A great chrome and glass building in the shape of a winged bird rises half-built from the jungles of Borneo.

Two years ago, this was a sprawling eucalyptus plantation, but in seven months the structure will be Indonesia’s presidential palace, perched on a hill overlooking the new capital, Nusantara. Evoking the Garuda, a legendary eagle of Indonesian folktales, work crews are scurrying to finish the palace in time to host the nation’s annual independence celebration in August.

The new city taking shape in the surrounding countryside is the brainchild of President Joko Widodo, popularly known as Jokowi, who launched the audacious $29 billion building project at the start of his second term in 2019. But as housing and infrastructure is added, the city’s future is far from certain, even as some 3,000 civil servants prepare to move to Nusantara later this year. With Jokowi set to step down in October after two terms as president, the project will be out of his hands.

His successor will be chosen in presidential elections starting Feb. 14, though most expect a runoff in June to decide. While two of the three main presidential candidates have backed the capital relocation, it is still unclear whether, and how hard, Jokowi’s replacement will fight to implement his vision.

In the meantime, momentum on raising money to build the new capital has ground to a halt. Few investors are willing to commit funds until Jokowi’s successor — and his views on the new capital — is clear. The government has planned to finance 20% of the total funding from the state budget, but still needs 80% from the private sector.

Around 32 trillion rupiah ($2 billion) have been spent from the state budget in the last two years, and 40.6 trillion rupiah more apportioned in the 2024 budget, while at least 35.9 trillion rupiah have been committed by private companies. But this is just a fraction of the amount needed to complete the five phases of construction, which are scheduled to run through 2045.

Foreign investors say they are pausing to make sure the Nusantara plans go ahead after the election.

“Nusantara is an incredibly wonderful opportunity,” said Lee Kang Hyun, chairman of Indonesia’s Korean Chamber of Commerce and Industry (Kocham). In his other role as chief operating officer of Hyundai Motor’s Asia-Pacific Headquarters, however, Lee is nonetheless cautious about investing in the capital. “We still don’t know who the next president will be. Their methods can change,” he stressed.

Lee also told Nikkei Asia that “Korean investors’ wait-and-see stance [could] linger further, depending on the result of the election.”

Jokowi entered office in 2014 and is constitutionally barred from seeking a third term but has sought to secure his legacy by moving the capital from sprawling and crowded Jakarta on Java island to the rolling plantations of East Kalimantan, on the Indonesian side of Borneo. Geographically the center of the Indonesian archipelago, the location reflects Jokowi’s push for “Indonesia-centric” development, as opposed to decades of “Java-centric” approaches, as he has put it in numerous speeches.

Jokowi has made every effort to ensure his successor will continue the project after he leaves power, going so far as to pass a law on the new capital in early 2022. “[The new capital] is [guaranteed] by law. The law is supported by 93% of the factions at the House of Representatives. What else are you asking for?” Jokowi told reporters who pressed him on the continuity of the project in November last year.

Another form of insurance became clear in October, when the front-runner to replace Jokowi, 72-year-old defense minister and a former army general Prabowo Subianto, announced that his running mate in the upcoming election would be Jokowi’s 36 year old son, Gibran Rakabuming.

“I emphasize that [Nusantara] development must not stop and must continue to change the paradigm related to Java-centric development,” Prabowo said while campaigning in Banjarbaru, South Kalimantan, on Jan. 20.

Gibran, for his part, has made it clear he plans to continue his father’s legacy: “Sustainable development in the new capital city will set a new point of economic growth, opening access and connectivity as well as job opportunities,” Gibran said, using the Indonesian-language acronym for the city’s official name, IKN, or Ibu Kota Nusantara. “IKN is a symbol of the transformation of development in Indonesia,” he said.

