Indonesia New Capital City Nusantara
The Indonesian government is building a green forest city as it moves its capital from Jakarta to Nusantara in the jungle of Borneo with an estimated project value of $45 billion. The distance between Jakarta and Nusantara is 1,236 kilometers and it can be reached in 2 hours by air from Jakarta to Balikpapan and then followed 90 minutes driving by car.
Construction of the new capital, called Ibu Kota Nusantara or IKN in Indonesian, started in July 2022 and has several phases, with the construction of government ministries offices already under way. The relocation of the seat of government from Jakarta to Nusantara, East Kalimantan, is a crucial component in Indonesia’s grand design towards achieving the “Golden Indonesia 2045 Vision” that aims to move from a middle-income country to a high-income country.
Nusantara is Indonesia’s first city that declared its regionally-and locally determined contributions (RLDC) to achieve its carbon-neutral goal by 2045 and it will have its own Voluntary Local Review (VLR) to track progress towards meeting Sustainable Development Goals (SDGs) at the local level and accelerate Indonesia’s attainment of the UN 2030 Sustainable Development Agenda. In October 2023, thirteen United Nations agencies (ESCAP, UNDP, ILO, UN Women, FAO, UNESCO, UN Habitat, UN Environment Programme, UNIDO, UNOPS, UNFPA, UNICEF, and UN Migration) came together to declare their support for the sustainable development endeavors of Nusantara.
The Nusantara National Capital Authority (OIKN) has completed five phases of groundbreaking from September 2023 to March 2024. The first groundbreaking took place on September 21-22, 2023, the second one on November 1-2, 2023, the third on December 20-21, 2023, the fourth one on January 17, 2024, and the fifth one on February 29-March 1, 2024. OIKN has also established an authority-owned enterprise, PT. Bina Karya, which represents the authority on commercial ventures, designed to expedite business-to-business dealings with the private sector.
The Indonesian government has provided various incentives and compensation to corporations interested in investing in Nusantara, regulated in Government Regulation No. 12/2023 concerning Business Licensing, Ease of Doing Business, and Investment Facilities for Business Actors in the Capital City of Nusantara. These incentives and compensations include corporate income tax (PPh) at 0% over 10 years, Value-added tax (PPN) for imports at 0%, Luxury goods sales tax (PPnBM) at 0%, Import Duty at 0%, as well as the Land and building tax (PBB) at 0% for 10 years.
The U.S. government through U.S. Trade Development Agency (USTDA) has supported the sustainable development of Nusantara by offering several programs. The first one was the Nusantara Business Forum took place in early March 2024, which discussed smart city solutions and related commercial opportunities to improve the livability and sustainability of the new capital. Other USTDA projects on OIKN include: the Nusantara Procurement and Project Management Workshop under the USTDA Global Procurement Initiative, the New Capital Reverse Trade Mission to the U.S. to introduce Indonesian officials to U.S. city solutions and Nusantara Smart City Technical Assistant to support the preparation of new projects for Nusantara’s smart city infrastructure.
For more information, please kindly contact: Commercial Specialist Ms. Yulie Tanuwidjaja (Yulie.Tanuwidjaja@trade.gov)