IKN infrastructure: Competing for smart capital city project
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 - Infrastruktur IKN: Berebut proyek ibu kota cerdas
25 May 2023
By: Afiffah Rahmah Nurdifa & Hendra Wibawa
Investment commitments in the smart city project in Nusantara Capital City (IKN) in East Kalimantan are increasing as the government holds dozens of meetings with numerous investors.
The smart city exhibition titled Indonesia-China Smart City Technology and Investment Expo 2023 was recently opened on Wednesday (24/5). However, several investment commitments have been established during the exhibition that is the product of cooperation between Indonesia and China.
The exhibition for investors from Indonesia and China that is scheduled to wrap up on Friday (26/5) was initiated by Perhimpunan Indonesia Tionghoa (INTI) and China-Asean Information Harbor Co. Ltd with full support from the China Committee of Indonesia Chamber of Commerce and Industry (Kadin).
Chinese investors will participate in at least three projects in IKN in East Kalimantan, including the smart city development.
The President Director of PT CAIH Infotech Indonesia, which is a subsidiary of China-Asean Information Harbor Co. Ltd., Loretta Thamrin stated that the smart city project was a part of the three projects from China that would enter Indonesia soon.
“There is also the intelligence transportation system (ITS) that is planned to be implemented in IKN worth US$2 million,” Loretta said.
Investment in ITS will come from the Chinese company Hisense International, which is a Chinese multinational equipment and electronics producer from Qingdao in Shandong Province.
Investors from China need time to ensure that the investment process in the smart city project is legal. “As there are still [more] stages, we have the China Committee of Kadin that is helping in the regulation side because China is targeting Indonesia but the registration must be clear,” he said.
China Hisense International is extending the list of foreign investors that are committed to work on the smart city project.
In the middle of March 2023, South Korea Republic Government stated their willingness to support IKN to be a smart city.
South Korea Republic Government is willing to cooperate with IKN Authority to realise Nusantara as a smart city with sophisticated technologies. Interestingly, the meeting between South Korea Government and IKN Authority was also attended by executives from private companies in South Korea such as Samsung C&T, Hyundai Elevator, and LG.
Loretta also revealed that investors from China were also interested in working on projects in the biotechnology sector worth Rp4.3 trillion.
Investment agreements in the sector are some of the other investment that will enter through the Indonesia-China smart city exhibition.
The interest in investing in the biotechnology sector is strengthened in the cooperation agreement between Leo-King Environment Group and PT Adhi Industri for Biological Technology Material Industrial Park and Digital Waste Incineration Power Plant worth Rp4.3 trillion.
In their records, Leo-King Group wants to build a new intellectual biotechnology material industry that uses palm oil and a digital waste incineration power plant.
The area will have a production capacity of 200,000 tonnes per year to accommodate a surfactant project of 50,000 tonnes per year.
The PHA project that will have a capacity of 10,000 tonnes per year will use raw materials such as palm oil and cassava and materials from the digital waste incineration power plant.
During the exhibition, Investment Minister/Investment Coordinating Board Chairperson Bahlil Lahadalia predicted that foreign capital investment from China in Indonesia would go up to the second position after Singapore.
According to him, China’s position went down to the third rank under Hong Kong. Previously, China secured the second position in 2022, but, at the start of this year, Hong Kong’s investment in Indonesia surged.
“In the first quarter of 2023, China’s investment realisation was number three. I feel that it will go up to number two after Singapore [in the second quarter]. There are more downstreaming in the sector,” Bahlil said.
Private realisation
He also revealed that investments from private business players in IKN would be realised in August-September 2023 after basic infrastructures were completed.
Investors will build projects in various sectors to support individual needs in IKN, especially of workers.
For example, he mentioned the sports stadium project that would be constructed by the Soccer Association of Indonesia (PSSI) and several other projects, such as housing and universities.
“So, the ones being constructed right now are basic infrastructures with investments from the government. It is impossible for private investments to enter while basic investments have not been completed,” he said.
On the other hand, he also mentioned that there was a plan to develop a financial centre in IKN, similar to Singapore.
The IKN Authority logged that there were currently 220 potential investors that had submitted a letter of intent (LoI).
A total of 34 potential investors have stated that they are serious to continue to the non-disclosure agreement (NDA) stage.
“Out of more than 200 LoIs, 34 have signed a non-disclosure agreement with the government. They are ready to be processed further,” IKN Authority Head Bambang Susantono said on Tuesday (23/5).
Moreover, there are nine flagship investment projects that are certain to enter. Based on IKN Authority’s data, the nine projects are in five different sectors, namely one entertainment facility (mixed-use), 1 sports facility, 2 offices, 2 hospitals, 1 school, and 2 hotels.
On a separate occasion, PT Ciputra Development Tbk (CTRA) Director Budiarsa Sastrawinata affirmed the investment commitments in IKN development.
He is targeting the construction of property projects that are located on top of 300 hectares of land to be carried out soon after the government has issued Government Regulation No. 12/2023.
CTRA has submitted a LoI to IKN Authority. “We have heard the explanation [on the investment regulation in IKN], and we can make sure that we are [investing]. We can progress to an agreement as we hope [to enter IKN this year],” Budiarsa said during the dissemination agenda on Government Regulation No.12/2023 at Ciputra Artpreneur in Jakarta on Tuesday (23/5).
According to him, Ciputra will continue their investment in IKN by carrying out a feasibility study for the IKN project. The calculation has been conducted, but it cannot be disclosed to the public yet. CTRA will remain focused on developing the 300 hectares of land to build an integrated settlement.
