Logo of Phnom Penh Post newspaper Phnom Penh Post - Indonesia seeks new investors for capital

Indonesia seeks new investors for capital

Content image - Phnom Penh Post
President Joko ‘Jokowi’ Widodo (centre) pours water brought by Jakarta governor Anies Baswedan (right), as East Kalimantan governor Isran Noor (third left) looks on, during a Kendi Nusantara ritual at the site for Indonesia’s new capital city Nusantara, on Monday. INDONESIAN PRESIDENTIAL SECRETARIAT PRESS BUREAU

Indonesia seeks new investors for capital

The Indonesian government is scrambling to find new investors for its multi-billion dollar new capital city project following the exit of Japan’s Softbank Group.

Coordinating Minister for Maritime Affairs and Investment Luhut Pandjaitan on March 17 said the government was turning to Saudi Arabia and the UAE to fill the funding gap.

The government was hoping to win over the UAE and Saudi Arabia for funds that were initially earmarked for Softbank’s Vision Fund, but that SoftBank had slashed following troubles over some of the group’s portfolio companies.

“Now, we are hoping that the Vision Fund funds from Abu Dhabi and Saudi can come here. No need to go through SoftBank again,” said Luhut.

He said that the government had been in talks with the UAE over the matter. The middle eastern country was inclined to inject more funds through the Indonesia Investment Authority (INA), and would bring in partners from around the world, including China.

SoftBank’s exit marked a blow to the capital relocation plan as the Japanese company was reportedly ready to invest $30-40 billion in the new capital, a huge portion of the initial development cost.

Building the basic infrastructure of the capital would cost an estimated 466 trillion rupiah ($32.6 billion). The government plans to pay one-fifth of that bill from the state budget, leaving the remaining four-fifths dependent on private investments.

Luhut added that SoftBank founder Masayoshi Son no longer sat on the new capital’s steering committee. The government was looking for a replacement to serve alongside Abu Dhabi Crown Prince Mohammed bin Zayed al-Nahyan and former British Prime Minister Tony Blair.

The coordinating minister was assigned by President Joko “Jokowi” Widodo to secure a replacement investor for the new capital city project.

“There are a number of investors interested in the project, both domestic and foreign investors,” said Jokowi during a visit to the site of the capital on March 10.

Jokowi has been getting cosy with Saudi Arabia and the UAE through several diplomatic visits, starting with a visit to both countries in September 2015. He achieved much greater success with the UAE, which committed $10 billion to INA in March 2021.

The Indonesian Chamber of Commerce and Industry (Kadin) and Real Estate Indonesia (REI) joined the fray by saying that they were lobbying a Spanish consortium, Madrid World Capital of Construction, Engineering and Architecture (MWCC), to replace Softbank.

Most recently, the Asian Development Bank (ADB) announced on March 18 it would provide technical support for the new capital, shortly after Jokowi appointed former ADB vice-president Bambang Susantono as head of the new Nusantara National Capital Authority (NNCA).

The Saudi Arabian embassy in Jakarta confirmed on March 21 that the two countries’ investment ministries were in talks over the matter, and that a delegation from Indonesia would visit Saudi Arabia in the near future for further talks.

“Cooperation in the investment sector between Saudi Arabia and Indonesia is very close, where a number of Saudi Arabian companies will participate in the development of new capital infrastructure,” the embassy said in a statement.

The UAE embassy did not immediately respond for comments.

NNCA head Bambang Susantono said that withdrawals like Softbank’s were a common thing in the business world. He said there was nothing to worry about, and that the NNCA was open to all investors, whether big or small.

“I remain optimistic that if we can structure this new capital city project well, investors will come by themselves,” Bambang said in a video statement on March 18.

A spokesman for the new capital city project Sidik Pramono said on March 21 that Softbank’s withdrawal would not hinder project development because there were other financial backers.

“Are we optimistic? That is a must. The government has committed that this does not weigh on the state budget,” he said.

Nurul Ichwan, undersecretary for investment planning at the investment ministry, on March 17 said Softbank’s exit was hardly a loss to the new capital as the company had not inked any formal deals over the project.

He was also confident that the withdrawal would not create a bad image for the project.

Luhut also reaffirmed that the project would take up no more than one-fifth of the state budget.

SoftBank left the new capital project at a time when its share prices had dropped around 60 per cent, dragged down by the falling share prices of portfolio companies such as China-based ride hailing company Didi and US-based co-working space WeWork.

Softbank’s exit has raised questions among observers over the project’s viability and attractiveness to investors.

Siwage Dharma Negara, coordinator of the Indonesia Studies Programme at Singapore-based think tank ISEAS-Yusof Ishak, said on March 21 that financial problems were unlikely to be the cause of Softbank’s withdrawal.

He said the project might not be economically attractive for investors due to its lengthy payback period.

“If the project was profitable, they would definitely enter. If not, then it would go ‘maybe next time’,” he said.

Centre of Economic and Law Studies (Celios) director Bhima Yudhistira on March 17 said it would be difficult to find investors as good as Softbank.

It was also generally difficult to find investors at the moment due to stormy global economic conditions with an ongoing geopolitical crisis, commodity price surges and monetary tightening, among other things, he said.

Bhima said that, in a worst-case scenario, the government might need to raise the state budget allocation for the project to 80 or 90 per cent, whether directly or indirectly through state-owned enterprises (SOE).

“It is either banking on the high commodity prices or finding new debt,” he said.



  • ‘Education’ a priority traffic-law penalty

    A top National Police official on June 21 neither rejected nor confirmed the authenticity of a leaked audio message, which has gone viral on social media, on a waiver of fines for a number of road traffic-related offences. General Him Yan, deputy National Police chief in

  • Pursat Ford assembly plant opens

    The Kingdom’s first Ford assembly plant was inaugurated on June 16 in Pursat province amid rising demand for brand-new vehicles among Cambodians. The facility is seen as a game changer for the domestic automobile industry, which could bring a wave of investors seeking to cash

  • Volunteer scheme to foster ‘virtuous’ humanitarian spirit

    A senior education official said volunteer work contributes to solidarity and promotes a virtuous humanitarian spirit among the youth and communities. Serei Chumneas, undersecretary of state at the Ministry of Education, Youth and Sport, made the comment during the opening of a training programme called “

  • Siem Reap’s $18M zoo said to educate public, help wildlife

    Angkor Wildlife and Aquarium Co Ltd has invested $18 million in a zoo in Siem Reap province, which will be opened in October to educate and promote animal conservation as well as attract national and international tourists. Currently, the Angkor Wildlife and Aquarium is building the

  • $50B infrastructure plan en route

    The government’s upcoming $50 billion,10-year infrastructure master plan will provide tremendous investment opportunities for domestic and foreign entities, transport experts and economists say. Minister of Public Works and Transport Sun Chanthol revealed the plan to Japanese ambassador to Cambodia Masahiro Mikami on June 15. At

  • Chinese firms unveil preliminary results on metro, monorail for capital

    Minister of Public Works and Transport Sun Chanthol and representatives from China Road and Bridge Corp (CRBC) and its parent company, the state-owned China Communications Construction Co Ltd (CCCC), met on June 24 for talks on results of the firms’ preliminary study on a potential metro