Meikarta, dubbed “the Shenzhen of Indonesia”, is the biggest private property project that has ever been initiated in Indonesia. The USD $19 billion project involves 500-hectares of property development, 100 hectares of open green space, 250,000 units of prime residential property, and 1,500,000 m2 of prime commercial space.

However, the future of the Meikarta project turned uncertain last week after Indonesia's anti-graft agency (Corruption Eradication Commission, or KPK) arrested staff-members of the Lippo Group and raided the homes and offices of several senior executives - including the home of Lippo Group Deputy Chairman James Riady - on allegations of bribery and corruption.

These raids came after Lippo Group Director of Operations Billy Sindoro was arrested on Monday (15/10) under suspicion of instructing his staff to transfer bribes worth up to USD $460,000 to non-active Bekasi Regent Neneng Hasanah Yasin and her staff to ensure the continuation of the Meikarta project.

This latest corruption scandal reveals several matters:

(1) Indonesia's regulatory framework is seemingly not ready to deal with a big project that covers multiple jurisdictions (and therefore encourages the bribing of officials as that would speed up - or avoid - lengthy, complex and conflicting bureaucracy).

(2) Construction/property projects in Indonesia tend to start while not all necessary permits have been secured.

This article discusses (a) the regulatory hurdles that are faced by the Meikarta developers, (b) the corruption case, (c) the impact on consumers and investors who purchased one or more units of the Meikarta project, and (d) gives a prediction about the future of the Meikarta project.

[...]

Read the full article in the October 2018 edition of our monthly research report. You can purchase this report by sending an email to info@indonesia-investments.com or a WhatsApp (WA) message to the following number: +6287884106944


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