Indonesia’s new capital: building Nusantara for security, sustainability, and regional influence

Jakarta, Indonesia’s capital, is sinking at an alarming rate. Faced with overpopulation and failing infrastructure, it now holds the title of the world’s fastest-sinking city. In response, the Indonesian government announced in 2019 the construction of a new capital, Nusantara, in eastern Borneo. Could relocating its capital transform Indonesia’s role in Southeast Asia and beyond?

With over 17,500 islands, Indonesia is the world’s largest archipelago and the fourth most populous country. Like many developing nations, it has experienced rapid urbanization, with more than half of its population now living in cities. Jakarta has grown into a megacity of 10 million people, serving as the nation’s administrative, economic, cultural, and entertainment hub. However, it is also synonymous with air pollution and traffic congestion, regularly ranking among the world’s most congested cities. In 2024, the megalopolis ranked 7th worldwide for traffic congestion, comparable to New York and London, even though Indonesia remains a developing nation. Moreover, Jakarta’s growth has outpaced its infrastructure development. Massive groundwater extraction, used to compensate for an unreliable water supply system, has become the primary cause of the city’s alarming land subsidence. Today, around 40 percent of Jakarta lies below sea level. Inefficient waste collection and drainage further exacerbate clogged rivers and urban flooding. Combined with rising sea levels due to global warming, this sinking land makes the city increasingly vulnerable to widespread flooding.

In 2019, former President Joko Widodo announced plans to relocate Indonesia’s capital, aiming to ease Jakarta’s severe environmental pressures and promote a more balanced distribution of wealth across the country. By relocating the capital, the Indonesian government hopes to encourage more balanced development across the country. Java, despite accounting for just a fraction of Indonesia’s landmass, generates over half of the nation’s economic activity. For instance, in the second quarter of 2024, the island accounted for 57 percent of the country’s gross domestic product, followed by Sumatra with 22 percent. By contrast, Kalimantan, despite being nearly four times larger than Java, contributed just over 8 percent, underscoring its relative underdevelopment.

Java and Jakarta are not only the political and economic heart of the country, but also a symbol of Java-centric governance that dates back to the colonial era. Java has been the political and economic center since that time, serving as the hub of the Dutch East Indies government. Today, more than half of Indonesia’s population lives on Java, where higher economic prosperity has fueled growing disparities with other islands. These disparities sparked separatist movements across the country from the late 20th century through the early 2000s. Moreover, Indonesia’s strong association with Java and Javanese culture has often led to the marginalization of the archipelago’s diverse cultures and regions. Moving the capital to Nusantara is thus a symbolic attempt to break from this post-colonial legacy, promote more balanced national development, and foster a stronger sense of unity across the archipelago. The new city’s name, “Nusantara” (“outer islands”), and its central geographical location are intended to embody Indonesia’s archipelagic identity and foster national unity across its diverse population.

Moving the capital is intended to stimulate investment and infrastructure in East Kalimantan, helping to redistribute wealth and reduce Java’s overconcentration. By establishing the seat of government in this province, Indonesia places its political and administrative core directly in the country’s resource frontier. East Kalimantan is very rich in natural resources, including oil, natural gas, coal, gold, timber, and palm oil, among others. Therefore, Nusantara will enable the development of infrastructure that underpins these sectors, such as ports, pipelines, power plants, and transport corridors, reducing dependence on Java-centric networks. According to former Indonesian Investment Minister Bahlil Lahadalia, the development of the new capital is expected to boost East Kalimantan’s economy by a factor of four.

In total, Nusantara is planned to span over 200,000 hectares, incorporating government, urban, and ecological zones, with full completion targeted for 2045 to mark Indonesia’s 100th anniversary. The first phase of development, which includes the Presidential Palace complex, key ministerial buildings, and residences for civil servants, is nearly complete. The city is designed to accommodate an initial population of up to 1.5 million residents, with room for future growth. Former Planning Minister Suharso Monoarfa stated that the new capital will become an economic hub, with the relocation of civil servants and military personnel expected to stimulate new industries, administrative centers, and businesses. Phase II (2025-2029) will expand the government area with legislative and judicial complexes, supporting infrastructure, and residential projects. Phase III (2030-2034) will focus on developing economic clusters and implementing smart-city initiatives that prioritize sustainability, including energy-efficient buildings, green infrastructure, and low-carbon transport systems, while preparing for population growth beyond government functions. Phase IV (2035-2039) will extend development to the seaport city of Balikpapan and Samarinda, the current capital of East Kalimantan, fostering broader regional growth and enhancing connectivity across the province. Finally, Phase V (2040-2045) aims to establish Nusantara as an internationally competitive, sustainable, and innovative city ahead of Indonesia’s centenary.

Among the Indonesian government’s primary objectives is to develop Nusantara into one of the world’s most sustainable cities, serving as a symbol of national identity and a future driver of economic growth. Notably, Nusantara is pursuing a dedicated Net Zero Strategy targeting 2045, in line with international climate objectives and biodiversity conservation frameworks. Nusantara aims to be a futuristic green city built on circular economy principles, where waste is minimized and resources are continually recycled and reused. Nusantara plans to generate almost all of its energy from renewable sources, including wind, solar, and hydroelectric power. Building a “green” capital in Kalimantan demonstrates Indonesia’s commitment to sustainable development, forest protection, and low-carbon urban planning. By showcasing advanced environmental policies and infrastructure, such as energy-efficient buildings, reforestation efforts, and climate-resilient urban design, among other initiatives, Indonesia will strengthen its credibility on the global stage in the long run. This, in turn, will give the archipelagic nation more leverage in international climate negotiations, allowing it to advocate for favorable funding, technology partnerships, and recognition of its climate initiatives.

