ASEAN investment forum: When IKN becomes a star in ASEAN
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 - ASEAN Investment Forum: Saat IKN jadi bintang di ASEAN
4 September 2023
By: Afiffah Rahmah Nurdifa & Hendra Wibawa
Foreign investors are hoping to enter the Nusantara Capital City (IKN) project in East Kalimantan despite the land status, location, and land price issues.
The development of IKN in East Kalimantan has become a star at Association of Southeast Asian Nations (ASEAN) Investment Forum (AIF) 2023.
The IKN project that is a national strategic project (PSN) requires investments from the private sector as its budget requirement reaches Rp466 trillion.
The state budget (APBN) can only provide Rp89.4 trillion, so investments from the private sector that use the public-private partnership (PPP) scheme are required to reach Rp253.4 trillion. Meanwhile, funding from state-owned enterprises (SOEs)/regional state-owned enterprises (BUMDs) is set to reach Rp123.2 trillion.
The Investment Ministry/Investment Coordinating Board (BKPM) revealed that there were potential investors from ASEAN countries that will enter IKN. The two countries that are interested are Singapore and Malaysia.
Investment Minister/BKPM Head Bahlil Lahadalia said that Singapore was one of the countries in ASEAN that is interested in investing in IKN development. However, Bahlil did not mention the form of the investment and the amount of the funds that will enter from Singapore. “Several ASEAN countries are entering. Singapore is entering. However, I believe that the money is not from Singaporean citizens, the money is from Indonesian citizens that is stored in Singapore,” he said at AIF 2023 on Sunday (3/9).
Bahlil’s statement is not without reason. Singapore is the highest foreign investment source in Indonesia. Singapore has always been a hub for other countries to store their funds.
The data from the Investment Ministry/BKPM shows that, throughout the first half of 2023, foreign investment from Singapore is the largest as it reached US$7.7 billion. The second position belongs to China with a foreign investment of US$3.8 billion.
Besides Singapore, the Malaysian government is also open to the cooperation opportunities in IKN.
During ASEAN Business and Investment Forum 2023 in Jakarta on Saturday (2/9), Malaysia Investment, Trade, and Industry Minister Tengku Datuk Seri Utama Safrul Bin Tengku Abdul Aziz said that Malaysia was looking for other cooperation opportunities. It was stated after Malaysia has established 10 memorandums of understanding (MoUs) with Indonesia. “After this, there will be more MoUs signed, especially from Serawak that include investment and utility cooperation,” Zafrul said.
Serawak’s geographical position that is near East Kalimantan allows Malaysia to provide supplies to IKN.
Besides that, Zafrul also revealed that there was several potential cooperation in waste management, infrastructure, and healthcare. “We are slowly looking for other new possibilities. Feasibility studies are underway.”
Currently, private companies from Malaysia and Serawak Regional Government have carried out feasibility studies.
Not only from ASEAN, foreign investors who are interested in investing in IKN also come from Kazakhstan.
IKN Authority Head Bambang Susantono said that his agency has signed a cooperation with a top company from Kazakhstan in the traffic management sector.
“The cooperation is a proof of concept to know if the technology offered is appropriate for our needs and will support our lives in IKN,” Bambang said in his official statement on Sunday (3/8).
The cooperation is an information transfer on traffic enforcement and traffic ecology from Kazakhstan through Sergek Projects Ltd that can be implemented on the traffic and the smart mobility from the construction worker housing.
Later, technologies from companies that have established a cooperation with IKN Authority (OIKN) will be exhibited at the Techno House to be tested.
Indonesia’s Ambassador to Kazakhstan and Tajikistan Fadjroel Rachman explained that Astana Local Government visited IKN on Saturday (2/9). The activity is a follow up to OIKN’s visit to Astana in Kazakhstan regarding the sister city cooperation.
“As a sister city, IKN learned a lot from Astana on how to develop a capital city,” he said.
Investor considerations
Meanwhile, OIKN Funding and Investment Deputy Agung Wicaksono revealed that there were several considerations that are making investors hesitate to invest in IKN. The considerations include land status, land locations, and land prices.
First, OIKN needs to determine and ensure that the status of the lands is clear and clear before offering them to investors.
Currently, lands that are clear and clear with a certificate from the National Land Agency (BPN) reach 34,000 hectares.
Then, the locations of the lands. The locations offered to investors have to be the best. “It is the process. If not, investors will scramble [for the best locations],” Agung said.
Hence, OIKN needs to offer the best locations to investors. The location is one of the aspects considered by investors.
Next, difficult negotiations between OIKN and investors regarding land prices. He ensures that his agency does not set a high price. “As the purpose is not to profit from land sales, but to attract investors to come and develop,” he stated.
