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Businesspeople need regulatory certainty, simplicity to invest in new capital city
“As long as the government fixes the regulatory complexity, infrastructure is attractive. The problem with first of a kind project is the government struggles to even get to the tender stage due to regulatory complexity so it needs a way to simplify [things]."
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Aerial view of Balikpapan-Samarinda toll road which will be one of the access gates into Indonesia's new capital city located in North Penajam Paser and Kutai Kartanegara, East Kalimantan. (JP/Akbar Nugroho Gumay)
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usinesspeople require regulatory certainty and simplicity in order to invest in the development of the new capital city, even more so than financial incentives, experts have said.
Pricewaterhouse Coopers (PwC) infrastructure finance adviser Julian Smith told The Jakarta Post that the government needed to get rid of regulatory complexity and time-consuming ministry coordination on "first-of-a-kind" projects that often resulted in infrastructure project delays.
The authority for new capital city needs to have the power to make regulations that override the regulations of individual ministries, said Smith in a phone interview, referring to waste-to-energy projects as an example of time-consuming coordination as businesses have to comply with waste, power and public-private partnership regulations.
Smith said the capital city area could be seen as a regulatory sandbox, in which if such regulation proved to be beneficial then it could be copied across the country.
“As long as the government fixes the regulatory complexity, infrastructure is attractive. The problem with first of a kind project is the government struggles to even get to the tender stage due to regulatory complexity so it needs a way to simplify [things],” he said.
President Joko “Jokowi” Widodo announced in August a plan to relocate the capital to North Penajam Paser and Kutai Kartanegara regencies in East Kalimantan in a bid to ensure economic development is evenly spread across the country after being centered on Java for decades.
It is expected that 54.4 percent of the Rp 466 trillion (US$32.73 billion) required for the plan will come from public-private partnership (PPP) schemes and will be used to fund the construction of government offices, courts, schools, hospitals, correctional facilities and related infrastructure.
