Executive Summary
Indonesia’s construction industry value is expanding rapidly, a trend forecast to continue over our newly extended forecast period (2010-2020). This is being driven by investment into both transport and energy infrastructure, as well as industrial construction related to the country’s growing mining sector. In 2010 we are forecasting construction industry growth of 5.7%, and between 2011 and 2015 we are forecasting growth to average 7.2% per year. This quarter we have added a new section covering residential, commercial and industrial construction as well as social infrastructure.
Key factors facilitating growth:
• Indonesian government’s efforts to attract private investment into infrastructure. The government has employed a number of tools and enacted a variety of measures to facilitate investments and increase the number of public private partnerships (PPPs). Measures include the creation of the Indonesia Infrastructure Fund, designed to provide an alternative source of funding for infrastructure projects. Measures related to land issues are also being implemented, as land clearance is one of the major barriers to the country's investment climate.
• Strong and growing Foreign Direct Investment (FDI). FDI in Indonesia has grown substantially over recent years, from US$6bn in 2006 to US$10.8bn in 2009, according to the Indonesia Investment Coordinating Board. This trend looks set to continue in 2010, with first quarter figures rising by 41% year-on-year (y-o-y) to US$3.92bn. Strong sectors for investment continued to be the transport, storage and communications industry, which recorded US$941.5mn investment for 23 projects and the mining sector, which attracted US$711mn for 12 projects. Both of these sectors demand supporting infrastructure, and investment into the sectors has buoyed the construction sector.
• Substantial investment plan for the power sector by state owned utility PLN. PLN is enacting a two phase ‘crash programme’ to expand electricity generating capacity, with each phase adding 10,000MW of capacity. PLN was targeting investments of US$7.9bn in 2010 and a further US$9.8bn for 2011.
• Transport infrastructure is receiving substantial attention, specifically freight networks. With heavy investment into the mining sector, accompanying railways and ports are being developed to export coal. Billions of dollars of investments in railways have been pledged in 2010, driving transport infrastructure growth over the next five years.
Despite a strong outlook, a number of factors could undercut prospects for growth. The first is very high inflation in the construction sector, driven by rising construction materials prices. According to a recent study of 11 countries in Asia, Indonesia had the fourth highest cement price in the region. Indeed, a 50kg bag of cement in East Java costs almost double what it would in China, according to the Jakarta Post.
With cement costs accounting for around 30% of project costs, the impact is notable. The main reason for the higher prices has been blamed on transport and distribution costs, and the uncertain electricity supply in the country is bound to have an impact. There are also concerns of collusion between cement makers, limiting production to drive prices higher. High prices could erode real value creation and if costs run too high, projects could become unfeasible financially.
The other threat is the business environment. Although the Indonesian government is working hard to attract private investors, there is still an underlying threat of corruption and transparency in tendering infrastructure. This culminates in a score of just 54.6 out of 100 for infrastructure business environment and 35.8 out of 100 for project finance ratings.
Ref. © 2010 Business Monitor International: Indonesia Infrastructure Report Q1 2011
31 Januari 2011
22 Juni 2010
STRATEGIC MANAGEMENT PRACTICES IN CONSTRUCTION INDUSTRY: A STUDY OF INDONESIAN ENTERPRISES
Since the establishment of the first national strategic development plan in the early 1970s, the construction industry has played an important role in terms of the economic, social and cultural development of Indonesia. The industry’s contribution to Indonesia’s GDP increased from 3.9% in 1973 to 7.7% in 2007. Business Monitoring International (2009) forecasts that Indonesia is home to one of the fastest-growing construction industries in Asia despite the average construction growth rate being expected to remain under 10% over the period 2006 – 2010. Similarly, Howlett (2009) places Indonesia as one of the 20 largest construction markets in 2010.
Although the prospects of the Indonesian construction industry have become attractive and very promising, many local construction firms still face serious difficulties, such as poor performance and low competitiveness. There are two main reasons behind the problem: the environment that they face is not favourable; the other is the lack of strategic direction to improve competitiveness and performance. Meanwhile, although strategic management has now become more widely used by many large construction firms in developed countries, practical cases or empirical findings related to the Indonesian construction industry remain scarce. In addition, research endeavours related to these topics in developing countries appear to be limited. This has potentially become one of the factors hampering efforts to guide Indonesian construction enterprises.
This research aims to construct a conceptual model to enable Indonesian construction enterprises to develop sound long-term corporate strategy that generates competitive advantage and superior performance. The conceptual model seeks to address the main prescription of a dynamic capabilities framework (Teece et al., 1997; Teece, 2007) within the context of the Indonesian construction industry. It is hypothesised that in a rapidly changing and varied environment, competitive success arises from the continuous development and reconfiguration of firm specific assets achieving competitive advantage not only dependent on the exploitation of specific assets/capabilities, but on the exploitation of all of the assets and capabilities combinations in the dynamic capabilities framework. Thus, the model is refined through sequential statistical regression analyses of survey results with a sample size of 120 valid responses.
