The relocation of the seat of power from Jakarta to East Kalimantan requires amendments to laws and budget supporting the relocation. Those arrangements are made after President Joko Widodo mentioned two regencies— North Penajam Paser and Kutai Kartanegara Districts— in East Kalimantan as the perfect administrative headquarters, because it has a minimum disaster risk, strategically locate in the middle of Indonesia, close to developed areas such as Balikpapan, and Samarinda, and its infrastructure relatively complete.

The capital relocation was an old issue, since Sukarno in 1957 reign was chosen to be the city of Palangkaraya. The capital of central Kalimantan province was chosen, because Sukarno assessed its location right in the middle of Indonesia. Then President Suharto in 1997, preparing a land area of 30 Ha in Jonggol area, West Java. While President Susilo Bambang Yudhoyono in 2009 has formed a team, although it has not yet determined its location.

Study of Bappenas

Over the past three years, the Ministry of National Development Planning (PPN)/ National Development Planning Agency (Bappenas) prepares the capital relocation study. First. Jakarta as the world’s fourth-worst countries in term of heavy traffic jam based on the survey over 390 cities. Jakarta overburdened by heavy traffic jam is seatback ineffective coordination among ministries.

Second. In addition to flooding in the upstream, Jakarta also recorded a land decline, and the rise of sea level in the North Coast of Jakarta. Thus, half of Jakarta is in the category of flood prone, or has a flood insecurity level under 10 years, or away from the ideal standard of large-city flood insecurity for a minimum of 50 years. This is inline with the quality of the Jakarta river water, which is 96% heavily polluted, poses a significant danger to human pandemic, as a result of poor sanitation.

Bappenas projects economic losses reaching the value of IDR 56 Trillion in 2013, and is currently projected to approach the value of IDR 100 Trillion per year, along with the increasing congestion of the Jakarta region. Therefore, Bappenas offers a new capital city concept that separates the business center and government center. The best practice concept that follows other countries, but still maintains Jakarta as a business center.

Amendments a Number of Laws

The Government must at least amendments a number of laws, as the capital relocation requires legal certainty and policy consistency. Private parties will be included in the development area of the new capital if there is certainty in legal and license. Referring to the study of the Directorate General of Regional Autonomy, there are at least five laws that need to be amendments, namely: First, Law No.29/2007 concerning Provincial Government of DKI Jakarta as the Capital Republic of Indonesia; Second, Law No.24/2007 on disaster relief; Third, Law No.3/2002 on State defense; Fourth, Law No.23/2014 on local government; and Fifth, Law No.10/2016 on the regional election.

Funds of IDR 466 Trillion

In addition to taking into account between west to east, as well as north to south, the determination of new capital city in East Kalimantan province will represent justice for accelerating economic development, especially eastern region of Indonesia. This determination, also consider the readiness of East Kalimantan that has a large and available land owned by the government and State-Owned Enterprises (SOEs) that are already available. The land, can be constructed so that it no longer requires exemption costs.

On the other hand, capital relocation still requires substantial costs, ranging from the transfer of Civil Servants (PNS), which was originally from Jakarta to East Kalimantan. Bappenas projecting, the government needs a fee of IDR 323 Trillion to IDR 466 Trillion, taking into account two scenarios. First. The government does not do resizing PNS, meaning all civil servants of the central government will relocate. Based on data from 2017, the new capital will contain 1.5 million inhabitants, including executive, legislative, judicial, Indonesian police (POLRI), Indonesian National Army (TNI), and their family members. This scenario is projected to require a fund of IDR 466 trillion.

Second. The government did resizing the number of civil servants, or just moved about 111 thousand personnel, plus members of the TNI, and the police and family. Through this scenario, the population is projected to transfer civil servants under 1 million, or precisely only about 870 thousand inhabitants. This scenario requires a smaller fee, or approximately IDR 323 trillion.

Public Private Partnership Dominance

The capital relocation financing source can be derived from four sources: First. The State Budget (APBN) is particularly for initial infrastructure, as well as the facilities of government and parliamentary offices. Two. SOEs for major infrastructure and social facilities. Three. Public Private Partnership (KPBU) for some key elements are also social facilities. Four. A source of financing from the private sector, especially those associated with residential properties and commercial facilities.

