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State firms upbeat despite change in govt priorities
State-owned construction firms remain upbeat in their business outlook for 2020, even though a shift in the government’s development priorities — from infrastructure to human capital — might mean less work for them next year
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span>State-owned construction firms remain upbeat in their business outlook for 2020, even though a shift in the government’s development priorities — from infrastructure to human capital — might mean less work for them next year.
The government’s total expenditure in the draft 2020 state budget is projected to settle at Rp 2.52 quadrillion (US$176.96 billion), up by 7.9 percent from this year’s budget of Rp 2.34 quadrillion. The development of human resources is expected to take up Rp 1.02 quadrillion, equal to 40 percent of next year’s total spending.
Meanwhile, the government is placing infrastructure development as its second priority, allocating around Rp 419.2 trillion —significantly less than for human resources development.
Despite the shift, state-owned construction firms PT PP, PT Wijaya Karya (WIKA) and PT Adhi Karya said they were still optimistic about securing major contracts in 2020 and the years to come.
Most infrastructure projects in the past four years, especially toll roads, were awarded to state-owned construction companies. Besides government projects, they also get contracts from the private sector.
PT Waskita Karya, for example, is maintaining a positive business outlook as it has prepared a number of strategies to anticipate a fall in new contracts in the next few years.
“We will bid on tenders offered by other state-owned firms [and] private entities to secure more contracts next year,” PT Waskita Karya finance director Haris Gunawan said in Jakarta on Tuesday.
Most of the company’s contracts from the past several years came from its own projects, such as toll roads, of which it is also the owner.
About 10 percent of PT Waskita Karya’s contracts are from other companies, but it hopes to increase that figure to 30 percent to anticipate a drop in its own projects.
Meanwhile, PT PP is also confident about its business prospects next year.
“We will further diversify our business and investments, as well continue our expansion overseas,” the company said, adding that with this strategy, the government’s swift in priorities would not affect its business.
PT PP’s diversification plan includes strengthening its position in the water supply business and venturing into renewable energy while eyeing to secure contracts from abroad, such as the Philippines, Malaysia and Vietnam.
PT Adhi Karya president director Budi Harto expressed a similar sense of optimism.
“We expect to secure Rp 25 trillion worth of new contracts next year, including from our own projects,” he said on Wednesday.
Adhi Karya expects to secure at least Rp 12 trillion in contracts from its own toll road project, the Solo-Jogja toll road in Central Java, and Rp 1.5 trillion from the Karian water supply network in Banten.
Budi said Adhi Karya would continue to receive more contracts for fully funded government projects and those built under a public-private partnership (PPP) scheme.
Kresna Sekuritas analyst Andreas Kristo echoed his sentiments, assuring that the change would not affect the firms’ businesses because government spending on infrastructure was still large.
The 2020 budget allocation for infrastructure development is projected to increase by 4.9, the highest increase since 2017.
“More opportunities will also arise in the future because of the government’s plan to move the capital [to Kalimantan],” he said via text message.
