Calculating the multiplier effect of IKN Nusantara
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Bisnis Indonesia - Menghitung dampak berganda IKN Nusantara
11 October 2024
By Lili Sunardi
Hasanuddin, Head of the Traditional Institution of Paser in Sepaku District, North Penajam Paser Regency, never imagined that connectivity in his region would improve alongside the development of Nusantara Capital City (IKN). Now, he feels more connected with other regions thanks to the continuously improving road access.
According to him, the development of IKN has been a blessing for the population around Nusantara, including East Kalimantan. One significant benefit has been the improvement of infrastructure in each region.
In addition, job opportunities for the population around Nusantara have increased, leading to higher incomes for locals. This, in turn, drives the economic growth of the population in East Kalimantan.
“The revenue of local businesses has also increased. Previously, before the development of IKN, they could only earn around Rp5 million in a day. Now, they can earn double that amount,” Hasanuddin said some time ago.
For micro, small, and medium enterprises (MSMEs), the development of IKN has positively impacted their revenue. For instance, the Independence Day ceremony at IKN has provided new hope for residents living nearby, including Maihartati, an MSME owner at the IKN Rest Area.
She expressed her happiness with the 79th Independence Day ceremony held at the IKN Rest Area by the IKN Authority last August.
“It increased our income. Hopefully, MSMEs, especially local ones, will receive more attention and support,” she stated.
The involvement of locals in IKN development is also evident from the vocational training activities oriented towards entrepreneurship, organised by the IKN Authority. At least 418 locals in IKN, located in North Penajam Paser Regency and Kutai Kartanegara in East Kalimantan, have participated in these programmes.
At least 418 locals, including indigenous people, have received training from the IKN Authority in cooperation with the Manpower Ministry and the Centre for Vocational and Productivity Training.
The IKN Authority is also organising the Coding Mum, Coding for the Disabled, and Solar Mum Batch 3 programmes. These training sessions are being held in Binuang Village, Sepaku District, North Penajam Paser Regency, which will be part of IKN.
The training has attracted 41 participants from several villages in Sepaku District.
The training materials cover graphic design, website creation, and digital marketing.
Regarding the Solar Mum programme, IKN Authority Green Transformation Director Agus Gunawan explained that participants would receive training on how to utilise and maintain solar panels.
In addition, the IKN Authority is currently planning to implement solar panels in villages on a large scale. “We are planning to install solar panels in selected villages. Not only on a small scale, but they will also be able to power places of worship and roads. This is what we are initiating,” Agus Gunawan stated.
For businesses, the development of IKN is a blessing as it increases the demand for goods and services. For example, the Indonesian Cement Association (ASI) recorded that IKN projects have absorbed 1.71 million tonnes of cement in the last three years since 2022.
ASI Chairperson Lilik Unggul Raharjo mentioned that cement demand for projects in the new capital has continued to increase each year. In 2022, cement demand in IKN reached 130,000 tonnes. This increased to 980,000 tonnes in 2023. It is forecasted to reach 830,000 tonnes in 2024.
She explained that cement absorption on Kalimantan Island reached 3 million tonnes, with 50% of this, or around 1.5 million tonnes, being used for IKN. The massive infrastructure development, especially in IKN, is helping industries manage the oversupply issue that has been a problem in the cement industry.
“Cement absorption in IKN has currently reached 600,000 tonnes. Hopefully, it will increase to surpass 1.9 million tonnes,” she explained.
The various benefits from IKN development that locals are already enjoying align with the government’s target to make IKN a new economic growth centre.
Statistics Indonesia (BPS) reported that the economy in Kalimantan grew by 6.17% in the first quarter of 2024. This figure represents a year-on-year (YoY) increase compared to the first quarter of 2023, which saw a growth rate of 5.82%.
East Kalimantan was the largest contributor to the economic growth on Kalimantan Island.
Acting BPS Head Amalia Adininggar Widyasanti explained that the increase in economic growth in Kalimantan is sustained by the development of IKN.
According to her, economic growth in the first quarter of 2024 occurred in all provinces on Kalimantan Island. East Kalimantan, where the IKN development is being implemented, has the highest contribution to the added value of Kalimantan, at 48.12%.
The investment prospects in East Kalimantan are also becoming increasingly brighter, thanks to the massive infrastructure development carried out by the government in cooperation with the private sector.
Budi Widihartanto, Head of the Bank Indonesia East Kalimantan Representative Office, mentioned that in the first quarter of 2024, East Kalimantan recorded an investment growth of 7.3% YoY.
Budi explained that this growth was driven by a significant increase in foreign direct investment, which rose by 16.78% YoY, significantly surpassing the previous quarter's growth of just 3.79% YoY.
Budi added that this positive trend is closely linked to the government's commitment to development and the contribution of the private sector, which has increased investor confidence.
“The high foreign investment growth is driven by the conducive investment climate in East Kalimantan, alongside the ongoing massive infrastructure development in IKN,” he said, as cited from his official statement.
