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Indonesia Infrastructure Report Q4 2009
Market |
Construction |
Report Type |
Market Research |
Country |
Indonesia |
Published |
12 August 2009 |
Number of Pages |
99 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
Indonesia construction sector will reach a value of US$71.66bn in 2013
President Susilo Bambang Yudhoyono – who was re-elected in July 2009 – has claimed that infrastructure projects will be among his major priorities over the next five years as the country seeks to boost growth and reduce poverty. BMI believes that as the global economy begins to recover in the second half of the year foreign investment funds will begin flowing into Indonesia once again, and that the government should take advantage of this opportunity to secure financing for key infrastructure projects.
The Yudhoyono government has already been active in this area, pledging to improve the country’s roads, airports, power plants, bridges and irrigation system. According to the National Development Planning Agency (Bappenas) the government will finance at least 29% of the total IDR1,430trn (US$140bn) that is expected to be spent on infrastructure between 2009 and 2014. The shortfall will be met by both local and foreign investors. As well as boosting economic growth, large-scale public works projects will also provide employment. However, Indonesia has not been as severely impacted by the global financial crisis as other countries. Unemployment stands at 8.1%, which is down from 9.3% in 2008.
Following the re-election of Yudhoyono, the biggest question is arguably whether Indonesia can join the BRIC (Brazil, Russia, India, China) league and make the group 'BRIIC'. Goldman Sachs in 2005 identified Indonesia as one of the 'Next 11' big emerging markets, and in Indonesia itself a group of business leaders and politicians have initiated a 'Vision 2030' plan to raise GDP per capita to US$18,000, have 30 companies in the Fortune 500 list, and make Indonesia one of the five biggest economies in the world by 2030. Reducing the country’s infrastructure deficit will be vital to achieving these ambitious goals.
In general the climate for investments in Indonesia’s infrastructure sector appears to be improving, although the country still suffers from a number of structural problems that are restricting economic development, including power outages and transportation bottlenecks. BMI believes that an undeveloped financial sector is also a serious issue, as it has made it difficult to secure long-term financing. Despite this, BMI forecasts that the construction sector will reach a value of US$71.66bn in 2013, up from a figure of US$37.35bn in 2008, driven by the fiscal stimulus package that will concentrate on infrastructure works.
In positive news, PT Perusahaan Listrik Negara (PLN), Indonesia's state-owned electricity company, has reportedly secured US$437.1mn in loans from a consortium of 23 regional banks. In addition, it has signed a US$1.06bn loan agreement with the China Export Import Bank and the Bank of China. Both agreements will go some way to help PLN implement its ambitious plans to develop Indonesia's electricity generating capabilities. Under the 'fast-track' programme, PLN will develop 10,000MW of coal-fired generating capacity through the construction of 35 power plants, to come online by 2011. Thus far, according to the Jakarta Globe, 33 power plants have been contracted; however, four have yet to secure financing.
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