(Bloomberg) -- A Chinese property developer is set to be the first foreign investor to build in Indonesia’s planned capital of Nusantara, giving President Joko Widodo’s signature project a modest boost weeks before his term ends.
Delonix Group will build a 500 billion rupiah ($33 million) mixed-use area that’s projected to house a hotel, serviced apartments, offices and commercial areas, Jokowi said in a groundbreaking ceremony in Nusantara, on the island of Borneo, Wednesday.
“Delonix Group’s entry as the pioneer foreign investor in the new capital will boost the trust of other investors to immediately enter,” Jokowi said. “Foreign investments are starting to arrive, which gives us confidence that Nusantara is an attractive location for investment.”
While the deal represents a milestone for the outgoing president, it’s also a far cry from the big names the government trumpeted as prospective investors in the $29 billion mega project, including SoftBank Group Corp. and BlackRock Inc. It could also signify a change in tactic for Jokowi, shifting to smaller but more nimble companies willing to invest in a city that’s being built from scratch.
According to its website, Delonix is an investment and tourism company based in Shenzhen and Hangzhou that’s expanded to Singapore and Japan. Its Indonesian unit aims to open 20 leased hotels within three years, with a focus on the greater Jakarta area, the website said.
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Other than Delonix, two other foreign investors also announced on Wednesday they will partner with local firms to build an international school and a 300 billion rupiah luxury resort.
Nusantara is seen to be the crown jewel of Jokowi’s decade-long presidency, which ends in October. The city, located in the Indonesian province of East Kalimantan, has been planned as a new center of government free from the chronic congestion and flooding in the current capital of Jakarta.
However, the project has been plagued by construction delays and struggled to secure binding foreign investment despite the government offering an array of special tax incentives and land ownership perks. That raises questions about the project’s future financing as the government is only allowed by law to cover 20% of the total cost.
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The looming leadership transition adds to the uncertainty over the future capital. While President-elect Prabowo Subianto has promised to continue developing Nusantara, the project will have to contend for space in the state budget as the incoming leader focuses on his own ambitious programs, including a $29 billion plan to provide free school meals nationwide.
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