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Indonesia vows to build Us$33bil capital

Republic finalising master-plan for new city

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“The capital project can create a lot of jobs and will have broad multiplier effects.” Suharso Monoarfa

JAKARTA: Indonesia is pressing ahead with plans to build a new capital as billions of dollars in private sector investment is seen as key to reviving an economy battered by the coronaviru­s pandemic, according to a senior minister.

President Joko Widodo’s administra­tion is working with the parliament to pass a bill to lay the legal foundation to start work on the Us$33bil new capital on the island of Borneo, Planning Minister Suharso Monoarfa said.

It’s also finalising a master-plan for the new city, he said.

While the plan has taken a backseat to allow the government to focus on stemming the pandemic and set aside almost Us$50bil to cushion the blow to the economy, it will become a priority next year, said Monoarfa, whose ministry is drawing up the legal framework and design for the yet-to-benamed city.

Jokowi, as the president is known, proposed the new capital last year to ease pressure on congested Jakarta, which is often hit by floods as parts of it lie below the sea level.

“Why should we continue with the new capital plan in the midst of a pandemic like this? The answer is that we need a locomotive that can deliver multiplier effects to the economy,” Monoarfa said in mobile phone text response to questions.

“The capital project can create a lot of jobs and will have broad multiplier effects.”

Indonesia has identified about 256,000ha of land in East Kalimantan on the island of Borneo for the capital – about four times the size of Jakarta.

An estimated 100 trillion rupiah (Us$7bil) a year in lost productivi­ty due to traffic jam in the greater Jakarta area, home to almost 30 million people, and the need to spread economic growth beyond the main Java island have prompted the new capital plan.

The new city will sport world-class educationa­l institutio­ns, modern hospitals, botanical gardens and an environmen­tally-friendly transporta­tion system, according to officials. Investors from China, the Middle East and the United States have shown interest in developing the city, Coordinati­ng Minister for Maritime Affairs and Investment­s Luhut Pandjaitan has said.

The capital is proposed to be funded by a mix of government and private-public partnershi­ps with bulk of the money coming from the private sector, according to Monoarfa.

Abu Dhabi Crown Prince Mohammed Bin Zayed Al Nahyan, Softbank Group Corp founder and chief executive officer Masayoshi Son and the US Internatio­nal Developmen­t Finance Corp have shown interest in investing in the new city, according to officials.

“There are not many large-scale investment projects of this size in today’s world,” Monoarfa said.

“So we hope that investors will come in large numbers and this is a great opportunit­y for them.”

The government’s investment will be limited to building the basic infrastruc­ture for the capital and a state spending of 10 trillion rupiah is set to draw at least 100 trillion to 120 trillion rupiah of private sector funds, he said.

While authoritie­s previously targeted a ground-breaking ceremony for the project in the fourth quarter of this year, Monoarfa acknowledg­ed a delay due to the pandemic but didn’t set a new date for start of constructi­on.

The government plans to move the capital in phases from 2024, with the new city eventually becoming home to as many as six to seven million people.

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