What's Happening with Indonesia’s New Capital City?

Indonesia is building a brand new capital city. Not expanding Jakarta. Not reforming it.

Replacing it.

Because Jakarta, a megacity of over 30 million people, is sinking. Literally. Over 40% of the city already sits below sea level, and it’s getting worse every year.

So now, the government is turning to something entirely new.

It’s called Nusantara, a 30 billion dollar mega-project rising in the middle of Borneo’s jungle. And after years of planning, it’s finally starting to take shape. But behind the headlines and press photos, progress has been slower than promised.

Private investment has fallen short. Public support is lukewarm. And with Jakarta still running the country, many are asking: What exactly is going on with Nusantara Capital City? Will the megaproject live up to its bold ambition, or has it become a high-stakes miscalculation?

To understand why all eyes are on Nusantara, we first have to understand why Indonesia is moving its entire capital in the first place.

Why Move a Capital?

Every year, Jakarta drops deeper below sea level, at a rate of roughly 7.5 centimeters annually in some places. That’s because so much groundwater has been extracted over the decades that the earth beneath the city is collapsing inward. Combined with rising sea levels and poor drainage, experts predict that by 2050, nearly 95 percent of North Jakarta could be permanently underwater.

But water isn’t Jakarta’s only problem.

It’s one of the most traffic-congested cities on the planet. The air pollution routinely exceeds safe limits. Infrastructure is crumbling. Flooding is frequent. With over 10 million people crammed into the city center alone, the government’s ability to respond to these issues is stretched beyond its capacity.

For years, presidents have tossed around the idea of moving the capital. But in 2019, President Joko Widodo, famously known as Jokowi, made it official.

Jakarta will remain Indonesia’s commercial center, but the government itself plans to move. Entire ministries, departments, and even the Presidential Palace.

And the new capital? It won’t be built next door. Instead, it will rise a whopping 1,200 kilometers away on the island of Borneo, in a province called East Kalimantan. The name, Nusantara, is an old Javanese word that loosely translates to “outer islands.” It’s a symbolic nod to Indonesia’s identity as a nation of more than 17,000 islands.

But symbolism wasn’t the only reason this site was chosen. It’s far from natural disasters. Safer from tsunamis and earthquakes. And located near an existing city, Balikpapan, with decent infrastructure and a port that can support the enormous logistical needs of a capital-in-progress.

In Jokowi’s words, this was a chance to fix decades of imbalance and redistribute opportunities and resources from overcrowded, overdeveloped Java to the rest of the country.

It was also a chance to do something bold. Something no one would forget.

Build a city. From scratch. In the jungle.

Location & Scale

Nusantara is being built in an area known for its dense rainforests and endangered wildlife. It sits between the districts of North Penajam Paser and Kutai Kartanegara, and is surrounded by jungle, hills, rivers, and scattered rural villages. But here’s where it gets wild.

The total area allocated for Nusantara is over 2,500 square kilometers. That’s more than four times the size of Jakarta, and almost three times the landmass of Singapore. Now, not all of that will be city blocks and skyscrapers. The plan is to develop it in layers.

At the heart of it all is the Core Government Area, about 6,000 hectares, where the presidential palace, ministries, parliament, and key infrastructure will be located.

Surrounding that is the Capital City Zone, covering around 56,000 hectares. This is where housing, business districts, schools, and hospitals will be built, creating an urban center for what is expected to be a population of 1.9 million people by 2045.

And then there’s the Greater Nusantara Area, stretching into hundreds of thousands of hectares, with designated zones for agriculture, forests, industry, and conservation.

To put that in perspective: You could fit all of Paris, London, and Manhattan into Nusantara’s development area, and still have room left for a small national park.

But the vision isn’t just about building a big city. It’s more about building a capital that doesn’t choke on smog. One that doesn’t flood every year. One where power comes from the sun, the wind, and the river, not coal-fired plants.

Nusantara, The Smart Forest City

Nusantara is being framed as a city of the future. A blueprint for how humanity might live more responsibly, more cleanly, and maybe even more happily. According to official planning documents, up to 65 percent of Nusantara will be green space, comprising conserved forests, mangrove buffer zones, and rewilded terrain.

Picture this: low-rise buildings nestled among canopies, solar panels glinting on rooftops, electric buses humming through tree-lined boulevards. Sidewalks. Bike paths. Underground trash systems. Smart lighting. Artificial intelligence managing traffic, energy use, and water flow in real time.

It sounds utopian.

And in many ways, it is.

The government has pledged that Nusantara will become carbon-neutral by 2045, the 100th anniversary of Indonesia’s independence.

How?

For starters, all buildings will follow green certification standards. Cooling systems will use district-wide energy networks, rather than thousands of inefficient air conditioners. Waste will be sorted and sucked through automated vacuum pipes, eliminating the need for garbage trucks. And electricity? It’s expected to come from a mix of solar, hydroelectric, and waste-to-energy sources, which are already being planned and piloted on-site.

Even the layout of the city is designed with sustainability in mind.

