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Softbank, govt clashed over new capital: Sources
The sources said Softbank founder Masayoshi Son had wanted the government to relocate all industries in Jakarta to East Kalimantan and to ensure that the capital had a minimum of 50 to 75 million inhabitants.
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oftbank Group founder Masayoshi Son and government officials had been in dispute over key details of the new capital long before the Japanese company withdrew from President Joko “Jokowi” Widodo's ambitious pet project, sources familiar with the matter have said.
The sources, who asked not to be named because of the confidentiality of the information, said Softbank founder Masayoshi Son had wanted the government to relocate all industries in Jakarta to East Kalimantan and to ensure that the capital had a minimum of 50 to 75 million inhabitants in the first phase of relocation so that it would be able to deliver the desired returns.
Government officials had said they could not force industries to relocate, and that Jakarta, which has a population of around 10.5 million, already suffered from congestion and pollution at its current scale, said the sources.
Jakarta and the core area designated for the new capital city are of roughly the same size at 66,150 hectares and 56,180 hectares, respectively.
“That was impossible,” said one of the sources, who attended a meeting between Softbank and the Office of the Coordinating Maritime Affairs and Investment Ministry.
The information sheds new light on the reasons behind Softbank’s withdrawal from the new capital project, a major blow to the endeavor, as the Japanese company was reportedly ready to invest US$30 billion to $40 billion in the new capital, a huge portion of the initial development cost.
Building the basic infrastructure of the capital is expected to cost around Rp 466 trillion ($32.6 billion). The government plans to pay one fifth of the bill with the state budget, leaving the remaining four fifths dependent on private investment or public-private partnerships.
According to one of the sources, Son insisted on Softbank's proposal, saying, “I don’t do small things […] I want to do big things”. The Office of the Coordinating Maritime Affairs and Investment Ministry turned down the proposal.
The sources also said Son wanted guarantees that Softbank would select all the designs and contractors in exchange for the funding.
Softbank Group and the National Development Planning Agency (Bappenas), which oversees development of the new capital, did not respond to requests for comment.
Read also: Indonesia seeks new capital investors after Softbank exit
SoftBank representative director and chairman Ken Miyauchi said on Friday that the main reason for the company’s departure was the unattractive return on investment "in terms of the time frame".
The Japanese firm would still invest in Indonesia, he said, but in another project in West Sumatra, Kompas.com reported.
Coordinating Maritime Affairs and Investment Minister Luhut Binsar Pandjaitan denied that there had been such a dispute and that investors were not enthused about the project’s potential returns.
“No, no. There is nothing to do with that,” Luhut told reporters in Jakarta on March 17.
Read also: ADB pledges technical support for new capital city
Center of Economics and Law Studies (CELIOS) director Bhima Yudhistira said on Saturday that it was reasonable for investors, including Softbank, to assess projected population and industry growth to calculate returns over the long term.
“It is reasonable to ask for those [metrics] in the new capital because having a law and political will will not suffice,” Bhima said.
