Strategic Role of Nusantara as Indonesia’s New Capital

It is hoped that Nusantara, as the nation’s new capital, will be a milestone in the government’s efforts to achieve equal distribution of sustainable economic development in Indonesia.

The optimism over its achievement is certainly not without reason. Geographically located right in the middle of the archipelagic expanse of the Unitary State of the Republic of Indonesia (NKRI), the capital city of Nusantara (IKN Nusantara) holds great potential for becoming a growth pole of the national economy.

A growth pole represents an abstract space that effects macroeconomic growth. This economic growth is manifest in both outward (centrifugal) and inward (centripetal) economic forces (Pasaribu et al, 2014). These economic forces encourage the creation of dynamic ties between economic sectors.

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In the context of the growth pole, it is believed that the strategic location of IKN Nusantara, which is in the geographic center of the archipelago, will be capable of generating a centrifugal economic force to various activities that help drive the wheels of the Indonesian economy.

This force is expected to balance the scales of economic growth, which has been concentrated in Java so far, with its economic dominance in contributing 59 percent to the national GDP (Statistics Indonesia/BPS, 2020). So, the optimism about IKN Nusantara’s potential of creating equitable economic development is not just a dream, but a vision that can be achieved together.

In addition to its great potential in supporting the national economy, it is also believed that the presence of IKN Nusantara will have a significant impact on the regional constellation of Kalimantan.

If it is capable of having a significant economic impact on the national scale alone, the presence of IKN Nusantara will certainly contribute to massive economic revival on a regional scale for the surrounding area, because its existence can also serve as a regional growth center.

A growth center represents differential space due to its potential influence on the economies of the surrounding area. This influence is marked by the flow of resources resulting from the emergence of various propulsive economic units, namely dominant economic units that encourage activities in other economic units.

The resulting flow of resources can be either positive (spread effect) or negative (backwash effect). The spread effect is manifest in the spread of the flow of resources to the areas around the center.

In this context, the existence of IKN Nusantara has been conceived so it is able to spread the flow of resources to the surrounding areas. On the other hand, the backwash effect is manifested as the absorption of the resource flow in areas surrounding the center.

In Gunnar Myrdal's thesis on the theory of circular cumulative causation, a positive impact of the cumulative flow of resources from the center to the surrounding areas will be achieved if the resulting spread effect exceeds the backwash effect. A backwash effect that outweighs the spread effect in regional development will cause developed areas to become more developed, while underdeveloped areas will lag further behind.

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The magnitude of a backwash effect can lead to leakages because of nonoptimal development processes or a failure to derive value added from the products produced in the surrounding areas (Nurjihadi, 2016). As for the development of IKN Nusantara, it is believed that the spread effect can be amplified by strengthening the domestic economic chain, given the strategic position of IKN Nusantara, which is expected to have the capacity to establish a good pattern of spatial interconnectivity with the surrounding area.

In the context of a growth center, IKN Nusantara’s strategic position close to two big cities in East Kalimantan, namely Balikpapan and Samarinda, has the potential to encourage the spread effect to the surrounding area through intensified interconnectivity of economic activities between the three cities.

The relationship between the three cities in shaping an economic ecosystem to drive the future economy can be compared to the interconnectivity of organs in the human body, in which IKN Nusantara can be likened to a "nerve center" that functions as the administrative core and center of green innovation.

The three cities will thus function to propel the wheels of the economy in the East Kalimantan regional constellation, which serves as the “lung” as a whole, with economic activities in its upstream agriculture and natural tourism sectors.

Balikpapan is the "muscle" that invigorates East Kalimantan's downstream industry in oil, gas and logistics, while Samarinda is the "heart" as the historical center of East Kalimantan, with a rejuvenated energy sector. The three cities will thus function to propel the wheels of the economy in the East Kalimantan regional constellation, which serves as the “lung” as a whole, with economic activities in its upstream agriculture and natural tourism sectors.

In the context of spatial patterns, IKN Nusantara as a regional growth center is supported by the emergence of various propulsive units of economic activity. This is reflected in the planned distribution of economic and industrial activities among the three cities, as well as other regions in East Kalimantan.

