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Indonesia
Con stru c ti o n Sector
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Indonesia Invest in remarkable Indonesia

Indonesia Construction Industry:


Challenges, Outlooks and Regulations
BAUMA 2013
Indonesian Day Seminar
Munich, Germany, April 17, 2013
M I N I S T R Y
O F P U B L I C W O R K S
R E P U B L I C
O F
I N D O N E S I A

OUTLINE

I. Introduction
II. Construction Industry Overview in Indonesia
III. Construction Opportunities in Indonesia
IV. Demand for Materials and Equipments to Support Construction
Industry

V. Government Regulation for Constuction and infrastructure Sector

I. Introduction

COUNTRY SNAPSHOT: THE BIGGEST ARCHIPELAGO


INDONESIA
GDP Size (2012)

US$ 870 Bi

Land Area

1,904,443 sq km

GDP percapita (2011)

US$ 3,562

Sea Area

3,116,163 sq km

Total Area

5,020,606 sq km

Coastal Line
Population
(Statistic Indonesia 2010 census)

81,000

km

240 Million people (4th biggest population)

Source: Various

The rising population share of Indonesias middle class


(% of Population)

2003

2010

37.7%

56.5%

Source: World Bank


4

II. Construction Industry Overview


in Indonesia

GROWTH OF GDP BY INDUSTRIAL ORIGIN (2007-2012)

Economic Growth of GDP


8,00

6.30

6.10

6.00

6,00

6.50

6.23

4.60

4,00

Growth of Construction Sector GDP

2,00

10,00

0,00
2007

2008

2009

2010

2011

2012

Source : Central Bureau of Statistics Indonesia

8.5
7.5

8,00

7.10

7.0

7.5
6.7

6,00
4,00

The growth of construction sector has


always been over the average economic
growth of the nine major sectors.

2,00
0,00
2007

2008

2009

2010

2011

2012

Source : Central Bureau of Statistics Indonesia

INDONESIA ECONOMY STRUCTURE


INDONESIA ECONOMY STRUCTURE: 2012
Contribution of Sectors to National GDP
Services
Finance 10.78%
7.26%

Agriculture
14.44%

Transportation
6.66%

Mining
11.78%

Contribution of construction
Sectors to National GDP in Asian
Country 2011
Country

GDP
(US$ Billion)

Contribution
(%)

1,729,0

7.9

Malaysia

237.8

1.6

Electricity
0.79%

Vietnam

103.6

9.3

Source: Central Bureau of Statistic Indonesia

Thailand

377.2

4.3

Value of GDP in 2012:


- Total = US$ 867.6 billion
- Construction = US$ 90.6 billion

Philippine

227,6

6.0

842.7

10.16

Trade
13.90%
Buildings
(Construction)
10.45%

Manufacture
23.94%

India

Indonesia

Profile of Construction Workforce


NO DESCRIPTION

UNIT

2008

2009

2010

2011

2012

Total Number of
Workforce (all sectors)

Person
(million)

102.5

104.9

108.2

109.7

110.8

Construction Sector
Workforce

Person
(million)

5.44

5.49

5.59

6.34

6.79

5.31

5.23

5.17

5.78

6.13

Portion of total
3

Education Level of Construction Workforce


Elementary School

54

52

52

52

52

High School

42

44

44

44

44

University/Diploma

Certified Construction Workforce (% from the total workforce)


Certified Skilled
labour

2.68

3.82

6.47

6.31

9.17

Certified Experts

1.14

1.83

2.20

2.03

1,91
8

IMPORTANCE OF THE CONSTRUCTION SECTOR TO THE


INDONESIAN ECONOMY
Source: Construction Satellite Account, 2012

Linkage Analysis
Backward Linkage
(BL)
BL Index
Forward Linkage
(FL)

FL Index

Multiplier Number
1.8510
1.1494

2.8182

1.7500

Output
multiplier

1.8510

Income
multiplier

0.2498

Employment
multiplier

0.0073

Value added
multiplier

0.7681
9

III. Construction Opportunities in Indonesia

10

Five Year National Development Plan 2010-2014

Almost 60% of Government budget


for infrastructure has been
channeled through The Ministry of
Public Works

Source : FYNDP 2010-2014

Infrastructure Fund by Central Government


US$ Billion

18
16
14
12
10
8
6
4
2
0

16.0

8.3

06

07

10.5

2.7

2005

* Exchange rate (Rp/US$) = 9,500

5.7

6.3

9.6

17.0

08

09

10

11
(APBN-P)

