Govt to raise foreign cap in construction sector

JAKARTA. The government is considering raising the foreign ownership limit in the construction sector to 70 percent to draw more foreign capital to help accelerate the development of infrastructure projects in the country, a senior official at the Public Works Ministry has said.

Deputy Minister Hermanto Dardak said in Jakarta on Thursday that the increase in foreign ownership would enable Indonesia to take advantage of the growing construction business as a result of the implementation of the ASEAN common market by the end of 2015.

“In line with the implementation of the ASEAN common market, the limit will be increased to 70 percent,” he said.

The policy will provide an opportunity for foreign construction companies, which at present still operate through their representative offices, to form a joint venture with their local partners.

“Currently, there are 16 foreign construction companies that operate through representative offices in Indonesia,” he said in a press conference.

The ministry’s construction division head, Hediyanto W. Husaini, meanwhile, said that the current limit on foreign ownership in the construction sector was set at 67 percent for construction companies and 55 percent for construction-consulting companies, as stated in the recently revised negative investments list (DNI).

He added that the ministry would propose that the President revise the current DNI so that foreign ownership in the construction sector could be increased as planned.

“Our target is to increase it to 70 percent, based on our need to boost infrastructure projects to improve our country’s competitiveness in the ASEAN market,” Hediyanto told The Jakarta Post.

“However, the government can reduce the limit again following an increase in the number of foreign investors in the sector, as long as the limit is not less than 51 percent for consultants and 55 percent for contractors as agreed among ASEAN members,” he continued.

Hediyanto said that the policy was not aimed at hampering the growth of local contractors, but rather to boost their competitiveness.

According to data from the National Construction Service Development Board (LPJK), the number of companies involved in the construction sector amounts to a total of 1,300 companies.

According to the National Development Planning Board (Bappenas) the government needs investments totalling at least US$550 billion to finance the country’s infrastructure projects between 2015 and 2019.

Of this $550-billion investment, the state budget can only provide around $97.3 billion. The remaining funds must come from state-owned enterprises and the private sector.

In November, the ministry will hold a construction exhibition, Konstruksi Indonesia 2014, in which construction companies from other ASEAN members are expected to participate.

“Konstruksi Indonesia 2014 is focused on the need to consolidate and synchronize all the efforts by stakeholders to leverage the opportunities of the coming ASEAN Economic Community (AEC) 2015, be they in the local or other ASEAN construction markets,” Hediyanto said, adding that the government was committed to pushing through and facilitating the expansion of access to the construction markets in other ASEAN countries. (Nadya Natahadibrata)