Home Blog Unlocking Investment Opportunities in The New Capital of Indonesia Business Licenses | Company Registration Unlocking Investment Opportunities in The New Capital of Indonesia InCorp Editorial Team 4 June 2025 6 minutes reading time Table of Contents Jakarta is No Longer The Capital City of Indonesia by 2024 Why the New Capital Nusantara is a Prime Investment Opportunity Investment Opportunities in the New Capital Nusantara Challenges in Investing in the New Capital Nusantara Conclusion In recent years, the proposed new capital of Indonesia, Nusantara, has generated much interest and discussion. With plans to relocate the capital from Jakarta to the island of Borneo, the Indonesian government aims to decentralize economic activity and alleviate Jakarta’s current issues. Moreover, the construction of Nusantara as the new capital of Indonesia offers immense investment opportunities for businesses and individuals alike, with ample potential for developing new renewable projects, infrastructure, and real estate. This article explores the investment prospects available in the new capital of Indonesia and the incentives provided to those who participate in this unique opportunity. Jakarta is No Longer The Capital City of Indonesia by 2024 Despite pandemic-related setbacks, the relocation of Indonesia’s new capital to the island of Borneo is scheduled to take place in the first half of 2024. Initially presented in September, the proposal involves relocating the capital from Jakarta to a 56,180-hectare area in East Kalimantan province. If the bill is passed into law by parliament this year, it will provide the legal basis for the 489 trillion rupiah project to proceed before the 2024 presidential election. Nevertheless, there are worries regarding deforestation and its potential environmental repercussions. The relocation aims to promote a more equitable distribution of economic activity throughout the country, mitigate income inequality, and address the issues of traffic congestion, flooding, and pollution currently faced by Jakarta. Why the New Capital Nusantara is a Prime Investment Opportunity The estimated cost to construct the planned city of Nusantara is over $35 billion, with the Indonesian government funding around 19% of the total cost. The remaining funding is open to foreign investors, with commitments from investors in UAE, China, South Korea, and Taiwan and offers from European countries. The planned city offers various investment opportunities in infrastructure, industrial complexes, water treatment facilities, housing, hotels, chemical and green industries, ports, and airports. The Indonesian government also encourages investment in transportation and renewable energy outside the new capital. The government offers tax holidays, super-tax deductions, 0% withholding tax, additional tax benefits for the capital city’s development, and non-fiscal incentives. Infrastructure projects for the first development phase are underway, including a water reservoir and a toll road extension. With Indonesia’s growing economy and various incentives for investors, investing in the new capital of Indonesia is a compelling opportunity. Read more: Indonesia to Adopt Global Minimum Tax in 2023: What It Means for Businesses Investment Opportunities in the New Capital Nusantara The Indonesian government offers several incentives to attract foreign investment to its ambitious new capital city project, Nusantara. The project, which will sit on a massive 632,850-acre site, presents opportunities for investors from various industries as it will require both soft and hard infrastructure developments. The project aims to transform inland forests into a new administrative center to be a smart city with efficient operations and better government services, expand maritime infrastructure, and develop renewable energy sources. The sectors that are outstanding opportunities for foreign investors are: 1. Development of Smart City Nusantara aims to be a smart city that utilizes information, communication, and technology to enhance government services and operational efficiencies. The government plans to use the Internet of Things (IoT) to deliver connected solutions, such as monitoring traffic flows and energy conservation. The capital city will have significant green open spaces, with 75% of the planned site designated as such. 2. Maritime Infrastructure The government aims to establish Indonesia as the primary hub of Indo-Pacific maritime activity through the Global Maritime Fulcrum (GMF) master plan. The GMF involves investing over $6 billion to expand ports in the archipelago and reduce logistic costs for investors. The sea toll program is the flagship project under GMF, aiming to reduce the price disparity of essential goods between the main islands and smaller isolated islands. 3. Renewable Energy Indonesia aims to achieve a renewable energy mix of 25% by 2025. The construction of the new capital from the ground up offers significant opportunities for creating fresh renewable initiatives. East Kalimantan province has considerable potential for clean energy, including wind power, biofuels, solar power, hydropower, and geothermal energy. Challenges in Investing in the New Capital Nusantara Firstly, as the construction of the new capital city is anticipated to take 15-20 years and comes with considerable opportunity costs, there is a concern that the IKN project may divert attention away from the government’s primary goal of managing the pandemic. There are also worries that the conflict between Russia and Ukraine may immediately influence financial and corporate decisions. Secondly, IKN Law might have formal and material flaws since it was approved swiftly and without adequate public input, which is against the law. There are