Construction Machinery

Transcription

Vol 3
Indonesian Market Focus
30 July 2013
Prepared for
Specially by
Table of Contents
Table of Contents ................................................................................................................. 2
List of Figures ......................................................................................................................... 3
1. Executive Summary ............................................................................................................ 4
2. Overall Market Environment and Trend ........................................................................... 7
3. Competitive Landscape .................................................................................................... 9
3.1 PT. Komatsu Indonesia / United Tractors ............................................................... 10
3.2 PT. Hitachi Construction Machinery Indonesia ..................................................... 11
3.3 PT. Caterpillar Indonesia / Trakindo Utama ........................................................... 11
3.4 PT. Daya Kobelco Construction Machinery Indonesia .......................................... 12
3.5 PT. Intraco Penta .......................................................................................................... 12
4. Future Development......................................................................................................... 13
5. Key Success Factors, Drivers and Inhibitors of the Industry ........................................ 15
5.1. Key Success Factors ............................................................................................... 15
5.2. Drivers...................................................................................................................... 16
5.3. Inhibitors .................................................................................................................. 16
6. Regulation and Government Concern.......................................................................... 17
6.1 Regulations on Market Access in Construction and Infrastructure Sector ......... 17
6.2 Investment Way to Public Sector Infrastructure .................................................... 18
6.3 Investment Facilities and Incentives for Qualifying Investors ............................... 20
7. Industry and Players Related News................................................................................ 21
7.1 MRT Construction Begins on August 2013 ................................................................ 21
7.2 Kuala Tanjung Port to Kick-Off in 2014 ...................................................................... 22
7.3 Construction Market in Indonesia May Grow 15% .................................................. 22
8. Opportunities in Construction Machineries Sector in Indonesia................................ 23
8.1 Trade Events related to the Construction Machineries Sector in Indonesia ........ 24
Korea International Trade Association (KITA)
2
List of Figures
Figure 1 - Value of Construction Commencements (in billion IDR) .................................. 7
Figure 2 - The Number of Construction Companies including Consulting Companies
in Indonesia .............................................................................................................................. 8
Figure 3 - The Origin of Construction Companies in Indonesia, 2008-2012 ..................... 8
Figure 4 - Heavy Equipment Market Value (in million USD) ............................................... 9
Figure 5 - Number of the Needs in Heavy Construction Equipments According to
MP3EI ....................................................................................................................................... 13
Figure 6 - Indications of Infrastructure Investment (US$ Billions), 2011-2025................... 14
Figure 7 - Potential Infrastructure Projects in Indonesia, 2013 ......................................... 15
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1. Executive Summary
1.1. Overall Market Environment and Trend
Indonesia is increasingly being considered as an emerging market with
the potential to be a major global economic heavyweight in the
coming decades.
Foreign investment is also on the rise and policymakers are eagerly
focused on enhancing the development of the economy.
Indonesia has witnessed some threats to the rapid economic growth,
including underdeveloped infrastructure, which is in need of massive
amount of investment particularly in transport links, energy and
communication.
Corruption has also been a major obstacle to economic growth and
cause for additional costs, discouraging investment spending
The outlook of Indonesia’s construction sector has been showing
healthy figures in recent years.
The sector has been a clear benefit of investment activity with a GDP
share total increasing from 6.2% in 2003 to 10.4% in 2012.
The total number of construction contracting companies operating in
the country is 182,200 contractors in 2011 up from around 112,000 in
2008.
The sector has been seeing a rise in labor costs due to the high
demand for construction workers.
It is estimated that the total value of equipment sales in Indonesia
reached USD 4.2 billion in 2012 with an annual growth rate at over 10%
in 2008-2012.
On the side of operating risks, there are some challenges in the
construction sector with regards to Indonesia’s excessive bureaucracy.
1.2. Competitive Landscape
The heavy equipment market has been dominated by foreign MNCs.
More than half of total demand for heavy equipments in Indonesia
comes from mining.
Major construction machinery players in the country include:
o PT. Komatsu Indonesia / United Tractors
o PT. Hitachi Construction Machinery Indonesia
o PT. Caterpillar Indonesia / Trakindo Utama
o PT. Daya Kobelco Construction Machinery Indonesia
o PT. Intraco Penta
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1.3. Future Development
The outlook for construction is still favorable in the country and
international heavy equipment suppliers remain optimistic about the
market prospect in Indonesia.
In terms of nominal output value, the construction machinery industry
will grow by approximately 15% per year over the next five years.
In order to attract investment for the master plan and projection
spending up to IDR 4,000 trillion (around USD 428 billion) during the
2011-2025 timeframe.
Construction machineries business in Indonesia has attracted massive
portion of Foreign Direct Investment (FDI) in the recent years.
The Government has already announced its intention to boost
infrastructure construction spending.
The unbalanced demand-supply of heavy equipments is one of the
issues that the Government has to address in the future.
The Government has been consistently conducting necessary reforms
to promote a conductive environmentally both in terms of regulation
and institution.
1.4.
