LEGAL UPDATES BY BEPARTNERS
Nusantara: The New State Capital City of Indonesia
24 January 2022

On Tuesday, January 18, 2022, The House of Representatives ratified the Bill on the State Capital City (“State Capital Bill"); which upon its enactment, shall replace and repeal Law No. 29 of 2007 on the Governance of DKI Jakarta as the Indonesian State Capital. This would bring abouts the change in location for Indonesia’s capital city from DKI Jakarta to a developing site to be named “Nusantara”, a plot of land nestled in East Kalimantan spanning an area of approximately of 256,142 hectares of land and 68,199 hectares of water. The origin of the name Nusantara is derived from a Javanese word meaning the entirety of the archipelagic nation.

 

The consideration behind the enactment of the State Capital Bill is that DKI Jakarta is no longer able to optimally carry out its role as a state capital city with the rapid uncontrolled population growth, declining environmental conditions and functions, and the decreasing level of comfort in life, and the uneven distribution of economic growth outside of DKI Jakarta and the neighboring Java Islands with other regions of the Republic of Indonesia. Therefore, the relocation of the capital city is expected to meet the needs of the Indonesian people for a safe, modern, sustainable, and resilient governance of the state capital city, and can also be a reference for the development and arrangement of urban areas in Indonesia.

 

The Framework and the Impact of the State Capital Relocation

 

Following its designation as the state capital city, Nusantara will take on the role of the Indonesian state capital and will function as the home of the country’s central government and representatives of foreign states, international bodies and related officials. Nusantara will be governed by the authority of Capital City of Nusantara (the “Authority”) which will start operating no later than the end of 2022. The Authority will oversee the preparation, development, and relocation of the State Capital. The implementation of the development and relocation of the State Capital will be carried out in phases.

 

Based on the State Capital City official website, the first phase will be held from 2022-2024. The initial phase of relocation will focus on the development of key infrastructure such as the presidential palace, MPR/DPR RI Building and housing, the relocation of the State Civil Apparatus of 500,000 residents, in addition to covering the construction and operation of basic infrastructure for the relocation of residents at this early stage. The ministries that are prioritized to be transferred to the Nusantara are the Ministry of Internal Affairs, Ministry of Foreign Affairs and Ministry of Defense.

 

As Nusantara will focus as the nation’s central government, institutions that carry out tasks, functions and roles related to financial flow and investment will stay in Jakarta and will not be transferred to Nusantara, which includes: a) Bank Indonesia; b) Financial Services Authority; c) Deposit Insurance Corporation; d) Business Competition Supervisory Commission; e) Non-Ministerial Government Institutions that carry out government affairs in the field of investment coordination.

 

In the following phases, the government will begin to build Nusantara as a formidable city as a center of innovation and economy. Furthermore, the government will also build infrastructure and utilities to develop innovation centers and priority economic sectors. The development of Nusantara is expected to be completed in 2045. After the completion of the development process, Nusantara is believed to become a leading city in the world in terms of competitiveness and become the best livable city. Therefore, Nusantara will not only have government offices, but also a new smart metropolis that can be a magnet for global talent and a center of innovation that can place Indonesia in a more strategic position in world trade routes, investment flows and technological innovation.

 

Closing Remarks

 

With the enactment of the state capital law, the relocation and construction of the new capital city is expected to have an impact on increasing the improvement of government administrative functions. As Nusantara will adopt an Electronic-Based Government System whose implementation will be integrated with the National Information Security System, the hope is that the Indonesian bureaucracy will be more integrated to be faster and more efficient.

 

Although Nusantara is designated as the state capital city, it is also hoped that the new capital city will improve the economic performance, such as the growth of new economic growth centers, new infrastructure center nodes, and reducing regional development disparities.

 

Should there be any queries related to this regulation or to find out if this affects your business or personal interest, please do not hesitate to contact us.

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