several petitions filed against the IKN Law. Thirdly, the underlying studies need to be more comprehensive and provide a sound philosophical or technical analysis, which raises questions about the accuracy and reliability of the project. Fourthly, The IKN mega-project is viewed as a risk to vulnerable biological habitats and environmental sustainability, raising concerns about ecological deterioration. Fifthly, as there are concerns about the social disparity, the growth of urbanization, and social conflict, moving the capital may lead to new inequality and social strife. Therefore, the government must devise a plan to address this worry. Lastly, as the majority of the land in the IKN area is already under the hands of private companies in the agriculture, forestry, and mining sectors—many of which have links to elite officials and their relatives—there are concerns about conflicts of interest in land concessions. Conclusion The move to IKN is a momentous one. Multiple ministries are involved in making the transition as smooth as possible. However, funding is still primarily needed. Multiple efforts have been made to the private sector through socialization to invite investments into the new capital of Indonesia. The project’s novelty has resulted in various incentives offered to participants, making it a unique investment opportunity. Investors who want to become part of this movement may benefit from the services provided by InCorp Indonesia (An Ascentium Company) regarding company registration and business license. Read Full Bio Verified by Hotdo Nauli Senior Legal & Delivery Manager at InCorp Indonesia Hotdo heads the Legal and Delivery team at InCorp Indonesia, managing Product Registration, Legal Advisory, and Business Licensing. With over 8 years of experience, she focuses on compliance and integrity, ensuring all client operations align with Indonesian laws and regulatory standards, including contract reviews and sector-specific licenses. She is also a licensed advocate and a member of the Indonesian Advocates Association (PERADI). Frequently Asked Questions Will the government check the minimum paid-up capital for doing business in Indonesia? The government will check the minimum paid-up capital, IDR 10,000,000,000. Fulfilling this requirement is a must. Can an individual or a business organization be a shareholder in a PMA company, and is there a minimum number required? A limited liability corporation is required by Indonesian company law to have two or more shareholders, who may be either a legal entity or an individual. The foreign investor must find a second shareholder to own shares in the PMA firm for investments that are 100% open, which could be an affiliated party. Are there investment facilities provided for foreign investors in Indonesia? A newly established PMA company in Indonesia is typically provided with import facilities, tax holidays, tax allowances, or investment allowances. Import facilities Investors in Indonesia, particularly in manufacturing, may benefit from import tax exemptions for capital goods and raw materials through the Master List Facility. The imported goods must meet specific criteria, such as not being produced locally or not meeting industry demand despite local production. Tax holiday The government offers CIT reductions of 50% or 100% for 5–20 years for listed pioneer industries, based on investment value. After this period, a CIT reduction of 25% or 50% applies for two fiscal years. Non-listed sectors can also apply by meeting criteria demonstrating pioneer industry status. Pioneer industries are industries that have a wide range of connections, provide additional value and high externalities, introduce new technologies, and have strategic value for the national economy. Tax allowance For companies in certain designated areas or regions, the government may provide the following tax concessions: Net income reduction up to 30% of the amount invested, prorated at 5% annually for six years, on condition that the assets invested are retained for the same duration. Accelerated depreciation and/or amortisation deductions An extension of tax losses carried forward for a maximum of ten years A 10% (or lower if treaty relief is available) withholding tax rate on dividends paid to non-residents The applicant eligible has to meet high-level-criteria for the above tax facilities: High investment value or for export purposes High manpower absorption High level of local content Investment allowance The government offers a reduction in net income of up to 60% of the investment, distributed at 5% annually over six years of commercial production, contingent upon the retention of invested assets for the same duration. To qualify, applicants must meet business line eligibility criteria and employ a minimum of 300 Indonesian workers in the project. Super deduction This facility could be granted to certain businesses, such as: 60% reduction in net income of the amount of tangible fixed assets invested for labor-intensive industries, distributed throughout a certain time frame. Up to 200% reduction in the gross income of the amount spent for human resources development in certain competency activities. Up to 300% reduction in gross income of the amount spent for certain R&D activities in Indonesia. What are the functions and responsibilities of a PMA company’s board and management? Indonesian Company Law establishes a two-tier governance system with Directors managing day-to-day operations and representing the company, while the Board of Commissioners supervises and advises them. The articles of association may empower board of Commissioners to provide consent or assistance to Directors for specific legal acts. Get in touch with us. 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