Local investors kick-start commercial projects in Nusantara

President Joko "Jokowi" Widodo led the groundbreaking for the first private investment in the Nusantara Capital City (IKN) project on Thursday, a city that is destined to house no more than 2 million people, thus raising questions whether the design can be sustainable or even achievable.  

Jokowi said the first commercial project in the new capital would be a five-star hotel named Hotel Nusantara with the groundbreaking on more projects to follow later, which will include more hotels, hospitals and a grocery store.  

He said it was the work of a consortium of local investors led by Sugianto “Aguan” Kusuma, founder of property giant Agung Sedayu along with other conglomerates from many sectors such as Sinarmas Group, Djarum Group, Barito Pacific, Adaro and Astra International.  

In total, these conglomerates will invest Rp 20 trillion (US$1.3 billion), Jokowi estimated, adding that he expected that more would join the bandwagon.  

The government has previously lured foreign investors to invest in new capital project, but many have yet to make firm decision other than conveying their intention. Developments have mostly relied on the state budget.  

The groundbreaking took place after the government and the House of Representatives concluded a recent discussion to amend the new capital law to include a guarantee that the construction of the new capital city would continue as planned until 2045 regardless of changes in administration.  

Meanwhile, the IKN Authority and the government have said on multiple occasions that only 2 million people will live in the city, citing a vision to create a livable and sustainable city.  

Experts have assessed the 2-million-population target as ambitious and optimistic, particularly as a short or midterm goal.  They also argued the population cap might hinder the government’s plan to attract more private investors to finance the new capital city.  

“This population restriction will raise questions among other property investors who are thinking of investing and building property in [Nusantara],” Institute for Development of Economics and Finance (Indef) analyst Andry Satrio Nugroho told The Jakarta Post on Wednesday. 

He argued that a small population would also imply a rather limited market opportunity and pose a longer waiting time for a return on investment, thereby raising its investment risk.  

Yusuf Wibisono, executive director of the Institute for Demographic and Poverty Studies (IDEAS) said on Wednesday that to make investing in the new capital city attractive, the government might need to consider aiming for a larger population of between 3 million and 5 million residents  

“If the IKN authority limits the population [too low] from the beginning, it contradicts the goal of attracting the maximum private investment, which relies on a large population,” he said.  

Should the population of the new city not experience significant growth, he pointed out that the project would likely remain dependent on public financing, something the government is seeking to avoid.  

He urged the government to instead make more of an effort to persuade people to relocate to and settle in Nusantara if it wanted to sustain the project in the long run. 

Indef’s Andry concurred, noting that civil servants felt reluctant to move with some even considering early retirement rather than relocating to the new capital.  

“The IKN Authority would be better focusing on the development of the new city and to sparking interest in people to move,” he asserted, rather than immediately implementing population restrictions. 

Other analysts feel that capping the population is unlikely to be feasible and suggest the government prepare for the worst if the capital project does attract more people.  

Melinda Martinus, lead researcher at Singapore’s Yusof Ishak Institute (ISEAS) told the Post on Wednesday that the plan was possible as initial guidance, but she emphasized that growth cannot be controlled.  

“We cannot prohibit people who want to come to Nusantara for better opportunities,” Melinda explained. “Likewise, as the city is growing, the key is to have a projected plan about where to put these people.”  

Delik Hudalah, Bandung Institute of Technology (ITB) metropolitan planning professor concurred, saying controlling the size of a city from a single entity would be a formidable challenge.  

Despite various methods to enforce such restrictions, many cities struggle due to limitations, government inconsistencies or market dominance.  

“Even the Chinese government appear to be struggling to implement population caps and curbing the rate of rural-to-urban population migration into its metropolitan cities,” Delik said on Monday, citing examples of Shanghai and Beijing.  

In the Indonesian context, Delik noted only five cities with more than 2 million people, namely Jakarta; Surabaya, East Java; Bekasi and Bandung, both in West Java, and Medan in North Sumatra.  

Learning from these cities, he explained that it would take decades to build a metropolitan area from relatively empty land, which implies a challenge for the new capital.  

The IKN Authority did not immediately respond for comments. 

Source: The Jakarta Post 

Indonesia central bank holds rates, keeps focus on rupiah

Indonesia's central bank left interest rates unchanged for an eighth straight month on Thursday, keeping its focus on making sure the rupiah remains stable and as inflation has stayed within target. 

Bank Indonesia (BI) held the seven-day reverse repurchase rate steady at 5.75%, where it has been since January, as widely expected by 31 economists surveyed by Reuters. Its two other main rates were also kept unchanged. 

