Nusantara Faces Funding Cuts as Indonesia Narrows Its Capital Move

A smaller budget and a new political role

Indonesia's plan to build Nusantara is entering a more constrained phase. State budget proposals point to funding falling from about 2 billion pounds in 2024 to roughly 700 million pounds in 2025, with around 300 million pounds planned for 2026. Private investment has also fallen more than 1 billion pounds short of early targets, leaving the new capital dependent on difficult choices about what to build first.

As of October 29, 2025, the project has new relocation milestones: the Public Works Ministry says the presidential office is scheduled to move on August 17, 2028, followed by executive, legislative and judicial bodies and their civil servants by August 2029. Those plans remain subject to broader budget decisions, including spending on food and energy self sufficiency.

President Prabowo Subianto signaled a narrower direction in May by describing Nusantara as a political capital, a change disclosed months later. The description has no clear legal force, and its precise legal meaning remains uncertain. It nevertheless points toward prioritizing the institutions needed to run government before completing the wider city.

The gap between buildings and population is already striking. About 2,000 civil servants and roughly 8,000 construction workers live in and around the site, compared with a target of 1.2 million residents by 2030 and 1.9 million by 2045. Apartments, a hospital, an airport and major roads are in place or nearing completion, but everyday urban life is developing much more slowly.

Officials maintain that funding and political commitment remain intact. Local shopkeepers and small contractors describe fewer customers and orders, while environmental groups warn that construction is changing ecosystems and indigenous livelihoods. Nusantara's immediate challenge is to turn an emerging administrative center into a functioning place to live without leaving neighboring communities to absorb the costs.

Why Indonesia wanted a different capital

Jakarta's congestion, flooding and sinking land helped drive the decision to build a new capital. Decades of unregulated groundwater extraction have caused parts of the coastal megacity to subside. Heavy rain and rising seas compound the flood risk, while chronic traffic slows commerce and makes daily life harder.

Nusantara, in East Kalimantan on the island of Borneo, was presented as a major national reset when the plan was unveiled five years ago. Planners envisioned a smart, sustainable city with extensive forest cover and a target of net zero emissions by 2045. Net zero means balancing the emissions produced with the emissions removed, rather than allowing the city's contribution to warming to keep growing.

The relocation also aims to spread economic activity beyond Java, where close to 60 percent of Indonesians live. An administrative center in Borneo could bring government activity, investment and jobs to another part of the country, although that ambition depends on people and businesses following the institutions that move.

Nusantara's planners are using a Voluntary Local Review, a United Nations supported tool normally applied to existing cities. The review is intended to improve transparency, measure progress and involve stakeholders, including the Balik and other indigenous communities, while the city is still taking shape.

Other Asian capital projects provide lessons for the planning process. Putrajaya offers experience with land rights and green corridors; Sejong with development in phases and climate resilience; and Astana with planning over a long horizon. For Nusantara, those lessons point toward the same practical needs: effective governance, disciplined investment and trust from the people expected to live and work there.

How the relocation timetable changed

The original ambition to secure a symbolic inauguration on Independence Day in August 2024 slipped amid construction delays and a compressed schedule. The Nusantara Capital Authority also experienced leadership disruption that year, when its top leaders stepped down.

Prabowo's government continues to support the project, but its spending priorities have changed the pace. His flagship free school meals program is reshaping the fiscal agenda, alongside food and energy self sufficiency programs. Nusantara now has to compete for resources within that wider set of commitments.

The description of Nusantara as a political capital has added uncertainty for investors and civil servants trying to judge how quickly relocation will proceed. An administrative core requires offices and government services. A larger city also needs enough schools, healthcare, shops, employment and housing to attract families and businesses.

Officials have proposed an extra 14.87 trillion rupiah for roads, schools and hospitals. That proposal focuses on the basic services needed to make the political capital function, even if the broader urban plan takes shape in stages.

The project's main dates show how the original vision is being stretched across a longer period:

• August 2024: The planned symbolic Independence Day inauguration slipped amid construction delays and a compressed timetable.
• May 2025: Prabowo described Nusantara as a political capital, a change disclosed months later.
• 2026: Budget proposals point to approximately 300 million pounds in state funding.
• August 17, 2028: The Public Works Ministry's target for moving the presidential office.
• August 2029: The planned move of executive, legislative and judicial bodies and their civil servants, subject to wider budget choices.
• 2030: The population target is 1.2 million residents.
• 2045: The longer term goals include 1.9 million residents and net zero emissions.

Buildings are rising, but streets remain quiet

Nusantara's emerging center has a strong visual identity. A sweeping highway climbs toward the construction area, where the presidential palace, crowned by a giant winged eagle, overlooks an orderly arrangement of roads and administrative buildings.

Apartment blocks, a hospital and an upgraded airport show that the urban core is taking shape. Residents who have visited describe a clean, futuristic setting, alongside long stretches of empty boulevards and an unfinished center. Away from active work sites, landscaping crews and curious tourists can be among the few people using the wide roads.

