New Indonesian capital one year on: Land demand cools amid COVID-19, but speculators still hover

New Indonesian capital one year on: Land demand cools amid COVID-19, but speculators still hover

Indonesian President Joko Widodo gestures as Governor of East Kalimantan Isran Noor stands during t
Indonesian President Joko Widodo gestures as Governor of East Kalimantan Isran Noor stands during their visit to an area, planned to be the location of Indonesia's new capital, at Sepaku district in North Penajam Paser regency. (Photo: Antara Foto/Akbar Nugroho Gumay via REUTERS)

JAKARTA: “Do you have land to sell?”  

That was the million-dollar question in Penajam Paser Utara and Kutai Kartanegara last year following President Joko Widodo's announcement that the country’s capital would move from megacity Jakarta to the underdeveloped districts in East Kalimantan province.

The plan to move the capital was deemed necessary as Jakarta, a crowded and polluted city of 10 million people, has for years been battling traffic congestion which costs US$7 billion in economic losses each year.

It is also one of the fastest-sinking cities on Earth with experts predicting that it could be submerged by 2050 if current rates continue.

Penajam Paser Utara and Kutai Kertanegara districts, on the other hand, are at minimal risk of natural disasters, the president said in his announcement and is geographically in the centre of the country where the government already owns about 180,000 hectares of land.

The government's announcement last August led to a spike in demand for land parcels in the new capital site. But with the COVID-19 pandemic and delays in development, the demand appears to have cooled for now. 

This being said, those interviewed by CNA noted that land around the capital site remains sought after and are seen as a sound investment for the future.

The COVID-19 pandemic has resulted in the government shifting its priorities, delaying the development of the 466 trillion rupiah (US$32 billion) project. 

Now, one year on, the new capital remains a plan on hold with the government asserting several times that it will still be developed when the time is right.

In this regard, land selling is not the talk of the town anymore. 

“Nobody is talking about land anymore, unlike last year when many people from out of town dined in my restaurant talking about it,” said Mr Eko, a restaurant owner in Penajam Paser Utara who like many Indonesians goes by one name.

When CNA met Mr Eko at his diner last year, he said that all his customers talked about every day was land prices.

Penajam Paser Utara
A sign welcoming visitors to the new capital of Indonesia has been put up at Penajam Paser Utara, East Kalimantan, in this photo taken in September 2019. (Photo: Kiki Siregar)

Mr Debi, a resident of oil city Balikapan about 80km east of Penajam Paser Utara, concurred.

He too witnessed a surge in the demand for land in his city last year, but said that the enthusiasm has abated for now.

INVESTORS REMAIN SANGUINE: MINISTER

Although there is currently no construction work in progress, Mr Suharso Monoarfa, the minister overseeing the new capital explained that the master plan is still being worked on.

“The detailed plan will follow, then we will include basic infrastructure works in cities that will support the future capital of the country, for example, Balikpapan, Samarinda,” the national development planning minister told CNA in a recent exclusive interview.

A highway has been constructed to connect Balikpapan with East Kalimantan provincial capital Samarinda.  

The National Development Planning Minister also revealed that investors are still keen in the new capital.

"There are still some investors, including domestic ones, who are still interested. And indeed they keep asking when it can start. 

"I think this is also important because, after COVID-19, the economic recovery will (focus on) investment destinations that promise high and fast capitalisation, one of them in Indonesia is the capital city project." 

Mr Monoarfa welcomed other countries to invest, especially fellow members of the Association of Southeast Asian Nations (ASEAN).

"In my opinion, because later it (the new capital) will also be a symbol of friendship in ASEAN, why should there be no legacy from ASEAN countries contributing to this capital city?"

Mr Monoarfa is hopeful that the new capital project can resume next year, once COVID-19 has been contained.

STRATEGIC ISLANDS NEAR EAST KALIMANTAN SOUGHT AFTER

A recent case of alleged illegal land sale involving the Malamber islands near the East Kalimantan province, which was reported by local media, suggests that there are still people who are eyeing land in the region despite the uncertainties in the relocation timeline.

The Malamber islands case caught the attention of the authorities after it was reported in June that a man allegedly sold the 6.4 ha island for 2 million rupiah to the regent of Penajam Paser Utara, who is also a businessman.

Inhabited by about five families, Malamber is part of the Balabalakang island chain which technically is in West Sulawesi province, but closer to Balikpapan Bay and the coast of East Kalimantan.

