Indonesia dismisses concerns over USD32bn capital city project

  • A top Indonesian official pledged on 8 Mar that construction on a new capital city deep within the jungles of Borneo island would not stall when the presidency changes hands next year as new incentives were unveiled to encourage investment.
  • With a USD32bn price tag and the COVID-19 pandemic delaying progress, some investors have expressed concern that development may lose momentum after Widodo ends his second and final five-year term in office in 2024.
  • Under an incentives’ package announced on 8 Mar, the government will remove corporate tax for companies investing at least INR10bn in some sectors for 10 to 30 years, with the longest tax holiday applied to infrastructure and public services up until 2035.
  • Tax cuts will also be given to foreign companies moving their headquarters to Nusantara and financial firms setting up in its financial zone.
  • Research and development costs will be tax deductible, while import taxes on capital goods will be removed, among other incentives.
  • The government will also provide land rights for 95 years, extendable by the same period, far longer than elsewhere in Indonesia.
  • The capital’s success hinges on private sector involvement, with only 20% of costs being shouldered by the state.
  • While no private deals have been signed, there have been more than 100 letters of interest from domestic and foreign companies including from Malaysia, China and the United States, said Agung Wicaksono, Nusantara’s deputy chief for funding and investment.

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