JAKARTA (BLOOMBERG) – Indonesia’s ambitious project to build a new capital city is attracting a local billionaire: Lippo Group’s John Riady who is seeking new projects to ride out of the pandemic slump.
The country that’s home to the world’s largest archipelago is building the new city from scratch on a piece of land in Borneo, some 1,400 kilometres northeast of the current capital Jakarta. Mr Riady, a grandson of the group’s founder Mochtar Riady, said he’s exploring opportunities to build hospitals or education centers in Nusantara, as the new capital will be called.
President Joko Widodo’s ambition to spread wealth more evenly across the nation by relocating the capital is in line with the company’s vision. “We think it’s very exciting,” Mr Riady told Bloomberg Television’s Haslinda Amin at the World Economic Forum in Davos, Switzerland.
Lippo Group has some experience in building cities from scratch. Its property developer arm Lippo Karawaci built an eponymous township just west of Jakarta with hospitals, universities and real-estate complexes. The group sought to replicate that success with Meikarta, a 278 trillion rupiah (S$26 billion) development east of Jakarta that’s touted as the “Shenzhen of Indonesia” until the project was cut back to a smaller scale as a bribery case hampered its progress.
Mr Riady was named president director of Lippo Karawaci in 2019 to help bring the business out of debt issues and troubled projects. Karawaci is now among the largest of Lippo’s business empire that spans from real estate to retail and financial services.
Indonesia’s new capital, which may cost some US$34 billion (S$46.6 billion) in early development stage, is being billed as a green city that will run on entirely new renewable energy sources. The government wants to have it ready in 2024, when Jokowi, as the president is popularly known, ends his final term.
The government is set to spend some US$5 billion to build state buildings, while private investors and state-owned companies will fund the rest, Coordinating Minister for Investment and Maritime Affairs Luhut Panjaitan said. Abu Dhabi has pledged around $20 billion to develop infrastructure, and other investors can help finance other blocks, such as education or hospital sections.
While the ongoing global supply chain disruptions could last for another six to nine months, Mr Riady remains confident about Indonesia’s outlook.
“We are very fortunate to be doing business and operating in Indonesia and Asean, a country and a region with very strong fundamentals,” he said. “So even amidst a lot of the volatility concern, inflation tension and Russia and Ukraine, our region continues to perform very well.”
Lippo’s real estate business saw a 86% jump in home sales last year and the healthcare business also performed well, Mr Riady said. “Even retail businesses that were hit hard by Covid have rebounded and we are seeing a very strong recovery,” he said.