Indonesia’s New Capital City: Public Funding and Public Support

Indonesia’s new planned capital city of Nusantara is the most significant public works project in modern Indonesian history. We study the economics and politics of Nusantara from the perspectives of public budgeting and political economy. Combining data from official planning documents and media accounts with a large body of original public opinion data, we find that (1) the only feasible source of funding that can be mobilized for Nusantara is the state budget, and (2) while Indonesians across age cohorts support the idea of relocating the capital, they do not support using public funding for this purpose. Given that the state budget is constrained for a project the size of Nusantara, our analysis highlights the trade-offs for the public between raising taxes, borrowing with future repayment obligations, or reallocating funds from other government programs.