For a year now, Indonesia’s Lippo Group has been mass-advertising a US$20 billion mega-project known as Meikarta on the eastern fringes of Jakarta, describing the ambitious undertaking as “epic in scale and vision as a truly integrated city of the future.”
Boasting 92 apartment and office towers, 18 of which are under construction, and 1.5 million square meters of prime commercial space, the 500-hectare development lies next to the new Kertajati International Airport, the Trans-Jakarta Tollway, and the planned Jakarta-Bandung high-speed railway. In addition to shopping malls, an international standard hospital and 100 ha of parkland, plans for the self-contained super-city include 10 five-star hotels, 150 elementary and high schools, three universities and an industrial research center.
For all its grand designs, however, Meikarta is fast becoming a millstone around the neck of Lippo Karawaci, the conglomerate’s main property arm. Construction is at a virtual standstill, sales are slow and Lippo stands accused of reneging on advertising costs.
Owned by the politically-wired Riady family, Lippo is Indonesia’s second-biggest diversified real estate developer with interests in banking, hospitals, schools, malls, department stores, and cable television.
Business sources familiar with the Meikarta venture say Lippo seriously miscalculated by going ahead with the project before it had obtained the necessary permits and licenses from the West Java government, apparently believing it could get it done while work was already in progress.
Indonesia is known for its unclear regulatory framework, a situation caused by weak coordination and cooperation between separate government institutions on both the central and regional level. Therefore, pioneering development projects are always plagued by a legal framework that is actually not prepared to deal with such a project.
Lippo Karawaci denies rumors it is in financial trouble, with listed subsidiary Lippo Cikarang saying it expects to book 10.5 trillion rupiah (US$750 million) in marketing sales from Meikarta this year, compared to 7.8 trillion rupiah in the months following its August 2017 launch.
Meikarta is by far the conglomerate’s most ambitious project in its 67-year history, a serious bet on the Jakarta metropolitan area spreading eastwards and eventually enveloping the hill city of Bandung.