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Uncertain demand makes investors queasy about new capital city: Apindo
Apindo says the government should address potential investors' concern over the new capital's small initial market composed of just civil servants and how it might resolve the demand issue.
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Cranes and other heavy equipment operate on Dec. 7, 2023 at the construction site for the Central Government Area (KIPP) of Nusantara Capital City (IKN) in North Penajam Paser regency, East Kalimantan. (Antara/M Risyal Hidayat)
T
he Indonesian Employers Association (Apindo) has blamed concerns over the potential market in Nusantara for the private sector’s reluctance to invest in the nation’s new capital.
Apindo chairwoman Shinta Kamdani said the main obstacle to the lucrativeness of investments in the city was its small population, adding that the government needed to address this issue.
Population figure was crucial to fostering a supportive investment climate in the greenfield megaproject worth Rp 466 trillion (US$28.4 billion), the business leader underlined.
“We are committed to assisting local business stakeholders with starting investments in [Nusantara]. However, we also expect there to be demand. Where will the demand come from?” Shinta said on Tuesday, as quoted by Bisnis.com.
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Concern over demand has prompted many business stakeholders to adopt a wait-and-see approach instead of investing in the new capital. Since it does not have a large population for the foreseeable future, many potential investors are worried the region might not have much of a market for their products and services.
Shinta also mentioned lack of certainty in the transition to Nusantara as another factor keeping potential investors at bay. This presented a challenge for investors, as they could not depend on the relatively small number of civil servants set to be among the city’s first inhabitants.
