BINUS Business School

Infrastructure is on the Rise in 2021, What We Know Now

Infrastructure and the economy always go hand in hand. For the last few years, Indonesia had put its focus on infrastructure development, but now it has to accept the cold reality of COVID-19 that pushed almost all construction projects on hold. This has clear negative impacts on the construction industry, most specifically the construction companies.

The year 2021, which is said to be the year of global economic recovery, will also provide the momentum for the government to continue to improve the nation’s infrastructure. This topic was discussed by Dr. Siddik Siregar (Former Director of WIKA Beton) during the third session of the webinar series “Connecting the Dots” held by BINUS Business School and the BINUS Graduate Program on Friday, March 19, 2021. Dr. Siddik Siregar is an alumnus of the Doctor of Research in Management at BINUS Business School and has extensive experience in the construction industry. Here is the complete review.

New opportunities for construction businesses

Previously, the construction sector was preoccupied with large-scale infrastructure projects, but now the trend of the construction firms has suffered a decline, especially since the pandemic hit in 2020. This was also proven in the data shown by Siddik regarding the infrastructure budget from year to year, in which the budget plummeted in 2020 to a 28% decrease from 2019.

The pandemic has caused a very big hit which resulted in thousands of construction services going out of business, but there are new opportunities that the construction companies can capture in order to survive the pandemic. This was also explained by Siddik, who revealed that most of the projects handled by the construction companies since the beginning of the pandemic were projects to provide COVID-19 countermeasure facilities, such as renovating non-hospital buildings into temporary hospitals.

In addition, a number of construction businesses have also seized opportunities as temporary procurement services in a number of ministries, such as the Ministry of Defense (Kemenhan) and the Ministry of Social Affairs (Kemensos).

Focus on infrastructure in 2021

Behind the harsh impact suffered by the infrastructure industry, there is a bright speck of light that can revive the construction sector in 2021. Basuki Hadimuljono as the Minister of Public Works and Public Housing (PUPR) and Sri Mulyani as the Minister of Finance have allocated an infrastructure budget for 2021 amounting to IDR414 trillion, nearly 2x the amount of the infrastructure budget in 2020.

This decision is not only prompted by the vaccination process throughout 2021, but also a big step from the government to shift its focus to infrastructure development in 2021. In a published data report, Siddik stated that 2021 would be a year filled with a series of development projects, one of which would be the National Strategic Project (PSN) consisting of 201 infrastructure projects and 10 programs.

The pros of the infrastructure boom in 2021

The focus on infrastructure certainly brings a breath of fresh air to the construction companies as well as the public, especially when considering the downturn in Indonesia’s economy over the past year due to the pandemic. The focus on infrastructure in 2021 has garnered two different public opinions. For some people, this effort was welcomed for several reasons.

Firstly, people thought that the move to focus on infrastructure would be able to accelerate the national economic growth. Secondly, the number of development projects that would take place in 2021 could open up many job opportunities. This would affect the national economy as well as the public’s welfare, especially for those who lost their jobs due to the pandemic.

Thirdly, the focus on infrastructure in 2021 would be able to continue development projects that were previously delayed. The completion of a national-scale infrastructure project was also considered to be profitable in the years ahead, as its benefits would include the ease of distributing building materials, food, and medical equipment to areas outside Java.

The cons of the infrastructure boom in 2021

There were several people who greatly welcomed the idea of refocusing on infrastructure in 2021, but there were also people who criticized this government decision. The public felt that the focus on infrastructure would be in vain if the government had not yet successfully controlled the national COVID-19 cases.

A number of people thought that the government was negligent in controlling the ongoing pandemic, and in fact, had gotten worse. The public asked for the government to focus on dealing with the pandemic first, then progressing on other important tasks on hand. The biggest criticism was on the decrease in the public health budget, only amounting to Rp169 trillion, far below the budget for infrastructure. Consequently, the government has received public criticism and finally increased the health budget allocation to Rp254 trillion.