12
(APBN)

11

MASTER PLAN FOR ACCELERETATION AND EXPANSION OF


INDONESIA ECONOMIC DEVELOPMENT (MP3EI) 2011-2025
200

Indications of Infrastructure Investment


(US$ Billion)
25.5

34.3

3.3

186.7

Other
Infrastructure

Total

1.9

150
70.4

3.4

Power &
Energy

Airport

100

50

12.7
35.7

0
Road

Port

Railway

Water Utility

ICT

Note: The investment will be funded by Goverment, State Owned Enterprises (SOE), and Privates.
Source : MP3EI
*Exchange rate (Rp/US$) = 9,500

12

NATIONAL CONSTRUCTION MARKET DATA (CONTRACTING SERVICES)


IN THE LAST 5 YEARS

National Construction Market Data


2009 - 2013

2009

45

PROJECT
VALUE
(US$ Billion)

16.1

2010

18.4

2011

21.8

40,3

40
32,4
35
30
US $ Billion

Year

21,8

25
16,1

18,4

20
15
10

2012

32.4

2013

40.3

5
0
2009

2010

2011

2012

2013

13

FUND RESOURCES OF NATIONAL CONSTRUCTION MARKET


2012 - 2013
2012
Join Fund:
US$ 2.7
Billion
FDI: US$ 3.1
Billion

2013
Central Gov
Public
Works: US$
5.9 Billion

DDI: US$
3.8
Billion

Central Gov
Non Public
Works:
US$ 3.4
Billion

Regional
State
Owned
Enterprises:
US$ 38.9
Million

SOE: US$
9.9 Billion

Local Gov:
US$ 3.4
Billion

Total in 2012 = US$ 32.4 Billion

Source: Website SISDI, Update 2 Januari 2013

Join Fund:
US$ 8.4
Billion

Central gov
Public
Works: US$
8.4 Billion

Central Gov
Non Public
Works: US$
3.4 Billion

FDI: US$ 3.1


Billion

DDI: US$ 3.8


Billion
Regional
State Owned
Enterprises:
US$ 584.2
Million

Local Gov:
US$ 3.8
Billion
SOE: US$ 8.8
Billion

Total in 2013 = US$ 40.3 Billion

*Exchange rate (Rp/US$) = 9,500

14

IV. Demand for Materials and Equipments


to Support Construction Industry

15

TYPICAL MAJOR CONSTRUCTION PROJECTS


IN INDONESIA

Infrastructure Projects
Road Projects
Covering more than 458 thousand km road

Bridge Projects
Long span bridge project for crossing large rivers, straits,
and crowded urban area in metropolitan city.

Flood Control Projects


Giant river dam, offshore dam, city canal, volcanic
sediment dam

Irrigation Projects
Covering more than 4.8 million Ha of agriculture
Continued...
16

TYPICAL MAJOR CONSTRUCTION PROJECTS


IN INDONESIA....(2)

Infrastructure Projects
Water supply and sanitation project
Covering 240 million people, 33 provinces, and 500 district

Hydro Power
Turbine for Mini hydro and Hydro Power Plant of 10 MW and up

Transportation infrastructure project: airport, seaport and


railway projects
Civil Works in Mineral and Energy Projects

Non Infrastructure Projects


Building Projects
Backlog supply for housing in 2013 more than 20 million units
17

MAJOR CONSTRUCTION MATERIALS AND


EQUIPMENTS IN INDONESIA

Cement
Steel
Asphalt
Glasses for green building
Pre-cast Concrete
Heavy Equipment
Compactor, soil mover, crane, road paver, pile
driver, mobile transporter, production units, etc.
18

MATERIALS AND EQUIPMENTS DEMAND FOR


INFRASTRUCTURE PROJECTS
NO

Item

2010

2011

2012

2013

2014

Cement (Mil. MT)

8.6

12.3

13.7

13.9

16.0

Steel (Mil. MT)

3.4

4.8

5.3

6.0

7.0

Asphalt (Mil. MT)

0.8

1.2

1.3

1.7

2.0

Heavy Equipment
(Tho. Units)

26.4

37.8

42.0

50.4

60.5

19

MATERIAL AND EQUIPMENT SUPPLY :


DEMAND FOR ALL NATIONAL PROJECTS IN 2012

No Item

Unit

Demand

Domestic
Supply
Capacity

Infrast

Non
Infras

Total

Utility Ratio

Cement

Mil. MT

60,57

13,7

41,2

54,9*

90%

Steel

Mil. MT

18,9**

5,3

8,0

13,3

70%

Asphalt

Tho. MT

890

1250

65

1315

147%

Heavy Eq.