The results of this study provide empirical evidence in support of the notion that a competitive advantage is achieved via the implementation of a dynamic capability framework as an important way for a construction enterprise to improve its organisational performance. The characteristics of asset-capability combinations were found to be significant determinants of the competitive advantage of the Indonesian construction enterprises, and that such advantage sequentially contributes to organisational performance. As dynamic capabilities framework can work in the context of Indonesia, it suggests that the framework has potential applicability in other emerging and developing countries. This study also demonstrates the importance of multi-stage nature of the model which provides a rich understanding of the dynamic process by which asset-capability should be exploited in combination by the construction firms operating in varying levels of hostility. Such findings are believed to provide useful to both academics and practitioners, however, as this research represents dynamic capabilities framework at the enterprise level, future studies should continue to explore and examine the framework in other levels of strategic management in construction as well as in other countries where different culture or similar condition prevails.
Although the prospects of the Indonesian construction industry have become attractive and very promising, many local construction firms still face serious difficulties, such as poor performance and low competitiveness. There are two main reasons behind the problem: the environment that they face is not favourable; the other is the lack of strategic direction to improve competitiveness and performance. Meanwhile, although strategic management has now become more widely used by many large construction firms in developed countries, practical cases or empirical findings related to the Indonesian construction industry remain scarce. In addition, research endeavours related to these topics in developing countries appear to be limited. This has potentially become one of the factors hampering efforts to guide Indonesian construction enterprises.
This research aims to construct a conceptual model to enable Indonesian construction enterprises to develop sound long-term corporate strategy that generates competitive advantage and superior performance. The conceptual model seeks to address the main prescription of a dynamic capabilities framework (Teece et al., 1997; Teece, 2007) within the context of the Indonesian construction industry. It is hypothesised that in a rapidly changing and varied environment, competitive success arises from the continuous development and reconfiguration of firm specific assets achieving competitive advantage not only dependent on the exploitation of specific assets/capabilities, but on the exploitation of all of the assets and capabilities combinations in the dynamic capabilities framework. Thus, the model is refined through sequential statistical regression analyses of survey results with a sample size of 120 valid responses.
The results of this study provide empirical evidence in support of the notion that a competitive advantage is achieved via the implementation of a dynamic capability framework as an important way for a construction enterprise to improve its organisational performance. The characteristics of asset-capability combinations were found to be significant determinants of the competitive advantage of the Indonesian construction enterprises, and that such advantage sequentially contributes to organisational performance. As dynamic capabilities framework can work in the context of Indonesia, it suggests that the framework has potential applicability in other emerging and developing countries. This study also demonstrates the importance of multi-stage nature of the model which provides a rich understanding of the dynamic process by which asset-capability should be exploited in combination by the construction firms operating in varying levels of hostility. Such findings are believed to provide useful to both academics and practitioners, however, as this research represents dynamic capabilities framework at the enterprise level, future studies should continue to explore and examine the framework in other levels of strategic management in construction as well as in other countries where different culture or similar condition prevails.
18 April 2009
Dynamic Capabilities in Construction -- Interim Results for the 2009 Survey on Indonesian Construction Firms
I’m conducting a research survey as a part of my Ph.D study to elicit critical comments and feedback from Indonesian large construction firms regarding to their dynamic capabilities and industry specific factors that contribute business success in
The research is based on the Dynamic Capabilities Framework (Teece, D.J., 1994/1997 ; 2007/2009) and Five Forces Framework (Porter, M.E., 1985)
UPDATE:
10 April 2009 – This summary was prepared for the 31 March 2009 online based result only, the paper based versions were not included and the result given here is now outdated
Please contact me on +61 402155808 or email if you would like more information or a copy of research results.
Thanks, M. Sapri Pamulu
04 April 2009
22 Maret 2009
Survey Bisnis Konstruksi Indonesia 2009
Beberapa waktu lalu, suatu survei tahap-1 terkirim yang bermaksud mendapatkan masukan tentang dampak dari factor-faktor dan dan luar terhadap strategi bisnis konstruksi. Perusahaan anda termasuk dalam populasi dari perusahaan konstruksi yang beroperasi di Indonesia. Survei merupakan proyek penelitian mahasiswa pasca sarjana yang dibiayai oleh Queensland University of Technology Australia.
