Strategic project: New Capital's appeal to foreign investors
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 - Proyek strategis: Daya pikat IKN di mata investor asing
23 November 2022
By: Muhammad Ridwan
Indonesia’s step to construct New Capital City (IKN) Nusantara successfully attracted several foreign investors to invest.
The G20 Summit has attracted investment from several countries to be involved in the construction of IKN Nusantara.
Investment Minister/Investment Coordinating Board (BKPM) Chairperson Bahlil Lahadalia said that the event had established memorandum of understandings (MoUs) with investors from South Korea, namely LG and Hyundai. However, several other countries have also stated their interest to invest in IKN Nusantara.
“Then, from several countries in Europe, United Arab Emirates and China,” Bahlil said in his statement to journalists on Thursday (17/11).
Bahlil added that the multinational power company, Foxconn, was also interested in entering IKN Nusantara.
He revealed that Foxconn would enter the technology provision sector in IKN Nusantara. The government is currently discussing the proposal submitted by Foxconn.
“Foxconn has a desire and has stated their interest to the President to invest in IKN,” he revealed.
Quoting the official statement of Trade, Industry, and Energy Ministry of South Korea, they mentioned that Korea-Indonesia Business Roundtable had produced 10 MoUs on Korea-Indonesia economic cooperation, green transition initiative, essential minerals, and infrastructure construction cooperation.
Previously, IKN Nusantara Management Authority had signed MoUs with Hyundai Motor Company and LG CNS during B20 Summit in Bali.
The MoUs are the follow up to Indo-Pacific Strategy announced by President Yoon during Korea-Asean Summit that discussed five major sectors, namely digital, supply chain, climate change, construction cooperation, and investment.
Green and Digital Transformation Deputy of the IKN Management Authority Mohammed Ali Berawi said that there were two MoUs signed by IKN Management Authority Head Bambang Susantono. The first MoU is with Hyundai Motor Company Advanced Air Mobility Division President Jaiwon Shin regarding the realisation of Advanced Air Mobility (AAM).
The second agreement signed is with LG CNS CEO Young Shub Kim regarding smart city collaboration in Nusantara.
“The collaboration among IKN Management Authority with Hyundai and LG is a form of commitment to make IKN Nusantara the centre of innovation and technology that attracts business development and green economy in Indonesia,” he explained.
Meanwhile, President Joko Widodo (Jokowi) stated that the capital city relocation would open investment opportunities in the infrastructure sector worth US$20.8 billion or Rp323 trillion.
This was revealed by Jokowi in his speech at the launching of Partnership for Global Infrastructure and Investment (PGII) during G20 Summit at The Apurva Hotel Kempinski in Bali on Tuesday (15/11).
“For example, Indonesia is currently boosting even construction through the capital city relocation to Nusantara. This will open investment opportunities worth US$20.8 billion in various infrastructure sectors,” Jokowi said on Tuesday (15/11).
Jokowi has been promoting the IKN project to investors. Previously, Jokowi held a market sounding to promote investment opportunities in IKN. The event was not only attended by foreign investors, but by also local investors.
In his welcoming remarks at the IKN market sounding held on Tuesday (18/10), President Jokowi said that the government’s plan to relocate the capital city from Jakarta to Nusantara would mostly rely on the involvement of investment from private companies.
“So, Nusantara is the future of Indonesia that can be realised with mutual effort. Not only the government, because we will only prepare 20% [of the funding], while the remaining 80% [will be provided] by investors, including you who attend tonight,” Jokowi said during the IKN market sounding in Jakarta on Tuesday (18/10).
Moreover, the budget to construct IKN until it is completed is predicted to surpass Rp466 trillion. If the state budget allocation for IKN construction reaches 20%, then the government must spend Rp93.2 trillion for the project.
Jokowi said that the government had rolled out the red carpet for potential investors interested in being involved in IKN Nusantara construction. Potential investors can mention what facilities they require to realise their investment.
Besides that, the Head of State affirmed that investors did not need to hesitate to be involved in the IKN construction. The new capital construction has a strong legal umbrella with the issuance of Law No. 3 of 2022 that is approved by 93% of the fraction in House of Representatives (DPR).
Jokowi added that investors could also freely choose the region or area that that they are interested in investing in. However, he affirmed that the interest could be followed up with a more serious commitment.
“Once again, do not hesitate. If there is something lacking, what is it? Regarding lands, there is the ATR/BPN Minister. If you are still unsure, please ask him. Regarding incentive, if it is still not enough, please ask the Investment Minister. Say that the incentive is not enough, ask for more. You can ask if the tax holiday is too short. If the tax deduction is too little, please say it,” Jokowi said.
