Amendments to Indonesia's new capital city law (Law 21 of 2023)
05 December 2023
05 December 2023
On 31 October 2023, the Indonesian House of Representatives (DPR) officially enacted Law No. 21 of 2023 on the Amendments to Law No. 3 of 2022 on the State Capital City (Law 21/2023). The Minister for National Development Planning, Suharso Monoarfa, aptly summarised the purpose of Law 21/2023 as "needed to provide a legal basis for accelerating activities for the preparation, development and relocation of the State Capital, as well as the administration of the Special Regional Government for the Nusantara Capital City more effectively, optimally, accountably and of course sustainably."
This update follows our previous article on this topic: "Nusantara Latest developments of Indonesia plan to move capital city".
Law 21/2023 brings several key changes to the Nusantara Capital City regulatory framework as follows:
Based on the transitional provisions of Law 21/2023, Law 3/2022 is to remain in effect as long as its provisions do not conflict with Law 21/2023. However, acts under Law 3/2022 must be adjusted no later than 2 months after Law 21/2023 is promulgated.11 In practice, this means that all acts (for example the existing spatial plan) that were carried out based on Law 3/2022 must now comply with Law 21/2023.
The revisions to Law 3/2022 on the State Capital City aims to strengthen the Nusantara Capital City institutions (while ensuring supervision by the President and DPR) and provide certainty in several important aspects including funding, land procurement and rights, and housing.
It must be noted that the amendments brought by Law 21/2023 will require several implementing regulations to be issued by the Head of the NCCA, such as on land reorganization (i.e. changing the spatial planning granted by the Central Government), and housing incentives. Nonetheless, the amendments brought by Law 21/2023 are meant to deliver a strong message that the current Indonesian government is committed to the new capital city project despite recurring uncertainties and speculations about the feasibility and perennity of the project, especially in light of the upcoming general elections in Indonesia in February of 2024. Time should soon tell the direction of travel for this gigantic enterprise which is meant to reset the center of gravity of the Indonesian archipelago.
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1. Article 6 of Law 21/2023.
2. Defined in Head of National Land Agency Regulation No. 12 of 2019 as "the policy of restructuring control, ownership, use and utilization of land and space according to spatial planning as well as efforts to provide land for public purposes in order to improve environmental quality and maintain natural resources by involving active community participation".
3. KSN is defined in Article 1(12) of Law 3/2022 as a special area whose area coverage and function are stipulated and regulated by Law 3/2022.
4. Article 15 of Law 21/2023.
5. Article 15A of Law 21/2023.
6. Article 16A of Law 21/2023.
7. Article 25 of Law 21/2023.
8. Article 26 of Law 21/2023.
9. As a note, pursuant to Government Regulation No. 14 of 2016, as amended by Government Regulation No. 12 of 2022, business entities carrying out housing construction are obliged to create housing areas with balanced housing (i.e. housing that is built in a balanced manner between simple houses, middle-class houses and luxury houses).
10. The specific incentives are not set out in Law 21/2023. This would be further regulated in a Regulation of the Head of the Nusantara Capital City Authority.
11. Article 42 of Law 21/2023.
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This material is current as at 5 December 2023 but does not take into account any developments to the law after that date. It is not intended to be a comprehensive review of all developments in the law and in practice, or to cover all aspects of those referred to, and does not constitute legal advice. The information provided is general in nature, and does not take into account and is not intended to apply to any specific issues or circumstances. Readers should take independent legal advice. No part of this publication may be reproduced by any process without prior written permission from Ashurst. While we use reasonable skill and care in the preparation of this material, we accept no liability for use of and reliance upon it by any person.