Indonesia’s New Capital City and Indigenous People: Reconciling Investments with Environment, Social, and Governance Principles in Indonesia 2023

In line with Indonesia’s aspiration to relocate its capital city to the East Kalimantan province, currently, the development of infrastructure for the new capital city has commenced.[2] Upholding the concept of a green, sustainable city, the new capital is set out to appropriate 75% of its area for green, open spaces.[3] Residential, institutional, and commercial buildings are aimed to be constructed using environmentally friendly methods.[4] Through the green and sustainable city concept and infrastructure, Indonesia aims to implement the Environment, Social, and Governance (“ESG”) principle in the development of the Nusantara Capital City (“IKN”).[5]

The construction of the new capital city, however, requires a substantial amount of cost, which is estimated to reach $35 billion.[6] The government has contributed as much as 20% of the funding, whereas the remaining 80% is aimed to be obtained from foreign investors.[7] The five prioritized industries for the development of IKN are natural resource-based industries, basic industries, medium-high technology industries, sustainable consumer goods industries, and innovation and research-based industries.[8]