Key Success Factor, Drivers and Inhibitor of the Industry
Key success factors:
o Excellent Reputation
o Continuation of Innovation and R&D in Technology
o Full-Service Maintenance
o Distribution Network and Support Offices
o Technical Know-How and Qualified Human Resource
Drivers
o Strong Growth in Fixed Asset Investments
o Government Supports
o Robust Economic Development
o Bank Financing System
Inhibitors
o Lack of Technology and Innovation
o Operation Risks in Indonesia
o Shortage in Human Resource
1.5. Regulations and Government Concern
A number of significant recent regulations have been imposed with
few or no warning, including in the mining sector, causing some
degree of unease among investors.
Laws and regulations affecting construction and related sectors must
be understood to operate in the country.
A more conducive Investment Environment in Indonesia is supported
by Law & PPP Regulations while heavy bureaucracy continues to
undermine the efforts to improve the ease of doing business.
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To facilitate foreign investors, the Investment Law introduced a number
of investment facilities or incentives for qualifying investors. The
machineries sector is one of the sectors eligible for these facilities.
1.6. Industry News
MRT Construction Begins on August 2013 - PT. Wijaya Karya aims to start
the Jakarta Mass Rapid Transit project in August 2013. A total of IDR 3.6
trillion (USD 396, 60 million) is allocated for construction costs.
Kuala Tanjung Port to Kick-Off in 2014 - The project would be
developed in a public-private partnership scheme. The first phase of
the project is projected to be completed by the end of 2015.
Construction Market in Indonesia May Grow 15% - Construction market
share is mostly controlled by large and medium contractors. The
Ministry of Public Works estimates the capitalization value of the
national construction sector in 2011-2015 to reach IDR 1,200 trillion.
1.7 Opportunities in Construction Machineries Sector in Indonesia
Construction power plants, transmission and distribution lines in
Indonesia would bring significant commercial opportunities to Korean
Companies in Construction Machineries sector that can supply
equipments such as transmission, transformers and distribution
equipment.
Korean Companies in construction machinery has an opportunity to
expand their business in Indonesia by renting or leasing heavy
equipments to the small tin miners, the sub-industry which is dominating
mining nowadays.
Korean Construction Machineries Companies have opportunities to
expand their businesses in the after-sales service field by having a
partnership with construction machineries suppliers providing services
needed.
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2. Overall Market Environment and Trend
As an extensive archipelago of around 1.9 million square kilometers and with a
population of around 240 million people, Indonesia is increasingly being considered
as an emerging market with the potential to be a major global economic
heavyweight in the coming decades. A growth of solid rates has been proved in the
country’s well-balanced economy, with an average over 6% and it came through
the global financial crisis relatively unscathed. Additionally, foreign investment is also
on the rise and policymakers are eagerly focused on enhancing the development
of the economy.
On the other hand, the country has also witnessed some threats in between,
including underdeveloped infrastructure which is in a need of massive amounts of
investment particularly in transport links, energy and communication. Corruption has
also become a major obstacle to the economic growth and caused an additional
cost that discourages investment spending. Nevertheless, there is an undeniable
fact of huge potential for Indonesia to grow in the near future and it is not limited to
the exploitation of its enormous reserves in national resources but in construction as
well. It is forecasted that the country’s economic growth will accelerate over 6.5%
driven by the rising of investment and industrial expansion.
The outlook of Indonesia’s construction sector has been showing a healthy figure in
recent years. Fixed investment has indeed climbed over the past decade, with its
share of total GDP growing from 19.5% in 2003 to a significant high of 33.2% in 2012.
The sector has been a clear benefit of this investment activity with a share of total
GDP increased from 6.2% in 2003 to 10.4% in 2012.
Figure 1 - Value of Construction Commencements (in billion IDR)
500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
2010
2011
2012
2013
Building Project*
102,941
135,301
158,124
225,896
Civil Project**
38,392
77,195
153,971
207,929
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* Building Project includes Residential, Retail, Office, Industrial, Hotel, Health, Education,
Community, and Recreation.
** Civil Project includes Infrastructure, Transport and Utilities
According to the National Construction Services Development Board, there has
been a quick rise in the number of construction contracting companies operating in
the country with a total number of 182,200 contractors in 2011 up from around
112,000 in 2008. Based on the law, Construction Company consists of consulting and
contracting company. Consulting company can be designer and also supervise
engineer.
Figure 2 - The Number of Construction Companies including Consulting Companies
in Indonesia
No.
1
2
3
Qualification
Consulting Companies
Number
449
264
5,892
6,605
Large
Medium
Small
TOTAL
%
7
4
89
100
Contracting Companies
Number
1,742
21,032
160,026
182,800
%
1
12
87
100
Source: National Construction Services Development Board (NCSDB), 2012
The medium and large firms combined account for around 85% of total construction
output value, with thousands of small contractors competing for the remaining 15%.
The number of large foreign contractors has also showing a positive growth with 79 in
2008 to around 130 currently, which mostly coming from Japan and the number of
EPC contractors is 23 companies. The consulting companies are mostly also coming
from Japan, China as well as Korea. More companies from India have also currently
joined and would like to expand their construction business in Indonesia.
