Indonesia’s plan to move its capital gains traction: Draft Bill on State Capital ratified into law

27 January 2022

On 18 January 2022, Indonesia’s House of Representatives (“DPR”) ratified a draft Bill on State Capital (“Bill”) into law at the plenary session. The majority at the session voted to turn the Bill into a legal umbrella for the construction of a new capital city for Indonesia situated in East Kalimantan.

The new capital is called Nusantara and will be located in the region of North Penajam Paser and Kutai Kartangera, approximately 2,000 km northeast of the current capital Jakarta.

Jakarta is facing severe environmental challenges with the threat of climate change looming over its 10 million residents. The government hopes that the move will reduce the burden currently shouldered by Jakarta as well as help redistribute economic activities and resources that are centred in Java (its most populous island) to the country’s vast eastern provinces.

The ratification of the law progressed quickly - the Special Committee for the Bill was set on 7 December 2021 and discussion took place within a one-month period, prior to the law’s ratification.

Legally, Jakarta will remain the country’s capital until the President issues a Presidential Decree announcing the move to the new capital, which is not expected until sufficient progress has been made on infrastructure development. The construction process is anticipated to take 15 to 20 years.