Indonesia’s leading presidential candidate, Prabowo Subianto, right, and his running mate, Gibran Rakabuming Raka, eldest son of President Joko Widodo, have stressed the need to complete the new capital.    © Reuters

As of December, construction of the first of five phases of the Nusantara project is 62% complete, according to the government. As of August, many government ministries and agencies will open offices there, and the government plans to transfer 3,000 civil servants to Nusantara from July to November this year. The government estimates the population of the city will reach 60,000 by the end of this year, rising to 2 million by 2040.

Embassies and foreign business headquarters located in Jakarta have been reluctant to discuss moving, however. “Although relocating the capital is a business opportunity, historically there have been few successful relocations,” said a senior diplomat in Indonesia, when asked why there is skepticism among foreign investors.

Indeed, many are concerned that Nusantara could share the fate of similar projects by Southeast Asian neighbors who have moved their capitals in the post-colonial era. In 1999, for example, Malaysia began relocating federal ministries and government agencies to a new administrative capital, Putrajaya, 25 kilometers south of Kuala Lumpur. But Kuala Lumpur remains the country’s financial and commercial capital today. Only one foreign diplomatic mission, Brunei’s, has so far relocated. Likewise, Myanmar in 2005 began shifting its administrative capital from Yangon to Naypyidaw, but most major embassies have stayed in Yangon.

“I doubt that Nusantara will quickly replace Jakarta as the financial hub,” Melinda Martinus, lead researcher at the ISEAS-Yusof Ishak Institute in Singapore told Nikkei, based on the population of Nusantara as compared to Jakarta, a city of 10 million.

While Kalimantan has industries that can support its development, including forestry, agriculture, and mining, Java, where Jakarta is located, has an industrial and service-based economy, said Martinus. “I am worried that the new capital city’s current capacity will not support what a capital city is supposed to be: connectivity with other global cities, knowledge creation, administrative services.”

Undeterred by naysayers, Jokowi envisions Nusantara as a “green and smart global city” that will help spur development in the eastern half of Indonesia and eventually lift Indonesia into the ranks of developed nations, as well as help to fulfill its pledge of net-zero carbon emissions by 2060. About 65% of the city is expected to be forested, helping it achieve net-zero emissions by 2045 through renewable energy.

Penajam Paser Utara regency in East Kalimantan Province in Borneo, Indonesia, is known for its rolling eucalyptus plantations. Now it is abuzz with cranes and trucks as the new capital takes shape. (Photo by Dimas Ardian)

“Our benchmark is not only Canberra or Putrajaya or Washington, D.C., but to become a center of the world economy,” said the Nusantara Capital Authority’s deputy for investment and financing, Agung Wicaksono, during a briefing in December.

Wicaksono added that Nusantara will be modeled on cities like Shenzhen and Dubai, two economic centers that were built from scratch. “Nusantara will be Canberra at the core, but with Shenzhen in the surroundings. … We want IKN to become the center of government and the center of economic growth,” he said.

For now, the plans appear to have captured the country’s imagination. In a poll conducted in October last year by Indikator Politik Indonesia, 58.4% of respondents said they support the project, compared with 28.7% who were opposed.

In Kalimantan, however, opinion is divided. Nurhayati, a 33 year-old who works as a nurse at local hospital in nearby Balikpapan, says she wishes the government would put as much effort into developing local public transportation, clinics and schools. “I disagree with the capital relocation because the more urgent concern is development in remote areas,” she said, “I’m still wondering how IKN can be developed so fast, but these small developments in the regions have such a hard time getting attention.”

But many hope the new plans will spark a business boom. Ahmad Sadaan, a motorbike taxi driver in Balikpapan, said his income has tripled in the wake of the Nusantara project. “We just enjoy the positive impact with more people coming, more demand. If the project is stopped, we will be very disappointed, and it might mean less income again” he said.

Risky business

If the plans do go ahead, Jokowi will have succeeded where previous Indonesian leaders failed.