Tho. Unit

150

42

168

210

140%

Usage ratio of material and equipment for infrastructure :


Cement 25%, Steel 40%, Asphalt 95%, Heavy equipment 20%
Utility Ratio = Demand/Supply x 100%
* Source: ASI (Indonesian Cement Association)
** Idle capacity (depending on imported raw material)

20

PROPORTION OF MAJOR DOMESTIC CONSTRUCTION


MATERIALS AND EQUIPMENTS
NO

ITEM

PROPORTION (%)
CONSTRUCTION

NON-CONSTRUCTION

Steel

78

22

Asphalt

95

Heavy Equipment

20

80

NO

ITEM

PROPORTION (%)
INFRASTRUCTURE

NON-INFRASTRUKTUR

Cement

25

75

Steel

40

60

Asphalt

95

Heavy Equipment

20

80

21

REQUIRED SUPPORTING INDUSTRY


FOR CONSTRUCTION

Pre-cast concrete Industry;


High strength steel wire, plate, and bar
industry;
Industry of additive material for concrete and
asphalt mixture;
Buton natural asphalt industry; and
Industry of heavy equipment for specific
purposes.
22

DEVELOPMENT FOR PRE-CAST CONCRETE INDUSTRY


IN INDONESIA

Current supply about 25% of concrete works;


It is forecasted to increase to 50% or even more
of the construction market;
Indonesia needs technical assistance to develop
and to spread out the industry to all over the
regions of Indonesia.

23

DEVELOPMENT FOR PRE-CAST CONCRETE INDUSTRY

Current and future mega projects that require


high-end precast concrete technology:
Sunda Strait Bridge;
Jakarta Mass rapid transportation (MRT);
Jakarta Monorail construction;
Earthquake resistant building system with precast
prestressed unbonded posttension connection.

The possibility of collaboration in German


investment projects in Indonesia.
24

DEVELOPMENT FOR HIGH STRENGTH STEEL


WIRE STRAND, PLATE, AND BAR INDUSTRY

The existing demand is exceeding the local supply


Demand tends to increase due to:
Increase in elevated road structure, fly over and long span
bridge, high rise building, mega stadium and mega convention
hall projects.

The growth of the Industry is slow due to:


Lack of technology and human resources;
Depend on brand holder;
Direct import is more preferred by project owner.

Need capital investment, advance technology and


human resources.
25

DEVELOPMENT FOR BUTON NATURAL ASPHALT


INDUSTRY

Potential deposit is more than 600 million MT, its


asphalt content is about 15%-30%, and laying on a
depth of 1.5m 30m;
The quality is better than oil asphalt, and so called
as a premium asphalt;
Demand for natural asphalt tends to increase due
to:
Oil deposit tends to decrease;
Oil price tends to increase, and then oil asphalt product
and its quality tend to decrease.

Need capital investment, advance technology for


asphalt extraction, and global marketing.
26

DEVELOPMENT OF HEAVY EQUIPMENT INDUSTRY


FOR SPECIFIC PURPOSES
To increase local content (currently between 40 60%);
Currently heavy equipment for road paver, crane, pile driving,
road material cycling, etc. are mostly imported (built in or CKD);
To develop specific heavy equipment for:
Flood control project
Bridge project
Tunnel project

: long arm excavator, amphibian


excavator and dredger
: launching gantry
: Tunnel bore machine (TBM)

To develop production equipment: Asphalt mixing plant and


Concrete batching plant.

27

SUPPLY CHAIN OF MAJOR CONSTRUCTION


MATERIALS AND EQUIPMENTS
NO

ITEM

Cement

Steel

Asphalt Oil

BN Asphalt

Heavy Equip

Glasses for
GB

Pre-cast
Concrete

RAW
MATERIAL
PROVIDER

SUPPLIER

PRODUCER

FABRICA-TOR

DISTRIBUTOR

SERVICE
PROVIDER

CONSUMER

BN Asphalt = Buton Natural Asphalt


GB = Green Building
= The main role
28

V. Regulations on Market Access in


Construction and Infrastructure Sector

29

REGULATIONS ON FOREIGN BUSINESS ENTITY

a. Market Access Limitation (Mode 3)


