Indonesia to tap foreign investors for development of new political seat in East Kalimantan

By Cheryl Arcibalcheryl.arcibal@scmp.com / https://www.scmp.com/business/article/3031991/indonesia-tap-foreign-investors-development-new-political-seat-east?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp | October 10, 2019 9:48 AM SGT
Indonesia's plan to move its capital from Jakarta to East Kalimantan will open up new opportunities for foreign investors, including those from Hong Kong and mainland China. The new political and administrative centre, to be developed at an estimated cost of US$33 billion, will be one of the biggest infrastructure projects in Southeast Asia in the next 10 years.
East Kalimantan will need infrastructure such as roads, bridges, freshwater pipelines, power plants and electricity lines, and better transport networks. Other facilities needed will include schools, hospitals, hotels, retail centres, housing, accommodation and entertainment centres.
"There are opportunities for foreign investors, as the government will invite major involvement of many parties such as state-owned and private entities under the public-private participation scheme in developing the new capital," said Nurdin Setyawan, associate director of strategic consulting at Cushman & Wakefield Indonesia.
The relocation of the country's political seat to North Penajam Paser and Kutai Kartanegara in East Kalimantan will see the transfer of 1.5 million civil servants from Jakarta, who will potentially opt to live closer to their place of work.
"The private sector will play an important role in supporting this move, as less than 20 per cent of the total cost will be covered by the state budget," said James Taylor, head of research at JLL Indonesia.
The development of infrastructure and accommodation is likely to spur a property boom in the new capital, and even in neighbouring cities of Balikpapan and Samarinda.
"The infrastructure spend on the new capital will definitely excite many foreign consultants and engineers alike," said Alan Cheong, executive director of research and consultancy at Savills Singapore. "As this project appears to have a firm starting date, it is more palpable than some other mega initiatives."
Cheong said consortiums of foreign and Indonesian companies may be needed to tender for any projects. Foreign developers, meanwhile, may find investment in data centres, logistic facilities and serviced flats attractive.
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