The 132m National Monument tower at the centre of Merdeka Square, Central Jakarta, is one of most popular tourist destinations in the Indonesian capital. The government is considering the relocation of the capital city to Kalimantan. YULIUS SATRIA WIJAYA/ANTARA/THE JAKARTA POST
The Indonesian government is seeking alternatives other than tax revenues to finance the development of the new capital city, most likely in Kalimantan, which will cost at least 466 trillion rupiah ($33.28 billion).
Among the most feasible alternatives is to monetise government assets, either office buildings or other properties, especially those located on main streets in Jakarta such as Merdeka, Sudirman and Thamrin.
Those assets, mostly in the form of office buildings can be leased or commercially managed in partnerships with private companies, National Development Planning Minister Bambang Brodjonegoro said following a limited Cabinet meeting in Jakarta last week.
They could also be sold under a swap scheme that would oblige the buyers to build infrastructure facilities in the new capital, Bambang said.
Such a financing option would alleviate the burden on the state budget in financing the plan to relocate the seat of the government, Bambang said. The use of government office buildings and other assets in Jakarta would gradually decline as government officials relocated to the new capital.
“[Government] assets in Jakarta could be used as a new source of non-tax revenue,” said Bambang recently in Jakarta.
Revenue raised from those assets could amount to 150 trillion rupiah, according to an initial estimate made by the National Development Planning Board.
Bambang said these revenues would be more than adequate to cover the financial cost of the capital city relocation that would otherwise have to be shouldered by the state budget.
The government has in principle decided to move the capital city to the resource-rich region of Kalimantan but it has yet to determine which part of Kalimantan will host the new capital.
The idea of relocating the capital city from Jakarta has been mooted for a long time. President Joko “Jokowi” Widodo revived the idea recently, saying that moving the capital city was a matter of necessity as Jakarta was no longer able to function as the epicentre of the country’s political and economic life.
The government earlier said that it would allocate about 93 trillion rupiah in the state budget to build main infrastructure facilities in the new capital such as such as a state palace, Indonesian Military headquarters and official residences.
The total cost of the relocation to the new capital is estimated to reach at least 466 trillion rupiah, most of which is expected to come from the private sector. The new capital will need to house 1.5 million residents, including 200,000 government officials and 25,000 police and military personnel.
Finance Ministry director of state property Encep Sudarwan separately said government assets could be managed by either the private sector or state-owned enterprises (SOEs) under partnership contracts, adding that preliminary studies were being undertaken by the Finance Ministry to map which assets could be offered to be managed by other parties.
Encep said the Finance Ministry would carefully assess the assets it would offer to the private sector or SOEs based on their social, cultural, political and historical value to ensure the assets were properly managed.
He went on to emphasise that the asset management scheme, regulated under Government Regulation No 27/2014, would not always lead to changes in the assets’ ownership.
“For example, [the government] could cooperate with the private sector [to manage its assets] and we will give 30- or 50-year [management concessions], during which we could collect revenue,” said Encep.
Speaking in a recent Cabinet meeting Jokowi, a former Jakarta mayor, said “it was almost certain” that the new capital would be established in Kalimantan following inspection visits and a number of studies.
“After field trips and based on a number of studies, it is clear that the new capital will be in Kalimantan,” said Jokowi. “We will further scrutinise the options as to which province [will host the new capital].”
On May, the president visited two locations touted as possible replacements for Jakarta as the new capital, namely Bukit Soeharto in East Kalimantan and the Triangle area located between Palangkaraya, East Katingan regency and Gunung Mas regency in Central Kalimantan,
The Triangle Area has 300,000ha available for the development of a new capital, while Bukit Soeharto is a 61,580ha forest located between Panajam Panser Utara and Kutai Kertanegara.