Foreign Service Provider(s) shall establish Representatives Office
(RO) in Indonesia;
Foreign Service Provider(s) shall be in the form of Joint Operation
(JO) or Joint venture (JV) with Indonesia Construction
Company(ies) holding registration certificate as a big company
issued by the National Construction Services Development Board
(NCSDB);
There is no limitation of Foreign Capital Share for JO;
JV Company shall be in the form of Limited Liability Company
(LLC) with a maximum foreign capital share of 55% for
constructing company and 49% for consulting company.
Continued...
30

REGULATIONS ON FOREIGN BUSINESS ENTITY . (2)

b. National Treatment (Mode 3)


License Fee Requirements
c. Business Requirements (Act No. 18/1999)
To conduct construction business in Indonesia, any construction
company, including Foreign construction Company who is willing
to form JO, shall be registered at NCSDB and obtain Business
License from the government;
JV Company shall be registered at NCSDB and obtain Business
License from the Indonesia Investment Coordinating Board
(BKPM).

31

REGULATIONS ON FOREIGN WORKER(S)


a. Market Access Limitations (Mode 4)
Only director(s), manager(s) and technical expert(s)/advisor(s) are
allowed subjected to Indonesian Labor and Immigration Laws and
Regulations;
Skilled and Unskilled Labor have not been negotiated yet.

b. Business Requirements (Act No. 18/1999)


Foreign expert(s) shall hold Competence Certificate and be
Registered at NCSDB).

32

LIMITATIONS IN GOVERNMENT PROCUREMENT

In accordance to Presidential Regulation No. 54/2010 and its


amendment No. 70/2012, Foreign Company (ies) is (are) only allowed
to participate a tender for a project with the value of:
Rp 100 Billion (US$ 10.87 Million) and above for constructing
services;
Rp 10 Billion (US$ 1.087 Million) and above for consulting services.

33

PUBLIC WORKS INFRASTRUCTURE


THE WAY TO INVEST
Investement Policy
Conducive Investment Environment in
Indonesia supported by Law & PPP
Regulations

Water Supply Sector


Act No. 7/2004
(Water Resources)

PPP Regulation
Presidential Regulation No. 67/2005, and its
amendment No. 13/2010 &
No. 56/2011
(PPP in Infrastructure Development)

Minister of National Development


Planning Agency Regulation No. 4/2010
(Guidelines for PPP in Infrastructure
Development)

Government Regulation No. 16/2005


(Water Supply System Development)

Minister for Public Works Regulation


No. 12/2010
(Guidelines on Business Cooperation
for Water Supply System
Development)
34

PUBLIC WORKS INFRASTRUCTURE


THE WAY TO INVEST
Investement Policy
Conducive Investment Environment in
Indonesia supported by Law & PPP
Regulations

PPP Regulation
Presidential Regulation No. 67/2005, and its
amendment No. 13/2010 &
No. 56/2011
(PPP in Infrastructure Development)

Minister of National Development Planning


Agency Regulation No. 4/2010
j.o. : No. 3/2012
(General Guidelines for the Implementation
of PPP in Infrastructure Provision)

Road Sector
Act No. 38/2004
(Road)

Government Regulation No. 15/2005


and Its Amendment No. 44/2009
(Toll Road)

Minister for Public Works Regulation


No. 295/2005 and Its Amendment
No. 27/2008
(Indonesia Toll Road Authority)
35

THANK YOU
SEE YOU IN INDONESIA
CONTACT US
MINISTRY OF PUBLIC WORKS
CONSTRUCTION DEVELOPMENT AGENCY
REPUBLIC OF INDONESIA
Jl. Pattimura No. 20, Jakarta 12110 Indonesia
Phone
: +62 21 7266640
Fax
: +62 21 7221782
Website
: www.pu.go.id

Annexes

37

SOME PPP OPPORTUNITIES


IN THE PROVISION OF INFRASTRUCTURE
TENDER STATUS IN PPP PROJECTS
No

Project Title

Brief Descriptions

Status in late 2012

Umbulan Water Supply,


East Java Province

PPP modality : BOT


Capacity planning: 4,000 Lps
Estimated project cost: US$ 204.2 Million
Estimated IRR: 14.54%
Beneficiary: The utilization for 1.6 million
inhabitants or 320,000 connection

The deal of capex values

Bandar Lampung Water


Supply, Lampung Province

PPP modality: BOT/concession


Estimated project cost: US$ 38 Million
Development of intake and WTP 2x250 L/sec
Development of distribution network and hose
connections