Figure 3 - The Origin of Construction Companies in Indonesia, 2008-2012
YEAR
Japan
Korea
China
India
2008
77
19
30
0
2009
75
26
32
0
2010
74
33
32
1
2011
80
57
39
5
2012
80
60
39
5
Source: National Construction Services Development Board (NCSDB), 2012
While, mining sector was showing a drop in the volume of key mining equipment
sales in Indonesia for the year 2012, demand for heavy equipment in general has
been on an upward trend in recent years. It is estimated that the total value of
equipment sales in Indonesia reached US$ 4.2 billion in 2012 with an annual growth
rate at over 10% in 2008-2012. This data includes building construction equipment,
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earthmoving and tunneling equipment, road building equipment, construction
materials manufacturing equipment and mining equipment.
Figure 4 – Heavy Equipment Market Value (in million USD)
6,000.00
Road Construction
Equipment
5,000.00
Building Material
Machinery
4,000.00
3,000.00
Building Construction
Equipment
2,000.00
Mining Equipment
1,000.00
0.00
2011
2012
2013
2014
2015
Earthmoving,
tunneling & Civil
Engineering
Equipment
Indonesia’s construction sector has become a critical source of employment growth
in the country. Around 7 million workers were directly involved in the construction
industry in 2012. The sector has been seeing a labor costs rise due to the high
demand for construction workers. The wages and salary index calculated by
Statistics Indonesia shows that salaries and wages have increased by 19.3% year-onyear on average in every month since 2009. Given the large portion of informal
sector workers in construction, changes in actual wages for construction workers are
lower than increases in minimum wages. However, the positive trend in formal sector
will still put greater pressure on construction companies’ profit margins.
In the side of operating risks, there are some challenges appeared in the
construction sector with regards to the Indonesia’s excessive bureaucracy who may
leads to delays of implementation and wearing away the viability of construction
projects. Indonesia ranks in 75th place in terms of dealing with construction permits,
recorded of an average 158 days to complete the process.
3. Competitive Landscape
The heavy equipment market has been dominated by foreign heavyweights. The
industry is highly competitive and concentrated, with four local players backed by
global heavyweights accounting for around 96% of total production volume.
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More than half of total demand for heavy equipments in Indonesia comes from the
mining equipments, particularly for large units, such as giant excavators.
Construction, agribusiness and forestry account for the remainder, mainly small and
medium sized units, up to 20 tones. It is stated that the leading domestic producers
will continue to focus on supplying the leading construction contractors that are
securing new business under the governments’ infrastructure development
programs.
3.1 PT. Komatsu Indonesia / United Tractors
Established in 1982, PT. Komatsu Indonesia Tbk (Komatsu Indonesia) is a joint venture
between Japan’s Komatsu and PT United Tractors. The company-owned
manufacturing plant in Cakung Clincing industrial area sits on a total of 20.3
hectares. The Company produces hydraulic excavators, bulldozers and off-highway
dump tracks. Fabricated components of the company include track frame, crawler,
boom, crawler frame. The Company also set up operations at the Cibitung Industrial
Estate in 2009 that covering an area of 5.94 hectares, where it runs a big size
fabrication plant and hydraulic reman cylinder plant.
Today, PT. Komatsu Indonesia Tbk remains a reliable partner in Indonesia covering
mining, forestry, and agro and construction businesses development. It is reported
that, Komatsu (the parent company) has been cutting its profit projections mainly
because of the expectation that demand for mining equipment in Indonesia will be
negatively affected by the recent drop in coal prices.
According to United Tractors, sales figure of Komatsu machineries in Indonesia was
showing a turn down from IDR 18,693 billion in 2011 to IDR 13,895 billion in 2012 with a
total number in volume sales down from 8,467 units in 2011 to 6,202 units in 2012. Its
total sales broke down into mining for 54%, agribusiness 24%, construction 16% and
forestry 6%. On the other hand, PT United tractors, the distributor of Komatsu
equipment, marked a total revenue growth of only 1.6% in 2012. Total revenue of
construction machinery recorded jumped down to IDR 22, 158 billion, as fall of 19%.
The Company recorded revenue from construction machinery for around 40% of the
total revenue of IDR 55,954 billion in 2012.
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3.2 PT. Hitachi Construction Machinery Indonesia
PT. Hitachi Construction Machinery Indonesia (PHMCI) is a subsidiary of Japan’s
Hitachi Construction Machinery. Established in May 1991, the Company is engaged
in the field of construction machineries and offers wide range of products such as
engineering products, excavators, construction machinery and heavy equipment
components. The Company’s heavy equipment components include dump truck,
side frame, crane frame and main frame. The company serves construction,
chemical, oil and gas, and heavy industrial sectors.
