AmCham Update Vol. 4 #13

SpaceX Eyes Nusantara, MRT Phase 3, OJK Chief's Insurance Pledge, New Natural Resources Contract Extension Terms

Feb 06, 2023

SpaceX Looking to Invest in New Capital

Elon Musk’s SpaceX, the technology and space travel company, is looking to invest in Indonesia's new capital city, Nusantara (IKN). Head of the New Capital City Authority Bambang Susantono said his team is ready to work with SpaceX on boosting internet connectivity in the planned capital, but has yet to see a proposal. SpaceX’s investment plans are said to have been hampered by licensing and permit issues, but Minister of Investment Bhalil Lahadalia said his ministry will help speed up the process as long as the investment details are clear.

Meanwhile, over 14 percent of the infrastructure for the new capital has already been built, according to Minister of Public Works and Public Housing Basuki Hadimuljono. He said IKN is being built to guarantee quality, aesthetics, and environmental sustainability under the overall vision of a Smart Forest City. He also said that throughout the construction of the new capital, the cutting down of trees and cliff reshaping will be kept to a minimum.

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MRT Phase 3 In Progress as Traffic Worsens Post Pandemic

Mass Rapid Transit (MRT) Jakarta plans to work hand-in-hand with the UK government to develop phase 3 of the MRT project, the East-West Corridor. UK Minister of Exports at the Department of International Trade, Andrew Bowie, recently visited Indonesia to confirm this collaboration. President Director of MRT Jakarta Tuhiyat, said United Kingdom Export Finance (UKEF) has submitted an expression of interest to support the East-West Corridor with $1.2 billion.

The East-West Corridor, which will extend the MRT route by 84.1 km from Cikarang, West Java, to Balaraja, Banten, is in the review stage and is expected to begin construction in 2024. However, there are a number of obstacles with utilities such as fiber optic cables, electricity cables, and gas pipes needing to be moved before construction starts.

Improvement of public transportation is needed as traffic continues to worsen post pandemic. There have been reports of traffic jams in major business districts, with people saying that even TransJakarta buses have been caught up in a worsening mess now that fewer people are working from home.

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AmCham Cares: Habitat for Humanity Indonesia

Responding to the Cianjur earthquake in November 2022, Habitat for Humanity Indonesia – a humanitarian organization focused on providing decent housing, water, and sanitation – has distributed 299 emergency shelter kits, 299 wash and clean kits, and five communal toilets for more than 500 families of survivors.

Dewi, a resident of Cipakucau, Sukajaya Village, Cugenang Sub-district, Cianjur District, is one of the survivors who has experienced the benefits of the communal toilet. “Once there are toilets from Habitat, the water access is sufficient because it flows smoothly and the water is clean,” said Dewi.

Apart from bathing, the survivors also can use the toilets for washing and fulfilling their cooking needs.

“For now, we are still praying that one day we can live in decent housing. With our condition now, we can only hope for donations,” said Dewi.

OJK Chief Promises to Resolve Insurance Issues ASAP

Financial Services Authority (OJK) chief Mahendra Siregar made a public promise to President Joko Widodo at the Annual Financial Services Industry Summit 2023 to resolve insurance issues as soon as possible. The progress of life insurance issue settlements is evident through a 7.8 percent decrease in life insurance premiums, while general and reinsurance premiums were up 13.9 percent in 2022, said Mahendra.

With these settlements progressing, Mahendra expects stable growth for the industry, supported by maintaining risk profiles, and adequate liquidity and capital. He also said there will be more synergy between financial sector regulators under the Financial System Stability Committee (KSSK) to supervise the industry.

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New Requirements for Oil, Gas, and Mining Contract Extensions

State-owned enterprises (BUMN) and regional-owned enterprises (BUMD) involvement will be required for the next series of contract of work (CoW) extensions for the oil, gas, and mining sectors. The government wants greater downstream processing, along with BUMN and BUMD involvement, and the state must take the biggest role, said Minister of Investment Bahlil Lahadalia.

President Joko Widodo has made three directives when considering oil, gas, and mining contracts in Indonesia. He said everything must go through the correct legal mechanism, there must be good economic calculations, and everything must be in the interest of the country and the people.

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For further information, contact Ivania Ananta ([email protected])

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Bali Special Economic Zones to Bolster Healthcare and Tourism

During his visits to the construction sites for the Kura-Kura Special Economic Zone (SEZ) and Sanur SEZ in Bali, Coordinating Minister for Economic Affairs, Airlangga Hartarto said he hoped the two SEZs can boost the region’s economy, especially the tourism industry. The government believes the development of SEZs will speed up investment and reduce economic disparity across the region.

Kura-Kura Bali SEZ is focused on high-end tourist sites, and is expected to employ 99,853 people and attract Rp 104.4 trillion in investment. Sanur SEZ, the first international-class healthcare SEZ in the country, expects 43,647 additional workers and Rp10.2 trillion investment.

The Indonesian Chamber of Commerce and Industry (KADIN) said the ability of the SEZ initiator to provide funding, management ability, and the capability to attract investors will determine the success of SEZ development.

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Fuel Consumption in 2023 Rising

Indonesia’s fuel consumption in 2023 is expected to rise to an all-time high of 670,000 barrels per day (bpd), up from 635,000 bpd in 2022. In response, the government has allocated 32.56 million kiloliters (kl) of subsidized fuel for 2023, up from 29.81 million kl in 2022.

As a net importer of fuel, a corresponding increase in imports is expected. Indonesia’s fuel imports surpassed pre-pandemic levels in 2022 of 380,000 bpd, and this could rise to 390,000-400,000 bpd this year. The government raised fuel prices by 30 percent in September 2022. Combined with the continued drop in global prices, the increasing imports are expected to be manageable.

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AmCham Update is AmCham's regular newsletter on developments related to the pandemic crisis and other issues in Indonesia. It is edited by AmCham Managing Director A Lin Neumann and written by the AmCham Staff. Paul L Goddard is the Managing Editor.

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