Jika anda telah menyelesaikan dan mengembalikan survey tersebut kepada kami, perkenankan kami mengucapkan terima kasih. Jika belum, sebagaimana Survey Tahap-2 ini merupakan survey tindak-lanjut dengan anda tentang survey sebelumnya, dan kami akan sangat menbghargai jika anda dapat melengkapi daftar pertanyaan hari ini. Kami memahami bahwa ini adalah waktu yang sangat menyibukkan tahun ini, tetapi adalah hal yang sangat penting bahwa informasi tentang asset dan kapabilitas perusahaan anda termasuk dalam studi kami untuk memberi gambaran yang luas tentang bisnis konstruksi yang beroperasi di Indonesia. Survei ini memerlukan waktu sekitar 15 - 30 menit untuk dilengkapi baik versi cetak (offline) maupun online versi Bahasa Indonesia dan English version
Untuk melengkapi survei ini, dimohon untuk memperhatikan instruksi sebagai berikut:
1. Survey ini akan mengkaji hubungan antara asset, kapabilititas dan kinerja perusahaan, kami menganjurkan untuk dengan singkat membaca semua faktor di Bagian Pertama, dan Daftar definisi yg tersedia sebelum membuat tanggapan akhir.
2. Untuk setiap item pertanyaan, mohon lingkari nomor yang tepat sesuai dengan jawaban anda. Terdapat tiga (3) bagian untuk diselesaikan ( Section/Bagian I, II, dan III)
3. Semua informasi dari sini akan diperlakukan dengan sangat rahasia. Semua data yang terkumpul akan dianalisa dan semua informasi tentang perusahaan/responden akan disimpan terpisah dari data survey.
4. Jika nada berkenan untuk menerima souvenir dan ringkasan hasil survey dari kami, mohon mengisi data respondend pada tempat yang tersedia di bagian akhir survey ini (hal.9).
5. Dimohon untuk melengkapi survey ini sebelum tanggal 31 Maret jika memungkinkan.. Survei yang telah diselesaikan agar dikirim melalu fax atau surat elektronik kepada M. Sapri Pamulu / Stephen Kajewski, BEE-QUT Brisbane, Australia 4001, Fax +61-7-31381170 (Internasional) or +62-21-7817235 (Lokal) atau email to m.pamulu@qut.edu.au
Terima kasih atas partisipasi dan kerjasamanya. M.Sapri Pamulu
Jika anda telah menyelesaikan dan mengembalikan survey tersebut kepada kami, perkenankan kami mengucapkan terima kasih. Jika belum, sebagaimana Survey Tahap-2 ini merupakan survey tindak-lanjut dengan anda tentang survey sebelumnya, dan kami akan sangat menbghargai jika anda dapat melengkapi daftar pertanyaan hari ini. Kami memahami bahwa ini adalah waktu yang sangat menyibukkan tahun ini, tetapi adalah hal yang sangat penting bahwa informasi tentang asset dan kapabilitas perusahaan anda termasuk dalam studi kami untuk memberi gambaran yang luas tentang bisnis konstruksi yang beroperasi di Indonesia. Survei ini memerlukan waktu sekitar 15 - 30 menit untuk dilengkapi baik versi cetak (offline) maupun online versi Bahasa Indonesia dan English version
Untuk melengkapi survei ini, dimohon untuk memperhatikan instruksi sebagai berikut:
1. Survey ini akan mengkaji hubungan antara asset, kapabilititas dan kinerja perusahaan, kami menganjurkan untuk dengan singkat membaca semua faktor di Bagian Pertama, dan Daftar definisi yg tersedia sebelum membuat tanggapan akhir.
2. Untuk setiap item pertanyaan, mohon lingkari nomor yang tepat sesuai dengan jawaban anda. Terdapat tiga (3) bagian untuk diselesaikan ( Section/Bagian I, II, dan III)
3. Semua informasi dari sini akan diperlakukan dengan sangat rahasia. Semua data yang terkumpul akan dianalisa dan semua informasi tentang perusahaan/responden akan disimpan terpisah dari data survey.
4. Jika nada berkenan untuk menerima souvenir dan ringkasan hasil survey dari kami, mohon mengisi data respondend pada tempat yang tersedia di bagian akhir survey ini (hal.9).
5. Dimohon untuk melengkapi survey ini sebelum tanggal 31 Maret jika memungkinkan.. Survei yang telah diselesaikan agar dikirim melalu fax atau surat elektronik kepada M. Sapri Pamulu / Stephen Kajewski, BEE-QUT Brisbane, Australia 4001, Fax +61-7-31381170 (Internasional) or +62-21-7817235 (Lokal) atau email to m.pamulu@qut.edu.au
Terima kasih atas partisipasi dan kerjasamanya. M.Sapri Pamulu
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