Market Trends of Indonesia Construction Industry
Growth of infrastructural plans drives the construction market in Indonesia
- As demand for these services continues to rise in Indonesia, the fourth most populous nation in the world, more data centers are soon to be built there. Indonesia is on track to overtake Singapore as the second-largest public cloud market in Southeast Asia. The country is already home to major cloud providers like Google Cloud, AWS, Microsoft Azure, and Alibaba Cloud. Equinix is currently trying to jump on board in Indonesia.
- To establish its International Business Exchange (IBX) data center in Jakarta, the tech company will invest USD 74 million. The expansion is anticipated to make it possible for businesses in Indonesia and beyond to make use of its reliable platform to link and connect the basic infrastructure that underpins their operations.
- Data across the first half of 2021 showed some signs of recovery, albeit at a much lower rate than the initial expectations. There remains a mixed picture for the remainder of the year. Since its peak in July, the caseload has improved, and restrictions have started to ease in Jakarta and some parts of Java. However, cases have continued to surge outside these regions.
- The government initially allocated a substantial proportion (slightly under 50%) of the 2021 budget toward infrastructure development, although it had to renegotiate and reallocate funds for healthcare. As such, projects in the pre-construction phases may come under heavy pressure, particularly state-funded projects, impacting the growth for the remaining months of the year.
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Increased involvement of state-owned enterprises (SOEs) driving the market
- More than 50% of construction roles are awarded to established Indonesian state-owned enterprises (SOEs) and companies such as Wijaya Karya, Adhi Karya Waskita Karya, and Pembangunan Perumahan. These SOEs are involved in major infrastructure projects across the market, such as the Patimban Deep-Sea Port in West Java or work relating to the Jakarta Mass Rapid Transit System.
- Under the National Medium-Term Development Plan (2020-2024 RPJMN), the government plans to invest IDR6 quadrillion (USD 412 billion) in developing transport, industrial, energy, and housing infrastructure projects by 2024. In November 2020, the government announced the provision of IDR 42.38 trillion (USD 2.6 billion) for state-owned enterprises (SOEs) in 2021 to help boost their role in supporting the country's economic recovery by creating more jobs and conducting business activities.
