Acceleration of Development of Nusantara Capital
The President of the Republic of Indonesia recently issued a Presidential Regulation No. 75 of 2024 on the Acceleration of the Development of Nusantara Capital (“Regulation 75/2024”). The background of the issuance of Regulation 75/2024 is to fulfill the provision of basic and/or social services as well as commercial facilities in order to achieve the creation of a habitable city ecosystem in the Central Government Core Area of Nusantara Capital City.
We set out key provisions under Regulation 75/2024 in this Newsflash.
♦ Key Definitions
- The National Capital named Nusantara, hereinafter referred to as the Nusantara Capital (Ibu Kota Nusantara or “IKN”) is defined as a special administrative unit equivalent to a province, whose territory serves as the seat of the National Capital as established and regulated by law.
- The Central Government Core Area (Kawasan Inti Pusat Pemerintahan or “KIPP”) is defined as part of urban area within the strategic national area of the IKN, serving the primary function as the national government center.
- Assets Under the Control of the Nusantara Capital Authority (Aset Dalam Penguasaan or “ADP”) is defined as land within the IKN area that is not related to the administration of the government.
♦ General Overview
Article 2(1) of Regulation 75/2024 provides that the implementation of the acceleration of the development IKN aims to create a livable city ecosystem, particularly in the KIPP, which includes the provision and management of basic and/or social services as well as commercial facilities. The provision and management of basic and/or social services as well as commercial facilities include the following:
In relation to the table above, Article 4(1) of Regulation 75/2024 provides that in order to accelerate the development of IKN, the Head of IKN Authority conducts the acceleration of the provision of basic and/or social services based on the funding from (i) the State Revenue and Expenditure Budget (Anggaran Pendapatan Belanja Negara or APBN), and (ii) other legitimate sources. In this regard, Article 4(3) of Regulation 75/2024 explains that the funding from other legitimate sources may be conducted through the procurement via direct appointment of entrepreneurs.
♦ Pioneering Entrepreneurs
Regulation 75/2024 also introduces the criteria of pioneering entrepreneurs. Article 5 of Regulation 75/2024 provides that the Head of IKN Authority may determine pioneering entrepreneur(s) for investment purposes from other legitimate sources in accordance with laws and regulations. The following are the criteria for the pioneering entrepreneurs:
- An entrepreneur that has expressed its interest and signed a letter of intent with the IKN Authority; and
- An entrepreneur that is willing to commence the construction in the IKN not later than 5 years from October 31, 2023, which means not later than October 31, 2028.
Furthermore, Article 7(1) of Regulation 75/2024 stipulates that the contribution for the management of ADP payable to IKN Authority by a pioneering entrepreneur may be either (i) at a rate up to Rp0,00, or (ii) be paid in installments.
♦ Determination of Land Value by the Head of IKN Authority
Article 6(1) of Regulation 75/2024 provides that in order to accelerate the implementation of the development of IKN, the Head of IKN Authority determines the land value in the IKN for:
- Management of ADP; and
- Implementation of Investments in the IKN.
Further, Article 6(2) of Regulation 75/2024 provides that the land value determined by the Head of IKN Authority based on the Land Valuation Zone, which follows the determination of the land value by a public appraiser (penilai publik).
Article 1(15) of Regulation 75/2024 provides that Land Valuation Zone is defined as a geographic zone consisting of one or more taxable objects that have a consistent average indicative value, bounded by the boundaries of ownership/possession of taxable objects within the administrative area unit of villages/sub-districts, without being bound by block boundaries.
♦ Certainty of Land Title Period
Article 9(1) of Regulation 75/2024 stipulates that the IKN Authority provides assurance of the period of the land titles through one initial cycle. Subsequently, the IKN Authority may grant a second cycle renewal to entrepreneurs, which possibility may be included in an agreement between the IKN Authority and an entrepreneur. The cycle includes the following:
Furthermore, Article 9(4) of Regulation 75/2024 stipulates that the IKN Authority shall conduct an evaluation 5 years after the granting of the first cycle of land titles to assess the fulfillment of the following conditions:
- The land is still properly utilized and managed in accordance with its condition, nature, and the purpose for which the title is granted;
- The title holder still meets the requirements to hold the title;
- The conditions for granting the title are being met by the right holder;
- The land use is still in accordance with the spatial planning; and
- The land is not indicated to be abandoned.
The issuance of Regulation 75/2024 to some extent may be fresh air or advancement to the investors as the Government has set a legal certainty of land title periods. We will keep you updated with the latest information and regulations in relation to the development of IKN.
AKSET
Please contact Johannes C. Sahetapy-Engel (jsahetapyengel@aksetlaw.com) or M. Raehan A. Fadila (mfadila@aksetlaw.com) for further information.
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