Indonesian president in damage control over new capital

By Stefanno Sulaiman and Kate Lamb

JAKARTA (Reuters) - Indonesia's president is rushing to reassure investors and bureaucrats about his $32 billion new capital city in a malaria-prone pocket of Borneo, after the resignations of two officials overseeing the plan raised fresh doubts about its future.

President Joko Widodo's announcement that he will start working next month from an office in Nusantara, a giant construction site over 1,200km (750 miles) from the current capital Jakarta, is unlikely to allay fears about his legacy project, analysts say.

"Investor confidence has dropped, I think. They were already in doubt and in 'wait-and-see' mode, partly because of the unclear land status, partly because of a lack of transparency in governance of the new capital," said Yanuar Nugroho, the president's former deputy chief of staff.

"The resignations worsen this… instead of explaining what really happened, the government is trying to cover it up," he said, describing the president as in damage control mode.

Travelling to Nusantara just a day after the two respected technocrats in charge resigned without explanation, the president broke ground on schools, office complexes and promised foreign investment was coming.

But years after the president announced his signature project, intended to ease the burden on the traffic-ridden, polluted, sinking and over-populated Jakarta, zero foreign funding has been committed.

A presidential spokesperson referred question regarding doubt on Nusantara's future to previous President Widodo's comment saying the project will continue as plan.

Jokowi, as the president is known, leaves office this October after serving the maximum two terms as his legacy project faces a host of problems, including land issues, water supplies, the threat of tropical diseases such as malaria, and widespread reluctance among civil servants to move.

An even bigger stumbling block could be president-elect Prabowo Subianto.

Prabowo won February's election promising "continuity", but the ex-commander has a legacy project of his own: a $29 billion "free meal" programme intended to curb stunting.

Privately, Prabowo is yet to discuss moving to Nusantara with his team, and while he has pledged to continue developing it, it is unlikely to be at the same speed, one politician with direct knowledge told Reuters.

A spokesperson for Prabowo did not immediately respond to request for comment, but publicly Prabowo has said he is committed to continuing the project.

Members of Prabowo's coalition have also privately discussed doubts about the capacity of the state budget to fund both the new capital and the nutrition programme, said a separate senior politician involved.

"If resources become scarce, (Nusantara) could just become a backburner item," said political analyst Kevin O'Rourke. "There's going to be a lot of competition for other spending items in the Prabowo administration."

'A SACRIFICE'

Envisioned as an uber-modern, green smart city complete with flying taxis, Indonesia's Nusantara is more technologically and logistically ambitious than new administrative capitals in the region such as Myanmar's Naypyidaw, and Malaysia's Putrajaya.

Thousands of civil servants are scheduled to be sent to Nusantara starting this September, but some are reluctant to go.

Of almost a dozen civil servants who spoke to Reuters, only two wanted to move, while others said they would consider quitting or seeking a transfer if asked.

"There is nothing there, health and education facilities and so on," said one civil servant in the communications ministry, "It's not a choice but a sacrifice."

The government has ensured basic facilities including apartments, water, electricity and internet will be ready when civil servants arrive, said Danis Sumadilaga, the head of the infrastructure task force for the Nusantara project.

"We must understand that not all of the facilities will be available in an instant...We are going there for work, what kind of facilities you want? You can't expect it to be like Jakarta," he said in a recent interview.

Other key government buildings including the presidential office, state palace, and some ministerial buildings will be ready in August when Indonesia will hold its independence day.

Foreign investment has been held back due to the election and associated risks, said Chris Wren, CEO of BritCham Indonesia, adding that interest was now picking up.

"There are interested parties as investors across the range of needs and opportunities – infrastructure, smart city tech, utilities, education, etc,” he said. “However, the sense remains that the pitch is far from perfected at this point.”

Public health experts have also expressed concern about malaria, with East Kalimantan, the Indonesian part of Borneo where the new capital is located, home to the country's second-highest rate of the mosquito-borne disease.

The government has stressed the capital site is malaria-free, but transmission remains a risk because of undocumented workers who illegally log nearby forests, epidemiologists say.

Official data shows the rate of malaria in Balikpapan, the closest city to Nusantara, more than doubled from 2022 to 2023.

"If they are not careful, I suspect malaria cases will increase in the next six months to a year," said Iqbal Elyazar, from Oxford University's clinical research unit in Jakarta. 

(Additional reporting by Ananda Teresia and Gayatri Suroyo; Writing by Kate Lamb; Editing by Lincoln Feast.)