According to the plan, Nusantara is to be a smart city developed on the green economy concept, with research, development and innovation centers, 21st-century education centers, Industry 4.0 centers, and other centers (ecotourism, city tourism, business, medicine, fitness).

The economic units in the capital city will integrate with other economic units in Samarinda and Balikpapan, with the former to focus on the low-carbon energy sector and the latter to become a center of chemical products (petrochemicals) and pharmaceuticals.

In addition, there are also the Maloy Batuta Trans-Kalimantan Special Economic Zone (SEZ), which is a center of palm oil processing (oleochemicals), and the Muara Jawa Industrial Estate, which is a center of low-carbon energy (E2W and solar panels), integrated pharmaceutical manufacturing (biosimilars and vaccines), and sustainable agriculture. Thus, the various economic units in the various regions are expected to bolster the role of IKN Nusantara as one of East Kalimantan’s economic growth centers.

In the context of spatial structure, IKN Nusantara and the two other cities are supported in their role to boost the East Kalimantan economy by the high potential for spatial interconnectivity between the three cities. This can be seen from the availability of various existing infrastructures that facilitate the regional mobilization of resource flows, especially between the three cities, but also to other growth centers in Indonesia.

Among these infrastructures are the Balikpapan-Samarinda Toll Road, the Trans-Kalimantan Highway, Sultan Aji Muhammad Sulaiman Sepinggan International Airport in Balikpapan, Aji Pangeran Tumenggung Pranoto International Airport in Samarinda, Kariangau Container Port in Balikpapan, and Semayang Samarinda Port. So, the hope to turn IKN Nusantara into a growth center that generates a spread effect is not merely an unfounded dream or ambition, but a workable vision that is highly likely to be realized.

Moreover, with the government's grand plan to develop IKN Nusantara as a global super hub that is locally integrated, globally connected, and universally inspired, its potential for generating a spread effect to the surrounding area is even more evident. The realization of this super hub concept can put Indonesia in a more strategic position in terms of world trade, investment flows, and technological innovation.

Thus, the super hub development concept for Nusantara as nation’s new capital city is expected to transform the Indonesian economy to be more inclusive.

In the regional constellation, this strategic position is projected to propel the wheels of the Indonesian economy by strengthening the domestic economic chain, not only for East Kalimantan, but also for all regions across the country. Thus, the super hub development concept for Nusantara as nation’s new capital city is expected to transform the Indonesian economy to be more inclusive.

An inclusive economy is indeed one of the visions that the government wants to achieve in relocating the nation’s capital city, based on the principle of "economic opportunities for all". This is one of the eight principles of the IKN development project, with the other seven being Bhinneka Tunggal Ika (Unity in Diversity), environmental design, interconnectivity, sustainability, and accessibility, circularity and resilience, technology-based comfort and efficiency, security and affordability, and low carbon emissions.

KOMPAS

Bambang Susantono and Dhony Rahajoe lead the authority for the National Capital of the Archipelago.

The principle of "economic opportunities for all" is fundamental to driving information transparency and business opportunities for the public in order to create a strong economic chain that is based on healthy competition between business actors.

The principle of "economic opportunities for all" needs to be supported by openness between communities. This is in line with the inevitably heterogeneous population of IKN Nusantara.

The heterogeneous structure of the population calls for openness among the people so as to allow for cultural integration between local residents and newcomers. Thus, the potential for horizontal social conflicts in IKN Nusantara can be minimized and, if any arises, restrict them to the lower class community.

With huge resource support and the government’s development plan, IKN Nusantara has great potential to become the driving force for the economy, through its role as both a national growth pole and a regional growth center.

Therefore, the government's effort to relocate the nation’s capital city deserves the support of all components of the nation. Successful development of Nusantara as the nation’s new capital city will be a symbol of pride, and a new milestone in Indonesia's economic revival across space and time in the development of human civilization.

KOMPAS/WISNU WIDIANTORO

Budi Gunawan

Budi Gunawan, Head of the State Intelligence Agency; professor at the School of State Intelligence

(This article was translated by Musthofid).