Malamber island
Malamber consists of Big Malamber island and Small Malamber island. (Photo courtesy of Ridwan Alimuddin)

According to the Constitution, island sales and purchases are illegal in Indonesia as they belong to the state. 

While the alleged seller has since clarified that he had sold the land on the island and not the island itself, the local police in West Sulawesi are still investigating the case.

The lawyer of Penajam Paser Utara’s regent dismissed claims about his client's involvement and told CNA the regent does not know the alleged seller.

Balikpapan Bay
Environmentalists are concerned that the capital's relocation to East Kalimantan will harm the Balikpapan Bay and its coastal communities. (Photo: Kiki Siregar)

Meanwhile, East Kalimantan coordinator of Mining Advocacy Network JATAM Pradarma Rupang, who has studied land ownership in large parts of East Kalimantan believed the Balabalakang island chain would be strategic if the new capital is developed.

“Its location which is near to the new capital makes it an important route, especially for logistics in central and eastern Indonesia, and it would make it also a transit place," Mr Rupang said.

READ: New Indonesian capital offers opportunities for development, but environmental pitfalls abound

The environmentalist claimed that the practice of buying and selling land, in general, is still prevalent in the area.

“It (the pandemic) did not stop a number of businessmen from outside East Kalimantan to conduct land surveys in a number of villages in the district of Penajam Paser Utara and Balikpapan city,” Mr Rupang said. 

LAND OWNERS CONTINUE TO BE APPROACHED

Mr Sikbukdin, head of local tribe Paser Balik in Penajam Pasar Utara concurred.

He said that he still receives calls from people who are interested in buying his land.

“Yes, there are still a lot of people but it is unclear who they are. They (claim to be) speaking on behalf of the National Development Planning Agency,” Mr Sibukdin said.

“I replied saying the new capital is still unclear, it is impossible the National Development Planning Agency is looking for land on its own,” said the 57-year-old who does not want to sell his land. 

READ: New Indonesia capital - Indigenous tribes fear further marginalisation

The exact location of the new capital has yet to be revealed but many are betting on the sub-districts of Sepaku and Samboja, which are at the border of Penajam Paser Utara and Kutai Kartanegara.

The 57-year-old tribe head owns land in Sepaku, Penajam Paser Utara.

Paser Balik House
The neighbourhood of indigenous Paser Balik tribe in Penajam Paser Utara. (Photo: Kiki Siregar)

Similarly, another Penajam Paser Utara resident also revealed that he still receives many requests from interested land buyers.

Farmer Hamzah, who regularly acts as a middleman between land seller and buyer noted that land price has not decreased despite the pandemic especially in sub-district Sepaku as land availability is scarce.

“People just positively think that the new capital project will start next year,” he added.

READ: How about Jokograd? Indonesians suggest names for new capital

Originally, the government planned to begin the construction of the new capital this year on an initial 40,000 ha plot of land and transfer the central administration functions to the new capital site by 2024.

PROPERTY STILL A SOUND INVESTMENT

Over in oil city Balikpapan, Mr Yoga Gunawan, the general manager of superblock Borneo Bay City, which comprises malls, offices, a hotel and apartments, said sales are relatively stable.

When the president announced the relocation of the capital at the end of August last year, Borneo Bay City acted quickly and immediately published a full-page advertisement of its property in a national newspaper the following day.

Borneo Bay City
Property developer Agung Podomoro Land's Borneo Bay City superblock in Balikpapan. (Photo: Kiki Siregar)

Even though there has reportedly been a decrease of 15 per cent in property sales in Balikpapan for the second quarter of 2020, Mr Gunawan is optimistic that the property remains a sound investment.

“According to the latest information, the new capital will still be developed … The people of Balikpapan are still optimistic about the relocation of the new capital,” he told CNA.

Mr Ali Tranghanda, CEO of property consultant and advisor Indonesia Property Watch, added that demand for land and property in the area where the new capital is thought to be has slowed down, but the potential is still there.

“The price of land is still stable with an overall correction of about 1 per cent to 3 per cent,” he told CNA.

READ: Trading places - Countries that moved their capitals

He also asserted that in the long term, the potential of the market is still very high.

“The plan (to relocate the capital) still exists, and there are parties which are sceptical about the big budget needed for the relocation.

“However, the situation is not a result of technical things but due to the pandemic.”

Despite the uncertainty, Mr Debi, the Balikpapan resident, is still hopeful the new capital will be realised soon.

“If the new capital is in East Kalimantan it will boost the economy.”

Source: CNA/ks

Bookmark