Government’s optimization efforts to draw foreign investors to IKN
President Joko Widodo seeks 80 percent of the Nusantara Capital City (IKN) development budget to come from Public-Private Partnership (KPBU) and direct investment while the rest from the state budget.
For the non-state budget scheme, the government, through Presidential Regulation No. 63 of 2022, has several schemes.
These include the IKN KPBU pattern conducted on the basis on Government Regulation on Budget Funding and Management to Prepare, Develop, and Relocate the State Capital and Nusantara Capital City Special Regional Government Implementation along with the derivative regulation.
This KPBU Scheme can be initiated by the minister, institution head, state-owned enterprise director and/or Nusantara Capital City Authority Head (solicited) and business enterprise (unsolicited).
The other funding scheme involves investment cooperation with a business enterprise.
This investment cooperation can also be undertaken with a state or private enterprise in which the entire or half of its capital is owned by the state.
The government seeks to fund the development of Nusantara IKN until 2045 by emphasizing on the non-state budget scheme.
Thus, what are the government’s optimization efforts to draw the investors’ interest to the Nusantara IKN development project in East Kalimantan?
Market sounding
The government’s optimization efforts comprise conducting market sounding to potential investors on the IKN development project.
IKN Authority’s Green and Digital Transformation Deputy Mohammed Ali Berawi stated that the government already attended invitations for business forums that came from neighboring countries and other nations.
They also received various invitations for a meeting initiated by investors and companies interested in participating in the IKN development.
A market sounding activity that the government already organized was the one that the IKN Authority held along with the Indonesian Chamber of Commerce and Industry (Kadin), and 800 potential investors had participated.
Moreover, the Public Works and Public Housing Ministry conducted the IKN project market sounding through the IKN Investment Forum.
This investment forum was held by the Malaysian International Trade and Industry Ministry along with the Indonesian Embassy in Kuala Lumpur, Malaysia.
This market sounding activity for businessmen and investors from Malaysia managed to produce 11 letters of intent from 11 Malaysian companies for IKN.
These letters were delivered directly by Malaysia’s International Trade and Industry Minister Tengku Zafrul Tengku Abdul Aziz to Head of the Nusantara IKN Authority Bambang Susantono.
The latest market sounding concerns the promotion of the Nusantara IKN development at the 2022 World Economic Forum (WEF) held in Davos, Switzerland.
The 2022 WEF became an event to promote various state interests and information on Indonesia to the WEF. Moreover, the 2022 WEF coincided with Indonesia’s Presidency in G20 in 2022.
Thus, Indonesia never misses an opportunity to showcase to the world its success in handling the pandemic, its economic revival, and eco-friendly investment policies.
In addition to market sounding, the government welcomes the interest of potential foreign investors represented by the government of various countries through bilateral meeting.
This includes South Korea’s plan to participate for clean water system development as well as Spain and Finland’s intent to be involved in the IKN development.
Until January 30, 2023, the IKN Authority had received 100 letters of intent from potential investors, and from this figure, there are 90 letters that are being followed up on.
These 90 letters of intent are from various sectors, with 25 letters related to infrastructure and utility, 15 pertaining to education, and 14 related to consultation services.
Moreover, there are 10 letters related to housing, nine letters pertaining to mixed use and commercial, six related to technology, and five related to health.
Lastly, there are four letters of intent related to private and state enterprise sector office and two related to public sector office.
Authority Business Agency
The other optimization effort by the government concerns the formation of the Authority Business Agency.
The IKN Authority Business Agency is formed from the state-owned enterprise PT Bina Karya that conducted refocusing.
Bina Karya itself has a service advantage in integrated technical consultancy service.
The company’s business scope involves regional building and development, sanitation and energy, road and bridge, harbor, airport, railway, water resources, as well as empowerment and management development.
The Authority Business Agency is formed to implement the investment cooperation scheme with the private party and comes under the guidance and supervision of the IKN Authority.
Investment cooperation through the Authority Business Agency is carried out through the business to business approach and/or duty of the IKN Authority Head for the development of Nusantara and partner regions.
This is undertaken especially to support economic transformation in the IKN and East Kalimantan as well as other regions in Kalimantan.
Investment convenience
Another effort made by the government to draw the investors’ interest, specifically foreign investors, is through the plan to issue the Government Regulation Draft for Investment Convenience in Nusantara IKN.
This investment convenience regulation certainly becomes one of the forms of legal assurance for investors.
Several points that may exist within the regulation include tax holiday for investment, tax holiday for office relocation, and tax deduction for select activities.
The others are special treatment in customs and excise, special tax treatment for financial center, and special treatment for value added tax.
The government plans to issue this regulation within the next one to two weeks.
The government’s action to draw investors’ interest, especially foreign investors to the IKN development project, has been intense and serious.
This is apparent from the government’s various strategic steps, starting from market sounding to international countries, formation of the Authority Business Agency to the issuance of investment convenience regulation.
All these efforts are undertaken, so that Nusantara IKN can be realized according to plan without excessively burdening the state budget.