Moving the capital to Borneo was an unmet goal of the country’s first president, Sukarno, who was in office from 1945 to 1967. Sukarno wanted to move the capital to Borneo because it is the largest of Indonesia’s major islands, at the center of the archipelago and because Jakarta was seen as a Dutch colonial legacy. The plans were then revived by late dictator Suharto in the 1990s, who sought to move the capital to West Java province. That was shortly before the Asian financial crisis hit in 1997, and he was forced to step down a year later. Former President Susilo Bambang Yudhoyono, who served from 2004 to 2014, raised the idea of moving the capital again, but also failed to transform the discussions into action.

Shortly after his reelection in 2019, Widodo picked up the baton of his predecessors, announcing his plan to relocate the capital, citing Jakarta’s chronic traffic and sinking foundations. He also stressed that the move would bring economic equality and growth in the eastern half of Indonesia. Java, home to Jakarta, accounted for 57.1% of Indonesia’s economy in the third quarter of 2023. The contribution of the Indonesian parts of Borneo island, where Nusantara is located, was only 8%, according to data from Statistics Indonesia, despite Kalimantan being four times larger than Java.

During a trip to Nusantara on Jan. 17 this year, Jokowi expressed hope that new businesses there will create jobs and propel economic growth in the new capital and the surrounding cities. The visit was Jokowi’s third since November and was seen as an attempt to convince prospective investors that the project is too big to fail.

While grandiose construction projects intended to secure a presidential legacy are not uncommon in Indonesia, they have a mixed track record. One cautionary tale is Hambalang, a 2.5 trillion rupiah (about $158 million at today’s exchange rate) sports complex project outside Jakarta announced under the previous president Yudhoyono, which was abandoned after it was marred by a corruption scandal.

Citing the large scale of the Nusantara project, and its minimal government funding, Nailul Huda, an economist at the Center of Economic and Law Studies in Jakarta told Nikkei that “IKN is at greater risk of failure and collapse than Hambalang.” However, he also added, “With various developments already underway on a massive scale in the field, stopping the project may not be viable.”

Instead, he said, the government may end up having to foot far more of the bill than it originally counted on: “The big risk is increasing allocations from [the state budget].”

The election: A moment of truth

An even bigger risk is the potential loss of government support for Nusantara, if a candidate opposed to the project is elected as Jokowi’s successor.

The project’s weak political link is represented by Anies Baswedan, a former governor of Jakarta [province] who appears most opposed to the move, reflecting the views of many Jakartans loath to see their city decline in status. During the first election debate in December, the 54-year-old Anies criticized the capital relocation plan, calling it “a legal product that has failed to go through a comprehensive public dialogue.”

“We see more urgent needs in front of our eyes. In Kalimantan, many damaged school buildings need to be rebuilt, and building railways or toll roads connecting cities in Kalimantan is urgent. … We haven’t been able to provide fertilizers” for farmers, Anies, a former education minister, said. “At the same time, we’re building a palace for the president. Where is our sense of justice?”

Regarding Jokowi’s motivations for the relocation, such as Jakarta’s traffic, environmental and overcrowding problems, Anies stressed, “Problems should not be abandoned, they should be solved. We think problems in Jakarta must be solved by building public transport and building more parks … to make Jakarta a comfortable, safe and … healthy city.”

The two other contenders, Defense Minister Prabowo and former Central Java Gov. Ganjar Pranowo, 55 years old, seem to favor Jokowi’s plan to relocate the capital. So far, Jokowi has not formally endorsed a candidate, but with his son Gibran on the ticket as Prabowo’s running mate, there is no doubt as to where his preference lies.

For now, Prabowo is leading the race, and he has seen a bump in support since his running mate was announced in October. The latest poll conducted between Jan.10 and Jan. 16 by Indikator Politik Indonesia, 48.55% of respondents said they would vote for three-time presidential contender Prabowo’s ticket. Anies recently rose to second place, with his support at 24.17%, while 21.6% backed the ruling party’s Ganjar.

So far none, of the polls show any ticket topping 50%, which is the share of votes needed to win the election outright. If no candidate wins a majority in the first round, a runoff will be held in June. In a scenario where Ganjar is eliminated in the first round, several polls have consistently shown Prabowo is expected to win, including Indikator’s latest survey, which showed 58% supporting Prabowo versus 28% supporting Anies.

