Construction business still has good prospects: Expert

Posted on 05 May 2016

Source: The Jakarta Post

Despite the weak growth of the construction industry in the first quarter of this year, the government’s infrastructure projects still have good prospects over the next few years, an expert says.

“Government-related construction including reservoirs, airports, seaports and highways will still have good prospects at least until the end of 2018 as the projects have been specified and the budget has been allocated,” Institute for Development of Economics and Finance ( INDEF ) senior researcher Iman Sugema said on Wednesday.

The Central Statistics Agency ( BPS ) reported on Wednesday that the Business Tendency Index ( ITB ), an indicator of optimism in the economy, fell to 99.46 in March, compared to 105.22 in the fourth quarter last year. It could have happened because there was a simultaneous drop in various business aspects such as revenues, production capacity utilization and average working hours, according to the BPS.

“It is different with private infrastructure projects because it is related to the country’s economic growth. Infrastructure construction is all about asset accumulation, which can only be reached if the companies have savings to invest,” said Iman.

Indonesia's economy only expanded by 4.92 percent year-on-year ( yoy ) in the first quarter of this year, lower than 5.04 percent in the previous quarter, the BPS added.

The House of Representatives is expecting the construction services bill, a revision of the existing 1999 Construction Law, to be passed into law in May, five months after the launch of the ASEAN Economic Community ( AEC ), which is expected to create an integrated market for capital, labor, goods and services within Southeast Asia.

An article in the bill stipulates that foreign companies or businesspeople intending to carry out construction work in the country will be obliged to set up a representative office in Indonesia or a joint company with a local construction firm.

Representative offices will also be obliged to have a joint operation with big national construction firm in their projects and to prioritize the hiring of local workers and the procurement of locally sourced materials and technology.

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