The relocation of Indonesia’s capital from Jakarta to a new location in Kalimantan has been discussed for several decades. This discussion was triggered mainly due to the challenges faced by Jakarta, including overpopulation, traffic congestion, and environmental degradation. In August 2019, President Joko Widodo announced the decision to move Indonesia’s capital, and to support this move, the government issued Law No. 3 of 2022 on State Capital. Among others, this Law established a new government agency, the State Capital Authority (Otorita Ibu Kota Negara or “OIKN”), which is a ministry-level agency responsible for the preparation, development, and relocation of the capital, as well as the administration of regional governments in the capital.
The new capital, named Nusantara, is intended to be the centre of the Indonesian government’s activities and to achieve this goal, the government hopes to attract both domestic and foreign investors into Nusantara. To facilitate investment in Nusantara, the government recently issued Government Regulation No. 12 of 2023 on Business Licensing, Ease of Doing Business, Investment Facilities for Business Players in the State Capital (“Regulation“), which offers various incentives that we will discuss in more details below.
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