Review on the Financing Scheme of Indonesia’s Capital City Relocation Plan: Lessons Learned from Brazil, Malaysia, and Tanzania

Abstract

To distribute the nation’s wealth fairly and to separate the administrative capital from center of business, Government of Indonesia is reviving the long-discussed plan of capital city relocation. The plan could cost around IDR200-300 trillion or about 13-14 per cent of 2018 state budget. The figure is quite significant and potentially disrupts budget allocation for priority programs if the plan is carried out without the thorough calculation on its financing scheme. This paper first seeks for the lessons learned on the financing scheme from both successful and failed stories of capital city relocations, mainly focuses on successful Brazil’s and Malaysia’s experience and botched Tanzania’s plan. Furthermore, this paper tries to find the connection between the lessons learned and the current situation in Indonesia, including its economic condition and the legal aspects, so as to get the best possible financing scheme. Analyzing the interview data with the qualitative method, this paper concludes that both resources from government and private sectors are needed in order to conduct the plan smoothly. According to the resource persons, the ideal proportion between budget and public private partnership are varies and each proportion may face different obstacles. Importantly, the government’s commitment plays a strong part in influencing the outcome of this long-overdue plan.