Despite having received 220 Letters of Intent (LoI) from prospective investors, no actual investments have been channeled to the Nusantara Capital City (IKN) project. The delay can be attributed to slow development of essential basic infrastructure, which is the key responsibility of the government.
Piter Abdullah criticizes lack of progress in IKN
Piter Abdullah, Executive Director of the Segara Research Institute, has criticized the government’s communication strategy. He asserted that investors are hesitant to participate when the basic infrastructure is still under construction.
Private investors are adopting a “wait and see” approach, especially in light of ongoing political activities.
Abdullah pointed out that the government, in collaboration with the Ministry of Public Works and Housing (Kementerian PUPR), is actively pushing for the completion of crucial infrastructure projects such as arterial roads, highways, internal roads within the IKN area, electricity, and clean water.
These foundational projects are essential to attract private investors. Abdullah acknowledged the impressive design and visionary nature of the IKN, as it aims to become a smart city.
Once the basic infrastructure projects are completed, Abdullah firmly believes that investors will flock to the IKN even without formal invitations. This sentiment aligns with the government’s commitment to the project’s long-term sustainability and its vision for future administrations.
On the other hand, Abdullah also stressed that the absence of private sector investments so far should not be interpreted as a lack of interest in the IKN project. Instead, it should be considered that business entities are carefully calculating the potential risks and benefits before committing to the project.
Private companies reject involvement in IKN development
Muhammad Reza Abdul Majid, Chief Risk & Sustainability Officer of Sinar Mas Land, expressed support for the mega project but clarified that their company currently has no plans to invest in the IKN project. Instead, they are focusing on the nearby Grand City Balikpapan project, which covers developing residential and commercial areas.
Government response
In response to the delays, the government stated that currently, most of the development of IKN is funded by the State Budget (APBN).
“Not yet [no investment has been channeled]. Currently all funds are from the State Budget,” said Basuki Hadimuljono, Minister of Public Works and Housing on February 5, 2023.
Basuki asserted that one of the main reasons as to why the investment has not been made is because of technical problems on land procurement.
