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SOLID and sustainable infrastructure is the backbone of a country’s economic growth. In Indonesia, infrastructure development is very important to support connectivity and equitable economic growth.
IKN Nusantara is the new capital city of Indonesia which has been established and regulated by Law Number 3 of 2022. It is located on the east coast of Kalimantan Island with an area of IKN Nusantara almost four times that of Jakarta, namely 256,142 hectares and a sea area of 68,189 hectares.
The Archipelago Capital (IKN) is not just a project, but a massive investment opportunity that opens the door for investors, both domestic and international, to contribute to creating modern and efficient infrastructure.
Various investment and financing opportunities are available to realize IKN to increase connectivity and economic growth throughout the Indonesian archipelago.
With abundant investment opportunities in IKN and the Government’s commitment to advancing infrastructure, IKN has great potential to support Indonesia’s economic growth in order to realize a better future for this country.
The Nusantara Capital City Authority (OIKN) stated that IKN development is not only an opportunity for the national economy, but also a global opportunity. This is because moving the country’s capital from one island to another has only recently occurred in Indonesia.
Investment opportunities
The government has developed various competitive incentives to support investment in IKN, with the aim of facilitating business activities. This includes land ownership without BPHTB fees, as well as competitive ownership/use rights, such as HGU for 95 years, HGB for 80 years, and HPL for 80 years.
Apart from that, the Government also provides exemption from compensation costs to business owners or investors related to foreign workers, as well as providing support in providing primary housing for business owners or investors and their employees. There are also fiscal incentives in the form of tax holidays, VAT and luxury goods tax, super-deductions, and customs exemptions for 4-6 years.
OIKN (Nusantara capital city authority) has prepared 12 priority investment packages for the development of the IKN area, which includes new renewable energy, telecommunications networks, transportation, housing, water treatment, waste processing, digital infrastructure, commercial infrastructure, health services, social and public facilities, educational services, and areas industry.
So far, OIKN has received 284 letters of intent (LoI) or statements of interest from private investors to be involved in the development of IKN Nusantara. LoIs for IKN development are still dominated by ASEAN countries.
“Most of them still come from Singapore with 27 LoIs, then Japan with 25 LoIs, Malaysia with 19 LoIs and there are also 17 LoIs from China,” said OIKN Deputy for Funding and Investment Agung Wicaksono.
In the third week of September 2023, OIKN will lay the foundation stone for private investors for the hotel, hospital, shopping center and sports sectors
“Construction or groundbreaking from private investors does not use funds from the APBN,” said Agung.
Financing scheme
The Ministry of National Development Planning/National Development Planning Agency (Bappenas) stated that the Government has designed an attractive financing scheme to attract the attention of investors to support IKN infrastructure development.
Overall, the Government plans to rely on IKN development on four main funding sources, namely the State Revenue and Expenditure Budget (APBN), budget allocations from regional governments, cooperation between the Government and business entities (KPBU), and direct private investment.
However, the Government will give priority to the use of the PPP scheme in developing IKN infrastructure because this scheme can increase the involvement of the private sector in these infrastructure projects.
The PPP scheme prepared by the Government will have a shorter completion time, namely 6 months for projects initiated by the private sector. Apart from that, various incentives will be provided to investors, including tax incentives.
The government is committed to creating a conducive investment climate for IKN development. The government will also guarantee legal certainty and consistency in the implementation of IKN development.
Moving the capital city to Kalimantan is one of the Government’s strategies to overcome regional development disparities. By moving the capital, there will be a significant increase in investment in the region.
Apart from that, this step can also encourage economic expansion through the creation of new jobs, improving infrastructure, and support for the development of potential economic sectors.
Deputy for Development Funding at Bappenas Scenaider Clasein Hasudungan Siahaan said that in the context of planning, IKN development is a strategy to reduce inequality in geographical development, which is currently focused on Java and Sumatra.
Law No. 3 of 2022 concerning National Capital states that Indonesia has set a goal to become one of the five largest economies in the world and achieve a high national income per capita by 2045.
This target is based on the four main pillars of Indonesia’s Vision 2045, which include human development and mastery of science and technology (IPTEK), sustainable economic development, equitable development, as well as national resilience and strong governance.
Moving the nation’s capital is one of the strategies to realize Indonesia’s 2045 economic targets, namely more inclusive and equitable economic growth through accelerated development of the Eastern Indonesia region. [antaranews]