PT. Hitachi Construction Machinery Indonesia’s manufacturing and production
facilities are located in Cibitung with a total land area of 31 hectares. Based on the
Financial Report of Hitachi Construction Machinery Group, the Company will
enlarge its existing Cibitung Plant in Java Island as well as construct a new plant in
the nearby area, in order to respond to the demand in the country, which has
become a major market for hydraulic excavators. An increase in annual capacity at
its plant in Cibitung from 3,300 to 5,500 units and 247 ultra-large excavators units will
be done by March 2014.
Hitachi operates with a sole distributor in Indonesia, PT Hexindo Adiperkasa which
classifies its operation into two geographic divisions: Java Island and Outside Java
Island. In 2012, an 8% accounted in Java Island of the total revenue, while 92%
came from the outside Java Island. The Company reported revenue of IDR 3,475
billion in 2012, a slightly drop from a figure showed in 2011 for a total of IDR 4,160
billion.
3.3 PT. Caterpillar Indonesia / Trakindo Utama
PT. Caterpillar Indonesia is a joint venture of Caterpillar Inc., USA who hold 80% of the
share and PT. Tiara Marga Trakindo for the remaining 20%. Trakindo was established
in 1970 then it became the authorized dealer for Caterpillar in 1971. The Company’s
headquarter is located in Cileungsi, Bogor with its portfolio of products covering
excavators, bulldozers, motor graders, wheel loaders, trucks, tractors, scrapers, road
reclaimer, pipelayers, wheel dozers, material handlers and forest machines. CAT’s
produced its 20-ton class of excavators and was made in Indonesia are primarily
sold into the mining, forestry, construction and agricultural markets. Currently, it has
more than 65 branches across different cities and provinces in the country.
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The factory in Cileungsi is focused on producing excavators and skidders. From the
initial capacity of 1,290 units per year, the Company approved the plan to triple
excavator production at the location.
The first PT Trakindo Training Center was located in the Jatiluhur Dam, Purwakarta,
West Java. In this place, the first batch of PT. Trakindo Utama mechanics was trained
by international instructors. In 1996, the Company’s training center of the training’s
activities have been moved and centralized at Cileungsi.
It is reported that Caterpillar has invested USD 150 million in a new mining truck
facility in Batam, the firm’s second manufacturing operation, and at that plant it will
produce a range of mining trucks chassis and bodies to be shipped to mining
customers throughout the Asia-Pacific region.
3.4 PT. Daya Kobelco Construction Machinery Indonesia
Established in 2000, PT. Daya Kobelco Construction Machinery Indonesia offers
construction equipment in Indonesia. The Company’s portfolio of products includes
crawler cranes, skid steer loaders, hydraulic excavators, wheel loaders and
harvesters.
In 2011, Kobelco Indonesia was officially opened ‘Kobelco Used Equipment Center’
as a trading posts of use Kobelco excavators. It is located in Jakarta, next to the
airport highway, on a 5000 acre land.
The Company also offers spare parts and component support, part exchange
program, field services, machine inspection program and preventive maintenance
contract to its customers. Kobelco Indonesia’s after-sales services include
commissioning, periodic service and customer training.
As of 2013, the Company operates a network of 17 branch offices and three service
stations across Indonesia. Kobelco Indonesia operates a subsidiary of Kobelco
Construction Machinery and it is headquartered in Jakarta.
3.5 PT. Intraco Penta
PT. Intraco Penta, Tbk is a company that distributes heavy equipments and has been
established for 42 years. In 1970, the Company was founded and started from a
simple store in Central Jakarta, a shop selling spare parts for heavy equipments.
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PT Intraco Penta has been maintaining a close partnership with its all principals who
have a leading reputation in the heavy equipments industry, namely Volvo, IngersollRand, Bobcat, SDLG and Sinotruk. The full support from these five reputable brands
has enabled the Company to continuously maintain its partnerships with the
customers who are mostly engaged in the mining business and domestic
contractors.
Furthermore, PT. Intraco Penta also serves companies in various sectors such as
agribusiness, oil and gas, infrastructure and construction as well as general industry.
Another achievement by the Company in 2012 where the Company was able to
enter LQ45 Index Rank in Indonesia Stock Exchange, as well as included in the list of
50 Best Companies in Indonesia from Forbes Indonesia magazine and awarded the
Top Performing Company by Investor Magazine.
One of the strategies of PT Intraco Penta to optimize value chain through the Total
Solution Provider business concept is by forming up two subsidiaries, namely PT
Intraco Penta Wahana (IPW) and PT Inta Resources (IR) in 2011. According to the
Company’s financial statement as of December 31, 2012, the Company recorded
relatively stable revenue worth IDR 2.59 trillion, accounted for 1,260 units of heavy
equipment sold.
4. Future Development
Despite some challenges, such as the fluctuation of the coal prices and mining
sector, the outlook for construction is still favorable in the country and international
heavy equipment suppliers remain optimistic about the market prospect in
Indonesia. In terms of nominal output value, the construction machinery industry will
approximately will grow by 15% a year in the next five years. It is supported by
urbanization, and rising incomes. The government’s effort to improve the
infrastructure base as part of its ambitious multiyear plan, called the Master Plan for
the Acceleration and Expansion of Indonesia’s Economic Development (MP3EI).