Restaurants and guesthouses report fewer customers after initial bursts of curiosity. Small contractors describe declining orders. For those businesses, the challenge is a shortage of regular demand: occasional visitors cannot provide the same steady trade as a settled population of workers and families.

Community leaders near the site describe mixed feelings. Pride in the national project sits alongside hopes for tourism and cultural exchange. There is also concern that residents outside the new city boundary will receive fewer benefits than businesses and individuals who secure contracts within it.

The government's account of progress and the accounts of quiet commercial streets describe different parts of the same development process. Infrastructure can be completed before enough people arrive to use it every day. Nusantara still has to connect its construction progress with a durable local economy.

Holiday crowds brought a sanitation test

The Eid holiday period exposed another practical challenge. Crowds left litter behind, drawing rodents from old burrows. Health and sanitation teams responded by deploying traps and expanding cleanup operations.

Thomas Umbu Pati Tena, the Nusantara Capital Authority's deputy for development control, described the conditions inherited from the landscape and said teams were responding:

This used to be a forested, hilly area. Naturally, there are many old rat nests. But we are not sitting idle. Our health and community teams are already working on this.

The city's caretakers say the problem is being managed. Their explanation reflects the practical demands of turning a wooded area into a place that receives residents, workers and holiday visitors.

Nusantara's early sanitation experience also shows why services matter alongside landmark construction. Waste collection and public health work must function when visitor numbers rise, even while permanent occupancy remains low. These everyday tasks are part of making the new capital usable, rather than simply completing its buildings.

The forest city promise faces environmental objections

Indonesia's government promotes Nusantara as a forest city and says roughly three quarters of the site will remain green, with only one quarter developed. Its climate plans include public transport, reforestation and clean energy, intended to deliver benefits over time.

Environmental advocates argue that the project's footprint is already larger than advertised. They cite the clearing of more than 2,000 hectares of mangroves and continuing pressure on East Kalimantan's forests, watersheds and wildlife. A watershed is the area of land that drains into a river or other body of water, so changes across it can affect communities farther downstream.

Construction materials extend the project's reach beyond Borneo. Quarrying and transport corridors in Sulawesi have been linked to reports of flooding and dust pollution. Those concerns connect the capital's building program to places that supply and move its materials.

Authorities reject claims of net environmental harm and say the city's transport planning, reforestation and clean energy will produce climate benefits. The disagreement centers on the balance between damage occurring during construction and the gains promised as the city develops.

Academic studies of land use in the Nusantara zone describe expanding built areas since the early 2000s and shrinking agricultural land. Researchers warn of risks to biodiversity, food security and rural livelihoods, as well as social tensions over compensation and land claims.

Those studies propose rigorous environmental impact assessments, zoning that protects ecological corridors, meaningful participation by local and indigenous communities, and legal recognition of customary rights. Ecological corridors connect habitats so wildlife can move between them. Customary rights concern communities' longstanding relationships with land and resources.

Indigenous communities face immediate changes

Indigenous communities along the Sepaku River say expanding earthworks have brought new flooding, muddier water and fewer places to fish. For households that depend on the river and surrounding forests, those changes affect daily needs before the new city's wider economic benefits arrive.

Advocacy groups estimate that more than 20,000 indigenous residents could face displacement. They also say 21 distinct groups in and around the area risk losing access to forests used for food, medicine and cultural practices.

The government denies that development is driving negative effects and says resettlement and compensation follow the rules. Critics argue that Indonesia lacks strong climate adaptation laws and a comprehensive framework for future water stress in both Borneo and Jakarta, leaving vulnerable households exposed.

Climate adaptation means preparing for changing conditions, such as heavier flooding or pressure on water supplies. In the communities around Nusantara, that concern overlaps with decisions about drainage, river access, land ownership and where people can continue to live.

Advocates warn that benefits could become concentrated inside the new city while costs fall on communities outside it. Their proposed safeguards connect environmental protection with participation in decisions, recognition of customary land rights and compensation arrangements that address local claims.

Attracting people requires more than offices

Moving civil servants is a large logistical task. Persuading private companies, universities, hospitals and families to relocate is harder, because they need reasons to establish their lives and activities in Nusantara beyond a government instruction.

Sarah Moser, a geographer who studies new capitals, described the difficulty of attracting a wider population after government employees arrive:

Once you have moved civil servants and their families, it is really hard to get other people to move.

Nusantara's population goals make that challenge central to its future. The approximately 10,000 civil servants and construction workers now living in and around the site amount to less than 1 percent of the 1.2 million residents targeted for 2030. Building an administrative workforce and developing a city of that size involve very different scales of settlement.

