Construction
From The Report: Indonesia 2014
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Increased government investment in infrastructure has helped unleash a boom in Indonesia’s construction sector. With rapidly growing demand for residential real estate, office buildings, industrial estates and other property across the archipelago, the construction sector is poised to see significant expansion. And, although the sector has declined since 2012, a new law that allows foreign nationals to purchase condominiums is likely to help drive up foreign direct investment for future construction projects. One of the main challenges for the sector in 2013 was the rupiah’s depreciation against the US dollar, which significantly increased the cost of building materials. The prices for asphalt and concrete, for instance, rose 21% and 20%, respectively. Dams, roads, and bridges account for the majority of government projects that are currently under way or planned to begin construction in the next few years. Toll roads and bridges will be the first investment areas as the government seeks to improve the nation’s transport links. Human capital development and a boost in industry standards are key for the sector to increase its overall GDP contribution. Though the sector may slow in the first part of 2014, it is expected to gain momentum once the new administration is given time to establish new regulations. If it favours infrastructure development with similar attention as the current administration, the sector will continue to benefit from increased government spending.

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Overview

Still growing: Infrastructure plans and demand for property drive the sector forward
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Increased government investment in infrastructure has helped to unleash a boom in Indonesia’s construction sector. With rapidly growing demand for residential real estate, office buildings, industrial estates and other property across the archipelago, the construction sector is tagging along for the ride. The Indonesian Contractor’s Association (AKI) noted an increase in the construction and building materials sector from $25bn to $40bn between 2011 and 2013 as infrastructure development and…

Analysis

In high demand: Building materials are seeing investment and capacity expansion
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As Indonesia’s real estate market has experienced growth in recent decades, the demand for building materials has skyrocketed. The domestic market is thriving, with Indonesia’s key players rapidly expanding production capacity of high-demand materials such as concrete and metals. Inflation is high for imported building materials and infrastructure challenges make transporting materials logistically challenging. However, as infrastructure is prioritised under the government’s plans, companies…

Analysis

A vital role: The equipment market is expanding along with the economy
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With a number of infrastructure projects being rolled out in the coming years, alongside overall real estate expansion and economic growth, the construction equipment sector has a vital role to play in Indonesia’s future development. Indeed, the value of the construction equipment market doubled between 2008 and 2013 – with Research and Markets analysts recently predicting a compound annual growth rate of 10% for the 2013-18 period. The market is one in which foreign firms, particularly those…

Analysis

Ready or not: ASEAN integration will challenge the domestic construction sector
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With the implementation date of the ASEAN Economic Community (AEC) set for December 31, 2015, Indonesia’s construction sector must take the right steps to ensure that it stays in the running. The AEC aims to create a single market and production base with free movement of goods, services and skilled labour. Such a development will enable greater access for foreign competitors looking to enter the Indonesian market to satisfy rising demand for construction services and building materials. Increased…