Figure 5 - Number of the Needs in Heavy Construction Equipments According to
MP3EI
No.
1
2
3
Type of Heavy Equipment Construction
Dozer, Excavator, Compactor, Dump Truck, Crane
and Road Paver
Asphalt Mixing Plant (AMP)
Concrete Batching Plant (CBP)
Total (Unit)
38,140
1,089
716
Source: Sistem Informasi Sumber Daya Investasi, 2013
13
In order to attract investment for the master plan and projection spending up to IDR
4,000 trillion (around US$ 428 billion) during the 2011-2025 timeframe, the government
is taking steps to strengthen public-private partnership (PPP) regulations. Given the
positive outlook and the rapid expansion of the country’s middle class, infrastructure
construction will be the leading sector in terms of growth followed by the other
construction sectors such as residential and commercial constructions.
Furthermore, construction business in Indonesia could not be separated from the
support of foreign investors. It has attracted massive portion of Foreign Direct
Investment (FDI) in the recent years. Though, the share in construction sector has
been falling in the recent years, domestic firms ramped up investment spending in
2012.
Figure 6 - Indications of Infrastructure Investment (US$ Billions), 2011-2025
25.5
34.3
70.4
35.7
Road
3.3
186.7
Other
Infrastru
cture
Total
1.9
3.4
12.7
Port
Power Airport Railway
&Energy
Water
Utility
ICT
Source: MP3EI
Note: The investment will be funded by Government, State-Owned Enterprises (SOE)
It is believed that the Government is trying to start kick rapid development of the
country’s infrastructure, the state of which is currently a major of drawback for
investors. Moreover, the Government has already announced its intention to boost
infrastructure construction spending, with proposals to spend IDR 194 trillion in 2013 to
finance the construction of a number of major road, railway and airport projects.
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Figure 7 - Potential Infrastructure Projects in Indonesia, 2013
No.
1
2
3
4
5
6
7
8
9
10
11
Sector/Sub-Sector
Air Transportation
Land Transportation
Marine Transportation
Railways
Toll Road
Water Resources
Water Supply
Solid Waste & Sanitation
Telecommunication
Power
Oil & Gas
Total
Quantity
7
2
4
3
3
0
18
4
0
4
0
45
Project Cost (US$ Million)
1,972.80
274.00
2,860.22
4,385.30
1,810.50
1,363.83
50.27
2,785.80
15,502.72
Source: Public Private Partnerships Book
The unbalanced demand-supply of heavy equipments is one of the issues that the
Government has to address in the future. Currently, the total number of heavy
equipment available in Indonesia has been recorded to be 150 thousand units, 50%
of which are registered in Jakarta. The Government should be able to invite
International manufacturers and investors, instead of merely expanding the import
of such equipment.
The commitment has been made by the Indonesian’s Government to speed up the
realization of infrastructure development by way of strengthening and revising it. The
Government has consistently conducted necessary reforms to promote a
conductive environmentally both in terms of regulation and institution. The country’s
Credit Ranking has been upgraded to investment grade BBB- by Fitch Rating has
become the holistic reforms efforts for a better environment for investment in
Indonesia.
5. Key Success Factors, Drivers and Inhibitors of the Industry
5.1. Key Success Factors
Excellent Reputation: An excellent reputation would give strong confidence
in the ability of the new player and improve the potential for to obtaining
long-term contracts.
Continuation of Innovation and R&D in Technology: Well-developed strengths
in construction design process, construction environment quality, construction
standard and code is necessary for industry players to succeed. Technology
and innovation would help heavy equipment players’ status to a higher level
of competitiveness and quality consciousness.
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Full-Service Maintenance: To perform well in this industry, players should be
able to provide full-service maintenance contract service that includes
comprehensive maintenance program with the goal of helping customers
achieve cost-efficiency and business profitability.
Distribution Network and Support Offices: Key to success in distribution lies in
fast and effective communication between each office, including
headquarter and branches. With extensive network and availability of heavy
equipments and spare parts, players would be able to complete flow
distribution and effectively accelerating product delivery between branches
and customers.
Technical Know-How and Qualified Human Resource: A reliable, solid and
trustworthy human resources and technical know-how played a key role in
the operational field. When both factors are functioning very well in the longterm operation, it will lead to a good reputation of the Company.
5.2. Drivers
Strong Growth in Fixed Asset Investments: Growth in fixed investments in
Indonesia spurred mostly by downstream segments, including infrastructure
and property investments. This could be a significant driver in construction
project volume and substantially increases the need for equipment. It is also
stated that fixed Investment has soared over the past decade in the country,
with its share of total GDP rising from 19.5% in 2003 to 33.2% in 2012.
Government Supports: The Government of Indonesia is focused on the
sector’s development through increasing the infrastructure construction
spending as a part of its multiyear Master Plan for the Acceleration and
Expansion of Indonesia’s Economic Development (MP3IE)
Robust Economic Development: Economic growth in Indonesia’s continuing
to make the government continues to improve infrastructure and increase
industrial restructuring.
