Unlocking Investment Opportunities in The New Capital of Indonesia

Unlocking Investment Opportunities in The New Capital of Indonesia
By: InCorp Editorial Team

Indonesia’s new capital city will be the first city with a forest city concept. The forest city concept will implement development that pays attention to the environment, especially the forests around the new capital city. The forest city concept is expected to be a solution to overcome various ongoing environmental problems such as climate change, global warming, forest destruction, pollution, food crisis, and lack of clean water sources. On the other hand, the development plan of the national capital in East Kalimantan also has several challenges and opportunities related to the balance of development and natural sustainability. The challenges and opportunities that arise can be used as targets for building a better capital city.

The construction of the proposed Nusantara city is expected to cost more than $35 billion, and the Indonesian government will finance roughly 19% of the entire cost. The remaining funding will be available for foreign investors, with commitments from investors in countries such as the UAE, China, South Korea, and Taiwan, as well as offers from European countries. The city presents investment prospects in various sectors, such as infrastructure, industrial complexes, water treatment facilities, housing, hotels, chemical and green industries, ports, and airports. The Indonesian government also encourages investment in transportation and renewable energy outside the new capital and provides tax holidays, super-tax deductions, 0% withholding tax, and non-fiscal incentives. The first development phase includes infrastructure projects like a water reservoir and toll road extension, reflecting the Indonesian economy’s growth potential and investment opportunities in the new capital.

To attract foreign investment for its Nusantara project, the Indonesian government offers various incentives. The project covers a vast area of 632,850 acres and requires both hard and soft infrastructure developments, providing opportunities for investors from different industries. The project aims to transform forest areas into a smart city with efficient operations and better government services, enhance maritime infrastructure, and develop renewable energy sources. The opportunities for foreign investors in the project include developing a smart city that utilizes IoT for efficient operations, establishing Indonesia as the primary hub of Indo-Pacific maritime activity, and achieving a renewable energy mix of 25% by 2025. The government plans to invest over $6 billion in expanding ports under the Global Maritime Fulcrum master plan and offers a sea toll program to reduce the price disparity of essential goods between islands. The project also offers opportunities for creating fresh renewable initiatives using the significant potential for clean energy in the East Kalimantan province.

The investment in Indonesia’s new capital city, Nusantara, is not without its challenges. Firstly, the project may divert attention away from managing the pandemic, and the conflict between Russia and Ukraine may affect financial decisions. Secondly, the IKN Law may have flaws and lacks public input, leading to petitions being filed against it. Thirdly, the underlying studies need to be more comprehensive to ensure the project’s accuracy and reliability. Fourthly, the mega-project is seen as a risk to vulnerable habitats and the environment, raising concerns about ecological deterioration. Fifthly, moving the capital may lead to new inequality and social strife, and the government must devise a plan to address this worry. Lastly, there are concerns about conflicts of interest in land concessions as most of the land in the IKN area is already under the hands of private companies in agriculture, forestry, and mining sectors, with links to elite officials and their relatives.

The decision to relocate to the new capital city of Indonesia, IKN, is a significant one, and various government ministries are working to ensure a smooth transition. However, the project still requires a considerable amount of funding, and efforts have been made to invite private sector investment through socialization. The new capital project presents a unique investment opportunity, and several incentives are being offered to attract investors.

Source: https://www.cekindo.com/blog/investment-in-nusantara