The absence of foreign investors in the plan to develop the Indonesian Capital City (IKN) in North Penajam Paser, East Kalimantan raises questions. Is this mega project not attractive enough in the eyes of foreign investors?
When visiting America last week, President Joko Widodo stated that so far no foreign investors had entered to take part in the IKN development project.
“Until now there hasn’t been any, but I am sure that after domestic investors move in more and more every month, investors from outside (the country) will soon come in. “We’ll see, it will definitely come in,” said the president.
This statement immediately attracted public attention, because so far the government has always claimed that there is great interest from investors, both foreign and domestic, in IKN development.
Speaking in a teleconference in Jakarta, Monday (20/11), Deputy for Financing and Investment at the Archipelago Capital Authority (OKIN) Agung Wicaksono claimed that many foreign parties had expressed interest in investing in the prospective capital of Indonesia’s new nation. However, no one has yet entered individually to invest in IKN.
“Not really in yet. In fact, it has entered together with domestic investor partners. “And this is in line with the President’s message that if foreign (investors) enter, they must partner with domestic investors,” said Agung.
According to him, there are two reasons why foreign investors have not independently entered into IKN development projects. First, because the government prioritizes foreign investors who can collaborate with domestic investors. Second, in the investment stage, namely the study and prioritization stage, domestic investors are considered to be quicker in following the process. Even so, he emphasized that foreign investors do not have to partner with red and white investors if they want to invest their capital in IKN later.
“It doesn’t have to be (partnership) but it will be preferable in the pioneer phase, this pioneer phase. And of course we are open. Next step-We are currently evaluating this because many foreign investors want to enter on their own. We will see whether they meet the criteria, and whether they are ready too. So can you enter by yourself? “It’s possible,” explained Agung.
He also denied the notion that the rule of having to partner with domestic investors made these foreign investors give up their intention to participate in IKN development. Because to date OKIN has received hundreds of letters of interest from foreign investors.
“I think foreign doesn’t mean they haven’t entered yet, but apart from those in partnership (with domestic investors) who have progressed to the due diligence phase, there are quite a lot of foreigners,” he said.
Agung gave an example of foreign investors who have partnered with national investors, namely in the Nusantara Hotel construction project in collaboration with Accor Group from Switzerland, then Mayapada Hospital which collaborates with Apollo Hospital from India. And PT PLN (Persero) through its subsidiary Nusantara Power is doing it joint venture with an investor from Singapore named Sembcorp to build a PLTS with a capacity of 50 megawatts (MW).
Investment Target IDR 45 Trillion by the End of 2023
Agung further explained that there had been 305 letters of expression of interest or letter of interest (LOI) who entered to take part in this mega project. Of this number, 172 came from red and white investors.
“So if 172 of the 305 are red and white, then the remaining 133 are foreign investors. “Most of them start from Asia, such as Singapore, Japan, Malaysia, China, Korea, but there are also America, and European countries, the Middle East, and others,” he explained.
OKIN targets investment realization by the end of this year to reach IDR 45 trillion. The investment realization up to November 2023 was recorded at IDR 35 trillion with 21 companies having laid the first stone or groundbreaking in September and November. The plan is that this will be carried out next December groundbreaking others with an investment value of IDR 10 trillion.
“This IDR 35 trillion is non-APBN and this is only 2023, and the target is to reach IDR 45 trillion by the end of the year,” he said.
Economist: Foreign Investors Still Doubtful
CORE Indonesia economist Muhammad Faisal said the partnership scheme between foreign and domestic investors in the IKN development project was quite good. According to him, this can make the investment process easier and faster.
“In my opinion, the partnership scheme is good, because on the one hand, the role of foreign investors is needed because in terms of capital it may be bigger. But in terms of efficiency factors in terms of workmanship, domestic (investor) knowledge of the field is indeed stronger. “So it could be a good synergy in my opinion,” said Faisal.
Apart from that, he believes that the government must be quite strict in selecting both domestic and foreign investors to take part in this project, especially those related to the defense and security sector.
However, Faisal sees several factors that make foreign investors still hesitant to invest their capital in this mega project, including the level of return on profits.
“This is a projects Which greenfields, opening up new land. So from an investment point of view, this is an investment that cannot be expected to produce returns or profits in a short period of time. “This means that the investment risk is greater because it can only be enjoyed in the medium to long term,” he explained.
Second, he said, how consistent is the government’s policy regarding IKN development. Will it continue, or will it stop midway?
“I think there are still doubts for foreign investors. The government must be optimistic and confident, but for investors the calculations are business calculations. “If they are not sure that it will bring profits, and when those profits will be achieved, they will tend to be slow to respond,” he concluded. (gi/em)
