When President Joko Widodo announced last week that Indonesia’s new capital city will be in East Kalimantan, Minister of Agriculture and Land Planning Sofyan Djalil said that the government would enforce a land value freeze at the site of the new capital city to avoid land speculation in the area.
But, during a talk in Jakarta yesterday, Sofyan conceded that the government is powerless to prevent land values from skyrocketing in cities located near the new capital city.
“It’s going up, that we can’t control. For example, as [part of the new capital city] is in North Penajam Paser [regency], there’s a land value hike in Samarinda. That can’t be controlled. How can the government prohibit that?” he said, as quoted by Kompas.
The new capital city will be partly located in North Penajam Paser regency and partly in Kutai Kartanegara regency. The location is roughly between the East Kalimantan provincial capital of Samarinda and the province’s largest city, Balikpapan.
A report by Nikkei Asian Review found that as soon as the location for the new capital city was announced, major property developers in Indonesia began aggressively marketing investment opportunities in residential and commercial properties in the two cities, particularly Balikpapan. Share prices for those developers also went up following Jokowi’s announcement.
That said, Sofyan assured the public that land value at the site of the new capital city site was safe from speculation. He said that the new capital sits on industrial forests currently operated by the Ministry of Environment and Forestry and that a new authoritative body would develop the site once the land’s concessionary status is lifted.
In the case that the government has to acquire land for the capital city’s connectivity infrastructure, Sofyan said the government may invoke laws justifying a land value freeze in those areas for the common good.
According to the government’s ambitious proposed timetable, construction on the new capital will begin in 2021 and the transfer of functions will take place from 2023-2024.