Jakarta. It can’t be helped for Indonesia to ask foreign investors to fund the collosal project of relocating the capital from Jakarta to Nusantara in East Kalimantan, but it is best for the government to not rely on one source of foreign investment, according to an analyst.

President Joko “Jokowi” Widodo has been pursuing international funding for the Nusantara megaproject whenever he meets world leaders or business representatives. Jokowi recently said the total costs to build Nusantara amounted to a whopping $33 billion. 

Ganewati Wuryandari, a researcher at the Research Center for Politics at the National Research and Innovation Agency (PRP-BRIN), said it was understandable that the government had been sparing no effort to attract foreign investors to help Indonesia build a city from scratch. 

“In an ideal world, it is best for us [Indonesia] to entirely fund the Nusantara project ourselves, but considering how huge the investment is needed, of course, that would be impossible. Especially since our economy has just recovered from the Covid-19 pandemic,” Ganewati told the 2023 Conference on Indonesian Foreign Policy in Jakarta over the weekend.

“But one thing that we should keep in mind is we must diversify our sources of investment. We should minimize the risks by not relying on one single country,” Ganewati said.

China has been a major source of foreign direct investment (FDI) over the past years. Government data shows it consistently sits in the top 3 of Indonesia’s largest foreign investors in 2019-2022. China became Indonesia’s second-largest FDI source in January-September 2023. FDI from China amounted to $5.6 billion over the said period.

Ganewati directed the forum’s attention to the China Index which captured Chinese influence across several domains, including the economy, in other countries. The 2022 China Index placed Indonesia in 16th place out of 82 countries with the economy becoming one of the most Chinese-influenced domains. Indonesia ranks just behind Kazakhstan.

“We ranked 16th on the China Index. This shows that there is a correlation between a country’s economic dependence on another country with the latter’s influence. Such indexes should be a warning,” Ganewati said.

The Nusantara Authority Body on Nov. 20 reported that the megaproject had received 305 letters of intent (LOIs) from domestic and foreign investors wishing to help build the new capital. 

Data shows that 172 of those LOIs came from domestic institutions. Singapore emerged as the foreign country that showed the most interest in the Nusantara with 27 LOIs. Seconded by Japan (25 LOIs). Malaysia and China both ranked third place by submitting 19 LOIs, respectively. Even so, the submission of LOIs is only the first step before the actual investments take shape. Interested investors will still need to have 1-on-1 meetings and undertake feasibility studies, among others.

President Jokowi not long ago made headlines for saying that the megaproject had not received foreign investments. According to the Capital City Authority Body, while it is true that no foreign investor has made an individual investment in the project, a number of foreign institutions have already partnered with Indonesian firms. For instance, local real estate developer Pakuwon Jati has partnered with American hospitality giant Marriott International to build hotels in Nusantara.

“So some have partnered with domestic partners. This aligns with what President Jokowi wants, that foreign investors must partner with domestic firms,” Agung Wicaksono, the deputy for funding at the Nusantara Authority Body, told a press briefing on Nov. 20.