The old proverb “if there is honey, the bees will come from nine mountains away” is no longer relevant to the current growth of Indonesia’s new capital, at least for the time being. President Joko Widodo stated in June 2023 that the new capital development will attract more investors, with a $48 billion investment opportunity for foreign investors. Unfortunately, until today, no investors have expressed an interest in investing in Indonesia’s new capital, despite President Joko Widodo’s offer of the right to cultivate (HGU – Hak Guna Usaha) over land in East Kalimantan for investors to be utilized for 190 years. This shocking offer raised many debates among policymakers and agrarian scholars because Joko Widodo’s declaration violated the agrarian law of Indonesia.
Pros and cons of the right to cultivate (HGU) in New Capital
The right to cultivate (HGU) is the right to cultivate land, and the State, as the highest authority, may govern the length of the right for a certain time. The right to cultivate is typically provided for the establishment of plantations, farming, fishing, or other productive activities. This right can be granted to both domestic and foreign investors. According to Article 29 of Law No. 5/1960 on Basic Provisions on Agrarian, the maximum term for this land title is 25 years, which is extendable for another 35 years. After expiration, this right can be extended for another 25 years. However, President Joko Widodo’s words in June 2023 have failed this Agrarian Law, as he has issued Presidential Regulation No. 75 of 2024, aimed at accelerating the Nusantara Capital City (IKN) development, which outlines several key measures designed to attract investors and expedite the construction process, indicating a significant opportunity for foreign property buyers and owners interested in investing in Nusantara’s development.
One of the most significant aspects of the new decree is the provision for extended land rights for investors. The new regulation grants the right to cultivate (HGU) for up to 190 years, divided into an initial 95-year tenure and a possible 95-year extension based on specific conditions and evaluations. Furthermore, it grants the right to build (HGB) and the right to use (HP) for a maximum of 160 years each, with an initial 80-year tenure and a possible 80-year renewal. These extended land rights are intended to provide long-term security and stability to investors, making Indonesia more appealing to them.
The protests against this mad and ambitious policy are heated, specifically coming from social scientists, historians, and those who understand Agrarian policies. If we take a look at the history of Indonesia in the 18th century when the Dutch occupied major islands in Indonesia, they left colonial legacies in terms of land acquisition which affected conflict, war, and poverty. In 1870, the Dutch colonial government introduced the notion of domein verklaring (free state domain) in its East Indies colony by enacting agrarian regulations to encourage private investment. This system allowed colonialists to obtain absolute power to control a large portion of Indonesian land. When Indonesia gained its independence in 1945, the newly independent government established rules to govern the state’s control over land. For example, in the Indonesian Constitution, article 33 clearly states that ‘the earth and water and natural resources contained therein are controlled by the state and used for the greatest prosperity of the people’. Shockingly, even though Indonesia has been free from colonialism for about 79 years, the act of colonialism continues, and it was initiated by President Joko Widodo.
Will New Capital ‘Nusantara’ attract “The Bees”?
Until today, the new capital has received 49.6 trillion rupiahs of investment. Unfortunately, all of the investments were made by domestic investors and were accumulated from September 2023 to March 2024. Foreign investors are still hesitant to put their investment in Nusantara. Following the author’s observations and in-depth analysis, there are some logical reasons why foreign investors rejected President Joko Widodo’s offer. First, global investors will undoubtedly reject the idea of investing in an area rich in biodiversity, with large rainforests, plenty of Indigenous groups, and orangutans as endangered species; it will go against their core business value of prioritizing sustainability (profit, people, and planet). Second, the ambiguity of Nusantara does not entice Indonesians to relocate. Joko Widodo stated in the first phase of relocation that he would relocate 10,000 government personnel, but the employees were also hesitant to relocate due to a lack of proper healthcare, educational institutions, and trading spots similar to those in Jakarta. Finally, despite the fact that the right to cultivate (HGU) in Nusantara will be granted for nearly 200 years, foreign investors remain enthralled by the current capital (Jakarta), which is still building public infrastructure such as highways and rapid mass transportation and continues to function as a business epicentre.
