Williamstown, MA -- (SBWIRE) -- 05/08/2012 -- The Indonesian construction industry increased in value at a compounded annual growth rate (CAGR) of XX.XX% during the review period (2007-2011). Significant private and public investments were made in Indonesian commercial, industrial, infrastructural and residential construction projects. The country is in urgent need of new roads, railways, bridges, ports, airports, and energy and communication infrastructure to facilitate its economic growth. Indonesia's infrastructure expenditure represents around XX.X% of the country's GDP and it is thought that the government will spend IDR XX.X trillion (US$ XX.X billion) on infrastructure over the next five years through both public and private investments. Infrastructure construction contributed XX.XX% of the construction industry value in 2011 and grew at a CAGR of XX.XX% during the review period. Within the infrastructure construction market, road infrastructure was the largest category accounting for a XX.XX% share of the overall market. A new land acquisition law passed in 2011 will allow the government to purchase land held up by disputes and accelerate the completion of road infrastructure projects. As a result of such developments in road, energy and communication infrastructure, the infrastructure construction market is expected to record a CAGR of XX.XX% over the forecast period (2011-2016).

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Key Highlights

- Increasing government spending on upgrading overall infrastructure, focusing on developing road, rail, energy and communication infrastructure, will provide growth opportunities in the Indonesian construction industry. Increasing population and urbanization will lead to a high demand for residential units. Indonesia also wants to develop other cities besides Bali and Jakarta as tourist destinations. This will need development of all types of infrastructural facilities. Indonesia's mining sector has also received large investments for developing rail networks and ports to transport coal.
- The government of Indonesia has announced IDR2,202.9 trillion (US$250 billion) of funding for infrastructure development which will be spent in the years up to 2015. This will be funded by both public and private investment with more than 60% of the funding coming from private investment.
- Increasing fuel and input material costs has added to the pressure on construction companies. Despite high demand for residential units, prices are not going up as expected due to oversupply of housing units, high mortgage and interest rates (which have started to drop) and high inflation which discourages people from borrowing money.
- The existence of established construction companies in the country and entry of new foreign contractors has led to high competition in the Indonesian construction industry. A construction boom before the economic crisis has left Indonesia with a large supply of housing units.

Companies Mentioned in this Report: PT Wijaya Karya (Persero) Tbk, PT Adhi Karya (Persero) Tbk, PT Jasa Marga (Persero) Tbk, PT Petrosea Tbk

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