Indonesia’s plans to move its capital to East Kalimantan province presents ample opportunities for foreign investors - Photo by Insider Stories

JAKARTA (TheInsiderStories) – Indonesia’s plans to move its capital to East Kalimantan province presents ample opportunities for foreign investors. Japan Bank for International Cooperation (JBIC), Tokyo-based Softbank Group Corp and the United Arab Emirates (UAE) have expressed an interest in investing in Indonesia’s new capital city projects worth US$33 billion.

“Our plan to move the new capital to Kalimantan has attracted many foreign investors. We are open to all of them, they must compete and we will determine who is the best. The latest were JBIC, Softbank, and United Arab Emirates,” Coordinating Minister for Maritime and Investment Affairs Luhut Binsar Pandjaitan told in a media briefing on Tuesday (12/10).

A project of this nature will present opportunities for companies engaging in soft and hard infrastructure, such as urban development, utilities, toll manufacturing, environmental consulting, as well as those in the business of designing smart cities, Pandjaitan revealed.

“Investments, for instance, in maritime infrastructures, such as developing ports, in East Kalimantan could encourage industrial productivity in Indonesia’s eastern regions, which covers 64 percent of the country’s total land area,” the minister said.

The government has announced will start the construction of the new capital city in 2021, with a view to having the administrative center fully operational by 2024. The move will cost an estimated Rp466 trillion ($32.82 billion), with the government intending to cover 19 percent of the cost. The rest is expected to come mainly from public-private partnerships, as well as direct investment by state-owned enterprises and the private sector.

The three financial sources are expected to meet the required funding needs, Pandjaitan said. The minister previously has announced the government currently is in talks with JBIC to establish a sovereign wealth fund (SWF), as it looks to double down on investment and boost economic growth.

“One of the points discussed by Indonesia and JBIC is considering, or in other words leading to an agreement to establish a sovereign wealth fund,” Pandjaitain told reporters. While the minister did not specify what the fund will invest in nor its scale, he said that he has also been in talks with the UAE.

Pandjaitan, however, said the fund he discussed with JBIC was different from one agreed with the UAE in September. That fund, he said, would collect money from overseas investment funds including the UAE, with the aim of attracting $5-10 billion to be spent on infrastructure such as the development of Indonesia’s new capital.

“Such funding will be key for the establishment of the new city in East Kalimantan, as the state budget will only cover 19 percent of the $33 billion needed for development,” the minister noted.

Meanwhile, Indonesia’s cooperation with Softbank has long been established. Recently, Southeast Asian ride-hailing company Grab said it will invest $2 billion into Indonesia over the next five years using funds from SoftBank.

The investment will be aimed at speeding up the development of Indonesia’s digital infrastructure. That includes building a next-generation transportation network around electric vehicles in local cities and improving the way important services, such as health care, are delivered in the country.

“Indonesia’s technology sector has huge potential,” Masayoshi Son, chairman, and CEO of SoftBank said in a statement. “I’m very happy to be investing $2 billion into the future of Indonesia through Grab.”

Panjaitan hopes three financial sources meet the qualifications set by the government. They are expected to be reliable for the construction of housing, schools, hospitals and commercial districts, also for infrastructure and government offices, such as the new presidential palace, legislative buildings, and police and military quarters.

Presently, East Kalimantan’s major infrastructure includes two international airports, a seaport, and the Balikpapan-Samarinda tollway. So there is still much to be built, and that requires the presence of investors, Pandjaitan ended.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com