Yanuar Nugroho and Julia Lau – There is growing disquiet among Indonesia's political elite about the uncertain fate of the new capital city, Ibu Kota Negara (IKN) Nusantara, after President Prabowo Subianto's press office announced that Jakarta, not Nusantara, will host this year's Independence Day celebrations. Several legislators demanded clearer signs from the president regarding the project's continuation.
Despite his apparent scepticism about the project – which was initiated by his predecessor Joko Widodo – Prabowo has chosen not to reverse course. Through a presidential instruction (Inpres 1/2025), Prabowo reaffirmed IKN Nusantara as a cross-administration strategic initiative, signalling political continuity.
The allocation of 48.8 trillion rupiah (about US$2.97 billion) of the state budget for the IKN's housing and government office projects through 2029 underscores this commitment. (For comparison, the total 2025 state budget is about US$226 billion; the amount allocated to Prabowo's "free meals" programme for this year alone is triple the IKN's five-year allocation.)
Yet, signs of reprioritisation are evident. The IKN is absent from the "top five" strategic priorities of the National Medium-Term Development Plan (RPJMN) 2025-2029, where food security, defence, and social assistance programmes – Prabowo's signature policy priorities – dominate. While this shift reflects arguably more pressing legitimate national concerns, it raises a fundamental question: is Nusantara still part of Indonesia's long-term vision?
Technically, Phase I of the IKN is near completion. Construction of the presidential palace, the central administrative core, and 47 apartment towers for civil servants has reached around 80 per cent. Over 42 companies, mostly domestic, have committed more than 62 trillion rupiah across housing, healthcare, and logistics projects. Even the repeatedly delayed relocation of civil servants has begun, albeit in a pilot phase.
The infusion of private capital has not met targets set during Widodo's presidency, but there are some glimmers of improvement. Intensified promotional efforts on the part of IKN Authority (OIKN), the governing body for IKN Nusantara, have yielded private-public partnerships worth over 130 trillion rupiah, and there has been some movement on the foreign investment front, including from Singaporean and South Korean companies.
At OIKN, governance is being reshaped. After its previous head resigned in June 2024, Prabowo appointed in his place Widodo's minister for public works, Basuki Hadimuljono, who has brought institutional memory and project discipline to the process. However, uncertainties remain around coordination, transparency, and long-term vision.
Symbolically, IKN Nusantara as the new capital is meant to break the Java-centric nature of Indonesia's economy, politics, society, and culture, to make it "Indonesia-centric", as Widodo has declared on many occasions. Today, however, Jakarta remains the country's gravitational centre for politics while its economic pull is undiminished.
Without credible and targeted incentives beyond those offered under the updated Government Regulation (PP) No. 29 of 2024 and stronger regulatory clarity, the vision of Nusantara as a political-administrative capital and as a counterpart to Jakarta (which will remain Indonesia's business centre) will remain rhetorical.
The IKN's legitimacy depends not just on its physical infrastructure, but also on how it honours the rights, heritage, and agency of those living on its soil. Nusantara risks becoming a contested space, alienating the very communities whose land it occupies. There are already socio-environmental concerns: reports persist of indigenous Dayak communities being excluded from meaningful participation and consultation in Nusantara's construction. Land reclassification has occurred without free, prior, informed consent (FPIC), as has involuntary resettlement, while deforestation in buffer zones (outside the central core) has increased.
Recent reports have exposed alleged vice activities. In early July 2025, Commission II of the Indonesian House of Representatives (DPR) highlighted that prostitution has proliferated in Sepaku, three kilometres from the formal development area, due to the influx of migrant workers. OIKN officials and local law enforcement acknowledged dismantling at least eight illicit stalls and detaining 64 sex workers in raids.
These incidents tarnish IKN Nusantara's image as a model, "smart forest city" and signal deeper problems, including the potential moral hazards of relocating civil servants, increased pressure on local social services, and the emergence of unregulated informal economies. They reveal a worrying dissonance between aspirations and on-the-ground realities.
If Nusantara is to succeed, four policy shifts are necessary. First, for funding, the government must synchronise public and private financing, phase public investment to reduce the risk to key parts of the construction process, offer investors credible guarantees, and unlock new sources of funds such as diaspora capital and green finance. Indonesia's global diaspora could be engaged through targeted investment vehicles or philanthropic initiatives.
Second, the government must improve inter-agency coordination. While the OIKN leads on-site execution, a dedicated inter-ministry secretariat reporting to the president could strengthen policy coherence, align national-level support mechanisms, and ensure accountability across ministries. In parallel, the OIKN could publish key milestones such as licensing progress, land acquisition, and social safeguards on a public dashboard to build investor and citizen trust.
Third, IKN Nusantara must adopt an "inclusion-first" ethos, embedding local and indigenous voices in its governance, planning, and impact evaluation, and embody regenerative and equitable development while rejecting extractive models.
Finally, Nusantara's future depends on institutionalising political continuity. This can involve elevating it to "national strategic project-plus" (PSN Plus) status, embedding it within medium- or long-term national development plans, and establishing cross-party oversight to protect the project from electoral volatility.
Whether the IKN Nusantara mega-project can succeed depends not just on concrete being poured and towers being built, but also on good governance – the integrity of its institutions, inclusivity in its development, and the foresight of the nation's leaders.
[Yanuar Nugroho is Visiting Senior Fellow at ISEAS – Yusof Ishak Institute, Singapore and Senior Lecturer at the Driyarkara School of Philosophy, Jakarta, Indonesia. Julia Lau is a Senior Fellow and Coordinator of the Indonesia Studies Programme, and Editor, Fulcrum at ISEAS – Yusof Ishak Institute.]