Indonesia construction sector: growing well but unevenly

“Indonesia’s construction sector has significant growth potential, given a sizeable infrastructure deficit and strong government support for infrastructure investment,” BMI Research said.

The research company anticipates national construction industry growth of 7% per year over the next decade. Java and its two surrounding provinces will account for an outsized proportion of investment and construction activity: the three provinces accounted for 40% of construction activity in 2015, although they are only home to 27% of the population.

“The concentration of political and economic activity in the region will help realise high-value infrastructure projects, such as urban transit and sewerage systems, that are necessary to address the issues association with urbanisation,” BMI Research continued.

Beyond these provinces, construction projects will be focused on improving transport infrastructure. In less-developed provinces on Java and Sumatra – the two most developed islands of the archipelago nation – long-distance transport links, as well as power transmission infrastructure, will be developed to improve intra-island logistics.

On outlying island provinces, infrastructure development will be focused on supported the natural resources industries, although growth here will lag other parts of the countries. For example, the islands of Kalimantan and Sulawesi have plans to development export-oriented railways and ports.

Although impressive, infrastructure plans have recently been delayed by land acquisition problems. The country’s cement industry is also plagued by significant overcapacity. According to Indonesia Investments, the industry has annual production capacity of over 100 million t, compared to 2016 demand of only 62 million t in 2016.

Of the 62 million t, Java accounted for more than half, with demand of 33.8 million t in 2016. Sumatra consumed 13.6 million t, a rise of 13.2% year on year. Sulawesi (5.4 million t), Kalimantan (4.1 million t), Bali and Nusa Tenggara (3.4 million t) and Maluka and Papua (1.5 million t) rounded out the country’s consumption profile.

The Indonesian Cement Association expects cement sales to increase by 4 – 5% in 2017.

Read the article online at: https://www.worldcement.com/special-reports/06092017/indonesia-construction-sector-growing-well-but-unevenly/