Do you Think IKN is Ready to Face The Ghost of Money?

IKN Criticism and Analysis Of its Financing Readiness

President Joko Widodo's bold vision to shift Indonesia's capital to East Kalimantan promises relief from overcrowding and environmental threats in Jakarta. However, as the colossal project nears, financial readiness becomes a glaring concern. 🌐💰

Critics argue that the whopping 466 trillion budget won't spare the national treasury, with prominent figures like Anies Baswedan and the Institute for Development and Finance (INDEF) casting doubts. 🤔💼

Join us on a deep dive into the intricacies of the IKN financing scheme — dissecting APBN's shaky ground, BUMN's rollercoaster profits, and the rollercoaster ride of PPP's projections. 🎢📉

Can domestic and foreign investments be the saving grace for this ambitious endeavor, or are we witnessing a financial tightrope act with uncertain consequences? 🤹‍♂️💡

As Indonesia stands at the brink of this transformative move, share your thoughts and concerns. The financial fate of the new capital hangs in the balance. 🇮🇩💬 #IKNFinances #IndonesiaCapitalMove #FinancialCritique

Let's dive more...

President Joko Widodo has had an ambitious development program during his period. The ambitious program is moving the country's capital. The country's capital will be moved to Panajam Paser, East Kalimantan. There are several reasons for moving the country's capital, including population density on the island of Java. Apart from population density, Jakarta's position as the nation's capital also causes GDP concentration on the island of Java. Contribution to the economy on the island of Java alone covers 58.49% of GDP (Indonesiabaik.id).

Apart from issues of equal population distribution and the economy, the relocation of Indoneasia’s capital is also motivated by environmental aspects. One of the things that is a strong driver for moving the country's capital is the threat of natural disasters. Jakarta itself has a 50% threat of flood disasters in under 10 years. The Jakarta area is also prone to natural disasters such as tsunamis, earthquakes, and volcanic eruptions. Land subsidence in the Jakarta area is also quite high, reaching 35-50 cm in the 2007-2017 period.

The various problems mentioned above provide a strong basis for immediately moving residents outside Java. Moving the capital is considered to have many positive values in Indonesia's development. However, moving to the capital city is not a simple matter. This is especially true if we consider the funding aspect. The budget needed for the development of the national capital (IKN) reaches 466 trillion. However, it is stated that these funds will not be fully charged to the APBN (www.in.go.id).

Even though it is considered that it will not burden the APBN the construction of the new national capital in East Kalimantan is not free from criticism. One of the criticisms was made by Anies Baswedan, Candidate for President of the Republic of Indonesia number 1 in the first presidential debate. Anies views that moving the capital requires large funds, but according to him, it will not solve the fundamental problems in Jakarta. This is because the focus of moving the capital city is only on moving ASN, while the economy will still be centered in Jakarta.

Apart from that, criticism was also leveled by the Institute for Development and Finance (INDEF). INDEF said that moving the capital was not strong enough to spur economic growth. INDEF research shows that moving the capital to East Kalimantan has no impact on GDP, aka 0 percent. Meanwhile, the impact on East Kalimantan's GRDP increased by 0.24 percent. Then, the negative impact was felt in other provinces, except North Kalimantan, South Kalimantan, and Papua in terms of GRDP (Hasibuan and Aisa, 2020).

Seeing the many criticisms and the small possibility of the impact of moving Indonesia’s capital on GDP, it is necessary to review the readiness aspect of the IKN financing scheme. The IKN financing scheme itself will be carried out through the APBN, BUMN, PPP, PMDN, and PMA. Reviewing the readiness of the APBN funding scheme can be carried out through analysis of state revenues and expenditures in the APBN. State revenue has tended to decline over the last five years, this is due to the pandemic situation which has had an impact on Indonesia. During the pandemic, Indonesia's APBN experienced a sharp decline to 1,629 trillion. Even though it increased in the following year, namely IDR 1,733 trillion, this increase was very far from pre-pandemic revenues, namely IDR 1,955 trillion. On the other hand, the state expenditure aspect has always experienced a deficit in the last 10 years. The biggest deficit occurred during the pandemic. State spending during the pandemic reached IDR 2595 trillion. So, it can be said that financing for the development of the country's capital based on the APBN is not yet ready (Siswantoro, 2022).

