The relocation of Indonesia’s capital from Jakarta to East Kalimantan will bring a tremendous amount of opportunities, particularly in the inter-city transportation and infrastructure business. The new capital, Nusantara, is geographically beneficial as it is located between Balikpapan to its south and Samarinda, the capital of East Kalimantan. Balikpapan itself is a port city and the financial center of the island with the highest average GDP in Kalimantan in 2019.
Nusantara, literally meaning the archipelago, is also very close to Central Sulawesi and West Sulawesi, only to be separated by Makassar Strait, a rich and diverse body of water that leads to the Celebes Sea and the Java Sea. The relocation of the capital itself raises a lot of questions because of the natural resources that can be found such as oil, gas, coal, palm oil and other commodities such as rice and livestock, biopharmaceutical plants and ornamental plants. The abundance of natural resources is unlike any other profile of capital cities in the world.
Unlike Jakarta, East Kalimantan has varieties of natural resources, dominated by coal production and palm oil followed by food products such as rice and livestock, biopharmaceutical plants and ornamental plants production. Ginger production dominated the biopharmaceutical plants production while cucumber topped the vegetable and fruit production with rose stalks production as the most produced ornamental plant in 2020.
Safer and more strategic location
President Joko Widodo said there were a few reasons behind the relocation of the capital. The first reason would be safety issue. He said Nusantara has a minimum risk of getting hit by disasters such as floods, earthquakes, tsunamis, forest fires and landslides. Second, Nusantara would be strategically located near the center of the island. Third, it will be close to 2 developed cities of Balikpapan and Samarinda and supported by their complete infrastructure. And lastly, the government owns around 180,000 hectares of land there.
In the future, Nusantara will be the center of the government as the embassies will also be moved to the new capital. Currently, the government has hired 3 major consultancy firms to help with the relocation of the capital: McKinsey who develops the master plan of the relocation, and Nikken Sekkei and Aecom which will help design Nusantara.
The design of Nusantara is referring to the concept of “Nagara Rimba Nusa” or Jungle Island Country made by design studio Urban+, which came 1st place in the new capital city idea design competition. Urban+ studio itself is created by Sofyan Sibarani, who previously worked at Aecom Indonesia as the Executive Director of Building and Places. So far, the concept and design shown by the government are referring to their ambition of creating the most sustainable capital city in the world.
With the relocation of the capital city, property developers have been eyeing various projects that may come along with it. Some real estate developer conglomerates have either bought or owned land in East Kalimantan such as Agung Podomoro Group, Cowell Development, Wika Realty, PP Properti, Bintang Omega Sakti and Lippo. Though short, the development of the province might focus for a while on Balikpapan and Samarinda as those two cities already have established infrastructures and connectivity.
A politically driven decision?
A report published by Mongabay shows that some high ranking politicians and major business figures have either invested or owned land in the province, such as Sukanto Tanoto, Hashim Djojohadikusumo, Luhut Binsar Pandjaitan, Yusril Ihza Mahendra, Lim Hariyanto Wijaya Sarwono and his wife Rita Indriawati. There is also Rheza Herwindo, the son of Setya Novanto, the former Speaker of the House of Representatives who is currently serving jail time for corruption, and Thomas Aquinas Muliatna, the former treasurer of the Great Indonesia Movement (Gerindra) Party who also happens to be Defense Minister Prabowo Subianto’s nephew.
The companies that have invested and operated in East Kalimantan are diverse. But due to the abundance of natural resources, mainly coal and the perfect soil for palm oil, most the companies revolve around coal mining, manufacturing and palm oil plantation. There are PT Adaro Indonesia Tbk, the second-largest coal mining company in Indonesia, PT Berau Coal, a coal mining company from the United Kingdom, PT Kideco Jaya Agung, another coal mining company, PT Astra Agro Lestari, an Indonesian palm oil company, and PT Sinar Mas Agro Resources and Technology, an Indonesian palm oil company that also happens to be the subsidiary of Sinar Mas Group, a conglomerate family business group that also operates in the real-estate sector.
