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H2 hopes high as builders wait for govt projects to accelerate
With realization of government infrastructure projects behind schedule almost halfway through the year, builders and analysts are holding out hope for a better second half
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ith realization of government infrastructure projects behind schedule almost halfway through the year, builders and analysts are holding out hope for a better second half.
State-run construction firms may only meet 31 percent of their full year targets, on average, by the middle of this year, according to Panin Sekuritas analyst Fikri Syuhada. Government infrastructure disbursement so far this year has been weak, despite initial hopes of a major boost following President Joko 'Jokowi' Widodo's state budget reform redirecting billions of US dollars from subsidies to capital expenditure.
'In line with previous years, when the government's infrastructure spending was better realized in the second half, we hope the situation will significantly improve in the upcoming quarters,' Fikri said.
The government's slow first-half budget disbursement for construction projects is reflected in state builders' performance, which has had to rely on demand from the private sector so far this year.
The Public Works and Public Housing Ministry, whose budget swelled 66 percent this year to Rp 118.5 trillion, may disburse only 15 to 20 percent of its state budget allocation by the end of the first half, minister Basuki Hadimuljono has said .
Basuki attributed the ministry's sluggish spending to administrative delays caused by its change from simply the Public Works Ministry, but said he expected full-year disbursement to reach 94 percent of the ministry's budget allocation.
How much the government spends on infrastructure projects in the second half will determine whether the country's economy improves, analysts have said, but progress so far has yet to show satisfying results. State contractors have said they do not expect to meet their contract targets this year.
Pembangunan Perumahan (PP) leads the pack, with 36 percent of its annual new-contract target met as of May; the company recorded Rp 9.8 trillion in new contracts from a Rp 27 trillion full-year target.
Wijaya Karya (Wika), Waskita Karya and Adhi Karya had met 16.75 percent, 27.4 percent and 24.6 percent, respectively, of their yearly targets for new contracts by May.
'I think it will be difficult for us even to maintain our new-contract value at the same level as last year. The problem lies in administrative procedure, with uncertainties in a number of government projects,' Wika corporate secretary Suradi Wongso told The Jakarta Post over the weekend.
Wika, the country's largest listed builder, had reaped Rp 5.3 trillion in new contracts as of May, 60 percent of which came from the private sector.
'For now, all we can do to boost our new contracts is partner with the private sector,' he continued.
Suradi said that Wika was currently eyeing around Rp 40 trillion in contracts from a number of oil and gas projects and 2x1000 megawatt coal-fired power plant Jawa V in Banten.
New contracts for four state builders in the first five months of the year were flat, Danareksa Securities analyst Joko Sogie stated.
On average, new contracts were up 17 percent year-on-year (yoy), mostly driven by the private sector.
'The monthly new-contract performance in June and August will be worth waiting for, we believe, since these months will potentially provide the first indication of the government's plans to boost infrastructure spending,' Joko said in a release.
'The July figures, however, will be seasonally low due to the impact of the Idul Fitri holidays. Nonetheless, if the monthly figures reach above Rp 7 to 8 trillion, we believe that this will show that the long-awaited infrastructure spending has finally started to take off.'
Meanwhile, PP corporate secretary Taufik Hidayat said that he was still optimistic that more government projects would come in and the company could meet its target by year-end, although 93 percent of its new contracts this year had come from private firms and fellow state-owned companies.
'Out of the total contracts we've booked, so far only 7 percent are from the government. That's fine, though, in fact, because there have been years where we had no government contracts at all in the first half,' he said.
