet. But it might not be the capital for long with Joko Widodo, the Indonesian president, announcing plans to move the government elsewhere.

Unfortunately, Jakarta has problems which look to be insurmountable. It is polluted, overpopulated, and constantly jammed with traffic. In addition, the city is sinking at an estimated rate of 25cm a year thanks to a combination of rising sea levels and subsidence due to the number of wells which are dug by citizens who need clean drinking water. Four million people live in neighbourhoods which are now up to four metres below sea level, and the sea wall built to defend them is also sinking.

For these very good reasons, President Widodo announced this week that Indonesia is planning to move its seat of government away from Jakarta at a cost of US$33bn. Three cities – Palangka Raya, Tanah Bumbu and Penajam – are being examined as alternatives and the process is likely to take a decade.

Splitting government and business capitals is not an unusual thing. For every country like Indonesia or the UK where it is all in one place, there are countries like the USA, South Africa, China and Australia which have the different pillars of society located in different cities.

While it seems sensible from the outside to move the capital city away from the enormous sinking traffic jam that is Jakarta, some voices inside the country are not convinced.

Firstly, there is an understandable lack of detail at this stage of the plan which has people worried. Secondly, people are not sure how this plan will be financed with Chatib Basri, the former finance minister, wondering whether the private sector will be asked to step in or if it will be a government funded venture. Thirdly, there has been nothing said about the fate of regular people who will either have to move along with the capital or be left behind in a place the national government has formally declared it has no long-term faith in.

For the moment we are happy to class the plans as “ambitious” rather than “imminent”. Capital cities build up over decades and the infrastructure required to move all of that is not easily put in place. It is the sort of move that will need decades to plan and execute, meaning that the current lack of any realistic strategy makes it unlikely for now.

However, it is a situation worth monitoring for anyone looking to invest in Indonesia as it continues its ascent into the upper levels of national economies around the world.