Bank Financing System: With a proper financial service system, customers will
be able to choose the financing schemes upon purchasing the heavy
equipments. Players supported with a proper financial service system will be
able to capitalize and channel funding to them.
5.3. Inhibitors
Lack of Technology and Innovation: Technologies to be used from the
beginning to the end of the construction of a highway project. Players would
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not be able to face the challenges in the industry by not being supported
with the latest technology installed on their heavy machineries.
Operation Risks in Indonesia: Indonesia excessive bureaucracy has often led
to delays in implementation, eroding the viability of construction projects.
Corruption in the country is also another factor which would diminish the
quality of Indonesia’s business operating environment and creating
inefficiencies in the construction sector.
Shortage in Human Resource: Lack of human resource in the construction
equipment operators would prevent the performance of the industry. Skilled
workers have moved to the other countries in pursuit of better pay and career
prospect. On the other hand, local workforce is still thinking that the jobs in this
sector are not outstanding enough besides being labeled dirty, dangerous
and difficult.
6. Regulation and Government Concern
The Government of Indonesia has acknowledged its under-spending on capital
investment in prior years and recognized that significant investment in infrastructure,
such as energy facility, seaports, railways and roads is now required. This factor has
led to various regulatory enhancements including, in regard to Public-Private
Partnerships. Furthermore, BAPPENAS, the agency who responsible for the national
development planning has set up the Government and Private Sector Cooperation
Centre to facilitate cooperation in infrastructure projects between the Government
and private sectors.
Nevertheless, complexity in bureaucratic processes continues its troublesome
presence in the investment regulation in Indonesia. A number of significant recent
regulations have been imposed with few or no warning, including in the mining
sector, causing some degree of unease among investors. There are important laws
and regulations affecting the construction and related sector in the country that
should be familiar to all interested players.
6.1 Regulations on Market Access in Construction and Infrastructure Sector
Market Access Limitation (Mode 3)
o Foreign Service Provider(s) shall establish Representatives Office (RO) in
Indonesia;
o Foreign Service Provider(s) shall be in the form of Joint Operation (JO) or
Joint Venture (JV) with Indonesia Construction Company(ies) holding
registration certificate as a big company issued by the National
Construction Services Development Board (NCSDB)
o There is no limitation of Foreign Capital Share for JO;
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o
JV Company shall be in the form of Limited Liability Company (LLC) with a
maximum foreign capital share of 55% for constructing company and 49%
for construction consulting services company
National Treatment (Mode 3)
o License Free Requirements
Business Requirements (Act No. 18/1999)
o To conduct construction business in Indonesia, any construction company,
including Foreign Construction Company who is willing to form JO, shall be
registered at NCSDB and obtain Business License from the government;
o JV Company shall be registered at NCSDB and obtain Business License
from the Indonesia Investment Coordinating Board (BKPM)
Market Access Limitations (Mode 4)
o Only director(s), manager(s) and technical expert(s)/advisor(s) are
allowed subjected to Indonesian Labor and Immigration Laws and
Regulations;
o Skilled and Unskilled Labor have not been negotiated yet.
Business Requirements (Act No.18/1999)
o Foreign Expert(s) shall hold Competence Certificate and be registered at
NCSDB
In accordance to Presidential Regulation No.54/2010 and its amendment
No.70/2012, Foreign Company(ies) is(are) only allowed to participate a tender
for a project with the value of:
o IDR 100 billion (US$ 10.87 million) and above for construction services;
o IDR 10 billion (US$ 1.087 million) and above for consulting services.
6.2 Investment Way to Public Sector Infrastructure
The government is trying to create a more conducive Investment Environment for
public infrastructure in Indonesia as supported by Law & PPP Regulations, explained
through the below figures:
18
Investment Policy in Water Supply Sector
PPP Regulation
The Government's Law
Presidential Regulation No. 67/2005,
and its amendment No.13/2010 &
No.56/2011 (PPP in Infrastructure
Development)
Act No. 7/2004 (Water Resources)
Minister of National Development
Planning Agency Regulation
No.4/2010 (Guidelines for PPP in
Infrastructure Development
Government Regulation
No.16/2005 (Water Supply System
Development)
Minister for Public Wors Regulation
No.12/2010 (Guideline on Business
Cooperation for Water Supply
System Development)
Investment Policy in Road Sector
PPP Regulation
The Government's Law
Presidential Regulation No.
67/2005, and its amendment
No.13/2010 & No.56/2011 (PPP in
Infrastructure Development)
Act No. 38/2004 (Road)
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
Government Regulation
No.15/2005 and its Amendment
No.44/2009 (Toll Road)
Minister for Public Wors Regulation
No.295/2005 and its Amendment
No.27/2008 (Indonesian Toll Road
Authority)
Furthermore, since construction in public works is included in the Negative List,
foreign investors should take a note of the regulation of FDI as stated below:
Sector Heading
Public Works
Sub-Sector Heading
Construction services under
IDR 1 billion contract value
Drinking water and toll road
businesses
Construction services above
IDR 1 billion contract value
Construction consultancy
services
Regulation of FDI
Reserved for Micro and Medium
Enterprises
Maximum 95% foreign
shareholding
Maximum 67% foreign
shareholding
Maximum 55% foreign
shareholding
19
6.3 Investment Facilities and Incentives for Qualifying Investors
To facilitate foreign investors, the Investment Law also introduced a number of
investment facilities or incentives for qualifying investors. Machineries sector is also
one of the sectors that eligible to these facilities. The details of facilities are captured
separately under the regulations as discussed below.
