Crowdfunding a capital: Indonesia’s unusual pitch raises eyebrows

The unorthodox proposal comes after Japan’s SoftBank opts not to invest in a project estimated to cost $32bn.

Jakarta traffic and skyline
Indonesia's government has proposed moving the capital out of Jakarta due to the city's chronic pollution and overcrowding [File: Ajeng Dinar Ulfiana/Reuters]

Penajam Paser Utara Regency, Indonesia – Indonesia has suggested crowdfunding the relocation of the country’s capital after a major investor declined to back the $32bn project, prompting ridicule from critics and questions about ownership of the planned city.

The unorthodox proposal came to light on Monday when the head of the government agency behind the plan told local media the option is being explored after Japan’s SoftBank Group Corp opted not to invest in the project.

“We will explore all creative funding models,” said Bambang Susantono, the head of the Nusantara National Capital Authority.

SoftBank confirmed it would not be involved in the project earlier this month, more than two years after Indonesia’s investment minister, Luhut Pandjaitan, announced the firm had pledged $40bn for the venture – an amount SoftBank denied discussing at the time.

Pradarma Rupang, head of the Mining Advocacy Network in East Kalimantan, the proposed location of the new capital, expressed concern that any crowdfunding effort would be dominated by businesses hoping to make a profit.

“As a result, I don’t know if there will be any reciprocity for these donors. Will they be shareholders?” Rupang told Al Jazeera. “What will be the compensation for these donors?”

Rupang said it would also be unreasonable to expect the general public to foot the bill.

“The community has been burdened with taxes, high education and other costs and the government has revoked fuel subsidies,” he said. “People are also paying for their own healthcare, particularly as the government has lost control of the COVID-19 pandemic.”

Joko Widodo
Indonesian President Joko ‘Jokowi’ Widodo first proposed relocating the capital in 2019 [File: Achmad Ibrahim/AP Photo]

The Indonesian government first announced plans to move the capital from Jakarta to East Kalimantan, a remote part of eastern Borneo, in August 2019. Joko “Jokowi” Widodo’s administration has argued the relocation is necessary because Jakarta is sinking due to unregulated groundwater extraction and suffocating smog, overcrowding and chronic traffic congestion.

Under the plan, 1.5 million of Jakarta’s 11 million residents would be relocated to an undeveloped area of jungle chosen for its clean air, vast open space and distance away from regions more prone to natural disasters.

Only about 20 percent of the relocation plan’s estimated $32bn cost will come from state coffers, leaving the private sector or other governments to make up the shortfall. Since the plan was announced, the government has sought investment from the Middle East, with five countries said to be in talks to provide funding.

The Asian Development Bank said earlier this month it would assist in raising money for the new capital, but stopping short of pledging direct funds or loans.

“ADB will share international lessons learned to help the Nusantara National Capital Authority to design and fund construction of the new capital,” ADB spokesman Ahmed M Saeed told Al Jazeera.

site of Indonesia's new capital
Indonesia plans to relocate 1.5 million of Jarkarta’s 11 million to an undeveloped area of jungle in Borneo [Courtesy of Abdallah Naem]

Crowdfunding, which is typically used by individuals and small startups, involves soliciting small donations from large numbers of people to finance a business venture. Some crowdfunding models involve “rewards” such as merchandise or equity in a company, blurring the lines between altruistic donors and investors.

Sri Murlianti, a political science lecturer at Mulawarman University in East Kalimantan, said the government’s plan is becoming a burden for the community at what is already a difficult time.

“It’s hard enough for people to buy cooking oil and other basic necessities, and now they are going to be asked to pay for the new capital too? It’s a mess,” she told Al Jazeera.

‘Oligarchic republic’

Indonesia has seen rising food prices and shortages of basic goods such as cooking oil, sugar and flour in recent weeks as a result of a number of factors, including the Russian invasion of Ukraine and disappointing harvests.

Murlianti said it is inappropriate for the state to ask citizens to fund a project with such unclear aims.

“It’s not good for such a project to be financed by the people. What is the public interest here?” she said.

“In the end, will policy just exist to accommodate the interests of the donors,” Murlianti added, arguing such a financing model could lead to an “oligarchic republic”.

Muhammad Bijak Ilhamdani, a regional assembly member in East Kalimantan, said while he finds the term “crowdfunding” disturbing, it is important to understand how the scheme would work before casting judgement. Is he part of Jokowi’s camp, or the opposition?

“The authority representing the government is responsible for explaining this to the public and it is still a grey area,” Ilhamdani told Al Jazeera. “What is this going to look like?”

Indigenous activist Jubain believes the idea of crowdfunding Indonesia’s new capital is ridiculous [Courtesy of Aisyah Llewellyn]

Jubain, the head of an advocacy group for the Paser Balik Indigenous people, described the idea of crowdfunding the capital as ridiculous.

“If the people of Kalimantan had asked for the capital to be moved here, then by all means we would have taken part and taken responsibility for it,” Jubain, who like many Indonesians uses one name, told Al Jazeera.

Jubain said he is also concerned that the government is planning to build the new capital on the ancestral lands of the Paser Balik without community consultation.

“Suddenly it was decided where ground zero would be,” he said. “Imagine if we help to fund the capital when actually we are the ones who should be getting compensation from the state for the use of our land.”

Jubain said the government has not been paying attention to the needs of the local community and the crowdfunding proposal has only made matters worse.

“We can’t get legal certainty about our land so that it is protected, and now this,” he said. “The plan to move the capital is half-baked.”

Source: Al Jazeera