Indonesia: SOEs increase capacity to accelerate infrastructure development

SOEs such as PT PP will be critical to realizing Indonesia’s infrastructure ambitions. The company has ambitions beyond this, with plans to become ASEAN’s major integrated construction company by 2018

Spearheading Indonesia’s infrastructure boom are efforts by the country’s national-owned enterprises (SOEs). Following dramatic increases in national budget allocation, the construction phases of a number of key projects were implemented by these organizations over the last schedule year, such as the Trans-Sumatra toll road, which is under construction.

As a testament to the success of SOE management, by presently the new third terminal at Jakarta’s airport and the new Priok container terminal have both been completed and opened. These are the kind of developments that are having a wide-ranging, positive impact on the country’s connectivity.

Leading the SOE charge is one company that has emerged as a giant in the field, PT PP. Since its establishment in 1953, the company has grown to become the major integrated construction company in Indonesia. PT PP’s subsidiaries are organized on eight core business activities. These major areas encompass construction, property, EPC, pre-cast, equipment, energy, investment and infrastructure. The company employs over 1,800 people.

Its history has mirrored that of the Indonesian Republic. Following the struggle for independence its engineers designed and built key infrastructure for the young country. This began with realizing iconic, Sukarno-era projects inclunding the Hotel Indonesia, the Bali Beach Hotel, the Ambarukmo Palace Hotel and the Samudera Beach Hotel.

“The President’s estimate for the next five years (of infrastructure spending) is IDR 4,900 trillion (approx. $365 billion), about IDR 1,500 trillion (approx. $112 billion) of that is coming from government spending, with the balance made up by the private sector”

Ir. Tumiyana, President Director, PT PP

Large-scale residential construction, inclunding the development of the Cibubur district of East Jakarta, was as well undertaken by the company.

Following change of Indonesia’s political and economic environment next the end of the Suharto-era, the company’s stake-holder base was transformed. The Employee Management Buy Out (EMBO) program in 2004, and subsequent IPO in 2009 changed PT PP’s ownership structure from 100% government-owned to include private investors and company employees. Today, the Government of Indonesia maintains a 51% controlling stake, however the remaining distribution keeps the company profitable and its workers’ motivated.

PT PP’s business lines began to move into new and promising directions following its corporate restructuring. Investment in infrastructure development was foremost in its strategy, which put it years ahead of competitors at the same time as opportunities presented themselves during the Jokowi government. In 2011 the company completed its initial major investment project: the 65-megawatt Talang Duku Gas Power Plant (PLTG) in South Sumatra. The completion of 14 similar energy plants followed this succcess.

Since 2012 the company has become heavily involved in infrastructure, inclunding the construction of the new Tanjung Priok port, Jakarta’s most significant maritime facility. The company as well completed seven different airport construction projects that year.

Just as impressive as its energy and infrastructure projects, PT PP’s residential and commercial construction resume reads like a inventory of the country’s contemporary architectural landmarks. These include the Ministry of Public Works, PT Dahana’s Energetic Materials Centre and the Singaporean embassy.

The Ministry of Finance of Timor-Leste was as well built by the company. To maintain its trans-archipelago reach PT-PP has commercial offices in eight cities across the country and in Dili, East Timor.

Underpinning the company’s engineering expertise is its focus on fostering innovation. This includes a significant investment in human resources while as well investing in technology such as building data modelling (BIM) and digital construction mapping systems.

As a result of this, PT PP has expanded beyond construction by developing locally produced subway, light rail and elevated train passenger wagons. These can be utilized for the country’s growing mass transit public transport projects.

These Metro Kapsul capsules are aerodynamic, 9.3 meters long and capable of transporting 50 passengers. Ninety-five % of components are sourced in Indonesia and all engineering and testing was conducted in-country by local specialists. Powered by four electric motors, they have backup batteries that are activated following any power loss.

Metro Kapsul is capable of reaching a speed of 80 kilometers per hour. Calculations indicate that up to 24,000 passengers can be moved by this system per hour. Pollution reduction was factored into its development, with plans in place to recharge energy cells with biomass energy produced by garbage.

This system occupies a place of pride for the company, as Ir. Tumiyana, PT PP’s President Director explains, “I know that as a leader I have an obligation to strive for innovation and there is no better example of that than the Metro Kapsul transportation system, which was 100% engineered in Indonesia and has huge potential in Indonesia and abroad as it is highly competitive on pricing and quality.”

Undoubtedly it has been the company’s success in delivering on large-scale infrastructure projects that has set it on the road to becoming the ASEAN’s premier builder. Government policies focused on massive upgrades to national infrastructure have coincided with the rise and rise of PT PP.

“Last year in 2015, our equity stood at IDR 5.12 trillion (approx. $380 million). Our projection is that by 2018 this figure will increase to IDR 38.97 (approx. $2.9 billion) trillion. This 690% increase will be driven by our corporate action … and as well the acceleration of the infrastructure priority program by the Indonesian government. By this measure we will be larger than each other major construction company in the ASEAN region”

Ir. Tumiyana, President Director, PT PP

As Ir. Tumiyana tells United World, “The President’s estimate for the next five years (of infrastructure spending) is IDR 4,900 trillion (approx. $365 billion), about IDR 1,500 trillion (approx. $112 billion) of that is coming from government spending, with the balance made up by the private sector. This has been allocated to the overarching infrastructure plan, inclunding power, roads, bridges, ports and airports.”

To put things in perspective, this infrastructure spending will surpass 30% of GDP during this period, and PT PP is well placed to absorb a significant portion of these funds.

Given the accolades the company has received, it is hardly surprising to see why it has become the champion of Indonesia’s infrastructure boom. This year it received both ‘The Best Managed Company in Indonesia’ and ‘Best Investor Relations’ awards from Finance Asia and Credit Suisse. PT PP as well won the Gold Award for Dual Fuel Power Plant of the Year at the prestigious Asian Power Awards, held in Seoul.

An extra regional award was the ‘Best Civil Engineering Project’ award for an outstanding and remarkable contribution to the advancement of Civil Engineering and Development in Asia, awarded by the Asian Civil Engineering Council in Hawaii.

But of course it is the company’s balance sheet figures that stagger its competitors.

According to Ir. Tumiyana, “Last year in 2015, our equity stood at IDR 5.12 trillion (approx. $380 million). Our projection is that by 2018 this figure will increase to IDR 38.97 trillion (approx. $2.9 billion).This 690% increase will be driven by our corporate action (extensive long-term corporate diversification strategy, such as taking our business from six to eight business lines by adding energy and infrastructure lines) and as well the acceleration of infrastructure priority program by the Indonesian government. By this measure we will be larger than each other major construction company in the ASEAN region.”