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Marketplace®

Daily business news and economic stories

Indonesia prepares to change its capital city and challenges await

Above, the new presidential palace in Indonesia's soon-to-be capital city of Nusantara seen on July 11.
Above, the new presidential palace in Indonesia's soon-to-be capital city of Nusantara seen on July 11.
Stringer/AFP via Getty Images

This week, Indonesia is slated to inaugurate a brand new city. Nusantara is set to become the capital of the world’s fourth most populous country. And the city’s construction comes with a price tag of $33 billion.

Another country relocating its capital? Egypt. The new planned city, outside Cairo, comes with an estimated cost of $59 billion. And in the past century, plenty of other governments have moved their capitals away from big, congested cities, including Brazil, Nigeria, Pakistan and Tanzania.

Indonesia’s current capital, Jakarta, has its share of hardships, according to Deden Rukmana, an urban planner at UT Arlington.

Think pollution and traffic. Maybe most concerning, however: “Jakarta is sinking,” Rukmana said.

It’s sinking, thanks to sea level rise and excess groundwater pumping. But is building a shiny new capital from scratch 800 miles away really a good investment?

“No,” Rukmana said, “because who is going to go and stay there?”

That question — how to attract people and businesses — plagues a lot of planned capitals, per Sarah Moser, a geographer at McGill University.

“They’re having population problems. You know, once you’ve moved civil servants and their families, it’s really hard to get other people to move,” she said.

One exception, Moser noted, is Brazil’s capital — Brasilia, which built in the 1950s.

“The population exceeded its target before it was even finished, because the construction workers brought their families and they all just sort of stayed,” she said.

Brasilia’s metro population now tops 3.5 million. But in other planned capitals that haven’t filled in as quickly, having the government move away from its people can be a liability.

Filipe Campante, an economist at Johns Hopkins, has found that for more remote capital cities, “corruption increases and the quality of governance goes down.”

Because, Campante said, there are just fewer people watching — whether they be protestors in the streets or journalists.

“When the government is out there and some isolated capital, the big newspapers are not covering so much and then you have corruption as a result of that,” he said.

Corruption aside, it’s important to think about the opportunity costs of up and moving capital cities, McGill’s Sarah Moser added.

“Citizens of Indonesia and Egypt need to question what resources are being diverted away from other things, like infrastructure upgrades, policing and security, you know, public institutions, within Jakarta or within Cairo,” she said.

Those Cities where millions of people are living — right now.

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