But even if a pro-relocation candidate such as Prabowo wins, one expert with high level contacts in the Indonesian government pointed out that despite the 2022 law, Nusantara might still be axed if it winds up costing too much and cannot attract enough outside investment. Even if the next president presses on with the relocation, he said, he might change the budget allotment or even minimize the project.

Indeed, some experts believe the current third-place candidate, Ganjar Pranowo, may eventually review the government’s approach due to questions about whether the project will attract sufficient foreign investment, although in public he continues to reiterate his support.

Ganjar visited the new capital site in December, repeating his pledge to continue with the project. “IKN has started and must be continued,” he posted on X, formerly Twitter. “Not just [by] implementing the law, but also [with] a commitment to eradicating development inequality.” However, he sounded a note of caution. “Everything must be calculated with careful planning, the ecosystem must be prepared, then everything is done through a correct and appropriate process,” Ganjar told state news agency Antara.

The former Central Java governor is concerned about straining the state budget, according to Muhammad Waffaa Kharisma, a researcher at the Jakarta-based Center for Strategic and International Studies. At least based on the current trajectory, the capital project “is permanent,” but, he added, “The potential scale of development is [something] we still need to observe,” Kharisma told Nikkei.

Tough sell

To turn the project into reality, the Indonesian government is working hard to attract foreign investment to help build the new capital. During a trip to New Delhi in September for the Group of 20 summit, Jokowi attempted to woo foreign leaders such as French President Emmanuel Macron to invest in the ambitious project. Jokowi also asked Chinese President Xi Jinping and Premier Li Qiang to accelerate China’s investment in the construction of the capital city during his trip to Beijing in October, after which China’s foreign ministry said that China supports Chinese companies “in participating in the construction of major projects such as Indonesia’s new capital.”

However, attracting backers has been a challenge. Although domestic companies have started building basic infrastructure such as hospitals, shopping malls and hotels, enthusiasm is scarce among potential international investors, and not many concrete pledges have materialized.

“Foreign companies are not so aggressively working on projects at this stage,” said Chihiro Fukuda, a senior director with Japan International Cooperation Agency, at an investment forum in Tokyo in December.

Fukuda added many Japanese companies hope to invest by collaborating with local companies because the majority of them see that “it’s risky to invest on their own.” Several potential investors from Japan, including major trading houses and construction companies, have joined tours of the new capital, although none has publicly pledged funding for the project.

As of Jan. 16, the government said Indonesia had received about 345 letters of interest, of which about 207 were from domestic companies. Foreign businesses from Singapore, Malaysia, Japan and South Korea have expressed interest in taking part.

For example, Hyundai Motor Group signed a memorandum of understanding with the new capital authority to work together to establish an advanced air mobility ecosystem. Meanwhile, European defense technology company Thales is looking for an opportunity to invest in areas such as cybersecurity and data centers. And Singapore’s Sembcorp Utilities has reportedly agreed to jointly develop solar power plants in Nusantara with Indonesian state utility Perusahaan Listrik Negara.

The investment commitments are there, albeit still with no major concrete promises of funding. Before the coronavirus pandemic, SoftBank CEO Masayoshi Son flew to Jakarta to meet Jokowi and pledged to invest in the new capital in January 2020. However, it later backed out without providing a reason. Son was named a member of the steering committee for the project, along with United Arab Emirates President Mohamed bin Zayed Al Nahyan.

Addressing the investment forum in Tokyo in December, director general of the Japan Bank for International Cooperation, Ryuta Suzuki, said more specific investment requests are needed for the capital. “Priorities have not been clearly defined, for example, in the areas of education and renewable energy. It is also difficult to understand in what fields and how the ministries and agencies in charge want Japanese companies to invest.

“One of the challenges of the new capital project is that, because the project is so grand, it is difficult to know where to start and what the priorities are,” Suzuki said.