China, Russia first foreign investors to plough millions into Indonesia’s long-delayed new capital

[JAKARTA] Indonesia’s ambitious vision for its new capital, Nusantara, took a major leap forward with the groundbreaking of two landmark property projects backed by Chinese and Russian investors. Combined, the projects are worth nearly one trillion rupiah (S$84.8 million).

Until now, Nusantara had struggled to secure international investment, making this a pivotal moment in the country’s efforts to establish the new capital as a strategic investment hub and sparking hope that more foreign-backed initiatives could follow.

President Joko Widodo officiated the groundbreaking of five projects valued at 1.5 trillion rupiah on Wednesday (Sep 25), two of which are being developed by foreign investors.

China’s inaugural property project in Nusantara is being developed by Delonix Nusantara, a property company owned by Chinese firm Delonix Group, with a total investment of 500 billion rupiah.

This mixed-use complex will span 24,200 square metres and feature a hotel, serviced apartments, offices and shopping centres.

Meanwhile, Russia also made its mark in Nusantara with the launch of Magnum Resort Nusantara, a residential complex developed by a domestic firm in collaboration with Russian developer Magnum Estate International.

Spanning about 1.3 hectares (ha) with an estimated investment of up to 500 billion rupiah, the complex will include serviced apartments, residential units and commercial spaces.

“The investment from foreign entities reflects confidence and demonstrates that Nusantara is a highly attractive location for investment in the sector,” said Widodo.

The initiative shows a significant breakthrough in Indonesia’s attempts to attract foreign investment, which has lagged since the groundbreaking of the first phase of the Nusantara project in 2022.

Despite a slow start, the Nusantara Authority has seen rising interest from foreign investors, with a surge in letters of intent from businesses in the US, China, Malaysia, Singapore and South Korea, signalling some momentum for the project.

“Currently, 472 letters of intent have been signed. But based on our assessment, only about 220 are viable,” said Basuki Hadimuljono, acting head of the Nusantara Authority.

Russia and China are not the only foreign investors eyeing opportunities in the capital, which spans 256,000 ha.

Singapore, through Sembcorp Utilities, has also announced its interest in collaborating with the state-owned electricity company, PLN, to develop a clean energy project in the future capital.

Indonesia is actively courting foreign investment into Nusantara through a range of tax incentives. Most recently, the government granted foreign investors an extension of land use rights for up to 95 years.

Estimated to cost US$32 billion, Nusantara was to be primarily financed by private investors, both domestic and international. The government, by law, can pick up only around a fifth of the tab.

The Nusantara Capital Authority reported that investments flowing into Nusantara reached 56 trillion rupiah by the end of August, with the majority coming from domestic investors.

First phase nears completion

Construction delays and funding challenges have been plaguing Indonesia’s new capital, which culminated last month in a scaled-back Independence Day celebration, a far cry from the grand plans initially envisioned.

Despite these setbacks, following the inauguration of the presidential palace complex last August, authorities reported that the development of Nusantara’s first phase is nearing completion – with 93 per cent done.

The city has been designed as a new centre of government, aimed at alleviating the chronic congestion and flooding that plagues the current capital, Jakarta.

Yesterday, authorities completed a trial run of the new airport in Nusantara, which will serve as the main gateway to the capital in the heart of Kalimantan.

President Widodo, who made the inaugural landing at the Nusantara airport, stated that the 347-ha facility should be fully completed by December 2024, with limited operations set to begin in June of next year. Widodo, who has stated that the development of the capital could span decades, intends to spend the final weeks of his administration on-site.

Valued at 4.3 trillion rupiah, the airport is situated around 43 km from the centre of Nusantara and will be connected via an existing road and a 23-km toll road.

The new airport should significantly reduce travel time to Nusantara, which has relied on the nearest major airport in Balikpapan.