Foreign investors are still wary of Indonesia’s new capital Nusantara. Will Prabowo moving there boost confidence?

JAKARTA: Foreign investors remain wary of Indonesia’s planned new capital Nusantara despite “continuity candidate” Prabowo Subianto winning the presidential election, raising questions on what more the government can do to get them on board the US$30 billion mega project.

Indonesia plans to hold its 79th Independence Day celebration in Nusantara on Aug 17, marking the move from Jakarta to the new capital in eastern Kalimantan. But it is still lacking the money to construct the city.

The government had previously said foreign investors were waiting for results of the presidential and legislative elections before they invest in Nusantara, locally known as Ibu Kota Negara or IKN.

However, 1.5 months after the elections held on Valentine’s Day, no foreign investor has signed a memorandum of understanding (MOU) with the Indonesian government. 

Knowing the results of the election is not enough for investors to take the plunge, said Mr Mohammad Faisal, executive director of the Centre of Reform on Economics (CORE) Indonesia, a think tank which focuses on research in economy and industry.

“First, there are still election disputes,” he said, referring to the court challenges by losing presidential candidates Anies Baswedan and Ganjar Pranowo. They urged a poll re-run and disqualification of the winner, citing fraud and irregularities during the elections. 

The constitutional court is expected to give its ruling by April 22. 

If it rejects the cases, Mr Prabowo and his running mate, Solo mayor Gibran Rakabuming Raka, who is also President Joko Widodo’s eldest son, will take their oath of office in October.

“Then, (investors) also want to know the leadership style of Mr Prabowo,” Mr Faisal added.

Although Mr Prabowo has said numerous times that he will continue the project, which is President Widodo’s brainchild, investors would want to know what his vision is and how he will make decisions, said Mr Faisal.

The plan is for about 19 per cent of Nusantara’s cost to be from the state budget, with the remainder from the private sector. 

MANY LETTERS OF INTENT, BUT NO MEMORANDUM OF UNDERSTANDING

The man overseeing Nusantara’s development, however, remains optimistic and thinks public-private partnerships (PPPs) may be the way to go.

Indonesian authorities have so far received about 369 letters of intent (LOI), Mr Bambang Susantono, head of the Nusantara Capital Authority, told CNA at the Indonesia-Singapore Business Forum 2024 in Singapore on Mar 27.

“About 40 per cent of them are from foreign entities,” he said.

“But most of them are at the stage of preparations. Why? Because most of them, if I may say, are interested in PPP rather than going directly to invest,” Mr Bambang said.