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The relocation of Indonesia’s capital to East Kalimantan, now known as IKN Nusantara, marks one of the country’s most ambitious projects in recent history. As the new administrative center, IKN offers substantial investment opportunities for local and international businesses, especially in infrastructure, housing, technology, and services. However, along with these opportunities, investors must navigate unique regulatory and legal challenges, from ensuring compliance with local laws to understanding the special policies introduced by the government to support the region’s development.

1. Legal Framework for Investment in IKN: Special Laws and Regulations
The Indonesian government has enacted Law No. 3 of 2022 on the National Capital to govern the capital relocation and provide a legal foundation for investments in IKN. This law establishes special incentives for investors interested in developing the IKN area, such as streamlined licensing processes, tax incentives, and reduced bureaucratic procedures. However, investors should exercise caution and understand the specific regulations that may differ from those applicable in other regions of Indonesia.

2. Permitted and Priority Investment Sectors
IKN Nusantara emphasizes the development of eco-friendly, sustainable, and high-tech sectors. Priority investments include infrastructure, green energy, technology, and sustainable housing. This section can detail the types of investments permitted in IKN and the sectors likely to receive additional incentives. Understanding these priority sectors can help investors identify the most lucrative opportunities.

3. Licensing Process and Regulatory Considerations: Balancing Legal Certainty and Investment Ease
The government has promised simplified licensing procedures to attract investments in IKN, including reducing typically lengthy processes. However, as a new area, licensing processes in IKN may undergo updates and adjustments. This section can discuss the licensing steps involved and highlight measures taken by the government to ensure legal certainty for investors.

4. Fiscal and Non-Fiscal Incentives for IKN Investors
The government provides a range of fiscal incentives for IKN investors, such as tax reductions or exemptions, access to land, and export-import facilities. Additionally, there are non-fiscal incentives, such as simplified permits for foreign workers, exclusive access for technology and innovation, and support in land acquisition processes. This section will outline these incentives and how to obtain them so investors can fully benefit from the opportunities offered.

5. Environmental and Social Challenges in IKN Investment
Investments in IKN also require consideration of environmental and social factors. Kalimantan is a region rich in biodiversity with strong local communities, so both the government and investors must consider the ecological and social impact of their projects. This section can provide guidance for investors on applicable environmental regulations, including strict environmental impact assessments (AMDAL), and ethical investment practices that foster good relationships with local communities.

6. Legal Protections for Domestic and Foreign Investors
Finally, this section can address government policies that protect investor rights in IKN. This includes protection against policy shifts, transparency in land acquisition processes, and legal safeguards in the event of disputes. These protections are intended to reassure investors, giving them greater confidence to invest in the new capital city, IKN Nusantara.

Investment in IKN Nusantara presents attractive opportunities, but it also involves challenges that must be carefully considered. Understanding the legal regulations and policies in place is essential for investor success. IRP Lawyers is ready to assist clients in navigating every legal aspect related to IKN investment, from licensing to the necessary legal protections, ensuring investments proceed smoothly and in full compliance with the existing regulations.