The House of Representatives’ Budget Agency has given its approval for an extra IDR 15 trillion (US$1.01 billion) for the Nusantara Capital City (IKN) development.
DPR Budget Chairman Agency Said Abdullah said these funds will be utilized for various projects scheduled for completion in 2023. This amount adds to the previously approved budget allocation of IDR 22 trillion.
Abdullah expressed his optimism that the construction of essential infrastructure and the establishment of the government center in IKN would progress smoothly. “We expect the president to move there by June 2024,” Abdullah said on Thursday (8/6).
IKN development still rely on the state budget
Indonesia is pushing for the completion of the IKN development by mid-2024, particularly the main administrative office of the capital city, including the presidential palace and key ministry buildings. At least 16,000 civil servants, military personnel, and police officers are expected to relocate to IKN next year.
The Public Works and Housing Ministry noted that from 2020 until the end of the first semester, infrastructure projects at IKN have used up a budget of IDR 24.16 trillion, or 55.2 percent of the total IKN budget for 2020-2024, which amounts to IDR 43.73 trillion.
Lack of realization investment for the IKN project
In the initial plan made by the National Development Planning Agency (Bappenas), the state budget for the IKN project was expected to reach IDR 92.34 trillion by 2045, 19 percent of the total IKN project budget of IDR 486 trillion.
This budget projection relies on the optimistic assumption that investors would cover 80 percent of the required funds for the IKN development. However, up until now, no investor has made a significant commitment to fund the project.
Furthermore, most private companies involved in the IKN project are primarily functioning as contractors responsible for constructing physical infrastructure, rather than serving as investors who provide financial resources for the project. This situation poses a risk of escalating the share of the state budget allocated to the IKN project.
The Investment Ministry reports that there is keen interest from 220 investors to develop diverse facilities at IKN. However only 36 potential investors have already taken steps by signing non-disclosure agreements (NDA) to actually carry out their project proposals.