It should be noted that most of Prabowo’s businesses also operate in East Kalimantan. PT Tanjung Redeb Hutani, an industrial plantation forest company, PT Kertas Nusantara, a pulp and paper company, and coal mining company Nusantara Kaltim Coal to name a few.
Infrastructure connectivity to the surrounding area
Currently, the planned area for the new capital is around 256,000 hectares with a core area of 56,000 hectares and 5,600 hectares intended for government areas. Widodo has instructed to allocate 100,000 hectares for plant nurseries.
PT Waskita Karya Tbk, a state-owned construction company, has established a task force to win projects at the new capital, targeting roads, housing and the presidential palace development projects. Moreover, the Minister of National Development Planning Agency (Bappenas) has appointed Real Estate Indonesia (REI), a group of real estate developers, to develop the new capital. Other state-owned companies such as toll road operator PT Jasa Marga and state-owned construction firm PT Wijaya Karya (WiKa) might also be involved in the development of other land infrastructures such as roads, toll roads, buildings and other facilities.
The connectivity of Nusantara’s area is still fairly limited with only the newly operated Balikpapan-Samarinda toll road and a single Jl. Samboja-Sepaku highway. There are also no railroads built although there was a plant to develop one that connects major cities on Kalimantan island. PT Kereta Api Borneo, a subsidiary of Russian Railways, wanted to develop one to transport coal but decided to back out because of the plan of the capital relocation. The project itself is worth around IDR53 billion and East Kalimantan provincial administration is still actively looking for other investors.
Road, railway and port projects
In terms of connectivity and accessibility, Nusantara’s area infrastructure is still far from decent. There would also be railroad projects that connect the airport to the city though not much is known about the Nusantara’s railroad projects. But the government, under the Directorate General of Railway, Ministry of Transportation, has allocated funds for the development of mass urban transport in Nusantara in the 2022-2024 State Budget. There is also a plan to develop Trans Kalimantan Railroad connecting Balikpapan and Samarinda. However, the funding might come from private entities as it is not allocated in the state budget.
Three new toll roads are also planned by the government to help with the accessibility of the city. Two of the three projects will be up for bidding while the other would be given to Jasa Marga. Each of the toll roads will be around 30-kilometers long and worth around IDR150 billion to IDR200 billion per kilometer.
- Toll roads projects
- Newly operational Balikpapan-Samarinda Toll road developed by PT Wijaya Karya and operated by PT Jasa Marga
- Three new proposed toll roads. Two will be up for bidding and one will be given to PT Jasa Marga as the operator and possibly PT Wijaya Karya as the developer
Strategically located near Makassar Strait and Balikpapan Bay, Nusantara should have a plan to develop its seaport both for cargo and cruise home port. Currently, Semayang Port and Kariangau Port will be the ones that support the city. Expansion plans for Semayang Port have been discussed and the Port of Kariangau also increased its capacity from 630,000 20-foot equivalent units (TEUs) to 3.5 million TEUs. The government has planned to build a new port for the city as Widodo and Prabowo have surveyed potential locations for the new airport and seaport.
- Kariangau Port
- Operated by PT. Kaltim Kariangau Terminal (Melati Bhakti Satya), is a regional company owned by the Provincial Government of East Kalimantan and an affiliated company of port operator PT Pelindo
- Operates as a container terminal such as container and non-container discharge load service, stuffing and stripping, industry and clean water service, custom area, and standard equipment of container terminal
- Port of Semayang
- Operated by PT Pelindo
- One of the busiest ports in Kalimantan as it serves as both cargo and cruise home port
There are currently two airports operating in the province. Sepinggan Airport in Balikpapan and APT Pranoto International Airport in Samarinda. The Ministry of Transportation has planned to build a new international airport 15 kilometers (kms) away from the city center of the new capital city. The transportation ministry is also planning to build a VVIP airport that should not need a lot of land area as opposed to any other commercial airport.
