Performance improvement: Leaning on infrastructure expenditure
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Bisnis Indonesia - Perbaikan kinerja: Bersandar pada belanja infrastruktur
21 August 2023
By: Anitana W. Puspa
When he explained about the posture of the 2024 state budget draft (RAPBN), President Joko Widodo said that the infrastructure budget next year would reach Rp422.7 trillion. It is the largest budget allocation for infrastructure in the last 5 years.
If accumulated from 2019 until next year, the infrastructure budget during President Jokowi’s era will reach Rp2,299.8 trillion. The budget will be focused on strengthening the provision of basic services, increasing productivity through connectivity and mobility infrastructures, expanding the irrigation network through dam construction, providing infrastructure in the energy sector and affordable food, evenly distributing information and communication technology access, and supporting national strategic projects.
In the last few years, the infrastructure budget allocation has been directed to support the development of Nusantara Capital City (IKN) in East Kalimantan.
The Public Works and Housing (PUPR) Ministry is setting their own target for stage 1 of basic infrastructure construction in IKN, which will include the Central Government Core Area (KIPP). The project is set to be completed in 2024.
According to IKN Infrastructure Development Implementation Task Force Chairperson Danis H. Sumadilaga, the progress of stage 1 of basic infrastructure construction in IKN has reached 38.1%, and all activities are still on schedule.
“The first stage of basic infrastructure construction in IKN has commenced since 2021, which includes the first stage of IKN access toll road, Sepaku Semoi Dam, the Presidential Palace, and the Presidential Office,” Danis said.
He said that the PUPR Ministry has commenced the second stage of IKN development.
“The second stage includes projects that were signed between April-May 2023, such as coordinating ministry offices and ASN (state civil apparatus) flats in IKN,” he said.
Danis stated that some basic infrastructure in IKN that will be completed in 2024 were clean water infrastructure and roads to improve connectivity to IKN.
“Clean water infrastructure that are being completed include Sepaku Semoi Dam and Sepaku Intake. Next, drinking water supply systems are also set to be distributed in several areas in IKN in 2024,” Danis said.
Meanwhile, regarding connectivity, Danis mentioned that he was currently completing the construction of the toll road that goes to the central area of IKN.
He said that the toll road that will be connected to Balikpapan-Samarinda toll road would shorten travel time from Balikpapan to the central area of IKN from 2 hours to only around 1 hour.
The amount of infrastructure expenditure next year is attracting state-owned construction companies to boost their performances.
PT Adhi Karya (Persero) Tbk Corporate Secretary Farid Budiyanti said that his company was optimistic about the construction market prospect being in line with the amount of infrastructure expenditure in the 2024 RAPBN posture.
“For the construction sector, we are optimistic about facing 2024 as the infrastructure budget has been allocated Rp422 trillion to strengthen basic services provision, increase productivity through connectivity and mobility infrastructures, and [provide] infrastructures to strengthen food and energy security,” he said on Friday (18/8).
Until July 2023, the issuer with the ticker code ADHI has secured new contracts worth Rp18.8 trillion, which grew 23% compared to last year from Rp15.3 trillion.
In July 2023, the company successfully secured new contracts to construct the S-03C package of the South Commuter Railway in the Philippines, the beach protection project in Cilacap, and the biopharmaceutical building project.
The new contract profile from the engineering and construction business line dominates 92% of their new contracts. The rest are property and other business lines.
Regarding the source of funding, 30% of the new contract composition come from government projects, 16% from SOEs (state-owned enterprises)/regional state-owned enterprises (BUMDs), 10% from construction projects from investment initiatives, and 44% from private companies/others.
The new contract realisation is still in line with the target in 2023 that reaches Rp27 trillion, which grew around 10%-15% compared to the realisation in 2022.
The company is currently focusing on completing several major and strategic projects, such as Solo-Yogyakarta-Kulonprogo toll road that is expected to connect Solo and Yogyakarta next year.
Besides that, there are several construction projects in IKN that are set to be handed over this year and next year, which include land development, toll road, building, bridge, and water infrastructure projects.
The efforts that have been implemented to improve ADHI’s performance this year are to collect more contract payments, to be prudent in choosing each project, to be more disciplined in managing cashflow and operation, and to implement suitable project financing schemes.
Meanwhile, a subsidiary of PT Waskita Karya (Persero) Tbk, PT Waskita Beton precast Tbk (WSBP), is targeting to secure new contracts worth around Rp3 trillion-Rp4 trillion in 2024.
WSBP Vice President of Corporate Secretary Fandy Dewanto explained that the strategy to secure new contracts in the political year was to increase the utilisation of all production facilities to support various projects in Indonesia.
“We are targeting the new contract value in 2024 to reach around Rp3 trillion-Rp4 trillion. Infrastructure projects in 2024 are predicted to continue to grow as basic infrastructure projects have been constructed,” he said to Bisnis on Thursday (17/8).
Fandy added that WSBP was also targeting to increase their supply to projects in IKN.
PT Wijaya Karya Beton Tbk Corporate Secretary Dedi Indra explained that, until June 2023, their new contract realisation has reached Rp3.81 trillion. Projects that are funded by the government through the APBN, the regional budget (APBD), and loans reach 42%. The rest come from private companies, SOEs, and BUMDs.
Dedi said that his company implemented risk management in each contract secured. The contracts need to provide down payment and monthly progress payments. The recognition of completed products in factories is the key to maintain WIKA Beton’s cash flow stability as well as capital expenditure control.
WIKA Beton’s procedure in choosing a work partner is to consider their competence, loyalty, financial capability, and compliance to applicable regulations.