Tax Holidays
Based on the Ministry of Finance Regulation No. 130/PMK.011/2011 the Government
may grant Corporate Income Tax (CIT) holidays or reductions to companies
investing in “pioneer industries”. It defined as ‘industries that have extensive links,
give additional value and high externality, introduce new technologies and have
strategic value for the country’s economy.’ Currently, investors in machinery are
eligible however there are no implementing regulations yet issued which define
what is included in “machinery”, the Ministry of Industry maintains an unpublished list
of qualifying activities and will generally confirm classifications on request.
The facilities which may be provided are:
o
o
A CIT exemption for a period of five to ten years from the beginning of
commercial production; and
A 50% reduction in the CIT due for the period of two years after the end of
the CIT exemption period.
Other qualifications stated that investors must have a legalized new capital
investment plan of a minimum of Rp 1 trillion or equal to USD 120 million and deposit
of 10% of their planned of investment in a bank in Indonesia not be withdrawn prior
to the realization of the investment plan. The investor also must be an Indonesian
legal entity not established before August 15, 2010.
In order to obtain the facility the investor should submit an application to the Minister
of Industry (MoI) or head of the BKPM. The MoI or BKPM will then make a proposal to
the Ministry of Finance (MoF) after having carried out research on the applicant.
The MoF is authorized to issue a decision on the tax facility and will form a committee
to research and provide recommendations to the MoF. The MoF will consult with the
President prior to the finalization of the decision.
At last, the MoF will issue a Decree where the application is approved or provide a
written notification if the application is rejected. If the application is granted, the tax
office will monitor the taxpayer’s business activities through periodic reports
including the realization of its investment plan. Failure to maintain the required
criteria could result in a termination of the tax facilities.
Import Duties
All investments approved by BKPM would attract the following supports:
a. A reduction from import duty rates to 0% on:
o The importation of capital goods (machinery, equipment, spare parts,
auxiliary e equipments, etc) for an import period of two years.
20
The importation of goods, materials or raw materials used to produce
finished goods or to produce services for two years of production.
b. An exemption from the Transfer of the Ownership Fee for ship registration
deeds or certificates made for the first time in Indonesia.
o
Corporate Income Tax Facilities
Government Regulation No. 1/2007 (“GR No.1”) as expanded by Government
Regulation No. 62/2008 and Government Regulation No.52/2011, allows BPKM to
provide the following CIT facilities for investments in specific sectors and/or regions:
a. A reduction in net taxable income of up to 30% of the qualifying investment
(applied over six years);
b. Accelerated tax depreciation (at double the normal rates)
c. An extended tax loss carry forward limit of up to 10 years; and
d. A reduction in withholding tax due on dividends paid to non-residents from
20% to 10%
Bonded Zones
This investment incentives is provided to the companies located in bonded area
with facilities are as follow:





An exemption from import duty, VAT and Article 22 withholding tax on the
importation of capital goods and equipment including raw materials required
for a production process;
An entitlement to divert up to 25% of exports (in terms of value) into the
Indonesian customs area;
An entitlement to sell scrap or waste into the Indonesian custom’s area in
certain cases;
An entitlement to transfer machinery and equipment to subcontractors
located outside bonded zones for no longer than 2 (two) years in order to reprocess their products; and
An exemption from VAT on the delivery of products for further processing from
bonded zones to subcontractors outside the bonded zones (or vice versa) or
to other companies in these areas.
7. Industry and Players Related News
7.1 MRT Construction Begins on August 2013
http://en.tempo.co/read/news/2013/05/03/057477720/MRT-Construction-Begins-on-August
PT. Wijaya Karya aims to start the Jakarta Mass Rapid Transit project in August 2013,
said the Company’s secretary, Mr. Natal Argawan.
The current issues the Company has been handling and working on is the project
administration as well as drafting a Detailed Engineering Design (DED) based on an
assessment made by Japan International Cooperation Agency. As explained
further, DED contains the details on MRT underground construction, a part of whole
21
MRT project that will be constructed by WiKa-Obayashi-Shimizu-Jaya Construction
consortium.
Two out of three MRT underground construction project packages has been
rewarded to PT. Wijaya Karya, and another package will be handled by Sumitomo
Mitsui Construction Corporation (SMCC) – Hutama Karya Consortium. A total of IDR
3.6 trillion (USD 396, 60 million) for construction costs of the three packages of 5.9
kilometers underground has been reported.
