The invitation to invest was conveyed by President Jokowi at the Ecosperity Week 2023 event which was held in Singapore, Wednesday (7/6). According to him, with this investment, Singapore can be part of the creation of a multi-trillion dollar economy.
“So, I suggest don’t wait too long, don’t just sit and watch. “This is a golden opportunity, which is very tempting in Indonesia, with all of you being able to be a part,” said Jokowi.
He explained that in the future IKN will be a comfortable city to live and do business. Even on this occasion, Jokowi invited potential investors in the land of the lions to move to IKN. How could it not be, later IKN will be designed to be a world-class smart city.
“(IKN) is surrounded by nature, a green city with 65 percent forest, the first carbon neutral city in Indonesia and will have world-class education and other facilities,” he said.
Furthermore, Jokowi said that in the initial stage his party had prepared 300 investment packages worth approximately USD 2.6 million in various sectors such as housing, transportation, energy and technology. Potential investors will also be pampered with various fiscal incentives such as tax holiday, non-collective value added tax, super deduction tax, and also import duty. The government, said Jokowi, always supports the development of green energy and industry in IKN and throughout the country by implementing a renewable energy transition.
“Indonesia is very serious about its commitment to the energy transition. “We have great potential in renewable energy, approximately 434 giga watts from geothermal, wind, solar, bayou and hydro,” he said.
Apart from incentives, Jokowi said that investing in IKN tends to be safe because economic conditions are well maintained at the five percent level, inflation is controlled at the four percent level and the trade balance is still in surplus and social and political conditions tend to be stable.
Investor Doubts
CELIOS economist Bhima Yudhistira said that investors’ hesitation to invest in IKN is understandable. Until now, he said, they still do not know the certainty of the sustainability of the IKN project in the hands of the new president in 2024.
“There is a question of how serious the government is in continuing the IKN development program, because in fact the attitudes and work programs of the presidential candidates, both Anies, Ganjar and Prabowo, are not clear enough regarding IKN,” said Bhima.
Apart from that, he said, investors still cannot confirm how many residents will move to IKN. According to him, this is important for investors to determine what business is suitable to do in the prospective new capital city.
“Then how long does the return on capital take? Break even pointhow much? Then return on investmentAnd internal return rate-how much? “That is still in doubt,” he explained.
Another factor, which also causes investors’ doubts, said Bhima, is the government which still frequently offers national strategic projects (PSN) on the island of Java, such as the Jakarta-Surabaya high-speed train construction project and the Patimban Port construction project on the north coast of Java.
“This shows that the direction of development is still Java-centric, much of the state budget will still be focused on building infrastructure and industrial areas in Java. Meanwhile, IKN is not designated as an industrial area, where the infrastructure is not commercial. “This is what makes many investors interested in investing in Java,” he explained.
Apart from all these factors, said Bhima, investors’ doubts are also influenced by the macro situation which tends not to be supportive, such as rising interest rates and still high inflation in many countries.
“So investors also consider how much interest the loan costs, and also if they enter IKN, maybe they will enter indirectly, but enter through purchasing SBN (state securities) so that it is considered a safe instrument,” he concluded.
Meanwhile, the Head of the IKN Authority, Bambang Susantono, on the same occasion said, “By the end of this year we will look at several commitments of course, we are discussing for example several NDAs (non-disclosure agreement) and now they’re on drawing board to provide some visibility studies, business plans and etc. And there are at least five countries that are now in a serious due diligence process, Korea is one of them, then Japan, China, Germany and the United Arab Emirates.”
Indonesia is building a “smart city” covering nearly 260,000 hectares in the forests of Kalimantan Island to replace the sinking capital Jakarta on the island of Java.
The government promised that only 20 percent of the total development costs of the archipelago would be covered by the APBN, and the rest would come from private investors. (gi/ab-uh)
