Antara/Akbar Nugroho Gumay

President Joko “Jokowi” Widodo has announced that the location of the new national capital will be in some administrative areas of North Penajam Paser regency and Kutai Kartanegara regency, East Kalimantan province.

In short, the plan to relocate the capital is motivated by two reasons: physical-empirical and political-economic.

The physical-empirical reason signifies the increasingly poor carrying capacity of the environment, congestion, urban sprawl, water crisis and land conversion. While the economic and political reasons include symbols of national identity, reflection of diversity and equitable development.

Jakarta has become the center of nearly everything. As the country’s trade center with a contribution of 20 percent to the national gross domestic product (GDP) of the trade sector, the financial services center with a contribution of 45 percent to the national GDP of the financial services sector, and the services center, which contributes 68 percent to the national GDP of the services sector.

The most strategic central business district (CBD) in Jakarta is known as the golden triangle, including Jl. MH. Thamrin, Jl. Sudirman and Jl. Gatot Subroto. The CBD has also expanded outside the golden triangle, namely Jl. Rasuna Said, Jl. TB Simatupang and Jl. MT Haryono. Not only are they filled with high-rise buildings such as office towers, hotels, shopping centers and luxury apartments, many buildings in CBDs are additionally used as government and embassy offices and regional government representative offices.

After the completion of the new capital, most government buildings in Jakarta, mostly in prime areas, would become vacant.

One of the biggest challenges in relocating the capital would be financing. The National Development Planning Agency (Bappenas) predicts that the relocation of the capital requires at least Rp 466 trillion (US$32.96 billion).

The financing scheme will be divided into three sources: Rp 89.4 trillion (19.2 percent) from the state budget; Rp 253.4 trillion (54.4 percent) from public private partnerships (PPPs); and Rp 123.2 trillion (26.4 percent) in private and state-owned enterprise (SOE) funding.

Based on the proportion of available financing, the government leans to reduce the portion of state budget in this scenario. Instead, the PPP scheme is designed to take the largest portion.

Alternative financing can be raised by optimizing state assets in Jakarta that are expected to become idle when the capital is relocated. One way is by using state assets to become a recurring source of income as nontax state revenue. This alternative can be used as a source of funds for financing the project under the PPP and private-SOE’s scheme in the new capital.

The State Wealth Directorate General (DJKN, 2019) noted that the estimated revaluation results of state assets in prime areas such as Jl. Medan Merdeka, Jl. MH Thamrin, Jl. Sudirman, Jl. Gatot Subroto, Jl. Rasuna Said and Jl. MT Haryono are estimated to reach over Rp 150 trillion with an estimated land area of 3 million square meters.

The schemes, according to Government Regulation No. 27/2014, will comprise the Lend-Use, Build Operate Transfer or Build Transfer Operate, and Long Leases. Those schemes will provide royalties as recurring income. Revenue from state assets could reach Rp 4.2 trillion per year. This value could be allocated as rent payments from state assets built under the PPP scheme and private-SOE cooperation in the new capital.

Thus several strategic steps are required. The first is to value the assets in which the government will collaborate with the private sector and/or SOE.

This is absolutely necessary because the government needs to know the real market value of the assets with potential for such an arrangement. The valuation must be carried out by an independent party, a public appraiser. Therefore, the role of the appraiser becomes crucial because appraisers are the only professionals that have the competence to issue an opinion on the market value of an asset.

Secondly is zoning modification where state assets are located. Based on the DKI Jakarta Spatial Plan, almost all state assets in Jakarta are in the Government Zone. Therefore, to attract the private sector to use the assets, zoning modification is a must just after government activities move to the new capital.

Not only zoning changes, land use intensity also needs to be increased in order to be able to build a financially feasible property such as an increase in building floor coefficient and building base coefficient.

Third, the provision of incentives. Incentives are needed as a stimulus to increase investment or interest in exploring asset utilization with the government. Incentives can be tax breaks and ease of permission.

This also could be an answer to the anxiety of the property market players about the sluggishness of the property market over the past few years.

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Certified valuer and real estate analyst Amin, Nirwan, Alfiantori and Partners Valuation Firm

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