The Indonesia government will offer tax incentives, including a 30-year tax exemption and 350% tax deduction, for companies investing in the country’s new capital called Nusantara, a top official said at an investors’ gathering on Tuesday.
Bambang Susantono, Head of the Nusantara National Capital Authority, said the investment rules for Nusantara will be finalised soon. “We will give fiscal and non-fiscal incentives, including a 30-year tax break for investment in infrastructure and public services, worth over 10 billion rupiah ($645,000). There will also be a 20-year tax exemption for investment in shopping mall facilities, tourism spots, and MICE (meeting, incentive, convention and exhibition) facilities. Lastly, we will offer a 350% tax deduction for investment in research and development activities in Nusantara,” he said.
The government will also make a special company to process deals and make investments easier in Nusantara, said Susantono.
At the gathering, Indonesian hospital operator PT Medikaloka Hermina committed to invest in the new capital city project. Hasmoro, Medikaloka Hermina’s president director, said the company has 45 hospitals in Indonesia, with two of them in East Kalimantan, which is close to Nusantara. “We commit to build a hospital with 104 beds in Nusantara, which will be finalised in 2024,” Hasmoro said.
Leona A Karnali, CEO of Saratoga-backed hospital chain Primaya, also expressed interest to explore investments in Nusantara.
Meanwhile, infrastructure company Adhi Karya has obtained new contracts from the Nusantara project. Its spokesperson, Farid Budiyanto, said as of September 2022, Adhi Karya has bagged 1.4 trillion rupiah worth of contracts from Nusantara, including toll roads to housing projects.
“We are joining all of Nusantara’s project tenders worth 20 trillion rupiah. We hope Adhi Karya can obtain 3-3.5 trillion rupiah of new contracts for this year,” Budiyanto told DealStreetAsia.
Some criticism
Piter Abdullah, executive director of Indonesian research and communication institution Segara Institut, said the incentives will create a negative sentiment about Nusantara and make the project look unattractive to investors.
“Rather than giving too many incentives, the government should continue to build basic infrastructure to make investors confident that the projects keep going and can give them profit,” he told DealStreetAsia.
At the gathering, Indonesia’s president Joko Widodo, known as Jokowi, sought to ease concerns about the future of Nusantara after his second term ending 2024.
“Everything has been approved by 93% of parties in parliament. If any one of you is still unsure, what else is missing? There’s no need to question anymore,” he told investors.
Jokowi said the construction of a dam and roads has started at the site of the new capital. The city will have one core area and nine economic generators, including a health centre, education centre, financial centre, and so on.
As many as 100,000 construction workers will accelerate work on the project next year in an effort to get the site ready by Aug 17, 2024, as Jokowi wants to celebrate Indonesia’s independence day at a new presidential palace.