Key resignations have ‘hurt credibility’ of Indonesia’s ambitious Nusantara project: observers

[JAKARTA] The abrupt resignations of two top technocrats at Indonesia’s new capital city initiative Nusantara were mainly led by doubts over meeting key deliverables on time and unresolved land and water issues, according to sources.

These woes have, in turn, deterred both domestic and foreign investors from committing funds to the multibillion dollar project, putting the fate of the project in East Kalimantan in jeopardy.

Several unresolved issues, including the availability of unencumbered land and a severe lack of water, are stalling progress, said the sources familiar with the project who did not wish to be named.

The Business Times (BT) understands that water scarcity is so acute that there is not enough even for construction, let alone for drinking and domestic use. Additionally, land earmarked for development remains uncleared, said one source.

The chief of the Nusantara Capital City Authority (IKN) Bambang Susantono and his deputy Dhony Rahajoe resigned on Monday (Jun 3), stirring widespread surprise and speculation about the project’s long-term status.

Their departures come two months before the inauguration of the new capital city on Aug 17, which is Indonesia’s Independence Day.

President Joko Widodo was set to host the celebrations from Nusantara, in what will be his final Independence Day before he steps down later this year.

It is understood that Widodo may have planned to move his office from Jakarta to Nusantara as early as the middle of this month. That ambitious timeline has suffered a setback with the recent unexpected resignations that add to the project’s existing challenges.

Following the departures that have spooked investors and market watchers, Widodo this week reassured the public that construction on the new capital city is progressing.

He has appointed Minister of Public Works and Public Housing Basuki Hadimuljono and Deputy Minister of Agrarian Affairs and Spatial Planning Raja Juli Antoni as IKN’s acting head and deputy head, respectively.

“The resignation of the two senior officials has hurt the credibility of IKN,” Wijayanto Samirin, co-founder of the Paramadina Public Policy Institute, told BT.

He said that their resignation letters were delivered to Widodo more than a year ago in early 2023, which suggests the issue has been festering for some time.

“It is critical that both Widodo and President-elect Prabowo Subianto take bold steps to modify the deliverables and targets to restore investor confidence,” he said.

Ajib Hamdani, a policy analyst at the Indonesian Employers’ Association, said that investors are concerned about uncertainty, the returns on their investment, and the status of the land in IKN.

The lack of private funding for the new capital has also hindered progress, despite the government’s efforts to relocate the first batch of 12,000 civil servants by September.

According to IKN’s official website, as at January 2024, only 47 trillion rupiah (S$3.9 billion) worth of investments have been realised, which is less than half of the 100 trillion rupiah target.