The government is set to revise Indonesia's negative investment list to allow full foreign ownership in 25 industries in a bid to attract more investment into the country. (Antara Photo/Maulana Surya)

Easier Permits, Tax Amnesty to Stem Industrial Construction Decline in 2017


JANUARY 10, 2017

Jakarta. Indonesia's industrial complex construction sector is likely to decline at a slower pace this year, thanks to government efforts to loosen permit requirements and additional investment from the tax amnesty program.

The construction would worth total Rp 32 trillion ($2.4 billion) this year, down 10 percent from 2016, according to an estimation from BCI Asia, a construction projects information provider. Last year, industrial construction contracted 31 percent, BCI Asia said.

"[The government's] ease of doing business scheme and the success of the tax amnesty in 2016 is expected to boost construction business, especially the industrial sector," said Gusti Rahayu Anwar, senior research analyst at BSI Asia.

Rahayu was referring to the government's policies packages last year that cut permits in property sector. Also, the government's tax amnesty has attracted more than Rp 100 trillion in repatriated assets from abroad which could be invested in domestic construction projects, she said.

Industrial construction has been declining since 2014, following a boom a year earlier that doubled the supply of industrial area but also depleted land banks for further development, particularly in the Greater Jakarta Area, Rahayu said.

Ferry Salanto, a senior associate director at a property consultancy firm Colliers International Indonesia, said industrial construction growth this year would be dominated by existing manufacturers that would like to expand their capacity.

"Regions with the most potential for development are Karawang, with an area of ​​2,500 hectares, Tangerang with almost 1,500 hectares, Serang's 1,000 hectares and Bekasi of less than 1,000 hectares," Ferry said.

He said Bekasi would fetch the highest price for industrial area this year.

Logistics and warehousing sector would account for about a third of the construction in all industrial area this year, followed by automotive (19 percent), chemical (10 percent), food and beverage (8.5 percent) and electronics (1.9 percent), Ferry said.

The remainder would be contributed by other sectors like plastics, oil and gas and manufacturing.