Manajemen Konstruksi Indonesia - Construction Management Indonesia: 25/01/09

EXECUTIVE SUMMARY

In time for the launch of BMI’s infrastructure Q109 reports we have revised our construction data. The data has been modified from 2008 onwards. This initiative stems from new methodology being introduced in our forecasting method and aims to increase the relevance and reliability of BMI’s infrastructure data. BMI strives to be able to offer five year industry forecasts for the Indonesia Q109report however that data is not currently available, but it will be updated in time for Q209. BMI therefore will make its predictions based on data sets from 2009-2012.

For 2009 BMI forecasts that Indonesia’s construction industry will be worth IDR 410,643 billion (US$45.20bn). The sector’s value is forecast to continue increasing and we expect it to be worth approximately IDR 585,829 billion (US$68.92bn) in 2012. We note that growth in Indonesia’s construction sector is slowing from its peak growth in 2006 of 9%. In 2008 year-on-year (y-o-y) growth slipped to7.76% and we predict growth will slow further in 2009 at just 5.76%. Growth in Indonesia’s construction industry is however expected to pick-up momentum after this lull and we forecast it to stand at 6.86% in2012.

Indonesia’s construction sector is forecast to make up 7.45% of the country’s total GDP and this is set to expand to 7.79% in 2012. In 2009 we predict that the sector will employ 5.6mn workers and we believe this number has upside potential and will reach 6.5mn in 2012. The construction industry will make up approximately 5.66% of Indonesia’s total workforce in 2009 and this share is expected to grow to 6.27%in 2012.

BMI believes that the construction sector, not just domestically in Indonesia, but worldwide will be buffeted by the global economic downturn and will lead to investors tightening their belts, leaving less money to go towards funding infrastructure related projects, especially those in the real estate sphere. This could see a serious decline in the number of companies available to participate in Private Public Partnership (PPP) projects, which will lead to delays and in some case cancellations of proposed infrastructure schemes.

In relation to Indonesia BMI has no news of specific projects that may be affected by the economic downturn, it could be a case of watch this space. BMI however is confident that the big infrastructure projects launched in 2008 especially projects associated with boosting Indonesia’s power infrastructure, where do to the fact that demand is outstripping supply, the country faces regular power shortages and cuts.