Officials overseeing Indonesia capital city project resign, raising questions

Development progress of Indonesia's new capital development known as Nusantara National Capital (IKN)

By Ananda Teresia

JAKARTA (Reuters) -The head and deputy head of the body overseeing Indonesia's planned new capital have unexpectedly resigned, raising questions about the $32 billion project.

With Jakarta, the current capital of 10 million, overcrowded and plagued by massive traffic jams as well as chronic flooding and sinking land, Indonesia is building a new capital, called Nusantara, in the jungles of East Kalimantan on Borneo - an island shared with Malaysia.

"The President has appointed the public works and housing minister and deputy agrarian minister as the acting head and deputy head," State Secretariat Minister Pratikno said on Monday.

He said the appointments would speed up construction and the resignations had long been discussed.

In his official Instagram account, Indonesia's President Joko Widodo on Monday ensured the public that the project's development would continue.

"The development of new capital will be continued in line with the shared vision that has been established," he said.

Bambang Susantono, a former official at the Asian Development Bank who was heading the project and his deputy Dhony Rahajoe, an architect and former real estate developer, did not immediately respond to requests for comment.

The government has been racing to build infrastructure required for the relocation of the first batch of 12,000 civil servants this September. But the plan has been twice delayed and the resignations come amid a lack of private funding for President Widodo's signature project.

"These resignations will make people question the project," said Arya Fernandes, an analyst at Indonesia's Centre for Strategic and International Studies. "The question is how to convince investors that there is no problem."

One stumbling block has been the status of land ownership at the new capital site, Public Works Minister Basuki Hadimuljono said at Monday's news conference.

"We will soon decide on the status of the land," he said.

"Whether we sell it, rent it or if there will be cooperation between government and companies, we will speed it up so that investors won't have any doubts."

Jokowi, as the president is known, plans to visit Nusantara on Tuesday to inaugurate several projects, including schools, while celebrations for Indonesia's Independence Day are planned there on August 17. He will step down in October after serving the maximum two terms in office.

President-elect Prabowo Subianto who is closely aligned with Jokowi, has pledged to continue developing the new capital.

(Reporting by Ananda Teresia; Additional reporting by Stefanno Sulaiman, Writing by Kate Lamb; Editing by John Mair, Edwina Gibbs and Bernadette Baum)