Signs of life seen in infrastructure sectors

Signs of life seen in infrastructure sectors

Sudibyo M. Wiradji, The Jakarta Post, Jakarta

For major construction companies involved in the construction
of property and infrastructure, business has almost returned to
normal after being hard hit by the country's economic crisis five
years ago.

But for those involved in other construction services such as
those related to oil and gas exploration, mining and
petrochemical plants, the wait for a return to normalcy continues
given the lack of interest on the part of investors in entering
these capital-intensive industries.

A. Sutjipto, president of state owned construction company PT
Wijaya Karya (Wika), said the property sector had shown signs of
life over the past two years thanks to an increase in the
construction of new high-rise buildings and supermarket outlets.

"The property sector saw a growth of between five and six
percent. But the growth rate is still far smaller compared to the
12 percent growth seen before the crisis," he said.

After almost coming to a halt in the wake of the economic
crisis, the property industry has begun to move again thanks to
the increase in the construction of new apartments and shopping
centers.

Construction of infrastructure such as roads and commercial
buildings such as malls in natural resources-rich provinces like
Riau and East Kalimantan has also been picking up.

With the introduction of regional autonomy several years ago,
provincial administrations now have more power to manage their
own wealth.

"Regional economy has created more business opportunities for
construction companies," Sutjipto said.

PT Wika is currently engaged in infrastructure development
such as the expansion of the toll road linking Jakarta, Bogor and
Ciawi (Jagorawi), the construction of irrigation facilities in
several areas and commercials buildings like malls and
apartments, as well as the construction of a railroad track

"We recently held a groundbreaking ceremony for the
construction of a railway linking Yogyakarta and Kroya in Central
Java," he said.

The double-track railway is being funded by a Rp 10.3 billion
(US$95.7 million) loan from the Japan Bank for International
Cooperation (JBIC).

Wika is constructing the railroad track in cooperation with
Japan's JFE Civil Engineering and Construction Corporation, with
managerial assistance from Japan Transport Consultant Co. Ltd.

Sutjipto, however, said that concerns the upcoming general
election would result in political conflict has had a negative
impact on the construction business.

According to him, many projects have been postponed pending
the result of this year's elections. "Only a few companies
obtained new contracts this year."

But Sutjipto said the general outlook for the country's
construction sector remained promising despite the postponement
of some projects.

He believes the legislative election next month and the
country's first ever direct presidential election in July will
come off without any problems, giving the country's economy an
extra boost.

Another company that has been able to survive the difficult
years is PT Leighton Contractors.

Although demand is not as high as before the economic crisis,
the company still receives a significant number of jobs,
especially those involving the construction of buildings,
bridges, mining facilities and undersea infrastructure such as
tunnels, as well as reclamation facilities for mining companies.

Leighton recently won a contract to build a road in Tanito
near Samarinda, East Kalimantan. The project, which kicked off in
March 2004, is expected to be completed in July this year.

Its ongoing projects include the construction of a double-
track railway linking Cikampek and Cirebon in West Java, the ABK
Loajan coal mine construction in East Kalimantan and the Sebuku
coal preparation plant and coal handling facilities, also in East
Kalimantan.

The construction of the Cikampek-Cirebon railroad track began
in 2001 and is scheduled for completion in May of this year.

"The railroad track project is the most challenging one due to
the high risks involved. A specific safety plan and safe working
plan had to be established and implemented," said Leighton
Contractors director Tjoeng Hing Kok.

PT Rekayasa Industri (RKI), whose core business is
engineering, procurement and construction (EPC) for
manufacturing, electricity and cement plants, as well as agro-
based industries, is relying on old projects due to the absence
of new contracts.

Rekayasa is currently completing several projects, with most
of the contracts having been signed one or two years ago. One of
these projects is the construction of industrial facilities at
the Balongan refinery complex in Indramayu, West Java.

The company received the order from state oil company
Pertamina. The project began in 2003 and is expected to be
completed in 2005.

Other ongoing projects include the construction of fertilizer
plant PT Pupuk Kujang in Cikampek, West Java, and the
construction of a ferronickel plant in Pomala, Southeast
Sulawesi.

While infrastructure and the property sector are seeing
relatively high growth, construction activities in the mining
sector remains somewhat gloomy.

"Mining projects have declined both in terms of size and
investment over the last few years," said PT ODG Wormald
Indonesia general manager Bill Bradshaw.

Despite the absence of new project contracts, PT ODG has been
able to survive thanks to its long-term maintenance contracts
with several mining companies.

The company handles the maintenance of electrical, AC, fire
and communication facilities for Sumbawa-based gold producer PT
Newmont Nusa Tenggara, gold producer PT Freeport Indonesia in
Timika, Papua, the Gosowong gold mining company in Halmahera,
Maluku, and coal mining company PT Kaltim Prima Coal (KPC) in
East Kalimantan.

Trans Bakrie, which is also involved in the construction of
oil and gas facilities, both onshore and offshore, and processing
plants for mining and manufacturing companies, was also affected
by the crisis.

Trans Bakrie experienced cutbacks due to the decline in
orders, particularly from oil and gas companies, following the
country's economic crisis.

However, the company managed to survive by changing its
business strategy to focus on exports. The recommencement of
several delayed projects such as the construction of water-
cooling systems for the Tanjung Jati B power station in Jepara,
Central Java, has also given Trans Bakrie fresh blood to grow.

"Over the last few years Trans Bakrie has become actively
involved in exporting air-cooler facilities to the U.S., Sri
Lanka, Australia and Singapore," said PT Trans Bakrie's general
manager for commercial affairs, Hery Kusnanto.

Like companies in many other business sectors, the future of
construction and engineering firms relies on the government's
ability to win back the confidence of foreign investors.

Hopefully, the legislative election next month and the
presidential election in July will pave the way for the
establishment of a government able to turn Indonesia into not
only a better place to live, but also to do business.