Instead of highways slicing through the center, roads will loop and curve around designated green zones. The city will follow a transit-oriented development model, meaning that most residents will live within a 10-minute walk of public transportation. By 2045, planners estimate that 80 percent of all travel within the capital will be done by public transit, walking, or cycling.

If you’re thinking, “This sounds incredibly ambitious,” You’d be absolutely right.

To date, very few cities, despite years of development, have achieved this level of integration between sustainability, technology, and livability. And Nusantara doesn’t have centuries to figure it out. It has 20 years.

How Nusantara Will Work: The Smart City Mechanics

Indonesia has set an ambitious goal for Nusantara: by 2045, the entire city will operate on a 100 percent renewable energy mix.

Through a combination of solar power stations placed on rooftops and building-integrated panels, hydropower drawn from Kalimantan’s abundant rivers, waste-to-energy plants that turn household refuse into usable power, and a smart integrated energy grid, designed to balance load across all sources.

Since Kalimantan isn’t connected to Java’s massive electricity grid, and Jakarta’s blackouts can’t follow the new capital, Nusantara is designed to be energy-independent, a city that powers itself.

Another radical shift is in the flood management system that Nusantara plans to build.

Rain in Kalimantan doesn’t arrive gently. It pours and tends to flood, just like in Jakarta. So, the engineers behind Nusantara borrowed a concept that has been growing in popularity worldwide: the sponge city.

The idea is simple: Instead of fighting water with concrete, let the city absorb it.

That means green zones that soak up excess rainfall, artificial wetlands and bioswales lining streets, underground reservoirs to store stormwater, and pavements made from permeable materials, not asphalt.

In practice, it would mean rain doesn’t flood your roads or homes. Instead, it disappears, pulled down into the earth, filtered naturally, and slowly released back into rivers or irrigation systems.

But there’s more. And here’s where things get futuristic.

Every system in Nusantara, from traffic lights to power grids and sewage pumps, is being built to integrate into a central urban operating platform, creating a digital twin. That is, a full-scale virtual replica of Nusantara, constantly updated with sensor data.

Why? Because with a digital twin, planners can simulate power outages, floods, emergency evacuations, and even traffic during the holiday rush. This lets officials test responses before real problems occur and adapt systems without disrupting everyday life.

Construction Progress: Where It Stands Currently

It’s one thing to announce a futuristic green capital. It’s another thing to actually build it.

So, how far along is Nusantara?

Well, as of mid-2025, a lot further than most people think.

In August 2024, Indonesia’s Independence Day ceremony was held in the new capital. And by the end of 2024, roughly 80 percent of Nusantara’s foundational infrastructure was already complete. That includes electricity, clean water systems, waste treatment, telecommunications, and the presidential palace.

More than a dozen government office buildings were structurally completed by January 2025. And the surrounding highway links, including some parts of the new toll road to Balikpapan, had opened to traffic.

The new Nusantara International Airport began handling domestic flights in late 2024. It isn’t fully scaled yet. But it works. In March 2025, the capital authority relocated permanently, and its offices now operate from Nusantara, not Jakarta.

Phase 2 officially started in April 2025, with a budget of about 48.8 trillion rupiah, which is over 2.99 billion dollars allocated for 2025 to 2029. The focus now is on building legislative and judicial complexes, supporting infrastructure, and expanding public access.

Piece by piece, the new capital of Indonesia is coming together.

But, there’s a question we haven’t answered. What happens now that there’s been a change in government?

Nusantara was Jokowi’s final act as president before he stepped down in 2024, and now, with a new administration under President Prabowo Subianto, there’s uncertainty about whether Nusantara will remain a top priority.

Prabowo has pledged support, but his vision and Jokowi’s haven’t always aligned. And with Prabowo already floating his vision of free public school meals and military expansion, one has to wonder where the resources to build a megacity and uphold Prabowo’s vision will come from.

In early 2025, Prabowo launched Danantara, a massive sovereign wealth fund with an initial capital of 20 billion dollars, backed by 61 billion dollars in state assets. And the purpose? Consolidate major state-owned enterprises like Bank Mandiri, Pertamina, and PLN, and use their dividends to fuel strategic sectors.

But, here’s the kicker. Nusantara isn’t on the agenda. The chief investment officer of the fund, Pandu Sjahrir, confirmed that the fund will focus on AI, food security, water and waste infrastructure, industrial sectors, digital infrastructure, but not on the new capital city.

But, is it really possible to float big projects like these when there are even bigger projects on the ground? Will investors be made to choose between investing in Danantara or Nusantara?

We’ve discussed stories like these on the channel before. Brazil’s Brasília. Egypt’s New Administrative Capital, Nigeria’s Abuja. Megaprojects often suffer because of a redirection of funds, a difference in political vision, and a drop in urgency.

And that’s not the only challenge Nusantara Capital City is facing.

From the beginning, the government has emphasized that Nusantara will be a smart forest city. But critics ask: how do you build a megacity inside a forest without destroying the very ecosystem you’re trying to preserve?