The new IKN development project will also be financed using the BUMN financing scheme. The assessment is carried out by reviewing profits and capital expenditures for infrastructure (Siswantoro, 2022). Under normal conditions before the pandemic, BUMN profit growth was only recorded as increasing in 2016, but after that BUMN profit growth continued to decline and reached its lowest point in 2020 as an effect of the pandemic. Even though in 2021, BUMN's profit growth increased rapidly from the previous year, reaching more than 200%, its profit performance was still lower compared to normal conditions. The explanation above shows that the profits obtained by BUMN are not consistent, both in terms of the development of profit value and the growth of profit value, so it will be difficult to predict in the future. This shows that the new capital financing scheme using BUMN is still not ready.

The third new capital financing scheme is the Public Privat Partnership (PPP). PPP is a financing scheme that President Jokowi relies on quite a bit. This is because the percentage reaches 80% in financing the Indonesian capital. Through this PPP scheme, the government invites the private sector to participate in contributing to infrastructure development, but this scheme is not privatization (Panayides et al., 2015). In terms of the value of IKN funding sources, the value of PPP project costs in 2017-2022 tends to show an increasing pattern, although it experienced the lowest decline in 2018, namely only 3251.6 million USD. However, after that, the estimated cost of PPP projects continues to increase and is even estimated to reach 22,579.57 million USD in 2022, or an increase of almost 7 times compared to the 2018 period (Siswantoro, 2022).

In terms of growth indicators, the estimated growth in PPP project costs in 2018-2022 tends to still fluctuate. In the 2018-2020 period, there was rapid growth in estimated PPP project costs, whereas in 2020 there was the highest growth, reaching 331%. However, after that, the estimated growth in PPP project costs again showed a decline in 2021-2022. So it can be said that the growth in project cost estimates is still inconsistent. Therefore, it can be concluded that the PPP financing scheme tends to be ready to fund the construction of a new national capital.

Next is the IKN financing scheme through Domestic Investment (PMDN). This can be seen from the development of the market capitalization value of the Indonesian Stock Exchange (IDX). The development of the market capitalization value of companies listed on the IDX in 2012-2021 is dominantly increasing every year. In 2012, the market capitalization value of companies listed on the IDX was only IDR 4,127 trillion or 47.9% of GDP, but 10 years later this value almost doubled to IDR 8,426 trillion. Apart from that, the development of the PMDN value in 2012-2021 shows a pattern of increasing every year. In 2012, the value of PMDN recorded in Indonesia was only IDR 92.182 trillion, but after 10 years this figure has increased almost 5 times to IDR 447 trillion in 2021 (Siswantoro, 2022). So it can be said that the financing scheme through private investment mechanisms is quite ready to fund the nation's capital. new.

Apart from domestic investment, IKN financing will also utilize foreign investment. According to the Investment Coordinating Board (BKPM), countries such as the United Arab Emirates (UAE), China, South Korea, Japan, and European countries have expressed interest in financing IKN. To assess the level of readiness of foreign investors in funding IKN, this research uses historical data related to the value and growth of Foreign Direct Investment (PMA) in recent years. The development of the value of foreign investment in the last 10 years tends to show a constant but slightly increasing pattern, with no significant decrease or increase occurring. When viewed from growth indicators, the development of foreign investment growth in Indonesia in the last 10 years tends to still fluctuate or experience ups and downs. So from this, it can be concluded that the financing scheme through foreign investment is quite ready to finance IKN (Siswantoro, 2022).

Based on the explanation above, IKN development, which is considered to have an insignificant impact, tends to burden the APBN and BUMN. However, the presence of domestic investment and foreign investment can support the giant IKN project. This does not yet take into account the consequences that will arise in the future.

🌟 Closing Call to Action: Your Voice Shapes Indonesia's Future! 🌏🔊

As we unravel the financial intricacies of Indonesia's grand capital move, your perspective matters! 🗣️💡 Are we witnessing a visionary leap or a financial tightrope act? Share your thoughts, concerns, and insights. 🤔📢

Join the conversation — your voice could influence the trajectory of this monumental project. 🚀✨ Let's shape Indonesia's future together! 🇮🇩💬 #SpeakUpForIKN #FinancialFuture #IndonesiaDecides