The new state capital law, which provides a legal framework for President Joko Widodo's ambitious proposal, stipulates how development of the capital will be funded and governed.
Jakarta, the current capital, is now home to 10 million people and is prone to floods, traffic gridlock and faces the risk of earthquakes.
Among other reasons, the East Kalimantan site was selected since it is a well-known part of the archipelago that is least prone to natural disasters.