Indonesia leads as Asia becomes fastest-growing construction market: report

Economy August 02, 2013 00:00

By The Nation

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Asia is tipped to be the world's fastest-growing construction market between now and 2020, with Indonesia and in particular Jakarta forecast to have the highest potential in terms of both market growth and profitability, according to Aecom, a global provi

“Asia Construction Outlook 2013” presents the latest update of the construction market in Asia midway through this year. The report reveals industry activity levels last year and provides near- and longer-term forecasts for construction by region, country and city. The findings are based on analysis of sector statistics combined with the results of market sentiment surveys undertaken by 41 Aecom construction experts across nine countries in Asia.
“Market intelligence of this type is invaluable for proactive organisations looking for new or alternative markets to enter and is something that can be overlooked by construction businesses, which often tend to be reactive” David Crosthwaite, author of the paper and associate director of Aecom’s business intelligence team, said yesterday.
The report shows that as Western economies have slowed, Asia has maintained strong growth and has been less affected by the global economic downturn in recent years. Asia has also become increasingly dependent on domestic demand, through burgeoning affluence and urbanisation, for its continued growth. 
Asia is the largest regional construction market worldwide, accounting for 40 per cent of global construction spending last year. Asia is forecast to account for almost half of global construction spending by 2020. 
Given its population size comparable to that of China, India offers a significant level of opportunity. However, its construction industry is only about one-third the size of the China market. With public investment levels likely to be constrained, India’s growth will greatly depend on its ability to attract private finance. China accounts for 41 per cent of the Asia-Pacific region’s construction spending, with expenditures of US$1.25 trillion (Bt39 trillion) last year. 
Indonesia emerges as a particularly interesting market. Construction spending in the world’s fourth-most-populous country accounted for more than a quarter of the nation’s gross domestic product last year, with about half of this expenditure funding infrastructure projects. Aecom’s survey also found that Jakarta is viewed as the No 1 city in the region for potential market growth and profitability. 
Construction activities will shift away from non-residential structures and move towards infrastructure and then, in the longer term, to residential projects. Funding models are also evolving in Asia, with growing use of private finance, including public-private partnerships.
Japan is also a key growth market through the end of the decade. Japan is expected to see sizeable growth in construction spending until 2018 as the earthquake/tsunami reconstruction effort gathers pace. However, the reconstruction is only expected to provide a short-term spike in construction activity, which is likely to return to trend later in the decade.
“Coupled with our 40 years of experience in the market, I believe this paper will provide an insightful perspective for the industry to understand the construction trends and activities in the region,” said Sri Kandan, chairman of Aecom unit Davis Langdon KPK. “Long-term planning and managed implementation are the keys to the sustainability of the construction industry, particularly in Asia.”