Currently, the government is planning to utilize and develop Sepinggan Airport in Balikpapan and APT Pranoto Airport in Samarinda as the gateways to Nusantara. To support this, the finance minister has allocated IDR326.37 billion or the expansion of APT Pranoto funded with State Sharia Securities.
Aerotropolis, an airport-centered city
Furthermore, they are also interested in an aerotropolis project near Nusantara. Aerotropolis itself is a metropolitan area located around and integrated into an airport. In it, there would be clusters of hotels, offices, distribution facilities, and logistics. And the three core activities of the aerotropolis would be divided into three sectors.
The first sector would be the terminal area that includes both passenger terminals and cargo terminals. The second sector would be the airport city that is in the airport area as well as the outside of it. And the third sector would be the aerotropolis area outside the airport.
The development of an aerotropolis could and should have a spread economic effect up to 15-30kms. This project is expected to be connected to the Sepinggan Airport as well as the APT Pranoto airport which could potentially open up opportunities for new inter-city railways, direct service inter-city bus rapid transit, shuttle buses, and a new toll road from Sepinggan to the city center of Nusantara as long as 47.63kms.
Elon Musk, the founder of SpaceX, is also interested in building a launch site in Nusantara’s area. Though it might impact the pollution level of the city because of the rocket fuel combustion. The project would enable fast travel from Indonesia to the US in just two hours. We might have to take into consideration whether SpaceX could revolutionize the airline industry and replace ordinary jet engines with rocket engines which could impact the environment differently.
Proposed and known projects are:
- Balikpapan Sepinggan Airport Expansion
- Extension of runway to 3,250 meters
- Additional taxiway
- Expansion of terminals to accommodate more passengers
- Operated and developed by PT Angkasa Pura I
- Samarinda APT Pranoto Airport
- Extension of runway to 3,000 meters
- Additional taxiway
- Operated by the Ministry of Transportation
- Aerotropolis Project
- Proposed by the Ministry of Transportation
- It might connect to the Sepinggan and APT Pranoto Airport
- Will and should include clusters of hotels, offices, distribution facilities, and logistics
- Will include inter-city railways, direct service inter-city bus rapid transit, shuttle buses and a new 47.63 kilometers toll road
Not much safer than Jakarta
Water supply will be a major concern as most of the rock formations near the area are permeable, meaning that water from rainfall will stream down to either the river system or dams. Moreover, the water quality in the area is less than desirable as the acidity of the rain is fairly higher than normal due to various mining activities and the groundwater that contains pyrite due to the characteristics of the area.
To combat the future shortage of water supply, the government have plans to build 14 dams and river water management systems. Of which, eight of them will be built soon. If all those facilities are built and running, they will be able to supply water for 24.47 million people.
Widodo might have said that one of the reasons for the capital relocation is how safer it is from disasters, one of which is floods. But in reality, Penajam Paser Utara Regency was hit by a flood in October and December 2021 due to high rainfall and high tide. Hundreds of houses were flooded around 600 hectares of farmland were affected ultimately resulting in crop failure.
It should be taken into consideration that the flood might cause landslides due to high rainfall, high tide, and the characteristic of the land. Some areas with high slopes must be left alone to avoid any major accidents and disasters.
Nusantara is also located near the Indonesian Archipelagic Sea Lanes II which possesses some degrees of danger as foreign entities can navigate freely. The city is also near the Flight Information Region of Singapore, Kinabalu Malaysia and Manilla Philippines. And more specifically, the city is within reach of ICBMs and hypersonic missiles of some countries.
The island of Kalimantan is also the location and passage of trans-national crime such as drug and human trafficking. It is also worth noting that the area is near the terrorist transit triangle of Sulu, Sabah and Poso.
