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A guide to Indonesia's construction industry

Indonesia's construction market is one of the biggest in Asia, and is expected to grow further over the coming years. This guide details the vital statistics about this key developing market that prospective investors will need to know.

 

Key statistics

 - Population: 249.9 million, the fourth highest in the world.
 - Annual population growth rate: -1.2 per cent.
 - Percentage of population of a working age: 66 per cent.
 - GDP per capita: $10,023.
 - Total GDP: $868.3 billion.
 - Estimated GDP growth: 5.1 per cent (2014 estimate).
 - Unemployment: 6.2 per cent.
 - Ease of doing business: 114th in the world.
 - Ease of getting credit: 71st in the world.
 - 2014 World Competitiveness Yearbook ranking: 37th.
 - 2014 World Talent ranking: 25th.
 - Government: Democratic republic.
 - DHL Global Connectedness Index 2014 ranking: 111th.
 - Interest rate: 8.9 per cent.
 - Foreign Direct Investment (FDI) into Indonesia: $6.3 billion (January-March 2015).
 - Of this, $1.2 billion came from Singapore; $1.2 billion from Japan; $600 million from South Korea; $400 million from the UK; and $300 million from the US.
 - Starting a business in Indonesia takes an average of 52.5 days, compared to the world average of 30.6 days.

 
Construction facts

 - Total construction spending: $267 billion (2013).
 - Predicted construction spending growth: 5.2 per cent (2014-19).
 - Size of construction workforce: 6.1 million (2012).
 - In the medium term, Indonesia is expected to see the fastest construction market growth of any Asian country, according to AECOM. Jakarta is the top-rated city in terms of market growth.
 - Indonesia is tipped to have the second most profitable construction market in Asia over the medium term, behind China. Jakarta is expected to be second in the list of cities or metropolitan regions with the most profitable construction market in Asia, only behind Singapore.
 - The number of foreign construction companies working in Indonesia increased from 118 in 2007 to 255 in 2012.
 - Bank Indonesia's Residential Property Price Survey Index rose to 181.64 in the fourth quarter of 2014, up by 1.54 per cent quarter on quarter. Regionally, the highest growth was seen in Balikpapan (4.49 per cent).
 - Across Indonesia, large houses saw the fastest price growth (1.68 per cent quarter on quarter).

 
Major projects

1. One Million Homes programme
The brainchild of President Joko Widodo, this project aims to deliver one million affordable houses across Indonesia by 2019. Basic infrastructure - including roads, drinking water supplies and lighting - will be paid for by the state.
The government has already set aside 13 trillion rupiahs ($998 million) from the state budget and a further 500 million rupiahs from the Social Security Executive Body (SSEB) to support the programme, which will be carried out in partnership with state-owned housing developer PT Perumnas.
BPJS Employment, the workforce arm of the SSEB, has disbursed 360 billion rupiahs for the project, according to Indonesian news portal Tempo. The body actually has a total of 180 trillion to contribute to the initiative, but existing regulations only permit it to give five per cent of this amount. 
President Widodo is aiming to amend these regulations so that BPJS can allocate 40 per cent of its funds, which will be used to build 24 blocks of affordable flats in Medan, Bandung, Semarang, Sidoarjo, Tangerang, and South Sulawesi, in partnership with local authorities.

2. Pertamina Energy Tower
When the Pertamina Energy Tower in Jakarta is completed (estimated for 2020), it will be the tallest building in Indonesia. The 99-storey building will rise 500 m above the capital city and will boast a 2,000-seat performing arts auditorium and exhibition pavilion, a central energy plant and a public mosque. The tower's wider campus will have enough room for 20,000 of the state-owned energy company's employees.
Developer SOM says the building will set a new standard for sustainable development and will be the world's first supertall tower to feature energy as its primary design focus. Eco-friendly design features will include an energy-generating "wind funnel", a curved facade designed to mitigate solar heat gain, and exterior sun shades that will save money by reducing the need for artificial lighting. Ultimately, the building is designed to generate the same amount of energy it uses.

3. Waldorf Astoria Jakarta
Due to open in 2018, the second Waldorf Astoria property in Indonesia will have 181 luxury guest rooms over its 74 storeys. It is set to be the tallest hotel in Jakarta and will include a 2,000 sq m ballroom, a business centre and multiple state-of-the-art meeting rooms. Among the other features are a health club and spa, an outdoor pool and a library lounge.
The hotel will be situated on Jalan MH Thamrin Road in the heart of the central business district, close to popular shopping malls like Plaza Indonesia, Grand Indonesia and Thamrin City. 

4. China Minsheng Investment's industrial parks and towns
China's largest investment fund, China Minsheng Investment (CMI), is spearheading a group of Chinese companies in investing $5 billion dollars in the construction of integrated industrial parks and towns in Indonesia. The initial sum is part of a wider $40 billion scheme involving more than 20 Chinese companies.
CMI has committed to investing in four main projects: a seaport, a coal mine, and cement and steel factories. It is hoped that these planned developments will attract a host of enterprises in sectors such as chemicals and general aviation.

 

Business culture

Understanding Indonesian business culture means grasping the concept of 'saving face', or avoiding the cause of shame. As such, Indonesians are typically very careful in their speech and interactions, and can often be quite indirect; as they do not wish to cause shame, they may phrase a negative answer in a certain manner, while expecting the listener to understand what they really mean.
Perhaps the most significant for foreign businesspeople to consider is the way Indonesians view time. They have a cyclic interpretation, and typically take the view that decisions should simply be made at the 'right time', rather than to a set deadline. It is crucial that foreigners respect this, rather than getting pushy and trying to force a deal through; this approach is only likely to succeed in scuppering any business opportunity.
Hierarchy is also a key factor. If you are being introduced to a group of people, always start with the eldest or most senior, and use titles wherever possible as they signify status.
The most common greeting is a handshake followed by the word 'selamat', while many Indonesians also give a small bow or place their hands on their heart.

 
International investment

Foreign direct investment (FDI) into Indonesia totalled $23.3 billion in 2014, up from $20.5 billion in 2013.
The most popular sectors for FDI were mining ($4.7 billion), food ($3.1 billion), transportation, warehouse and telecommunication ($3.0 billion), metal, machinery and electronics ($2.5 billion), and chemicals and pharmaceuticals ($2.3 billion). 
West Java ($6.6 billion) was the region to attract the largest amount of FDI, followed by the Special Territory of Jakarta ($4.5 billion), East Kalimantan ($2.1 billion), Banten ($2.0 billion) and East Java ($1.8 billion).
The greatest FDI contribution came from Singapore ($5.8 billion), with the remainder of the top five rounded out by Japan ($2.7 billion), Malaysia ($1.8 billion), the Netherlands ($ 1.7 billion) and the UK ($1.6 billion).

 

Interior design trends 2015

As with any country, Indonesia's interior design traits vary from industry to industry, but some common themes exist. Many high-end offices have a minimal look, often comprising exposed walls and flooring, and metallic structures. Wooden planking on the floors or walls - or even both - is used to add warmth to a room.
In recent years, trends have been influenced by the growing prevalence of the green movement, meaning interior designers have had to consider whether their plans are environmentally friendly as well as aesthetically pleasing.


Related Events

Event20 Mar

Indobuildtech Ja..

20-24 March, 2019
INDONESIA

JAKARTA, INDONESIA
Venue: INDONESIA CONVENTION EXHIBITION CENTER (ICE)

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