Earlier this month, BUILK team has a chance to go to Indonesia to study the market and sightseeing. As besides that, we’d happen to catch a little talk time about how is his perspective and thought toward Indonesia overall market and situation now with Mr. Vikorn Phongsathorn, who’s a SCG Indonesia Business Support Director.
How’s the overall construction situation in Indonesia?
As the conversation went, we asked him about how is the construction condition doing here.
And he said “Within these past two to three years, the construction industry health was in the average level, even the government tried to promote their infrastructure projects, with the initial purpose to evoke up the private companies sector.”
“The infrastructure budget given by government actually is a great amount, compared to Thailand, with the budget of 2 Billion Baht; but, Indonesia has got six times from Thai’s number, which is 12 Billion Baht. Mainly, they were focusing on repairing the roads, metro, dam, and stuff.”
What do you think about the construction industry growth within these years and in the future?
We as SCG usually monitor the growth as the main factor of how’s the industry goes. We usually got the number from the cement suppliers association, which is quite credible. As the number has shown from last year, the graph didn’t really gone up to almost flat. However, I just recently got the number from January to August 2017, it’s 5.7% growth which is bigger than the GDP Growth of the first half year for abit. (which is 5.01%)
We think that this year overview would be better, since the number of last year was pretty low. Nevertheless, the real estate developers that we’ve been known has told us about some segment in the industry is bigger than other segments, for instance, the medium high sector, including the luxury goods that tend to be good either commercial or residential and it seems to get this level till the end of this year. However, the medium low sector might not perform that good and I hope it could getting better by time.
Indonesia interesting construction activities?
In Indonesia, there is an another industry’s indicator; which is how’s the export activities doing, in the other words, since because this country flow mostly depend on the exports – community products: charcoal and palm oil, and its combined to be almost 25% of all export goods.
Normally, the construction businesses growth determine by again, the price of charcoal and palm oil; if the prices go up, there will be an one year lag time, in order for the construction market to grow with the same pathway manner. I had done gathered researches this whole time, the prices of these two goods from last year was up and I think within or at the end of this year, the construction sector will get better. And it is actually healthy at this point with 5.7% which is the almost the first of ASEAN; I think others couldn’t hit this number, except Cambodia. With price of charcoal within the year of 2017 has cost $USD 90 per ton, which leads the overall outlook of the half year has the good condition till the end.
Apart from that, the government has planned the growth percentage at 5.4 for next year, which is totally good, compare to Thailand seems to be impossible. The government also has the government spending plan, as they will divide the budgets into small portions; however, if within the third quarter, the tax had not been collect as goal, the government will cut off some budgets on infrastructure projects. Yet, this year, the government appears to hit their goal, thus, the tax won’t need to be cut off like these past year.
The construction industry leading factor that the government usually highlighted as the first priority is housing for poor people project. Last year, they didn’t happen to reach their intention, anyhow, they had exceed the goal of million households. From my point of view, I think as a whole environment could be in a very good state.
Investment opportunity in Indonesia towards other countries within Southeast Asia?
With the construction materials suppliers perspective, I could say that we’ve seen investment opportunities, for instance, SCG has seen that the market is in a considerable size and able to grow in a high perspective, thus, we entered the market as same as others big private companies. As compared with others, Indonesia is the only country that has numerous of foreign companies joint (for example, the world’s biggest palm oil exporter). Even the industry hasn’t have that much of expansion, the industry’s health is in a very good shape; since the industry is really over-supply of investors; nevertheless, in demand side, including either buyers or suppliers rate in the construction industry could possibly be outstanding within these next two years