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Indonesia Construction Industry:Challenges, Outlooks and Regulations

Munich, Germany, April 17, 2013

IndonesiaConstruct ion Sector

Invest in remarkable Indonesia


Indonesia

Invest in

Indonesia

Indonesia

Indonesia

Invest in remarkable Indonesia Invest in





Invest in remarkable IndonesiaInvest in remarkable Indonesia Invest in

BAUMA 2013Indonesian Day Seminar

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 AInvest in remarkable IndonesiaIndonesia



Indonesia

Invest in


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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


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I. Introduction


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COUNTRY SNAPSHOT: THE BIGGEST ARCHIPELAGO

I N D O N E S I A

Land Area 1,904,443 sq km

Sea Area 3,116,163 sq km

Total Area 5,020,606 sq km

Coastal Line 81,000 km

Population(Statistic Indonesia 2010 census)

240 Million people (4th biggest population)

GDP Size (2012) US$ 870 Bi

GDP percapita (2011) US$ 3,562

Source: World Bank

The rising population share of Indonesias middle class

(% of Population)

Source: Various

37.7%

2003

56.5%

2010


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II. Construction Industry Overview

in Indonesia


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GROWTH OF GDP BY INDUSTRIAL ORIGIN (2007-2012)

The growth of construction sector has

always been over the average economic

growth of the nine major sectors.

Source : Central Bureau of Statistics Indonesia

0,00

2,00

4,00

6,00

8,00

10,00

2007 2008 2009 2010 2011 2012

8.57.5 7.10 7.0 6.7

7.5

Growth of Construction Sector GDP

0,00

2,00

4,00

6,00

8,00

2007 2008 2009 2010 2011 2012

6.306.00

4.60

6.10 6.50 6.23

Economic Growth of GDP

Source : Central Bureau of Statistics Indonesia


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INDONESIA ECONOMY STRUCTURE

INDONESIA ECONOMY STRUCTURE: 2012Contribution of Sectors to National GDP

Agriculture

14.44%

Mining11.78%

Manufacture

23.94%Electricity

0.79%

Buildings(Construction)

10.45%

Trade

13.90%

Transportation

6.66%

Finance

7.26%

Services

10.78%

Source: Central Bureau of Statistic Indonesia

Value of GDP in 2012:

- Total = US$ 867.6 billion

- Construction = US$ 90.6 billion

Contribution of construction

Sectors to National GDP in Asian

Country 2011

Country GDP

(US$ Billion)

Contribution

(%)

India 1,729,0 7.9

Malaysia 237.8 1.6

Vietnam 103.6 9.3

Thailand 377.2 4.3

Philippine 227,6 6.0

Indonesia 842.7 10.16


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Profile of Construction Workforce

NO DESCRIPTION UNIT 2008 2009 2010 2011 20121 Total Number of

Workforce (all sectors)

Person

(million)102.5 104.9 108.2 109.7 110.8

2 Construction Sector

Workforce

Person

(million)5.44 5.49 5.59 6.34 6.79

Portion of total % 5.31 5.23 5.17 5.78 6.133 Education Level of Construction Workforce

Elementary School % 54 52 52 52 52

High School % 42 44 44 44 44

University/Diploma % 4 4 4 4 4

4 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


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IMPORTANCE OF THE CONSTRUCTION SECTOR TO THE

INDONESIAN ECONOMYSource: Construction Satellite Account, 2012

Multiplier Number

Output

multiplier 1.8510

Income

multiplier0.2498

Employmentmultiplier

0.0073

Value added

multiplier0.7681

Linkage Analysis

Backward Linkage

(BL) 1.8510

BL Index 1.1494

Forward Linkage

(FL)2.8182

FL Index 1.7500


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MASTER PLAN FOR ACCELERETATION AND EXPANSION OF

INDONESIA ECONOMIC DEVELOPMENT (MP3EI) 2011-2025

0

50

100

150

200

Road Port Power &

Energy

Airport Railway Water Utility ICT Other

Infrastructure

Total

35.7

12.7

70.4

34.3

25.5 186.7

3.4

1.9

3.3

Indications of Infrastructure Investment

(US$ Billion)

Note: The investment will be funded by Goverment, State Owned Enterprises (SOE), and Privates.

Source : MP3EI

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


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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.


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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.


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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 spanbridge, high rise building, mega stadium and mega conventionhall 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 andhuman resources.


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DEVELOPMENT FOR BUTON NATURAL ASPHALT

INDUSTRY

Potential deposit is more than 600 million MT, itsasphalt content is about 15%-30%, and laying on adepth of 1.5m30m;

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 productand its quality tend to decrease.

Need capital investment, advance technology forasphalt extraction, and global marketing.


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SUPPLY CHAIN OF MAJOR CONSTRUCTION

MATERIALS AND EQUIPMENTS

NO

ITEM

RAW

MATERIALPROVIDER

SUPPLIER PRODUCER FABRICA-TOR DISTRIBU-

TOR

SERVICE

PROVIDER

CONSUMER

1 Cement

2 Steel

3 Asphalt Oil

4 BN Asphalt

5 Heavy Equip

6 Glasses for

GB

7 Pre-cast

Concrete

BN Asphalt = Buton Natural Asphalt

GB = Green Building

= The main role


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V. Regulations on Market Access in

Construction and Infrastructure Sector


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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 constructioncompany, 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 BusinessLicense from the Indonesia Investment Coordinating Board

(BKPM).


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PUBLIC WORKS INFRASTRUCTURE


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PUBLIC WORKS INFRASTRUCTURE

THE WAY TO INVEST

Investement PolicyConducive Investment Environment in

Indonesia supported by Law & PPP

Regulations

PPP RegulationPresidential 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)


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Annexes

SOME PPP OPPORTUNITIES


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SOME PPP OPPORTUNITIES

IN THE PROVISION OF INFRASTRUCTURE

TENDER STATUS IN PPP PROJECTS

No Project Title Brief Descriptions Status in late 2012

1 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

2 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

3 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


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OPPORTUNITIES IN PPP PROJECTS

No Project Title Brief Descriptions Status in late 2012

1 DKI Jakarta-Bekasi-

Karawang 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

2 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

3 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

4 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

5 Jatigede Water Supply,

West Java Province

PPP Modality: BOT


Development of WTP: 6,000 Lps

Procurement of transmission pipe ND 1,600mm, length 7.15 Km

Waiting for Completion

of Dam Structure

6 Expansion of Padang Water

Supply, West Sumatera

Province


Development of WTP: 2000 L/sec

Rehabilitation of distribution network

Preparation of pre FS


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(2) Western Semarang City Water Supply

PPP Modality : BOT/Concession

Estimated Project cost : US$ 40-

70 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 unitStatus:

Due diligence to final business case


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(4) Karian-Serpong Water Conveyance

PPP Modality : BOT

Capacity Planning : 10,000 Lps

Estimated Project Cost : US$ 690 Million

Estimated IRR : 16 %

Beneficiary : The utilization for 4 million inhabitants

or 800,000 connection

Project Location : 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


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(5) Jatigede Water Supply

PPP Modality : BOT

Capacity Planning : 6,000 Lps

Estimated Project Cost : US$ 357.6 Million

Estimated IRR : 20 %

Beneficiary : The utilization for 2,4 million inhabitants

or 480,00 connection

Project Location : 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


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