Govt proposes additional budget of Rp8 trillion for IKN development
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.
Investor Daily - Pemerintah ajukan tambahan anggaran Rp8 triliun dalam pembangunan IKN
24 March 2023
Jakarta - The Finance Ministry will propose an additional budget of around Rp7-8 trillion for Nusantara Capital City (IKN) development this year. The additional budget will be given to the Public Works and Housing (PUPR) Ministry.
“This amount is a new addition as the President has asked for lands to be prepared for investors. So, land development is required,” Budget Director General of the Finance Ministry Isa Rachmatarwata said at a media gathering in Jakarta on Tuesday (22/3/2023).
Isa said that, even though the PUPR Ministry has proposed an additional budget of around Rp7-8 trillion, this amount is not final. She predicts that there will be more additional budget for the IKN development process. The budget required to develop IKN until 2045 is predicted to reach Rp466 trillion. From that amount, the state budget (APBN) portion is around 20% or Rp89.4 trillion. This allocation will be used to build official housing for state civil apparatus (ASN)/the Indonesian National Armed Forces (TNI)/the Indonesian National Police (Polri), the State Palace, strategic buildings for TNI/Polri, legislative and judicial buildings, executive buildings, green open spaces, basic infrastructures (drinking water and sanitation), logistics routes, correctional institutions, and military bases, carry out land procurement and development, and improve non-toll connectivity.
Meanwhile, Rp253.4 trillion will be provided through the public-private partnership scheme. The contribution of the private sector is expected to reach Rp123.2 trillion.
The budget from the non-APBN scheme will be used for the construction of ASN/TNI/Polri official housing, main infrastructures (besides the ones provided by the APBN), executive buildings, railway urban transport, public housing, universities and private education institutions, the science-technopark, connectivity improvement (airports, ports, as well as toll and non-toll roads), educational facilities, health facilities, correctional institutions, private health facilities, shopping malls, and MICE facilities.
Previously, the National Development Planning Ministry/Bappenas had set a budget of Rp23.6 trillion for IKN development this year. The budget will be used by several ministries and institutions for IKN development.
From the budget allocation, the PUPR Ministry receives the largest budget that reaches Rp20.8 trillion. The funds will be used to construct the palace, basic infrastructures, and office complexes in IKN. The PUPR Ministry will focus on IKN development, especially the Central Government Core Area (KIPP) that includes the presidential office, the vice president’s office, national roads, and toll roads.
The PUPR Ministry is also carrying out the construction of drinking water, sanitation, and drainage facilities in KIPP. The government is targeting the first phase of KIPP development to be completed in 2024. Infrastructure construction is one of the government’s five agendas in 2023.
Reasonable budget increase
On a separate occasion, Centre of Reform on Economics (Core) Indonesia Researcher Yusuf Rendy Manilet said that the government’s step to increase the budget for land acquisition is reasonable. The land acquisition cost in an infrastructure construction process is the largest cost component.
“I think that it is reasonable for the PUPR Ministry to increase the budget for land acquisition in IKN development,” Yusuf said when he was contacted on Thursday (23/2/2023).
Yusuf thinks that it is ideal for IKN’s development financing scheme to merge funds from the private sector and the government. The PPP scheme is crucial to be boosted as the APBN portion in IKN development will be supressed to be as small as possible. “Hence, I think that successful fundraising for IKN development will be determined by how the government boosts the PPP scheme,” Yusuf said.
