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New contracts in H1 adumbrate brighter future
The combined new contracts of publicly listed state-run builders in the first half of the year adumbrates a sign of life in the countryâs infrastructure development after a slow start and sluggish spending
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The combined new contracts of publicly listed state-run builders in the first half of the year adumbrates a sign of life in the country's infrastructure development after a slow start and sluggish spending.
Data compiled by The Jakarta Post shows that the contracts of four construction firms ' Wijaya Karya (WIKA), Waskita Karya, Adhi Karya and Pembangunan Perumahan (PP) ' reached Rp 40 trillion (US$3 billion) during the first six months of the year, historically a slow part of the year for the construction industry.
Although the figure was still far from meeting a combined new target of Rp 100 trillion, the figure nonetheless revealed significant increases month by month, with June alone contributing nearly Rp 14 trillion.
The four listed firms saw their outstanding new contracts for 2015 jump from the previous month's data. WIKA and Waskita, which mostly rely on government projects in generating income, saw their new contracts nearly double from their previous five-month figure.
The first-half yearly data further indicated noteworthy annual growth, having increased by nearly 60 percent compared with the same period of last year.
Analysts have said that June's figure had breathed fresh air into the industry, which was previously in a somewhat dire position despite a boost in the infrastructure budget to support President Joko 'Jokowi' Widodo's ambitious infrastructure programs. The Public Works and Public Housing Ministry saw its budget swell 66 percent this year to Rp 118.5 trillion.
'The latest month suggested a very large pick-up. If this is sustained we should be positive in the construction sector and the JCI [Jakarta Composite Index],' said Stevanus Juanda from UOB Kay Hian in a report.
The construction sub-index, which earlier this year was the frontrunner in supporting the JCI on positive sentiments stemming from an expected growth in infrastructure spending, has slipped by 0.42 percent year-to-date. This is in line with a 6.22 percent decline in he JCI ' now the worst performer in the South-East Asian region.
A number of analysts have attributed the constant fall in the JCI to an economic slowdown and sluggish government spending. This has produced disappointment in investors.
When contacted by the Post, company officials said that they had no plan to scale down their targeted new contracts despite a sluggish first six-months, all of which suggests that they are confident that government infrastructure projects would come through in the second half of the year.
Thendra Chrisnanda from BNI Securities said that he had a positive outlook regarding future prospects in the industry. He cited media reports that said that the Public Works and Public Housing Ministry had concluded 76 percent of its infrastructure project tenders, or equal to Rp 90 trillion.
Among the projects were the Ciawi'Sumedang-Dawuan toll road in West Java, the Manado-Bitung toll road in North Sulawesi and the Balikpapan-Samarinda toll road in East Kalimantan.
