Deni Ghifari, Jakarta – Businesses want to see the state allocate more funds to Nusantara's development before they themselves feel confident about investing in the future capital city.
Indonesian Employers Association (Apindo) labor affairs chair Bob Azam told The Jakarta Post on Monday that the megaproject's pace of development was still dictated by state spending and firms needed to be convinced of the government's commitment before the project could move entirely into private-sector hands.
"I think [Nusantara] still needs big budget [allocations]," as the infrastructure installed so far was still "very, very basic", said Bob, pointing out that only the future state palace had been erected, while premises for ministries and the House of Representatives were yet to see the light of day.
The state budget draft formulated by the outgoing government only earmarks an allocation of Rp 137 billion (US$8.9 million) for the Nusantara Capital City (IKN) Authority, the special governing body for the future capital.
At least some Rp 4 trillion is to be redirected from the Public Works and Housing Ministry next year, but the total of those two allocations still pales against this year's allotment of about Rp 40 trillion.
Divided into several stages of development until 2045, the centenary of Indonesian independence, the future capital city requires an estimated Rp 466 trillion to build, only about 20 percent or Rp 93 trillion of which is to come from the state coffers, which leaves the lion's share to the private sector.
Over the last three years, President Joko "Jokowi" Widodo's government has spent around Rp 75 trillion on Nusantara, which means there is now only roughly Rp 18 trillion in possible public funding left if the government wants to stick with its initial plan for public and private investment.
Finance Minister Sri Mulyani Indrawati explained on Aug. 16 that the numbers were intentionally set low to accommodate wiggle room for the incoming administration, since the cabinet of president-elect Prabowo Subianto was the one to execute this budget. This arrangement applied not only to the IKN Authority's budget, but also to some ministries.
"This is to give the authority to the president-elect to decide in accordance with his priorities," said Sri Mulyani, arguing that "overall, governance can go on with this state budget and important priorities will remain on the roll".
She went on to say that the "important [Nusantara] infrastructure" facilities that could attract investment were still a priority, and the direction of their development was now "the domain of the new government".
The government and the House of Representatives will further discuss the details of the 2025 budget before making it official by the end of September, on the eve of Prabowo's inauguration in late October.
The president-elect himself reiterated his commitment to Nusantara's development on Aug. 12, expressing his desire to "finish it if possible". He also said the city may be functional within three to five years.
Neither Hasan Nasbi nor Thomas Djiwandono, two of Prabowo's transition team members who currently sit in senior government posts under Jokowi, responded when the Post asked whether the incoming government would bump up the budget allocation for Nusantara.
Indonesian Chamber of Commerce and Industry (Kadin) chairman Arsjad Rasjid told the Post on Monday that Nusantara's investment allure "is not solely determined by the state budget contribution but also by incentives offered".
Some of the incentives the government rolled out, such as tax breaks and near century-long land permits, were good enough but highlighted that "simplifying" bureaucratic hurdles was necessary to "ease and accelerate investment processes".
BCA chief economist David Sumual told the Post on Aug. 20 that Nusantara's development "cannot entirely depend on the state budget", given that there were lots of limitations with state spending, for example mandatory spending for wages that reduced the overall fiscal space and potential expenditure for other programs.
A case in point for the latter is Prabowo's flagship free meals program, which the president-elect's team has strongly signaled would be the incoming administration's top priority.
Considering its costly nature, Bank Permata chief economist Josua Pardede said the free meals program restricted the resources the next government could commit to Nusantara.
He told the Post on Aug. 20 that the incoming government "will probably encourage" public-private partnerships to move Nusantara forward.
Both economists agreed that fiscal injections were particularly important to establish the basic infrastructure in the under-construction city in East Kalimantan, on which investor confidence would heavily rely.
Speaking to CNBC Indonesia on Aug. 1, then-investment minister Bahlil Lahadalia said the construction of Nusantara's "first cluster", which covered the city's core area and basic infrastructure, was to be wrapped up by "around September to December".
BCA's David insisted that the commitment expressed through the moving of state functions from Jakarta to the future capital was no less important than establishing basic infrastructure, given that "if there was no activity, people wouldn't invest".
The government has so far only planned to relocate over 10,000 civil servants to Nusantara in September, but it remains to be seen when cabinet ministers will start working there.
Jakarta is still Indonesia's capital city, since the government has yet to issue the legally required presidential decree to confer that status on Nusantara, which Jokowi said on Aug. 12 was not "merely an administrative" matter but also one of "readiness on the ground."