Indonesia is pushing to relocate its capital to Nusantara due to overcrowding and rising sea levels. This is because 60% of the total population is concentrated on Java Island, where Jakarta, the current capital, is located, making it too economically as well as population. Another important reason is that Jakarta’s ground is falling 7.5 centimeters on average every year due to rising sea levels and reckless development and rapid increase in high-rise buildings.
The relocation of the new capital is a project focused on Indonesian President Joko Widodo. The Indonesian government plans to build Nusantra as an eco-friendly smart city that replaces Jakarta. The Indonesia plans to officially declare Nusantara as the new capital in the first half of next year and relocate the presidential palace, office, city hall, and major administrative departments in time for Independence Day in August.
President Jokowi, whose term ends in November next year, is stepping up efforts to relocate the capital. On the 8th, the Indonesian government announced massive tax benefits for the relocation of the new capital. Companies that invest more than 10 billion rupiah (about 860 million won) in Nusantara will be given up to 100% corporate tax exemption for 10 to 30 years. It also promised tax breaks for foreign companies moving its headquarters to Nusantara and financial companies established in financial zones. Various R&D costs will also be deducted from taxes and capital goods import taxes will be exempted.
The Indonesian government, which promised to exempt residents living and working in Nusantara from income tax for up to 30 years, also decided to exempt real estate transfer taxes, acquisition taxes, and cognitive costs for various registrations by a certain period. The policy will be applied immediately from this year, and the earlier you invest, the longer the tax exemption period will be.
The unprecedented large-scale support benefits are because the private sector desperately needs to participate and secure investment in the construction of the new capital. Although $34 billion is needed for the construction of the new capital, the Indonesian government plans to cover only 20% of it with government funds and raise the remaining 80% through private investment. The Indonesian government said more than 100 letters of intent to invest have been received from domestic and foreign companies, including Malaysia, China, and the United States, but not many companies have confirmed their investments yet.
However, since the construction progress rate is only 8% so far and President Jokowi’s term ends in November next year, there is still a lot of concern about whether the new water project can continue afterwards. Along with the relocation of the capital, Indonesia civil servants also have to move to a new capital semi-forcefully, and there is also a task to resolve the growing dissatisfaction centered on civil servants.
