The Indonesian government has just enacted the law on the nation’s capital city (the “Law”)*. Based on the Law, the current capital of Indonesia, Jakarta, located on the island of Java, will be relocated to an area on the island of Borneo. While the reasons underpinning the move include the environmental stress placed on the current capital, the move is not without controversy – the primary concern being the environmental impact on Borneo.

The new capital will be called Nusantara, meaning archipelago. It will serve as the new home for central government activities, as well as the seat of representatives of foreign countries and international institutions.

The change will be carried out in stages with a newly appointed authority, the Nusantara Capital Authority, in charge of planning, development and relocation (the “Authority”). The Authority will also be in charge of administering the capital city once it has been relocated. The Law stipulates that the Authority must start operating by the end of 2022.

The new capital city development will probably be one of the largest infrastructure development projects ever undertaken by the Indonesian government. Interested parties can take part in this project through public-private partnership schemes, as well as being involved in its financing. The Authority is authorised to provide incentives to parties that support the financing.

Further provisions regarding the planning, development, and relocation of the capital city will be regulated in implementing regulations.

*Law Number 03 of 2022 concerning the Nation’s Capital City.