Construction in Indonesia – Key Trends and Opportunities to 2017

Construction in Indonesia – Key Trends and Opportunities to 2017

Synopsis

This report provides detailed market analysis, information and insights into the Indonesian construction market, including:

• The Indonesian construction market’s growth prospects by sector, project type and type of construction activity
• Analysis of equipment, material and service costs across each project type within Indonesia
• Critical insight into the impact of industry trends and issues and the risks and opportunities they present to participants in the Indonesian construction market
• Assessment of the competitive forces facing the construction industry in Indonesia and profiles of the leading players
• Data highlights of the largest construction projects in Indonesia

Summary

Indonesia’s construction industry has performed well during the review period, driven by strong economic activity and high levels of investment. Fixed investment has soared over the past decade, with its share of total GDP rising from 19.5% in 2003 to a high of 33.2% in 2012. The construction industry has been a clear beneficiary of this investment, and has grown by 7.4% on an annual average basis, in real terms, over the past 10 years, well above the GDP growth rate of 5.9%. It maintained this rate of growth in 2012, expanding by 7.5%. In line with this trend, the construction sector’s share of total GDP increased from 6.2% in 2003 to 10.4% in 2012. Despite some challenges, the outlook for construction is favorable, supported by urbanization, rising incomes and government efforts to improve the infrastructure base as a part of its ambitious multiyear Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development (MP3EI).

Scope

This report provides a comprehensive analysis of the construction industry in Indonesia:

• Historical (2008-2012) and forecast (2013-2017) valuations of the construction market in Indonesia using the construction output and value-add methods
• Segmentation by sector (commercial, industrial, infrastructure, institutional and residential) and by project type
• Breakdown of values within each project type, by type of activity (new construction, repair and maintenance, refurbishment and demolition) and by type of cost (materials, equipment and services)
• Analysis of key construction industry issues, including regulation, cost management, funding and pricing
• Assessment of the competitive environment using Porter’s Five Forces
• Detailed profiles of the leading construction companies in Indonesia

Reasons To Buy

• Identify and evaluate market opportunities using our standardized valuation and forecasting methodologies
• Assess market growth potential at a micro-level via 600+ time series data forecasts
• Understand the latest industry and market trends
• Formulate and validate business strategies by leveraging our critical and actionable insight
• Assess business risks, including cost, regulatory and competitive pressures
• Evaluate competitive risk and success factors

Key Highlights

• Indonesia’s medium-term economic prospects are positive and investor confidence is building. With continued strong domestic demand growth offsetting weaknesses on the external side, real GDP growth is forecast to be in the range of 6–6.5% a year in the next two years. The forecast expansion in Indonesia’s middle class, rising urbanization and labor force participation underpin the projection of real GDP growth of 6–7% a year between 2015 and 2017.
• The government has succeeded in maintaining a deficit consistently below 3% of GDP over the past 10 years. It has also managed to reduce its debt burden from a peak of 77% of GDP in 2001 to just 24% in 2012. It is partly due to improvements in the government’s fiscal health that international credit ratings agencies have upgraded Indonesia’s sovereign credit ratings, with Fitch and Moody’s returning investment-grade status to Indonesia.
• Indonesia has attracted massive foreign direct investment during the review period, with the total rising to US$24.6 billion in 2012. However, the share attracted by the construction sector has fallen, from a high of US$618.4 million in 2010 to just US$240 million in 2012. Although FDI in the construction industry has been disappointing, domestic companies ramped up investment spending in 2012.
• A new bill on land procurement was passed in December 2011. Under this law, the government is obliged to provide land and can purchase property at market value, reducing the potential for speculators to buy and sell property at exorbitant rates and cause delays in projects. This law is expected to accelerate infrastructure projects over the forecast period.
• The government of Indonesia announced a new regulation in May 2012 which allows foreigners to own property in Indonesia. However, ownership has been limited to condominiums only. According to the new regulation, foreigners must first apply for a Building Ownership Certificate (SKBG) and then they can own an apartment unit without the need to own land. The SKBG may be held for 60 years, with a provision to extend it for another 60 years. The move is expected to attract considerable foreign investment in the housing sector.