Clarification process on
Januari 2013

Maros Water Supply,


South Sulawesi Province

Construction of intake: 270 Lps


Installation raw water transmission: 8,5 km
WTP: 250 Lps
Reservoir: 4,500 m3
Main distribution network: 37 km
Estimated cost project: US$ 11.50 Million

Pre-Qualification

38

OPPORTUNITIES IN PPP PROJECTS


No

Project Title

Brief Descriptions

Status in late 2012

DKI Jakarta-BekasiKarawang Water Supply


(Jatiluhur),
DKI Jakarta-West Java
Province

PPP modality : BOT


Capacity of WTP: 5,000 Lps
Estimated project cost: US$ 663 Million
Procurement of transmission pipe ND: 1,800 mm, length 58 km

Financial and
institutional review

Western Semarang Water


Supply,
West Semarang-Central
Java Province

PPP modality: BOT/concession


Estimated project cost: US$ 40-70 Million
Development of intake: 1,050 L/sec
WTP: 2x500 L/sec

Due dilligence to final


business case

South Pekanbaru Water


Supply,
Pekanbaru Municipal &
Kampar Regency

Development of WTP: 500 L/sec


Development of distribution pipe
Estimated cost project: US$ 41 Million

Preparation of Pre FS

Karian-Serpong Water
Conveyance,
Banten Province

PPP Modality: BOT


Estimated cost project: US$ 690 Million
Development of WTP: 10,000 Lps
Procurement of transmission pipe length 90 km

Waiting for Dam


construction

Jatigede Water Supply,


West Java Province

PPP Modality: BOT


Estimated cost project: US$ 357.6 Million
Development of WTP: 6,000 Lps
Procurement of transmission pipe ND 1,600mm, length 7.15 Km

Waiting for Completion


of Dam Structure

Expansion of Padang Water


Supply, West Sumatera
Province

Estimated cost project: US$ 20.50 Million


Development of WTP: 2000 L/sec
Rehabilitation of distribution network

Preparation of pre FS

39

1. DKI Jakarta, Bekasi, Karawang Water Supply


(Jatiluhur)
Scope of Project:
Development of intake : 5,000 Lps
Development of Water Treatment Plant (WTP) : 5,000 Lps
Procurement of transmission pipe ND : 1,800 mm length 58 km
Estimated Project Cost:
US$ 663 Million

Status:
Financial & institutional review

40

(2) Western Semarang City Water Supply


PPP Modality : BOT/Concession
Estimated Project cost : US$ 4070 Million
Project Location : Western
Semarang City
Scope of Project:
Development of intake : 1,050
L/sec
Transmission pipe of raw water
WTP : 2x500 L/sec
Distribution pipe system
Reservoir
Distribution and service unit

Status:
Due diligence to final business case
41

(3) Pekanbaru Selatan Water Supply


Scope of Project:
Intake
Development of Water
Treatment Plant (WTP) : 500 L/s
Development of distribution
pipe
Project Location :
Pekanbaru Municipal and Kampar
Regency
Kampar River

Cost Estimation : US$ 41 Million

Status : Preparation of Pre FS


42

(4) Karian-Serpong Water Conveyance

PPP Modality
Capacity Planning
Estimated Project Cost
Estimated IRR
Beneficiary

Project Location

: BOT
: 10,000 Lps
: US$ 690 Million
: 16 %
: The utilization for 4 million inhabitants
or 800,000 connection
: Banten Province Karian and Serpong
Project Scope :
Development of Water Treatment
Plant (WTP) 10,000 Lps
Procurement of transmission pipe
length 90 km
Status : Waiting for Dam Construction
43

(5) Jatigede Water Supply

PPP Modality
Capacity Planning
Estimated Project Cost
Estimated IRR
Beneficiary

Project Location

: BOT
: 6,000 Lps
: US$ 357.6 Million
: 20 %
: The utilization for 2,4 million inhabitants
or 480,00 connection
: West Java Province
Project Scope :
Development of Water Treatment Plant (WTP)
2x3,000 Lps
Procurement of transmission pipe ND 1,600
mm; 7,150 m
Development of Reservoir 2x7,000 m3
Status : Waiting for Completion of Dam Structure
44

(6) Expansion of Padang Water Supply


Location
: Padang Municipal
Estimated Project Cost
: US$ 20.50 Million
Project Scope :
Increase of water treatment of 2000 l/s
Rehabilitation of distribution network
Status:
Preparation of pre FS IRSDP-ADB

45