A consortium of Indonesian companies led by property and construction group Agung Sedayu broke ground yesterday on the first private sector development in Indonesia’s new capital of Nusantara in East Kalimanatan, Borneo Island, Jakarta Post reports.

The $1.3bn project will include a hotel, shopping malls, and office towers.

It is located on what is now a vast eucalyptus and acacia plantation, but will eventually be a premium spot near the presidential palace.

Speaking at the groundbreaking ceremony, Indonesian president Joko Widodo said domestic investors should lead the way in creating the city.

“Once these big names are here, they will be the locomotive for others to follow,” he said.

Bambang Susantono, the head of the Nusantara National Capital Authority, told reporters that the development would have a botanical garden, parks and open spaces to make “a lovable city”.

Chair of Agung Sedayu, Sugianto Kusuma, toldthe Nikkei Asianewspaper: “The government has decided that the development is to be finished by next year. We are looking into building supporting facilities like housing and supermarkets.”

Joining Agung Sedayu in the consortium are Indonesian conglomerates Salim Group, Sinar Mas, and Pulauintan.

Private investment not materialised

The Widodo government wants Nusantara to have a population of 2 million by 2045.

But so far, the hoped-for wave of private investment has not materialised.

Nikkei Asianotes that work on the city has been carried out by state-owned companies building basic infrastructure such as roads, bridges and a dam, as well as the new presidential palace and some government offices. About 45% of the central government area in the centre of the city has been completed.

Earlier this year, Jakarta announced a package of incentives to attract investors, including land-use concessions for up to 190 years.

The government is aiming to complete the first phase of the $30bn programme next year, with plans to hold the nation’s next Independence Day ceremony on 17 August at the newly completed presidential palace.