Seizing Opportunities in the Indonesia’s Capital City Relocation: A New Potential for Foreign Investment
Indonesia New Capital City: Nusantara
The second-largest island of Kalimantan, which is bordered by Brunei and Malaysia, where the future capital of Indonesia, Nusantara, will be located. The Indonesian government is seeking for investors to help finance this massive project. The project is estimated to be entirely finished in 2045, on the 100th anniversary of the nation’s independence, after the first phase of project development is completed in 2024. In order to finance the enormous project, Indonesia is looking into a number of funding options, including using state funds, soliciting investments from foreign partners, and encouraging crowdsourcing.
The relocation of the capital city of the country is still an issue that is being raised by the public. It’s not just an urgent matter, but some of the publics are still having questions about the Investments that are being used to help build it.
Some parties are even worried that the relocation of the capital city will make the government’s debt continue to mount. Understandably, in building a new capital city, the government claimed that the portion of National State Budget in the development of the new capital was not up to 100 trillion rupiahs.
In other words, if the total cost of moving the city reaches 466 trillion rupiahs, then another 366 trillion rupiahs must be financed from investors, including foreigners. President Joko Widodo (Jokowi) has indeed stated that investment, including foreign investment, which are not in the form of loans (debt). In other words, the Government also does not provide any guarantees for the investment. However, an economist from the Institute for Development of Economics and Finance (INDEF) assessed that Jokowi’s statement was not sufficient to answer public concerns over the potential for debt accumulation in the construction of the new capital city.
According to INDEF, foreign investment in the development of the new capital would be ideal if it was used for something more commercial in nature, rather than only for infrastructure development and meeting government needs. However, INDEF admitted that they did not reject the new capital infrastructure development plan which had been touted by the government. This is really needed as a solid foundation to expedite the downstream industrial plan.
Relocation of New Capital will Create New Investment Opportunities
The Ministry of National Development Planning (PPN) stated that the relocation of the New Capital City (IKN) from Jakarta to East Kalimantan would provide a large space for all parties to make medium and long-term investments.
They said the IKN development was part of achieving the 2045 vision for Indonesia to become a developed country. With the development of the IKN, it is hoped that it will accelerate the recovery and transformation of the national economy after COVID-19. According to PPN, the relocation of the IKN will not only move the government administration but will be carried out with the development of economic sectors in the area around IKN.
The component that can encourage the movement of the economy from the capital city of the country is an infrastructure development in there itself and the surrounding area. Including logistic infrastructure and other supporting infrastructure as well as basic infrastructure.
The Ministry of National Development Planning projects that there will be six clusters around the New Capital City, namely the clean technology industry, integrated pharmacy, sustainable agriculture, ecotourism, chemical products, and the low-carbon energy cluster.
For the initial estimate, the total financing for the New Capital is 465.85 trillion rupiah. The financing scheme prioritizes the high role of the private sector through PPPs amounting to 252.5 trillion (54.2%), through private investment and Government Enterprise (directly) of 123.2 trillion (26.4%) of the total financing needs for the physical development of the New Capital City. The remaining 90.37 trillion (19.4%) is financing from the National State Budget.
Housing Development in the New Capital City Will Open Potential Investments
The Ministry of Public Works and Public Housing (PUPR) stated that the potential for housing development in the New Capital City area is wide enough and is expected to attract investors to invest. The determination of the development of the new capital city is not only to build infrastructure and housing, but also to promote economic distribution and equity in the regions. In addition, the design of the New Capital City is to build a new city with the heterogeneity of people from all regions in Indonesia.
The development of the New Capital City is an existing challenge as well as an opportunity to open investment potential in the region. In this case, the government will only take a portion of 20 percent and the remaining 80 percent for investment opportunities for entrepreneurs and housing developers to be able to participate in providing housing for the community.
New Capital City Location : North Penajam Paser Regency Region
Investors seize property business opportunities related to the construction of the new capital city
The government’s choice to move the capital to the North Panajam Paser Regency region of East Kalimantan is thought to have a significant impact on the local real estate market. With the establishment of the New Capital City, large cities that were once the economic hubs of East Kalimantan, such Samarinda and Balikpapan, will increasingly experience growth momentum.
In fact, property experts predict that the demand for real estate in neighborhoods close to the New Capital City, like Samarinda, will keep rising as a result of the construction. The New Capital City has a very promising economic future thanks to the influx of investors from many countries. More workers and investors interested in the New Capital City will be drawn to properties in locations with improved infrastructure, such as Samarinda.
The developer’s efforts to build new projects in Samarinda are the right steps. The increasing population and many other interests that will follow the construction of the New Capital City require residential areas with a higher concept and level of comfort than before.
Hebronstar Strategy Consultants
Rezanda Suteja/ Business Analyst
Source:
https://www.beritasatu.com/news/891459/pembangunan-ikn-investor-asing-harus-gandeng-pengusaha-lokal
https://bappeda.kaltimprov.go.id/storage/data-centers/September2021/zNPFAwFfhrKe6NOUadXI.pdf
https://english.news.cn/20220404/feb89494c81f4088998c577c35364115/c.html
