Widodo upbeat on new capital city Nusantara

Indonesian President Joko Widodo's first cabinet meeting in the new capital city Nusantara, or IKN, is a "strong symbolic gesture" that shows his determination to pursue its development despite construction delays and funding concerns, analysts said.

Widodo presided over the Monday meeting at Garuda Palace, a majestic bird-shaped palace modeled after the mythical Garuda, Indonesia's national emblem. Vice-President Ma'ruf Amin and 38 ministers attended the meeting, along with incoming President Prabowo Subianto and his running mate Gibran Rakabuming Raka, Widodo's eldest son.

Widodo will be stepping down from office in October, but Prabowo said his government will continue with the development of IKN, or Ibu Kota Nusantara.

Dedi Dinarto, lead Indonesia analyst at public policy advisory firm Global Counsel, said Widodo is "clearly sending a strong symbolic gesture to the wider public, portraying the new capital project not only as a top priority, but also as a lasting legacy".

He said that in the current climate of high interest rates, foreign investors are cautious about pouring money into projects with less attractive value propositions. Widodo thus aims to reassure global investors that the project is here to stay even after the end of his administration, Dinarto added.

The IKN development is estimated to cost over $30 billion. While a total of 40 trillion rupiah ($2.5 billion) has been allocated this year for IKN, the government is hoping to secure 100 trillion rupiah in private investments to finance this mega project.

Rezha Bayu Oktavian Arief, co-founder and CEO of Jakartabased social enterprise and advisory firm Obviously Sustainable, said the cabinet meeting is a "strategic move" to send a message to future investors and other stakeholders.

"Despite the challenges, the (development of the) new capital is on track, and the government is working diligently to complete all necessary developments," he said.

Arief said holding the meeting in Nusantara also highlighted a key reason behind Widodo's decision to relocate the capital from Jakarta — "to promote equality and prosperity for all Indonesians". He said this has been a consistent theme in Widodo's vision for the project since he announced the relocation plan in 2019.

Canvas for future

In his opening speech at the cabinet meeting, Widodo said moving the capital to Nusantara in East Kalimantan Province would lead to "equal distribution" of economic development. He noted that Java island, where Jakarta is located, accounts for 58 percent of the nation's GDP. The new capital will serve as a canvas for painting Indonesia's future, he added.

More than 50 percent of Indonesia's population of 280 million also live in Java, and nearly 11 million live in Jakarta. In contrast, East Kalimantan in Borneo — an island that Indonesia shares with Malaysia and Brunei — is home to less than 6 percent of the population. Widodo said this is another consideration to relocate the capital as Jakarta is densely populated.

Josua Pardede, chief economist at PermataBank in Jakarta, questioned its readiness to function as the new capital, alluding to reports on problems with electricity and water supply in IKN.

"Investors typically look for stability and infrastructure reliability when making decisions," Pardede said. "While the symbolic cabinet meeting might generate some positive sentiment, significant investment will likely hinge on tangible progress in addressing these basic infrastructure needs."

Leonardus Jegho is a freelance journalist for China Daily.