JAKARTA - President Joko Widodo announced on Monday (Aug 26) that he had picked East Kalimantan as the location for Indonesia's new capital.

"Jakarta has received overwhelming burdens as the centre of administration, business, finance, trade and services, as well as (housing) the country's largest airport and seaport," Mr Joko told a media briefing.

The burden on Java island is also increasing because it is now home to 150 million people, or 54 per cent of the population, he added.

Parliament will have to pass a law as the legal basis to realise the President's plan for the shift, which will be very costly.

Under the relocation plan, Jakarta will be the commercial capital of South-east Asia's largest economy, while a new city will become Indonesia's administrative capital - akin to the respective roles played by Kuala Lumpur and Putrajaya in Malaysia.

The government had earlier shortlisted two regions on the island of Borneo for the new capital - East Kalimantan and Central Kalimantan.

Jakarta has served as the administrative, financial and trade centre of the country since independence in 1949.

However, the city has suffered from traffic congestion, overcrowding, widespread pollution and regular flooding for decades. Jakarta is also sinking by 10cm a year and its residents have dug deep wells to draw out raw water.

Mr Almuzzammil Yusuf, an MP from the opposition Prosperous Justice Party (PKS) told The Straits Times last week that the government would have to conduct a thorough study on why it is important to move the capital and has to come up with draft legislation for the move before Parliament can schedule when to start deliberating on the issue.

"These documents must be brought to universities to get inputs. Parliament would also open sessions for prominent academics, experts, non-governmental organisations to also get inputs, before any deliberation on a proposed Bill starts," Mr Almuzzammil said.

Mr Joko had earlier tasked National Development Planning (Bappenas) Minister Bambang Brodjonegoro to carry out the study on moving the capital. The agency has not made public details of the study.