Research Briefing | Feb 23, 2022

Capital move not likely to threaten Jakarta’s economic importance

The Indonesian government has ambitions to move the country’s capital away from Jakarta to an as-yet unbuilt city over 1,000km away on the island of Borneo. The construction of the new city, to be named ‘Nusantara’, is planned to start in 2022 with government operations and personnel beginning to relocate from 2024. Should the move go ahead, we think it is unlikely to be a significant economic threat to Jakarta.

What you will learn:

  • The main motivations for the move are to ease the urban and environmental pressures on Jakarta.
  • Should the move go ahead, we think it is unlikely to be a significant economic threat to Jakarta.
  • Land subsidence, however, is a more substantial threat to Jakarta with the possibility in the coming decades of large swathes of the city coming under water, displacing people and businesses. In our baseline forecasts, enough preventative measures are introduced to avoid this and we project Jakarta’s economy to grow on average by 5.1% a year, 2022-2040.
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