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Indonesia construction roundup 2014

The construction industry in Indonesia has seen great success recently. In 2014, the country saw share prices booming, a growth in foreign investment and a huge number of new starts and project completions. This was also the year in which Indonesia finished building three skyscrapers above 200m, putting it on level pegging with the US, Canada and Japan.

A lot of Indonesia's success can be attributed to developments in the last few months. In this roundup, we will examine what the last quarter has held for Indonesian construction, as well as looking ahead to the future and what changes can be expected in the coming months.

 

Projects

A large number of major construction projects have been announced recently in Indonesia, several of which look set to significantly change the skyline of the capital, Jakarta. 2014 has truly been the year of the skyscraper for the city, which is a trend that looks set to continue on into the future.

The current tallest building in Jakarta is the Cemindo tower, which is still under construction. The 63-storey will open next year, but will soon lose its title when the 74-storey Waldorf Astoria Jakarta is completed; an event scheduled for 2018. This is still nothing compared to the Pertamina Energy Tower, which will be 99 storeys tall when finished in 2020.

Outside Jakarta, a new 30.6 Megawatt power plant is under construction. The     structure is attached to a cement factory in Tuban, East Java, and will use waste heat from the area to power the generator. The 26-month project began in late October 2014, so is scheduled for completion at some time in late 2016.

 

Investment

While some firms were building impressive structures, others were investing in the Indonesian construction industry. This is something the country's current president, Joko Widodo, is keen to encourage. At the annual Pacific Rim economic forum, he announced that he would be introducing measures to make Indonesia more of a prime investment destination.

"I'm very happy to be among with you, because you know I was a businessman many years ago. So this morning I am very happy because we can talk about business, about investment with all of you," he said to the assembled delegates.

Among the measures was the announcement that funding was to be redirected toward improving the nation's buildings and infrastructure. Some of this money is to come from slashing fuel subsidies, which the Indonesian government currently spends $27 billion a year on.

There was also the announcement, in November, that Chinese firms would be investing more in Indonesian projects in the future. Not only will China be providing funding to the schemes, Indonesia will also be able to benefit from its expertise and other input.

 

Statistics

The growth of Indonesia's construction industry is backed up by a number of statistics that not only show 2014 to have been a great year for the sector, but also indicate growth in the future. The industry has been expanding for years, recording growth of 6.6 per cent in 2013 compared to the 5.8 per cent growth in GDP.

The statistics for 2014 have not been fully compiled, but estimates from late in the year show a positive outlook across several areas. Cement sales in Indonesia, for example, reached 59.9 million metric tons. This is slightly lower than the 61 million predicted in August, but still represents year-on-year growth of 5.1 per cent.

Steel sales were also up, with an estimated 15.1 million metric tons sold in 2014. This is compared to 2013's figure of 14.3 million tons. Meanwhile, the ceramics industry showed growth of around ten per cent, which is especially impressive considering Indonesia's GDP only rose by roughy 5.1 per cent.

 

Outlook

All these developments seem positive and highlight the strong growth of Indonesian construction. But is this going to continue in the future? All the signs currently suggest that the industry boom will keep going through 2015 at least, making this an excellent time to invest in Indonesia.

Many Indonesian companies have almost doubled in value, with some reaching even higher values than that. The 13 listed construction firms on the Indonesian exchange saw their share prices increase by an average of 90 per cent in 2014, with shares in Waskita Karya and Pembangunan Perumahan rising by almost 200 per cent!

Meanwhile, Mr Widodo is already going ahead with his plan of making it easier to invest in Indonesia with a new measure of reducing dividend payment requirements. This should reduce red tape in the industry, and allow companies more freedom to invest in further construction projects.
Overall, the outlook for Indonesia is extremely positive. With luck and clever investment, the country's construction industry could be in for another booming year in 2015.


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