JAKARTA – The Indonesian government has upgraded its incentives for investors who will fund the ongoing construction of its future capital Nusantara. The revised incentives are part of the newly issued Government Regulation 29 of 2024.

Much of Nusantara is still under construction. The entire project, which is reportedly falling behind schedule by years, is expected to cost Indonesia US$35 billion. However, only 20% of the total bill will be financed by the Indonesian government.

Indonesia is seeking private sector funding, particularly from foreign investors, to continue the development of the city’s megastructures.

The new resolution is expected to attract foreign investors by offering them an extended period of land use, a streamlined approval of environmental permits, and the permission to employ foreign workers if their businesses operate within the new capital.

Deputy Minister of Investment Yuliot Tanjung said the country’s new centre of government and trade is already catching the attention of international businesses.

“Foreign investments in renewable energy have started. They are preparing for the implementation of their investment activities and are currently in the licensing stage,” Yuliot said.

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Ease of doing business in Nusantara

The government initially offered investors a total of 95 years of land use. The rights, however, would have to be granted over three phases. An initial grant of up to 35 years can be extended by an additional 25 years and renewed for another 35 years.

Under the revised incentive plan, the government would grant businesses 95 years of land use right from the first phase.

The new resolution also reconsiders the ease of securing environmental permits, which are an important part of the overall business licence application process in Indonesia. New criteria will be set concerning the environmental feasibility, impact management, and commitment to protection and oversight of businesses that will open in Nusantara.

Hiring foreign workers in Nusantara

International businesses are also allowed to hire foreign workers if they set up their operations in Nusantara.

However, they must hire an Indonesian counterpart to serve as a peer of the foreign employee. After the foreign employee’s work permit lapses, they must return to their home country.

Local counterparts must develop the same competencies required for the role by training and shadowing their international colleagues.

The Indonesian government mandated the setup to facilitate knowledge sharing between foreign and local workers and develop Nusantara’s supply of world-class talent.

The centre of governance

President Joko Widodo recently moved into the new presidential palace in Nusantara, where he will continue to undertake his official duties until the end of his term.

Meanwhile, civil servants working for the central government are expected to move operations to Nusantara later this year.