Indonesian Construction Companies Opportunity – The development of the Nusantara Capital City (IKN) is forging ahead with vigor, marked by the initiation of 89 construction projects amounting to a staggering Rp 68.6 trillion. In a bid to accelerate progress, the government has unveiled substantial opportunities for companies specializing in construction to invest in IKN.
Danis H. Sumadilaga, Chairperson of the Task Force overseeing IKN development under the Ministry of Public Works and Public Housing (PUPR), highlighted the current minimal level of investment by construction firms in IKN. He expressed hope that stakeholders would grasp the vast potential for collaboration and investment in the construction sector within IKN.
“It is not solely about meeting relocation targets; rather, the infrastructure development is also aimed at catalyzing pure investment momentum in IKN,” emphasized Danis during the Discussion Towards the New Nusantara Capital City, quoted on Tuesday (27/2/2024).
It’s not just about rushing to achieve relocation targets, but infrastructure development is also expected to boost pure investment momentum in IKN in the future.
“In efforts to fulfill infrastructure development in IKN, [we hope] to increase pure investment,” said Danis.
No Investment from Construction Companies in IKN Yet
Despite the monumental strides in infrastructure development, there remains a conspicuous absence of investment from construction companies in IKN. As of now, no construction service companies have committed their capital to IKN, with most merely assuming roles as supporting contractors.
Surprisingly, the total investment parked in IKN has soared to Rp 47.5 trillion by January 2024, primarily fueled by property, healthcare, and education enterprises. However, there is a promising prospect on the horizon, with reports indicating that several financial sector entities, such as PT Bank Mandiri (Persero) Tbk. (BMRI) and PT Bank Rakyat Indonesia (Persero) Tbk. (BBRI), are poised to join IKN.
The absence of foreign investment in this mega project raises pertinent questions. Wina Tania, Partner at Dentons HPRP, shed light on this issue, attributing it to foreign investors’ apprehension regarding legal certainty in the new capital city project.
“While the government has initiated investment opportunities through the Government Cooperation with Business Entities (KPBU) scheme, where initial costs are borne by investors, many remain cautious,” remarked Wina, Quoted from liputan6 (2/26/24).
Therefore, Wina added, foreign investors need legal certainty in the return of their investment in the IKN project, especially those carried out through the KPBU scheme. Although the government has placed the Ministry of Finance and PT Indonesia Infrastructure Guarantee (PII) to guarantee these projects.
“So what we need later is additional assurance to convince investors when the tender is opened that there is government backing here. We believe this is a mitigation to make investors confident that the project can proceed smoothly,” Wina said.
89 Construction Work Packages Have Been Implemented in IKN
Meanwhile, despite the relatively modest investment from construction companies, the government remains steadfast in its commitment to advancing basic infrastructure construction in IKN. Progress in phase 1 construction has reached an impressive 76%, with a total of 89 construction projects already underway across various sectors, including office spaces, residential areas, religious sites, and water supply and sanitation systems.
Danis reiterated that the construction process is proceeding according to the predefined stages, with significant progress witnessed in key projects such as the State Palace and the direct toll road to IKN, which has reached completion at 70%, significantly reducing travel time to Balikpapan.
The development of IKN is being executed in five distinct phases. Phase I, spanning from 2022 to 2024, focuses on the initial relocation of priority government functions, accommodating a population of 260,000 individuals. Subsequent phases entail the development of core areas, industrial zones, smart cities, and the consolidation of infrastructure and ecosystems across three cities, culminating in the establishment of IKN as a global hub by 2045, accommodating a projected population of 1.9 million residents.
The development of the IKN represents a monumental undertaking for Indonesia, holding the potential to unlock a treasure trove of economic and social benefits for the nation. As the project progresses, overcoming challenges related to investment and ensuring transparency will be crucial for its ultimate success. The IKN, once completed, aspires to be a beacon of sustainability, innovation, and inclusivity, serving as a model for future generations and a testament to Indonesia’s unwavering spirit of progress.
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