Distance from established media and civic centers creates another concern. Filipe Campante, an economist at Johns Hopkins University who has studied remote capitals, warned that a government operating farther from scrutiny can face weaker oversight:

When the government is out there in some isolated capital, the big newspapers are not covering so much and then you have corruption as a result of that.

Critics also point to the opportunity cost of construction. Money directed to Nusantara is unavailable for other uses, including flood control, mass transit, water security and public institutions in Jakarta. Supporters argue that Indonesia can invest in both cities if spending is spread over decades and Nusantara attracts new sources of growth in eastern Indonesia.

Who will finance the wider city?

The state expects to provide roughly one fifth of Nusantara's total cost, with domestic and foreign investors supplying the rest. That division makes private investment essential to the larger urban vision, especially as proposed public allocations decline.

Companies from several countries have expressed interest in roads, energy, transport and housing. Chinese firms have moved early with commitments covering infrastructure, digital systems and industrial development. By May 2025, project announcements put Chinese investment near 70 trillion rupiah, alongside dozens of letters of interest.

The first foreign developer has broken ground on a mixed use complex, combining different activities within one development. Major technology companies have also explored roles in the city's information backbone, the systems needed to connect its digital services.

Investment can bring capital, technology and jobs. Dependence on a single partner, or debt terms that restrict future choices, could reduce Indonesia's flexibility. Indonesian planners say they want to diversify funding sources and strengthen safeguards while inviting participation from abroad.

Letters of interest and announced projects are early steps. Financial close is the point at which financing arrangements are completed so a project can proceed with its funding in place. Deals reaching that stage will provide a stronger measure of investment progress than announcements or groundbreaking ceremonies.

Domestic cement producers see Nusantara and other public works as sources of demand over the next several years. The industry nevertheless faces overcapacity, high energy costs and pricing pressure. Producers are investing in cement blends that produce less carbon and alternative fuels, in line with government ideas for green procurement.

Better logistics, improved shipping between islands and digitized operations could help producers. Nusantara may support those changes, but deeper improvements in the cement industry depend on national market reforms, rather than demand from one project alone.

Public administration must keep pace with construction

Nusantara requires coordination among ministries, state companies, provincial authorities and private developers. Scholars studying the project propose a smart bureaucracy model built around clear strategic leadership, coordination between agencies, capable operational teams, independent monitoring and evaluation, and strong digital systems.

Their proposed sequence begins with a comprehensive legal framework and an empowered single authority. Core information and communications systems would follow, before an integrated platform delivers public services and transparent data to residents and investors.

The Voluntary Local Review can support that work by establishing a baseline for measuring progress toward carbon neutrality in 2045 and tracking forest conservation. A baseline records starting conditions, allowing later changes to be measured against them.

The review also puts stakeholder engagement at the center of planning, including consultation with indigenous groups and protection of cultural heritage. Publishing credible indicators could help authorities build public trust and give investors a clearer view of how the city is being managed.

Budget allocations, civil servant relocation targets and the opening of schools, clinics and housing will be practical measures of progress over the next two years. Environmental measures include the share of land preserved, reforestation underway, water quality in the Sepaku basin and transparent resettlement data. Community engagement, grievance channels and protections for indigenous land rights will remain central to the project's legitimacy.

Jakarta still needs investment

Jakarta's problems will continue even if Nusantara meets its relocation milestones. Tens of millions of people still live and work in the existing economic center, where sinking land, flooding, air pollution, transport pressures and housing needs demand sustained attention.

Stronger water management and expanded piped water supplies are needed to reduce reliance on groundwater pumping. Coastal defenses where feasible, better drainage upstream and continued work on air quality, public transport and housing remain part of the city's needs.

Advocates argue that Indonesia still lacks comprehensive climate adaptation law for the conditions Jakarta is likely to face. Moving government offices addresses the location of administration; protecting residents and businesses requires continuing investment in the city they occupy.

A twin city approach is taking shape, with Jakarta remaining the economic engine and Nusantara handling administration. Better connectivity and institutions that work smoothly across the two centers could support both a modern political capital and a renewed commercial heartland. Neglecting Jakarta would widen inequality and weaken the promise of the relocation.

Key Points

• State budget proposals fall from about 2 billion pounds in 2024 to roughly 700 million pounds in 2025 and around 300 million pounds in 2026.
• Private capital is more than 1 billion pounds short of early targets, while the state expects investors to fund roughly four fifths of the total cost.
• Prabowo's political capital description points toward an administrative focus, with its legal meaning still uncertain.
• The presidential office is scheduled to move on August 17, 2028, with government bodies and their civil servants planned to follow by August 2029.
• About 2,000 civil servants and 8,000 construction workers live in and around the site, against a target of 1.2 million residents by 2030.
• Authorities promise extensive green space and climate benefits; environmental and indigenous advocates warn of habitat loss, flooding and displacement.
• Investment financing, functioning public services, environmental safeguards and continued spending on Jakarta will determine how the two centers develop.