7.2 Kuala Tanjung Port to Kick-Off in 2014
http://www.mm-industri.com/news/kuala-tanjung-port-construction-to-kick-off-in-2014/
Indonesia will start construction on the much-anticipated Kuala Tanjung Port in North
Sumatra next year. The port will connect the country’s western region to the
international world.
The construction itself will be managed by state-run port company, Pelindo I, which
already manages ports in Sumatera. The firm is currently processing all the necessary
documents and permits before design had been completed. The port’s master plan
had been approved and signed by Transportation Minister and its detailed
engineering design had been completed, said the firm’s spokesman, Eriansyah.
The project would be developed in a public-private partnership scheme as it was a
huge project. According to the masterplan, the port will be developed in several
phases since it would have a total capacity of 25 million and 20-foot equivalent units
(TEUs) by the end of 2030. The first phase would cost around IDR 6.5 trillion (USD
668.86 million) and it is projected to be completed by the end of 2015.
In addition, Kuala Tanjung has been listed in the National Logistics System (Sislognas)
as a project that might help improve the nation’s logistics chain by reducing
inefficiencies.
7.3 Construction Market in Indonesia May Grow 15%
http://en.indonesiafinancetoday.com/read/28459/Construction-Market-May-Grow-15
The Indonesian Builders Association (Gapensi) estimates that the national
construction market in 2013 will grow 15% year-on-year (YOY), while the national
construction capitalization is projected to reach Rp 400 trillion.
The national economy and trend of construction needs for infrastructure projects are
the drivers to the projection that it will grow continuously every year.
Soeharsojo, the Chairman of Gapensi said that there is still much homework for the
government, including the needs for fully integrated supply chain for the national
construction.
22
Market Inequality
Construction market share is mostly controlled by large and medium contractors
who are only equal to 13% of the total national contractors which amounted to
182,800 enterprises. Moreover, the Ministry of Public Works estimates the
capitalization value of the national construction sector in 2011-2015 to reach IDR
1,200 trillion.
8. Opportunities in Construction Machineries Sector in Indonesia
Power Plant Construction Project
The New Electric Generation Plan (RUPTL) in 2011-2020 predicted that the
electricity demand will grow 8.5% per year. During the said period, it is estimated
that the total investment needed for electricity development will reach USD 96.2
billion. Construction power plants, transmission and distribution lines in Indonesia
would bring significant commercial opportunities to Korean Companies in
Construction Machineries sector that can supply equipments such as
transmission, transformers and distribution equipment. Developing partnerships
with localized EPC players is an essential foundation to winning deals.
Renting or Leasing Heavy Equipment
The existing small tin miners available in the country need more heavy equipment
in order to operate their business. Meanwhile, large holders of mining concessions
have handed over the job of mining to contractors boosting the opportunities for
the rental companies to grow. Customers who come mostly from the mining
sector are tend to rent equipments but have an option to purchase the
machines when times are more stable. This leasing strategy could also optimize
the supply chain of heavy equipments distribution in the country.
After-Sales Services
Since the prospect of construction machineries in Indonesia is really
encouraging, the players realized that after-sales services are important to
guarantee success in marketing of heavy equipment. Korean Companies have
opportunities to operate a business in this particular field by having a partnership
with construction machineries suppliers on providing services needed. Services
might be in the forms of consulting service, maintenance and training for
operators.
23
8.1 Trade Events related to the Construction Machineries Sector in Indonesia
Building & Infrastructure Exhibition Indonesia 2013
PT. Pamerindo Indonesia specialized in trade exhibitions for the Indonesian market
will arrange the 17th International Series of Building, Construction and Infrastructure
Development exhibitions on September 4-7, 2013 in Jakarta International Expo,
Kemayoran. The event held every once in 2 years, will cover all aspects of Building
and Construction Industry in Indonesia. Construction machineries suppliers will be
allowed to build their own stand to have the flexibility on presenting their products.
For more details about the event:
http://www.allworldexhibitions.com/images/shows/201210291_building%20indonesia%20201
3.pdf
Indonesia International Infrastructure 2013 (Conference and Exhibition)
IIICE 2013 is an influential infrastructure conference and exhibition in Indonesia in
both scope and scale. The event will highlight infrastructure on the provincial as well
as the national level. IIICE also will present full display demonstrating MP3EI’s
economic agenda including priority infrastructure projects slated for development.
The next event will be held on November 13-15, 2013 in Jakarta Convention Center.
For more details visit: http://www.indonesiainfrastructure.org/why_indonesia.html
The 5th Indonesia International Bus, Truck, Heavy Duty Vehicle & Equipment
Exhibition 2014
The fourth edition of IIBT 2013 held along with Heavy Equipment Indonesia 2013
attracted 980 exhibiting companies from 25 countries, 8 international pavilion, and
27,100 trade visitors from 370 countries. Through this event, supplier will be able to
introduce, show and sell their equipments and met a lot of prospect buyers and new
line of clients. Currently, IIBT events held in two cities in Indonesia, Jakarta and
Surabaya. For more information visit: http://iibt-exhibition.net/index.php
24

Construction Machinery

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