Indonesia Announces Huge Incentives For Businesses Investing In Country’s $ 34 Billion Under Construction Capital City Nusantara

Indonesia President Joko “Jokowi” Widodo has unveiled a slew of incentives to businesses investing in Indonesia’s planned new capital, Nusantara, including tax holidays of up to 30 years and 95 years of land use permits.

Among the incentives offered is removing import taxes on capital goods and tax deduction for research and development facilities in the proposed capital city.

The government will prioritise and incentivise investments in renewable energy, toll roads, ports and airports, public transport, industrial parks, health care and education.

The Indonesian government plans to develop the new capital city in five stages from 2022 to 2045. The government plans to raise 80% of the $30 billion needed for the Nusantara infrastructure development from public-private partnerships and the private sector, with the state budget covering the remaining 20%.

The first phase will focus on building weirs, toll roads, a state palace, and housing for civil servants and will be funded entirely by the State Budget.

The new capital city Nusantara (meaning- archipelago), encompasses an area of 180,000 hectares between the regencies of Kutai Kartanegara and Penajam Paser Utara. It is located in East Kalimantan, a province comprising of 3.5 million people and endowed with natural resources, including oil and gas, timber, and oil palms.

President Joko Widodo announced the decision to relocate the capital in 2019.

The new capital was proposed to lessen the infrastructure burden on Jakarta, a megalopolis of 10.5 million congested, plagued by air pollution, and gradually falling into the Java Sea. The burden on Java island is also increasing because it is now home to 150 million people, or 54 per cent of the population.

President Joko Widodo also envisions Nusantara as a leading fintech hub in Asia by attracting a nucleus of financial technology companies, including startups.

“We will build a financial center [in Nusantara], but not like in Singapore or Hong Kong. It will be a fintech center. We will also offer very competitive investment incentives there.” the president promised.

The Indonesian government has approved 100% tax exemption for up to 25 years for business units set up by banks, insurers and Islamic finance companies in the new capital. Other financial services companies, including the capital market, pension funds, venture capital firms and fintech companies, can apply for an 85% tax deduction.

Global companies that move regional offices to Nusantara will be eligible for full tax exemption for ten years. Exemptions from personal income tax for Nusantara-based company employees will also be offered.