The decision reaffirmed most analysts' expectations that BI will stand pat on rates until global uncertainty eases due to concerns over pressure on the currency. 

BI's Governor Perry Warjiyo said the benchmark was consistent with the central bank's stance to ensure inflation stays within the target range in 2023 and 2024. 

The inflation target range will be lowered to 1.5% to 3.5% in 2024, the central bank said. 

The rupiah remained emerging Asia's best performer but has gradually depreciated against the U.S. dollar in recent weeks to its weakest in six months, amid rising U.S. Treasury yields. Indonesian bond yields have also risen. 

BI has been trying to balance currency stability with keeping inflation in check while maintaining growth momentum in Southeast Asia's largest economy as exports fall amid softening commodity prices. 

"Monetary policy remains focused on controlling the stability of the rupiah exchange rate as an anticipatory and mitigation measure against the spillover impact of global financial market uncertainty," Warjiyo told a press conference. 

BI expects the U.S. Federal Reserve to increase rates in November, which Warjiyo said could maintain the dollar's strength. Meanwhile, a slowdown in major trading partner China could put pressure on Indonesian exports. 

LIMITED LEEWAY 

BI's room to ease policy was constrained by a strong U.S. dollar and the pressure on Indonesia's balance of payments, Fakhrul Fulvian, an economist with Trimegah Securities, said. 

"Room for easing will only appear next year," he said. 

Consultancy Capital Economics also pushed back its expectation for BI's first rate cut from October to December. 

Its analyst Gareth Leather said the Fed's hawkish comments appeared to have uneased BI, noting that the Indonesian central bank must keep the rupiah steady due to the country's large stock of foreign currency debt. 

BI kept its GDP growth target for 2023 at a range of 4.5% to 5.3%, compared with 2022's growth of 5.3%. 

Inflation, which peaked near 6% last year on high energy and food prices, returned to BI's 2% to 4% target earlier than expected this year. In August, inflation remained close to the midpoint of the range at 3.27%. 

BI has also begun offering its own notes this month in a tweak to its monetary operations intended to deepen domestic financial markets and attract foreign capital inflows. 

Warjiyo said market has responded positively to the notes, with multiple over subscriptions in its first two auctions, during which BI sold a total of 37.7 trillion rupiah ($2.45 billion). Some 5% of the notes have been traded in the secondary market, mostly bought by non-residents, BI said. 

The governor said the size of future auctions would depend on market appetite. 

Source: Reuters 

Indonesia to fully stop operation of PLTUs in 2058: Minister

The government will stop the operation of coal-fired power plants (PLTUs) in 2058, or two years before Indonesia targets to achieve zero carbon emissions, Minister of Energy and Mineral Resources (ESDM) Arifin Tasrif stated. 
 
 

"After 2030, PLTUs will no longer be developed. Additional power plants after 2030 will be sourced from new and renewable energy (EBT). The operation of PLTUs will completely stop in 2058," he remarked at the 2023 Indonesia Energy Transition Dialogue on Monday. 

In order to meet the electricity needs, which are estimated to reach 1,942 terawatts per hour (TWh) in 2060, the minister noted that Indonesia will build a power plant sourced from EBT, with a capacity of 700 gigawatts (GW). 

 
Tasrif stated that in 2030, solar energy utilization will be increased on a massive scale, geothermal energy utilization will also be maximized to 22 GW, and in 2039, nuclear power will be commercialized as an energy source, with capacity increasing to reach over 30 GW in 2060. 

 
"Meanwhile, hydroelectric power plant (PLTA) pump storage will be developed in 2025, while the battery energy storage system will be built on a large scale in 2034," he remarked. 

 
The minister highlighted that the government is also preparing funds to reduce the high risk of developing geothermal energy electricity sources in 20 working areas, with the potential to produce 6,783 megawatts of electricity. 

 
According to Tasrif, electricity from more environmentally friendly sources will meet public demand from the government's electrification program, such as the use of electric vehicles and electric stoves equipped with the construction of charging stations. 

 
He noted that these programs are expected to reduce people's dependence on fossil fuels that are not environmentally friendly. 

 
However, in conducting energy transition, he stated that Indonesia still faces several challenges, including the availability of technology, the need to improve technological practices, the availability of supporting infrastructure, and limited funding. 

 
The minister remarked that Indonesia is currently working with the Just Energy Transition Partnership (JETP) to accelerate a just energy transition, especially in the power plant sector. 

 
"We still have a lot of work to do, and we hope to continue to collaborate with other countries," he stated. 

Source: Antara news