PETALING JAYA: Malaysia should seize investment opportunities arising from Indonesia’s development of its new capital city Nusantara in East Kalimantan, a Malaysia External Trade Development Corp (Matrade) official said.
The official said Nusantara will be built on a 256,105ha (632,850-acre) site – almost four times the size of Jakarta – and 200,000ha (494,210 acres) of inland forest – three times the size of New York City – and this ambitious project will attract investors from a variety of industries and is predicted to see 47.7% growth in real investment.
“It will cost RM138 billion (466 trillion rupiah), with 19% coming from the state budget and the remainder coming from collaborations between the government and private sector businesses. The financial resources to develop the new capital will come from the state budget, state-owned enterprises (SOE), and the private sector through public-private partnerships (PPP) and private investment,” the official told SunBiz.
The Indonesian government intends to rely heavily on PPP, with current estimates showing that the government will only fund 10-20% of the total cost, with the private sector covering the rest of it, as well as project risks. The PPP is preferred for developing the infrastructure in the new city, while SOE and private parties are expected to invest in the residential facilities and commercial areas. Nusantara will need both soft and physical infrastructure, including urban utilities, manufacturing, seaports and airports, and network and communications, among others.
Development starts with the presidential palace, the central government offices, government worker housing areas, and military and police headquarters, all of which will be accomplished gradually.
The plan of this new administrative city provides vast areas of opportunities in which Malaysia can offer expertise and services. They range from conception to delivery which include town planning, designing and architecture, construction, support services such as financing, human resources and talent, product sourcing of building and construction materials, and maintenance and repair,” the Matrade official said.
Additionally, one of the key points for Malaysia to tap into the development of the Nusantara is the border development with Sabah and Sarawak, both of which have expressed interest in supporting Nusantara by supplying building materials and other fast-moving consumer goods.
There is also a possible collaboration initiative on Borneo Energy Grid and Trans Borneo Highways to boost electrification needs, connectivity and trade within Brneo Island. Sarawak exports 150MW of hydro energy to West Kalimantan annually and eyeing mega hydro projects worth US$2.5 billion (RM11 billion) with 1300MW in Malinau, North Kalimantan, through Sarawak Energy.
Moreover, there will be benefits in terms of tourists and trade in areas such as Serudung, Sebatik, Labang, and Bakalalan. It also creates an alternative route for trade by utilising barter trade jetties in Sandakan, Tawau and others which will provide alternative solutions for sea logistics support for trade.
“It is hoped that Indonesia can consider normalising border trade in those entry points to provide cheaper options for goods compared to Java Island,” the Matrade official said.
Therefore, Matrade encourages interested Malaysian parties to quickly establish presence in Indonesia and start finding a suitable partner in other development projects such as Rebana Project in West Java before taking part in the Nusantara project.
“Possible collaboration between Malaysian and Indonesian companies for the Nusantara projects has the support and assistance from the Indonesian Chamber of Commerce and Industry,” the official said.
The project’s first phase is set to begin in 2022 and lasts until 2024, with construction to continue until 2045. The other four stages are more open for participation during the second stage onwards and are more related to other infrastructure development and commercial.
“Malaysia should look at the provincial master plan to support the Nusantara development. Bappenas (Indonesia’s National Development Planning Ministry) has already started to publicise lists of projects available and up for grabs. New government offices and housing for around 1.5 million federal servants are included in this price tag,” the official said.
Nusantara aspires to be a “smart and green city”, with 75% of the capital city’s proposed site will be open space, with 65% of that protected.
“Indonesia would require significant private funding to attain a renewable energy mix of 25% by 2025, up from 14.7% now. There are lots of possibilities to construct new renewable projects in the new capital, which is being built from the ground up. Even though Kalimantan’s provinces are known for their coal, gold, oil, timber, and palm oil exports, this is the case,” said the Matrade official.
According to a study conducted by Indonesia’s Ministry of Energy and Mineral Resources, the combined sources of wind power, biofuels, solar power, hydropower, and other renewable energy sources in East Kalimantan province can exceed 20GW. Solar electricity accounts for 65% of the total, while hydroelectric power accounts for 26%.
“However, the fact that Indonesia’s bureaucratic environment is still convoluted, with a divide between local and national governments, may deter private investment. But the government has taken considerable steps in 2021 to ease investment restrictions on infrastructure.
“This is reflected in Indonesia’s Operational Risk Index score of 53.9 out of 100 for Investment Openness, which is low in comparison to the Jokowi (President Joko Widodo) administration’s goals and falls behind regional rivals Malaysia, Thailand, and Hong Kong. As a result, legal concerns, as well as potentially lengthy anti-corruption and due diligence inspections, are likely to deter the government from relying on PPPs,” the official said.
According to Matrade, some Malaysian companies – including IJM, Sunway, Tan Chong and UEM – have already expressed interest in the opportunities in Indonesia.
Source: The Sun Daily
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