Private sector expecting concession of up to 90 years at Indonesia New Capital Project 私营部门预计在印尼新首都项目中将获得长达90年的特许权

Indonesia Construction Business Registration and Tenders

Property players expect concession for the new capital city construction project to be attractive for the private sector, such as possible extension of up to 90 years.

REI (Real Estat Indonesia) Vice Chairman Hari Ganie said that certainty about the concession period was crucial as it significantly impacted the decision of developers to be involved in the new capital city project.

In order for [the concession] to be attractive, we suggest that the concession period can be extended to up to 90 years. If that can be realised, we think that the private sector will be thrilled.

Housing Provision Director General of the Public Works and Public Housing (PUPR) Ministry Khalawi Abdul Hamid said that the government would ask developers to cooperate in housing construction projects in the capital city.

He said that the private sector would be provided a certain concession period through the public-private partnership (PPP) scheme. When the concession period ends, the government will take over the management.

Meanwhile, the study  reveals that there are several steps that the government must take before establishing a cooperation with the private sector in the new capital city project.

The steps that must be taken include making the procurement competitive, transparent, and optimally packaged. The steps must be implemented so that the contract tender will meet the market demand and attract international suppliers and Indonesian partners.

Besides that, the government can also finance the project internationally using a stable currency. It’s reckoned that the new capital city project was too large to be financed by rupiah.

Lastly, an innovative and contractual clawback mechanism must be implemented to prevent investors from profiting off property price increase at the public’s expense.

In implementing the PPP scheme, It’s reckoned that government could learn from other countries, such as England and Holland, that have successfully implemented PPP for government facility construction, which includes government offices, police stations, and courthouses.

Foreign companies interested

Foreign companies are also interested in the new capital city project. One of them is a multinational company from Japan, Softbank.

“Smart city concept which has the latest technology, green city, and also artificial intelligence development are what we are interested in,” Softbank President Masayoshi Son said after meeting President Joko Widodo last week.

Softbank will arrange several cooperation potentials in the new capital city construction that is located between North Penajam Paser Regency and Kutai Kartanegara Regency.

Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Panjaitain revealed that Softbank offered to invest millions of US dollars. Luhut explained that the Indonesian Government would calculate the rationality of the investment potential.

He said that Softbank could support the investment for the construction of supporting facilities in the new capital city. “However, government building construction has been financed by the state budget. All supporting [facilities] can be financed by Softbank,” he said.


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