The construction sector is one of the strategic sectors in Indonesia in supporting the achievement of national development. This strategic position can be seen from the linkages with other sectors. The construction sector is an important part of the formation of construction products and services that bridges between providers of construction products and services and their users. In this market sector coverage, there are several important factors that influence such as businesspeople, supply chains, and employees that will determine the success of the construction activity process as a driving factor for socio-economic growth in Indonesia.
Therefore, the development of the construction sector becomes one of the important and strategic public agendas when looking at developments that occur rapidly in the context of globalization and liberalization, poverty and inequality, democratization and regional autonomy, as well as damage and natural disasters. Apart from that, the development of the construction sector cannot be separated from the context of the ongoing political, cultural, economic and bureaucratic transformation process.
Based on data from Statistics Indonesia, 2021, the construction sector growth in 2020 experienced a significant decline. This sector experienced negative growth of -5.67% (y-o-y) or decreased by 9.02 points. Almost all construction projects were postponed due to the pandemic. The postponements and delays of a number of infrastructure projects and the backdrop of poor macroeconomic conditions have cut the growth projection for the Indonesian construction sector for the 2020 period.
The decline in growth in the construction sector has occurred since 2018 (down 0.8 points) due to project debt owned by big players, expansion of the market for big players which makes it difficult for small players to get demand, the proportion of projects that have emerged is not matched by a high number of players, postponement of some big projects, and several other factors. Real growth for the construction sector in Q1/2020 was 2.9% (yoy) or decreased by 3.01 points from the same period in 2019. Based on this, the decline in construction sector growth was not entirely caused by the pandemic because policies such as new lockdowns were effectively implemented in April 2020.
As it is known, the construction sector is closely related to medium and large scale social activities. The implementation of a Large-Scale Social Restriction (PSBB) policy and lockdown which was carried out as one of the pandemic countermeasures certainly had a significant negative impact on the operations where all project plans had to be stopped and temporarily postponed until there was a new policy regarding the operating permit.
Following this, a decline in the number of players also occurred every year. Based on data from the Indonesian Construction Contractor Association (GAPENSI), 2021, there was a decrease in GAPENSI members of 4,297 companies where the largest decrease in companies was in K1 qualifications (project work with a value of IDR 1 billion) of 54% of the total decline in 2020.
This shows that as many as 4,297 companies did not re-register as members of GAPENSI and also indicated that they were out of business or dormant, because by ceasing to be a member, those companies accepted the risk of the difficulty to obtain projects. The details of these companies are B2 qualifications of 18 companies, K1 qualifications of 2,307 companies, K2 qualifications of 524 companies, K3 qualifications of 931 companies, M1 qualifications of 344 companies, and M2 qualifications of 179 companies.
However, in 2021, VISI predicts that the construction sector is expected to rebound and grow to reach 6% (y-o-y). This was driven by the commencement of construction activities of several projects which in their implementation had been supported by adequate health protocols. In addition, the use of labor in the construction sector in Q4/2020 is indicated to have improved with Weighted Net Balance (WNB) -0.55%, up from WNB -1.07% in the previous quarter, in line with improving business activities in the construction sector. In Q1/2021, construction sector business activity is predicted to increase with WNB business activities by 0.15%, growing positively after the previous quarter’s contraction with WNB -0.23%.