Boston, MA -- (SBWIRE) -- 02/27/2014 -- As expected, quarterly data on Indonesia's construction sector supported our view that there is limited scope for construction growth in 2013 and 2014 to outperform growth seen in 2012. Furthermore, the downside risks we had previously highlighted - namely a deepening deficit (brought on by ballooning subsidies), higher borrowing costs, declining purchasing power for companies, the 2014 elections and bottlenecks in project execution - are manifesting and are set to adversely affect near-term construction activity. As such, we maintain our construction growth forecasts in 2013 and 2014, with growth reaching 6.7% in 2013 and 6.3% in 2014.
The key factors that will facilitate growth are:
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- In November 2013, Indonesia released the fifth edition of its Public Private Partnership (PPP) Book during Indonesia's annual infrastructure conference. The book highlights the PPP infrastructure opportunities across the country and lists 48 projects. 21 of these projects have been tendered out and the remaining 27 projects (valued at a combined US$47.3bn) are at the planning stage and have yet to start their tendering process. The majority of these 27 projects are from the energy, transportation and water sanitation sectors and are expected to break ground in 2014, according to the Jakarta Globe, citing Bastary Pandji Indra, a director of PPP at the National Development Planning Agency (Bappenas). Besides the launch of the PPP book, the Indonesian government had announced during the infrastructure conference that it plans to develop a total of 56 infrastructure projects from 2014 onwards. These projects, valued a combined US$35bn, are spread across Indonesia, but are mostly located on the islands of Java and Sumatra. Out of this 56 infrastructure projects, 32 of them will be developed under a PPP framework and 34 of them are expected to be started between 2014 and 2017 (15 in 2014). These 34 projects are eight seaports, two airports, eight railways, five power plants and 11 water supply and waste treatment plants.
- At the end of 2013, Indonesia had carried out amendments to the country's negative investment list (DNI), known also as Presidential Regulation No. 36/2010. The proposed amendments are part of the government's triennial review of the DNI, a presidential decree that aims to regulate foreign involvement in Indonesian business sectors. Some of the proposed revisions include allowing foreign investors to fully manage and operate toll roads, ports, power plants through a public-private partnership (PPP) framework. At present, the revised DNI is awaiting approval from President Yudhoyono.
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