Over the past three days, the Indonesian President Joko (Jokowi) Widodo has been visiting the eastern part of Indonesia, including Wondama District in West Papua, where Jokowi has officially opened Wasior Port as part of the maritime highway programme.
Wasior Port is located in Wondama Bay and was built to help improve connectivity, by meeting the local need for transport infrastructure and facilities, and to allow the local economy to grow and reduce the disparity in prices between regions.
Wasior Port is one of several infrastructure projects in East Indonesia. The government and the private sector have been trying to boost the construction sector there since last year. The Bank Mandiri research team has found that, as a result, the average growth in this sector is highest in eastern Indonesia. (Read: Indonesia Leads Asia’s Economic Growth)
The highest growth rates were in Sulawesi and Maluku-Papua, at 11.7 percent and 10.1 percent, respectively. “However, Java is still the main driver of the national construction sector, with a 58 percent share in 2015,” the research team said on Tuesday (4/5).
The team expects to see a similar pattern this year, with a slowdown in growth in the sector in Java, and strengthening of the sector in East Indonesia. This is due to the government’s focus on developing the eastern part of Indonesia.
The Bank Mandiri research team predicts that this year, infrastructure projects will make up 51.1 percent of construction projects. This will be the first time in five years that the value of infrastructure projects has outstripped the value of property development. A contributing factor is the IDR 313.5 trillion earmarked for government spending on infrastructure in the 2016 state budget, up 7.99 percent on last year’s spend.
The team reported that the construction sector contributes 10.3 percent to total GDP, making it the fourth largest contributor to the economy last year. The sector’s share of GDP has grown steadily in the past five years, from 9.1 percent in 2010 to 10.3 percent in 2013.
The figures clearly show that growth in the construction sector has been consistently higher than national economic growth. Last year, this sector grew by 6.65 percent, outstripping the national economic growth of 4.79 percent. (Read: World Bank Revises Indonesia's Economic Growth Projection)
Meanwhile, 97 percent of infrastructure spending goes on transport, irrigation, telecommunication, information, houses, energy (including electricity), oil, and gas infrastructure. Growth in the property sector remained stagnant as mortgage interest stayed high. But, the government’s call to cut bank interest rates should get the property construction sector back on its feet in coming years.
BCI Asia data indicate that several large infrastructure projects, in Lampung (Jakarta), East Java, and East Kalimantan, entered the construction phase in the first quarter of the year is located. The project of the highest value is the toll road development in Lampung.
Meanwhile, in Gresik, East Java, Pertamina will be constructing an onshore gas pipeline, and in Jakarta, the government will be constructing the Bandung High-Speed Railway from Halim Perdana Kusuma to Gedebage. In East Kalimantan, the major infrastructure project is the Jangkrik Complex Project Subsea Development. (Read: BI Predicts 6.5 Percent Growth in Indonesian Economy in 2018)
There are also promising infrastructure projects in other provinces, especially construction of access roads and bridges. “Infrastructure development is definitely going to be a major driver of regional economic growth in 2016,” the team said.
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