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Germany keeps eye on Nusantara as Indonesia tries to woo foreign investors

Jakarta Globe - January 30, 2024

Jayanty Nada Shofa, Jakarta – A German diplomat said Tuesday that his country was keeping a close eye on Indonesia's capital relocation amidst the government's attempts to convince foreign investors.

Indonesia is currently building a new capital in East Kalimantan completely from scratch to replace the sinking and overly populated Jakarta. The project calls for a whopping $33 billion investment, and Indonesia wants the lion's share of the costs to be covered by investors; be it from home and abroad. But this leads to the question of what other countries actually think of the project.

Thomas Graf, the deputy head of mission of the German Embassy to Indonesia, said that it was up to Indonesia to decide where its capital should be as a sovereign country.

"We are observing the [relocation] process with great interest, although we do see the major challenge of the substantial amount of money needed. We do see work is progressing. So we [Germany] will be looking at how things in [Nusantara] evolve," Graf told reporters in Jakarta on the sidelines of a waste management forum.

Graf, however, did not talk much when asked whether German investors had reached an agreement to invest in Nusantara.

"This is a question that not only relates to Germany but also to private investors from all over the world. ... Let me put it like this: there might be more investors to come," the German diplomat said.

The Nusantara capital authority revealed in late December 2023 that there were German investors who were interested in helping turn the new capital into a smart city. Investors from South Korea, the US, France, China, and Finland also showed similar interests. Earlier that year, the Nusantara authority inked a memorandum of understanding with the German tech giant Siemens on smart city cooperation.

Convincing foreign investors

Work is underway to convince the international community and investors that the capital relocation has seen progress and complies with sustainability principles.

The Nusantara agency not long ago launched a net-zero emission strategy, even claiming that they were the first city in Indonesia to have such a document. There are also plans to launch an assessment for sustainable development goals (SDGs) progress to further convince sustainability-conscious investors, according to Bambang Susantono, the chairman of the Nusantara authority body.

"We should build international confidence first, and the foreign investments will follow," Bambang told reporters at a separate press briefing in Jakarta on Tuesday."If there is anyone who says Nusantara is only worsening the climate change, come on, we are actually doing the opposite," Bambang said.

Nusantara to date has witnessed four phases of groundbreaking ceremonies of infrastructures, across different sectors, including hotels, housing, and health facilities, among others. The total investments of the projects that already began construction reached approximately Rp 47.5 trillion (around $3 billion).

Bambang added: "[These groundbreaking ceremonies] show that local investors do find this [Nusantara] project well-planned, and is something that is profitable."

The Nusantara agency reported that it had received around 350 letters of intent from both interested domestic and foreign investors so far.

"Foreign investors do take a longer time compared to domestic institutions. ... But we are looking for a deal that is most profitable for our country. We are not doing a fire sale here," Bambang said.

Source: https://jakartaglobe.id/business/germany-keeps-eye-on-nusantara-as-indonesia-tries-to-woo-foreign-investor