IKN flooded with interested 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.
Investor Daily - IKN kebanjiran minat investor
21 November 2023
By: Arnoldus Kristianus, Imam Suhartadi & Euis Rita Hartati
Jakarta - Nusantara Capital City (IKN) that is currently under construction in North Penajam Paser, East Kalimantan is attracting a significant amount of interest from investors. This includes both domestic and foreign investors looking to invest in the area. The high level of interest is evident from the numerous Letters of Intent (LoIs) that have been submitted to the government, expressing a desire to participate in IKN development.
IKN Authority has received 305 LoIs. These include 172 from domestic investors and 133 from foreign investors. These foreign investors include 27 investors from Singapore, 25 investors from Japan, 19 investors from Malaysia and China, 9 investors from South Korea, 7 investors from the United States of America, 3 investors from Finland and Spain, 2 investors from United Arab Emirates, Thailand, and Germany, and several other investors hailing from other countries.
In terms of the investment value, the government is targeting the investments to reach Rp10 trillion at the end of this year. Previously, the government carried out two groundbreakings in IKN for projects that have a total investment value of Rp35 trillion. Hence, in 2023, the government is targeting investments in IKN to reach Rp45 trillion.
President Joko Widodo (Jokowi) said that the government was still prioritising domestic investors amid the 300 submitted LoIs. “There are many, but we will prioritise domestic investors first,” President Jokowi said after releasing the second phase of aid for Palestine at Halim Perdanakusuma Air Force Base in Jakarta on Monday (20/11/2023).
They are only LoIs, but President Jokowi predicts that the interest of foreign investors in IKN will still increase with each passing day.
“We consistently update every country on the progress of IKN to highlight the investment opportunities available, and many are interested. To date, we have received 300 LoIs that have been signed. While no project has started yet, the sheer volume of LoIs suggests that it’s only a matter of time before one commences.,” he stated.
Meanwhile, IKN Authority Financing and Investment Deputy Agung Wicaksono stated that there were 172 domestic investors during a virtual briefing on Monday (20/11/2023).
“So, we can see the speed of domestic investors. The investment process will commence with a Letter of Intent (LoI) and culminate in a formal agreement.,” he said.
According to Agung, the government is targeting IKN to be a world-class city. Hence, IKN development will involve foreign investors. “In the end, foreign investors are required as we want IKN to be a world-class city that caters to everyone, including investors from all over the world that bring various technology and service standards,” Agung revealed.
Investing in Nusantara is a process that begins with the submission of a Letter of Intent (LoI) to the IKN Authority, which is followed by a review and an assessment of the priority scale of the sector mentioned in the LoI. Once this is done, a one-on-one meeting is conducted. The investor then delivers a confirmation letter, and in return, receives a response letter from the IKN Authority. The next step involves the creation of a Non-Disclosure Agreement and the submission of a data request, which allows the investor to conduct a feasibility study. The final step in the process is the establishment of an agreement based on the result of the feasibility study. Each of these steps is crucial to ensuring a smooth and successful investment process.
Agung explained that the foreign investors were currently at the stage of submitting their LoIs. However, the government will carefully review and assess the priority scale of the sectors mentioned in the LoIs. He said that it was important to prioritise sectors that domestic investors were interested in. Following this, the process will advance to the one-on-one meeting and the agreement establishment stages.
“Domestic investors can go through the process faster to evaluate risks and returns, which aids them in making a decision and reaching an agreement,” Agung stated.
Previously, IKN Authority Secretary Achmad Jaka Santos Adiwijaya said that there were 103 LoIs submitted for the housing sector and 71 LoIs for the commercial sector. Meanwhile, there are 63 LoIs submitted for the educational infrastructure sector, making it the third most popular sector. The rest of the LoIs are submitted for the transportation sector and the healthcare facility sector.
Centre of Reform on Economics (CORE) Executive Director Mohammad Faisal sees that President Jokowi’s step to prioritise domestic investors in IKN development is appropriate as the area is the country’s symbol.
“Is it better to prioritise domestic investors? Yes. I think so, because IKN is the country’s symbol, so we need to finance it ourselves as much as we can,” Faisal said.
However, Faisal said that foreign investors were also required as funding from the state budget (APBN) is not enough to support IKN development.
He also highlighted that it was important for the government to determine which project can be invested in by foreign investors. Besides that, the government must also prepare a plan for foreign investors who want to invest in IKN as soon as possible.
Faisal reminded that investors would consider the benefit that they can receive in the medium term and in the long term. The trust of investors relies on the seriousness of the government and the consistency of the policies, considering the change of leadership in 2024.
Besides that, the trust of investors will also be affected by the incentives provided by the government and the speed of IKN development in the early stage.
“So, with that assumption, it will be better if [the government] can do everything smoothly and optimally. It will be more attractive to investors,” he said.
Meanwhile, on a separate occasion, Institute for Development of Economics and Finance (Indef) Deputy Director Eko Listiyanto sees that domestic and foreign investments in IKN need to be realised in parallel. According to him, the heterogeneity of investors will also spark optimism in IKN development in the future.
“Domestic [investors] are fine. They show focus on boosting domestic [development]. However, I think that it cannot be denied that foreign investors are required. Why? Because the narration is to construct a new city,” Eko said.