In addition, in order to launch a moving plan, the government needs to form the governing body directly responsible to the president. This authority will manage the investment funds of new capital development as well as cooperation, both with BUMN and private sector. This agency must also prepare and develop the structure, ranging from the preparation of spatial patterns, infrastructure development and government facilities, then control the development process of infrastructure, and manage and Building and public facilities.


The relocation of the capital became rational post-centric Jakarta position, which is the center of government, business, and culture, making the capacity of Jakarta to be inadequate. Jakarta has to face challenges such as congestion, flooding, and potential environmental disasters. From the economic side, economic development in Indonesia is too focused on the island of Java, raising the difference between the western and eastern Indonesia. Indonesia’s largest economic contribution is dominated by Java island 59.1% per 2Q19. Then followed by Sumatera 21.3%; Kalimantan 8.0%; Sulawesi 6.3%; Maluku and Papua 2.2%; and Bali and Nusa Tenggara 3.1%.

The issuance of local government bonds (municipal bond), as one of the alternative financing infrastructure projects, and public services East Kalimantan, must meet the strict requirements and procedures attached to the Government Regulation (PP) No.56/2018; Regulation of the Financial Services Authority (POJK) No.61/2019; No.62/2019; No.63/2019; and regulation of the Minister of Finance (PMK) No.180/2019. The Beleid requires: First. The amount of the remaining loan area plus the loan amount to be withdrawn should not exceed 75% of the acceptance of regional expenditure budget (APBN) in the previous year.

Secondly. The ratio of Debt to Service Coverage Ratio (DSCR) is at least 2.5%. Thirdly. The Government must not have a arrears for the return of the loan from the central Administration. Fourth. The municipal bond should be used to finance infrastructure or investment in infrastructure development for the public benefit. Fifth. The municipal bond can only be issued in the domestic market and use rupiah currency. In addition to Central Java, OJK has recorded DKI Jakarta, and East Java is interested in issuing the municipal bond.

On the other hand, capital relocation became a positive sentiment of issuers, who were engaged in the construction, property, or infrastructure sectors, some of which already had projects in the region. Almost all SOEs issuers have expansion plans in East Kalimantan. Waskita Beton Precast Tbk (WSBP) will build a concrete plant of 11.6 Ha with a production capacity of 250,000 per year. Meanwhile, the subsidiary of Wijaya Karya Tbk (WIKA), Pembangunan Perumahan Tbk (PTPP) will also be involved in the project.

WIKA has a number of projects in East Kalimantan such as Gas power Plant (PLTG) 2×50/60, Sultan Aji Muhammad Sulaiman Airport, Sepinggan, and Tumbang Samba Bridge. WIKA and PTPP also have shares in the Balikpapan-Samarinda toll road project which is done by Jasa Marga Tbk (JSMR) with ownership of 15% respectively. Meanwhile, Waskita Beton Precast Tbk (WSBP) has a factory area of 11.6 Ha, with a production capacity of 250,000 tons per year.

Bumi Serpong Damai Tbk (BSDE) has land in Semboja, located 47 Km towards Balikpapan, and 87 Km towards Samarinda. Meanwhile, Ciputra Development Tbk (CTRA) has more landbanks in Samarinda which are area of 590 Ha, and Balikpapan covering 30 Ha. In the landbank, CTRA has a project of Ciputra Bukit Indah and Citra City Balikpapan respectively in Balikpapan. In the short term, land bank owners will have a positive effect. Long term, the capital city of the country also requires a suburban. In this case it will be positive for both CTRA and BSDE.

Astra International Tbk (ASII) also owns an asset in the form of a port managed by Penajam Banua Taka Port or called Astra Infra Port Eastkal. This port has warehousing facilities, open land, workshops and assembly, and able to accommodate vessels up to 10,000 DWT. The port is also the shore base of the oil and gas industry, the mining industry, and the Astra group’s business activities.

Meanwhile, in addition to owning a mall, hotels with assets valued at IDR 6.7 Billion, PP Properti Tbk (PPRO) also got an offer from landowners around the Penajam of 500 Ha. In terms of infrastructure, Jasa Marga Tbk (JSMR) has a toll road of Balikpapan-Samarinda for 99.35 Km. Meanwhile, Wijaya Karya Beton Tbk (WTON) has a factory area of 26 Ha.


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