New capital city: IKN's basic infrastructure potentially delayed
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Bisnis Indonesia - Ibu Kota Baru: Infrastruktur Dasar IKN Berpotensi Molor
19 June 2024
By Alifian Asmaaysi
Bisnis, Jakarta – Basic infrastructure construction in Nusantara Capital City (IKN) in East Kalimantan in 2025 is predicted to face suboptimal progress due to the low budget allocation received by the Ministry of Public Works and Housing (PUPR).
An economist from the Institute for development of Economics and Finance (Indef), Tauhid Ahmad, explained that the decline in the budget allocation of the PUPR Ministry in 2025 to Rp75.63 trillion could impact the development progress of IKN.
According to him, several infrastructure projects in IKN will not progress significantly.
“The budget allocation was reduced to only a few percent of the proposed amount. The reduction is quite significant,” he said on Tuesday (18/6).
He reckoned that the IKN project would not progress smoothly, similar to other infrastructure development programmes.
Amid the small budget, Tauhid reckoned that a technical ministry, especially the PUPR Ministry, needed to tactically prioritise its main programmes.
He believes that prioritising basic infrastructure projects in IKN, such as roads and energy infrastructure, was crucial to sustaining the investment climate in the new capital city.
“Failure to prioritise them will impact investment in IKN. How far will the government offer phases 1, 2, and 3 of IKN development? Each phase is a mandatory obligation for the government to fulfill,” he affirmed.
PUPR Minister Basuki Hadimuljono mentioned that the budget ceiling of the PUPR Ministry for 2025 was far smaller compared to last year, which was at Rp149.74 trillion.
In 2025, the PUPR Ministry will receive a budget allocation of Rp75.63 trillion. Basuki stated that his ministry required Rp212.58 trillion for 2025 to complete ongoing projects, including those in IKN.
“Why is the budget for 2025 only Rp75 trillion? The information from Bappenas states that it is to provide room for the new government,” Basuki said.
On another occasion, IKN Infrastructure Development Task Force Head Danis H. Sumadilaga explained that the task force has divided the IKN development project into three phases. The first phase includes physical construction from 2020 to March 2023, consisting of 40 packages with a contract value of Rp25 trillion.
The second phase involves physical construction scheduled from April to November 2023, comprising 31 packages valued at Rp27.63 trillion. The third phase encompasses physical construction from December 2023 to 2024, with 33 packages totalling Rp26.53 trillion.
With the lack of budget, he added that financing for IKN construction would be tight.
He mentioned that the task force would prioritise ongoing projects with a multi-year contract.
“At the time, Basuki clarified that it was an initial budget that could change to align with the policies of the new government,” he stated.
Airport toll road
Currently, the PUPR Ministry is tendering the construction project for section 1B of the IKN toll road, which is the Sepinggan Airport-Balikpapan Toll Road-Samarinda toll segment.
Based on the information stated on the electronic procurement services (LPSE) website, the total value of section 1B of the IKN toll road project is Rp3.8 trillion, which will be sourced from the state budget (APBN).
“In accordance with the IKN development plan in East Kalimantan, the PUPR Ministry through the East Kalimantan Centre for Implementation of National Roads (BBPJN) will construct section 1B of the toll road, encompassing the Sepinggan Airport-Balsam Toll Road segment,” the PUPR Ministry wrote.
The project will be carried out for 510 calendar days from the specified start date in the work order.
The construction period includes the completion of the work, but it does not cover road and bridge performance maintenance.
Therefore, the PUPR Ministry has scheduled the tender for section 1B of the IKN toll road to enter the prequalification stage on 19 June 2024. Meanwhile, the prequalification announcement will be made on 28 June 2024.
If the tender process goes smoothly, a winner will be determined on 19 July 2024 and announced on 25 July 2024. Meanwhile, the contract will be signed on 1 August 2024.
The ongoing construction of the IKN toll road consists of three sections, namely section 3A (Karang Joang-KKT Kariangau) spanning 13.4 km with a progress rate of 77.59% as of early June 2024, section 3B (KKT Kariangau-Tempadung Interchange) spanning 7.3 km with a progress of 86.09%, and section 5A (Tempadung Interchange-Balang Island Bridge) spanning 6.7 km with a progress rate of 83.62%.
Later, the IKN toll road will be connected to the Balikpapan-Samarinda toll road at KM 8 (Kariangau). This means that travellers heading to the central government core area (KIPP) do not need to take the Balikpapan-Samarinda toll road all the way to KM 33. The IKN access toll road is also set to operate in August 2024.
Not only the toll road, the PUPR Ministry will also start to tender schools, markets, and community health centres (Puskesmas) in the civil servant (ASN) housing area in IKN.
Quoting the information stated on the LPSE website, the self-estimated price of the projects are at Rp414.93 billion.
The projects’ development aims to meet the demand for goods and services from IKN citizens. In the initial stage, priority will be given to ASN.
“The aim of the development is to secure service providers for constructing schools, markets, and puskesmas in the ASN housing area in IKN, East Kalimantan,” the PUPR Ministry wrote.
The scope will cover 5 main projects, namely the construction of elementary schools, middle schools, high schools, markets, mosques, and puskesmas.
The government is planning to construct schools, markets, and puskesmas in IKN to ensure that the development aligns with the Nusantara vision.
In accordance with the implementation, the PUPR Ministry has scheduled the announcement of the winners on 4 July 2024. Meanwhile, the contract signing process will be held on 12 July 2024.
