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Indef: Incentives not enough to attract investors to new capital project

Tempo - October 24, 2022

Riri Rahayu, Jakarta – The Institute for the Development of Economics and Finance (Indef) executive director Tauhid Ahmad asserted that various incentives offered by the government are not enough to attract companies to invest in the new capital city project of IKN Nusantara, especially foreign companies.

Tauhid commented that interest rates are now increasing. Consequently, the bond market is likely to provide higher value for investors rather than investments in the real sector. "If [bonds] go up, they will give more hope than in the real sector," Tauhid told Tempo via a phone call on Monday, October 24, 2022.

Another factor that does not attract global investors is the project's worthiness. "It's long-term investments, while investors expect quick returns. It's [usually] 10 or 15 years, but the IKN Nusantara project is until 2045. Of course, this will make them think again," said Tauhid.

Therefore, Tauhid argued that within the next 10 to 15 years, the project development will tend to rely on the state budget. Meanwhile, investors – especially local investors – will tend to see the potential in neighboring cities, such as Samarinda.

"The government's offers seem to be less attractive. The problem is not the incentives but the certainty," Tauhid emphasized, believing that investors could accept the offer if there is a decision about the transfer of civil servants within the next four years. That way, investors can invest in the housing sector.

Tauhid further mentioned the green economy concept and the potential small population in the new state capital are among the factors that turn off investors to enter the new capital city project in East Kalimantan.

Last week, President Joko "Jokowi" Widodo offered generous incentives to companies that invest in the IKN Nusantara project, including the 30-year tax holiday.

Source: https://en.tempo.co/read/1648807/indef-incentives-not-enough-to-attract-investors-to-new-capital-projec