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.