A tower crane near the Sarinah department store in Central Jakarta in April 2017. (JG Photo/Yudha Baskoro)

Push in Infrastructure Development Starts Making Impacts: Gapensi


JULY 02, 2017

Jakarta. Despite continued traffic jams, overcrowded public transportation, ports and airports during this year's Idul Fitri holiday, there are signs the government's push for more infrastructure development has started making impacts on easing people's lives and help propel growth, an industry association reported.

"Unlike in previous years, when there were extreme traffic jams, this time transportation [during the Idul Fitri holiday] ran relatively smoothly. Prices of staple foods also remained stable," Andi Rukman, the secretary general of Construction Contractors Association (Gapensi), said on Friday (30/06).

He said a stronger push for infrastructure development in the archipelago has already resulted in several positive impacts, including smoothing out movement of people and goods in time for the massive Idul Fitri exodus when Muslims returned to their hometowns from urban centers.

According to the government's master plan, the government has set a target to develop a total of 15 new airports, 24 ports, 2,650 kilometers of new roads, 1,000 kilometers of new toll roads, 3,258 kilometers of new railway tracks and 60 ferry crossing ports from 2015 to 2019.

This plan requires a total of Rp 5,519 trillion ($414 billion) worth of investment, some of which will have to come from the private sector.

Infrastructure development in Indonesia is still facing many classic barriers, such as land acquisition and financing issues, but a speedier development could help push economic growth this year.

Andi said the construction sector was the sixth top driver of the country's economic growth in the first quarter of this year, but the association is optimistic it could contribute more to the country's gross domestic product this year.

"Around 70 percent of infrastructure development is construction work which absorbs workers and boosts economy in affected areas instantly," he said.

Indonesia's economic growth grew slightly in the first quarter of this year on the back of better export prices for some of the country's key commodities and stronger demands from its major trading partners.

The biggest economy in Southeast Asia grew 5.01 percent year-on-year in January-March, the country's statistics bureau (BPS) said in May, slightly higher than a 4.94 percent growth in the previous quarter.

Analysts and investors were split over how this growth momentum can carry on to the rest of the year, as they were not sure how investment and domestic consumption will perform this year.

Sectoral-wise, the highest growth came from the information and communication sector, which grew 9.01 percent in January-March since the corresponding period last year.

Transportation and warehouse sector followed in second place, mining and mineral resources in third and construction — growing 6.26 percent year-on-year in the period — in sixth.

Andi said the association is optimistic the construction sector will climb up to the top three of growth drivers by the end of the year, as the government is speeding up project developments. "There are many mega projects being worked on, including airports, railway infrastructure, ports, toll roads and others," he said.

Meanwhile, private consumption in Indonesia, which contributes more than a half of the country's gross domestic product, slowed slightly in the first three months of the year, while investment remained sluggish, particularly affected by slow growth environment globally and domestically.

However, since lower government spending in the second half of last year had dragged growth, the government has made efforts to push for more spending in the first quarter of 2017.

Finance Minister Sri Mulyani Indrawati told Reuters in April there would be no more spending cuts this year as revenue-collection was estimated to be on track and 2017 GDP growth was projected to top the official target of 5.1 percent.