The Government of Indonesia recently issued a new law in connection with its plan to relocate the State Capital to Nusantara in Kalimantan ("Nusantara"). Matters related to the capital relocation from Jakarta to Nusantara are now stipulated under Law No. 3 of 2022 on the State Capital ("State Capital Law") issued on 15 February 2022 that governs several matters including but not limited to the City Development Plans, Transfer of Land Rights, and Establishment of Regional Authority. In this article, we summarize the key points in State Capital Law, particularly the development plan, regional government authority, and transfer of land rights.

Development Plan

The development plan of Nusantara State Capital is divided into five stages starting from 2022 until it deems completed in 2045. The development stages are as follows:

Stages

Development Period

Development Plans

Stage 1

2022 - 2024

This stage will involve three major works, including those on urban, infrastructure, and economic developments.

Stage 2

2025 - 2029

At this stage, the Government of Indonesia is targeting to complete the main infrastructure to be connected with the new developed areas after the completion of Stage 1.

Stage 3

2030 - 2034

Preparation of the supporting infrastructure includes the public transportation, drinking water treatment plants, power supply facilities, and waste management.

Stage 4

2035 - 2039

Commencement of developments in the education and health sectors to support the economic growth of Nusantara.

Stage 5

2040 - 2045

The development of Nusantara is expected to reach its peak at Stage 5, marked by the sustainable industrial development and stable population growth to run the city's productivity.

Regional Government Authority

Indonesian government will soon form the governing regional authority for the Nusantara State Capital, named the National Capital Authority of Nusantara ("Authority"). The Authority is responsible for the preparation, development, transfer of Nusantara State Capital activities, as well as implementation of the Special Regional Government of Nusantara State Capital.

Moreover, the Authority will be granted with the following special authorities:

  1. Issuing investment licenses;
  2. Providing facilities to ease business activities; and
  3. Granting special facilities to parties that support the financing of the preparation, establishment, and relocation of Nusantara, as well as development of Nusantara and partner areas.

Based on our reading of the concept of the Authority, this will be quite similar to the Authority that was established in Batam.

Funding Scheme

The funding of Nusantara is not solely sourced from the State Revenue and Expenditure Budget (Anggaran Pendapatan dan Belanja Negara or "APBN"), but also from various other schemes involving business actors:

  1. Government and Business Entity Cooperation schemes (Kerjasama Pemerintah dan Badan Usaha or "KPBU") prioritizes on infrastructure provisions in Nusantara, including:
    1. KPBU Tariffs (User Payment): the government will cooperate with Private Entities by returning the investment in the form of User/Costumer Payments; and
    2. KPBU Availability Payment: periodic payments made by the Minister/Head of Institutions to Private Entities for the availability of infrastructure services in accordance with the quality and/or criteria as specified in the PPP Agreement.
  2. Participation schemes for State-Owned Enterprises (Badan Usaha Milik Negara or "BUMN") and/or private companies, such as:
    1. BUMN, through investment cooperation with private companies in the implementation;
    2. BUMN, based on government assignments; and
    3. private companies, through private investments with incentives.

Land and Transfer of Land Rights

The Authority and other Indonesia's ministries and agencies will acquire lands in the site of Nusantara through forest land release and land acquisition mechanisms. They should be done in accordance with the prevailing laws and regulations on land acquisition for the purpose of public interest, or direct land acquisition. Moreover, the Authority is given the Land Use Rights (Hak Pakai) and Land Management Rights (Hak Pengelolaan).

Meanwhile, the general public, both individuals and legal entities, may obtain the Land Management Rights in Nusantara by entering into a Land Rights Agreement with the Authority. The duration of the agreement may be adjusted as needed.

The Condition with the Current State Capital, Jakarta

It is important to note that, until the stipulation of the date of the State Capital relocation through a Presidential Decree, the position, function, and role of the State Capital remains in hands of the Special Capital Region of Jakarta.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.