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SoftBank’s withdrawal does not affect investment in the new nation’s capital

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By: Aulia Hawa )*

The DPR has ratified the Draft Law on the State Capital (RUU IKN) into Law Number 3/2022 concerning the State Capital as the basis for the Government to transfer IKN. The relocation received a positive response from large investors including Softbank although in the end it withdrew.

One of the IKN investors, SoftBank, is known to have withdrawn from investing in the process of moving the State Capital (IKN). The postponement does not affect investment because IKN development continues.

The head of the IKN Communications Team, Sidik Pramono, said that in principle the financing for IKN development could come from the APBN and other legal sources of funding according to the provisions of the legislation. However, the portion of APBN financing is kept to a minimum.

Sidik said that the commitment of parties outside the government regarding financing so far is still in the early stages. He said that in its realization it would be discussed in more detail with the government. The government will also not rely on just one potential investor. So far, as has been reported, a number of potential investors are interested in investing in the IKN development program.

Sidik said that institutions, including the organizational structure of the IKN Authority, will be regulated in a Presidential Regulation (Perpres) which is one of the priority derivative regulations mandated by the IKN Law. In a statement SoftBank said, “We are not investing in this project, but we are continuing to invest in Indonesia through the SoftBank Vision Fund portfolio company.

At the end of January 2022, the Minister of National Development Planning and Head of Bappenas, Suharso Monoarfa, said that one of the funding sources for IKN development would rely on the use of state assets. In the first phase until 2024, Bappenas noted that IKN development requires a capital of around Rp. 110 trillion.

“The first funding scheme, we will optimize state assets that are not sold, for example the Bappenas Building,” Tutut Suharso said. Meanwhile, the assets of the ministries and institutions that have been left behind will be leased to the private sector. The government will also think of various ways to increase the value of these assets in order to strengthen support for the Nusantara IKN development process in East Kalimantan.

The government is also preparing to seek investors for the construction of the National Capital City (IKN). Investment exploration has begun to attract investors’ interest in the IKN project.

Meanwhile, the Chairman of the MPR RI Bambang Soesatyo (Bamsoet) has emphasized that the development of the Nusantara IKN in East Kalimantan must continue regardless of the country’s leader who will replace President Jokowi. Bearing in mind that the construction and relocation of the State Capital has been regulated in Law No. 3/2022 concerning the State capital.

Previously, the Coordinating Minister for Maritime Affairs and Investment (Menko Marinves), Luhut Binsar Pandjaitan, reported the results of his visit to Riyadh, Saudi Arabia some time ago to Indonesian President Joko Widodo.

In his report, Luhut said that Prince Muhammad bin Salman was interested in collaborating in several projects, including the construction of the national capital (IKN), supply of crude oil for petrochemicals, to mangroves and coral reefs.

In his official statement, Luhut explained, “They are included in our sovereign wealth fund. So their PIF (The Public Investment Fund) will be included in various projects. The President has also decided to form a task force, for that, later the team will immediately work and communicate with Saudi Arabia.

The team will return to Riyadh for technical negotiations with the Riyadh side. It is hoped that one to two weeks after the negotiations, Riyadh will come to Indonesia to discuss the technicalities of each project and see the potential of the project.

SoftBank’s withdrawal does not interfere with investment in IKN considering that the Government continues to conduct explorations with Middle Eastern countries. In fact, Prince Muhammad bin Salman from Saudi Arabia is interested in collaborating in the development of IKN. This interest indicates that foreign investors are still enthusiastic and interested in investing in Indonesia, and the public is not expected to be affected by the issue of SoftBank’s withdrawal from the IKN project.

)* The author is a contributor to the Pertiwi Institute

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