Satellite data and on-site investigations confirm that the region is home to various endangered species, including the Bornean orangutan, the sun bear, the hornbill, and the clouded leopard. So, where do they go when the bulldozers start to raze their homes? How do they survive when concrete is poured over the grounds they used to run around? Will this megaproject be responsible for the extinction of these species, despite its visionary goals of building a forest city?

In theory, it is possible to build a city while also protecting biodiversity. But in practice, that balance is incredibly hard.

Now, let’s talk about people: the very foundation that Nusantara can’t move forward without, yet seems to be moving through.

The Indigenous Balik community has called this forest home for generations. Families have lived on the land, fished its rivers, and farmed on its soil. They’ve buried their ancestors here. Their sacred stones have stood untouched for centuries. Their lives are deeply rooted in this place. We have to ask, is it okay to uproot them so suddenly?

You might argue that it’s for the greater good. But what about the immediate cost?

Floods now hit harder in Balik communities, in part because the shape of the surrounding hills has been altered by plantation companies. And while Nusantara promises a smart sponge city to manage flooding in the future, what happens to the people already there, living with the consequences in the present?

The obvious solution is compensation. But there’s a problem. Most people in the community don’t have the formal papers to prove land ownership. And without those documents, without the money or legal support to fight in court, any compensation offered, even if well-intentioned, is bound to fall short.

Take Yati Dalia. One day, she had a house, a shop, and a family nearby. The next day, she came home to a notice demanding that she leave in two weeks. She lost her house and her shop, and her siblings lost their farmland too. And she’s just one person out of the growing number of community members who have been forced out.

She was promised 150 million rupiah, roughly 9,200 dollars, in compensation. But the money hasn’t come. And even if it does, she doubts it will cover the cost of a new home nearby, since land prices have increased significantly since the development began.

According to Myrna Asnawati Safitri, the Nusantara Authority’s deputy for environment and natural resources, new regulations are being finalized to recognize areas of historical significance to local communities. She acknowledges that “issues such as land disputes are long-running and complex,” which does not bring any reassurance.

Nusantara is supposed to represent progress. But are the opportunity costs of this progress being managed fairly?

And, it’s not only the people who are without money. There’s the project itself.

Nusantara was initially estimated to cost around 32 billion dollars, with 20 percent of that expected to come from state funding and 80 percent from private investment. But that hasn’t happened yet. Although investments worth roughly 4 billion dollars have come in from over 40 domestic and international companies, that’s still just a fraction of the total capital required to deliver the city at full scale.

And part of the reason is investor caution. While the interest is there, confidence isn’t. They want proof that it will be a worthy investment. They want to be assured of commercial viability before they commit large sums. As Public Works Minister Basuki Hadimuljono bluntly put it, “An IRR above 12 percent will definitely be attractive for both foreign and domestic investors,” implying that anything below could stall the deal entirely.

The good news, though, is that early investments are beginning to materialize on the ground. Bina Bangsa School and Gunadarma University have broken ground on their new campuses in Nusantara, marking a shift from talk to construction.

Microsoft also announced a 1.7 billion dollar investment in AI and cloud infrastructure in Indonesia, which will contribute to data hubs that will one day anchor Nusantara’s tech ecosystem. Even better, the Malaysian developer, Citadel Group, and other investors are preparing to break ground on housing, hotel, and office building investments worth 6.5 trillion rupiah.

So the wheels are turning. What’s uncertain is whether they’ll gain enough momentum. Because while the capital city’s promise is bold, the path forward depends not just on ambition, but on whether this early traction can scale fast enough to keep the project alive.

Conclusion: So… Will Nusantara Work?

Will Nusantara become the sustainable, world-class capital its designers promised? Or will it become another overambitious megaproject — half built and half abandoned?

Despite progress, Nusantara still has a long way to go. If all phases are completed successfully by 2045, Indonesia will have a functioning, sustainable capital in the geographic center of the country, a smart city powered by renewable energy, and a tech hub that attracts foreign investment to Kalimantan.

However, if funding dries up and the megaproject is not completed, Nusantara risks becoming a partially built government complex with low occupancy, a financial sinkhole, or a ghost city similar to Myanmar’s Naypyidaw or Egypt’s New Administrative Capital.

At this moment, Nusantara is both a construction site and a gamble.

But it’s a gamble with logic behind it.

It’s bold, flawed, expensive, and risky. But it’s also visionary in a way most cities aren’t allowed to be anymore. And as of today, the cranes are still moving. The dream is still alive.

Key Takeaways

• Indonesia is building Nusantara, a new capital city in Borneo, to replace sinking Jakarta.
• Nusantara aims to be a sustainable, smart forest city with 65% green space and carbon-neutral by 2045.
• The project faces challenges including slow private investment, environmental concerns, and community displacement.
• As of mid-2025, significant infrastructure is complete, but future funding and political support remain uncertain.
• Nusantara’s success hinges on balancing ambition with practical execution and addressing ongoing issues.

Sources

• Original MegaProjects video: What’s Happening with Indonesia’s New Capital City?
• Hero image source by Medelam / openverse, by.

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