New Capital City: IKN project accelerated this year
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 - Ibu Kota Baru: Proyek IKN terakselerasi tahun ini
21 September 2023
By: Alifian Asmaaysi & Maria Elena
Jakarta - Based on the absorption of the state budget (APBN), the development of Nusantara Capital City (IKN) in East Kalimantan is starting to be accelerated this year.
From January to August 2023, the IKN development project has absorbed funds of Rp6.4 trillion from the total budget in the 2023 APBN that reaches Rp29.4 trillion.
Budget absorption in the first eight months of this year that reaches Rp6.4 trillion has surpassed the total budget absorption in 2022 that reached Rp5.5 trillion.
Finance Minister Sri Mulyani Indrawati said that the government has spent Rp6.4 trillion as of 31 August 2023 (year-to-date/YtD). This year, the Transportation Ministry has set the IKN budget to reach Rp29.4 trillion.
“Currently, Rp6.4 trillion has been realised as of 31 August. The total budget ceiling of IKN development this year reaches Rp29.4 trillion. [The realisation] has reached Rp6.4 trillion, which is 21.8% [of the budget ceiling],” she said at the APBN Kita press conference on Wednesday (20/9).
From the realisation, Sri Mulyani said that Rp4.7 trillion has been realised for the infrastructure cluster from the budget ceiling of Rp26.5 trillion.
For the infrastructure cluster, Sri Mulyani said that the budget realisation has been used to build the State Palace and the central government core area (KIPP), settlement areas, flats for civil servants (ASNs) and defence and security officers, and IKN toll road.
Besides that, the budget will also used for the duplication of Pulau Balang Short-span Bridge and the construction of Sepaku Semoi Dam, Sepaku River flood control, and river basin areas at Sanggai River, Pamaluan River, Saluang River, and Tengin River.
The budget absorption realisation for the non-infrastructure cluster has reached Rp1.6 trillion from the budget ceiling that reaches Rp3.0 trillion this year.
The budget for the non-infrastructure cluster has been spent to coordinate relocation, recommend policies to ministries and institutions, carry out mapping, monitoring, and evaluation activities, provide Polri protection, and operate IKN Authority.
The government is allocating the budget to develop IKN from the APBN from 2022 to 2024, which reaches Rp75.5 trillion. In 2024, IKN will be allocated a budget of Rp40.6 trillion.
“Next year, Rp40.6 trillion will be prepared to develop IKN so that relocation can be carried out in August,” Sri Mulyani said.
Besides the APBN, the government is directing IKN to be financed by domestic and foreign private investments.
Green and Digital Transformation Deputy of the IKN Authority Ali Berawi revealed that various consortiums were interested to invest in IKN. Interests to invest have been stated by consortiums from the United States of America (USA) and South Korea.
There are at least five foreign consortiums that have stated their interest to develop projects to support IKN development.
“There are many that are interested the smart city of IKN. For example, we have the Nusantara technology house in IKN. It is a showcase of the smart city concept that can implement e-government, smart buildings, and sky taxis,” he stated.
In detail, Ali explained that consortiums from the United States of America that are part of United States Agency for International Development (USAID) would work on Nusantara’s smart city master plan.
A company from the United States of America that is part of the consortium is Honeywell International, Inc. that is a US multinational conglomerate that procures various commercial products and aeronautical systems.
IKN Authority also logged an interest to invest from a Finnish consortium that is committed to developing the smart city project of IKN. Moreover, the legendary company Nokia is also said to be interested.
“They are interested to participate to develop the smart city. Nokia will join,” Ali added.
Besides that, IKN Authority has signed a memorandum of understanding (MoU) to procure pollution sensors with an organisation from Finland, which is Smart City Innovation Cluster.
Smart capital city
Meanwhile, a consortium from South Korea that consists of Hyundai Motor Company and LG Corp will procure sky taxis.
Ali also explained that IKN Authority has logged interests to invest from consortiums in Germany and China, which will showcase their renewable energy utilisation.
“The point is there are many global companies that are interested to participate as the smart city will be a city that is built for the present and the future,” Ali said.
On the contrary, PT Tokyu Land Indonesia (TLID) is considering the opportunity to invest in IKN after topping off the construction of the condominium Branz Mega Kuningan.
Tokyu Land Indonesia Director Tai Horikawa revealed that the company that is part of Tokyu Fudosan Holding from Japan did not rule out investing in IKN.
“[Even though] we currently do not have a specific project that contributes to IKN development, we will continue to monitor [business and investment opportunities in IKN],” he said on Wednesday (20/9).
According to him, his company is still focusing on working and developing several projects in Jakarta and its satellite cities, such as Bekasi, Bogor, Depok, and Tangerang.
“We are currently focusing on condominiums. The condominium that we currently have [Branz Mega Kuningan] could be handed over in 2024. Until now, we have been developing the condominium business. In the future, we will also focus on leasing assets. So, not only purchasing and selling apartments, but we will also lease them,” he said.
On another occasion, House of Representatives (DPR) Commission II Deputy Chairperson Junimart Girsang explained that the revision of the IKN Law would include three important points, which will be passed at the next DPR plenary session.
Firstly, the revision of the IKN Law that has been agreed on is the legal certainty required to continue preparation, construction, relocation, and establishment of a special regional government for IKN.
“To provide the legal certainty, changes must be made to Law Number 3 of 2022 on IKN,” he said.
Then, to provide a clear land status for lands that are owned or controlled by locals and to make the land regulation lex spesialis to support investments in IKN.
“So, some lands in IKN are also lex spesialis to support investments,” Junimart said.
Last but not least, the IKN Bill will also strengthen the position of IKN Authority to prepare, construct, and relocate the capital city.
