In our previous instalment on the new Indonesian Capital series entitled “Nusantara: The New Capital City of Indonesia”, it was mentioned that the House of Representatives had agreed to ratify the Bill on the State Capital (“State Capital Bill”) on 18 January 2022 which is intended to be a standing piece of legislation that will inherently govern the new capital city of Indonesia - to be called Nusantara. The State Capital Bill has officially been enacted and passed on 15 February 2022 as Law No. 3 of 2022 on the State Capital (“State Capital Law”).

The State Capital Law itself consists of 11 chapters and 44 articles. There are not many changes in terms of content within the State Capital Law compared to the State Capital Bill. However, there was one additional provision to the State Capital Law, namely Article 12 paragraph 2 regarding the special authority of the Authority. Article 12 paragraph 2 states that the Authority has special powers, such as the power to grant investment permits, provide business facilities, and provide special facilities to parties that support financing in the context of preparation, development and relocation of the State Capital, as well as the development of the Capital of the Nusantara.

As also mentioned in our previous article that the process of relocating the capital city to the Nusantara, that is to be located in Kalimantan, will be carried out in several phases starting from 2022 to 2045. The table below we will further describe the phases in relocating the State Capital:

Regarding land acquisition used for the development of the above phase, the State Capital Law states that land acquisition by the Authority and/or Ministries/Agencies in Nusantara will be carried out through a forest area release mechanism and a land acquisition mechanism in accordance with the laws and regulatory provisions. Furthermore, the Authority is also given the authorities to enter into and bind themselves in regards to Agreements concerning Land Rights (Hak Atas Tanah or HAT) with individuals or legal entities whose utilization of such property must be adjusted to the development needs of Nusantara. Moreover, land acquisition must also take into account the precautionary principle followed by the provision of adequate and fair compensation as referred to in Government Regulation No. 19 of 2021 on the Implementation of Land Procurement for Development in the Public Interest. Therefore, if an objection from the party entitled to own or control the land occurs, the compensation will be deposited in a court setting (through a consignment process) so that the land acquisition and development can still be carried out.

Article 12 paragraph 2 states that the Authority has special powers, such as the power to grant investment permits, provide business facilities, and provide special facilities to parties that support financing in the context of preparation, development and relocation of the State Capital, as well as the development of the Capital of the Nusantara.

Meanwhile, for the funding and financing of the development and relocating Nusantara above, the government shall use the following scheme: (i) by way of synergizing finance sources from the Indonesian State Budget (Anggaran Pendapatan dan Belanja Negara or APBN) and other legitimate sources in accordance with the provisions of the legislation; and (ii) through the utilization of State Property (Barang Milik Negara or BMN). Table below is the further description on the above funding schemes:

Should there be any queries related to this regulation or to find out if this affects your business or personal interest, please do not hesitate to contact us.