The development of Nusantara is projected to cost over USD 30 billion, a substantial financial commitment for a developing country like Indonesia. Funding comes from a mix of public and private sources, but the government aims for roughly 80 percent of the total cost to be covered by private investment. Its neighbors, Malaysia and Brunei, as well as Saudi Arabia, have already pledged to partner in supporting Nusantara’s development. By involving Malaysia, Brunei, and Saudi Arabia, Indonesia shows it is diversifying beyond its traditional reliance on China for major infrastructure financing. Malaysia and Brunei’s investments strengthen intra-ASEAN economic and political cooperation, promoting regional unity, while Saudi Arabia’s participation signals growing engagement of Gulf and Muslim-majority nations in ASEAN economies. This partnership diversifies Indonesia’s funding sources beyond the traditional Asia-Pacific players, providing the country with greater geopolitical options and diplomatic leverage.

The move is also largely driven by geography: East Kalimantan sits near the center of the Indonesian archipelago, far from major active tectonic plate boundaries and active volcanoes. As a result, it is far less prone to earthquakes, eruptions, and tsunamis than Java, Sumatra, or Sulawesi. Beyond safety considerations, relocating the capital to Kalimantan is a strategic decision for maritime defense and enhanced intra-ASEAN cooperation.

According to the Nusantara Capital Authority, the decision to move the capital away from Jakarta is strategic due to Nusantara’s location as a shipping route. Nusantara’s location in East Kalimantan places it near the Makassar Strait, a vital maritime corridor that serves as Indonesia’s main domestic shipping route between the western and eastern parts of the archipelago. It could serve as an important backup for international shipping between the Pacific and Indian Oceans if the Malacca Strait becomes congested or disrupted by offering a more secure route for commercial and naval vessels. This central positioning enhances connectivity across the archipelago, supports economic integration, and strengthens Indonesia’s geopolitical presence in Southeast Asia.

By moving the center of government eastward, Indonesia also plans to position itself closer to contested maritime zones, particularly in the South China Sea region, signaling its intent to enhance national integration and assert a stronger presence in strategically sensitive waters. With one-third of global shipping and significant oil and gas reserves at stake, the South China Sea has become the theatre of fierce competition between China, the United States, and Southeast Asian nations. China asserts control over nearly the entire area through its “nine-dash line” and has reinforced its presence by militarizing artificial islands, a move challenged by the United States naval patrols conducted in the name of freedom of navigation. Several ASEAN members, including Vietnam, the Philippines, and Malaysia, dispute China’s claims, while others lean toward Beijing, leaving the bloc divided. Nusantara’s proximity to the South China Sea will allow for faster coordination of defense, naval patrols, and diplomatic engagement in contested waters. Overall, this geographic shift demonstrates Indonesia’s intent to be more actively engaged in maritime security, regional diplomacy, and ASEAN affairs, projecting influence beyond Java and showing that it is a central player in shaping Southeast Asia’s geopolitical landscape.

Sharing the island of Borneo with Malaysia and Brunei also offers opportunities to deepen cooperation between the ASEAN members. In 2023, the three nations agreed to form the Borneo Economic Community (BEC), which will foster cross-border collaboration in trade, sustainability, infrastructure, skills, and innovation. As of today, Nusantara and the renewable energy initiatives represent the flagship projects driving BEC’s vision of a sustainable, interconnected Borneo economy. In 2023, Malaysian states of Sabah and Sarawak announced their plan to develop a railway link to Kalimantan, while Sarawak’s nearly completed Pan Borneo Highway currently connects its major cities and could complement the future rail network extending to Nusantara.

In addition to its strategic maritime location, Nusantara’s development includes extensive land and air connectivity to integrate the new capital with Java and other islands. Plans call for new highways and expressways linking Nusantara to major East Kalimantan cities, such as Balikpapan and Samarinda, as well as inter-island ferry connections to ensure smooth transportation across the archipelago. The city will also feature a modern airport to accommodate domestic and international flights, while railway links are being considered to facilitate freight and passenger movement, supporting both economic activity and administrative mobility.

However, the relocation of Indonesia’s capital has prompted considerable political and public debate. Environmentalists and local Indigenous communities have raised concerns that building Nusantara in East Kalimantan’s rainforest could threaten rare and endangered species, such as orangutans and clouded leopards, while also impacting local tribes like the Balik people. The project’s enormous cost and the challenge of completing such an ambitious city within the proposed timeline also remain significant issues. These debates underscore the complex trade-offs involved in balancing national development goals with financial prudence, environmental sustainability, and social equity.

Indonesia’s capital move to Nusantara follows several countries relocating their capitals, such as Brazil’s shift to Brasília in 1960 and Myanmar’s establishment of Naypyidaw in 2005. While Brasília succeeded in stimulating development in Brazil’s interior, but struggled with social inequality and limited urban vibrancy, Naypyidaw effectively transferred administrative functions from Yangon; yet, the new capital has faced challenges attracting residents and private investment. These examples suggest that while political and strategic goals can be achieved, ensuring that a new capital thrives as a dynamic city requires sustained planning and strong social integration.

The relocation of Indonesia’s capital to Nusantara is a bold attempt to address environmental, economic, and geographic challenges while reshaping the country’s national identity and regional influence. By integrating sustainable urban planning, strategic resource management, and enhanced connectivity, Nusantara aims to balance development across the archipelago and assert Indonesia’s role in Southeast Asia. Yet the project also faces significant hurdles, including high costs, environmental risks, and social challenges.