Indonesian Development Giant Bakrieland Partners with China Construction First Group
Indonesia’s PT Bakrieland Development is going to partner up with state-owned China Construction First Group (CCFG) on a US$350 million project in Jakarta this year.
The plan is to use 10 hectares of land to build a housing and commercial complex. The structure will have flats, shopping malls, a hotel and a gathering hall. The development would signify CCFG’s first venture in Indonesia.
Both sides are still ironing out the details of the contract. It is yet to be decided if it would be a joint undertaking or if Barkieland would act as the developer and bring CCFG on board as a contractor.
If it ends up being a joint project, Bakrieland’s stake would have a 30% stake. And CCFG would have to take care of the financing by providing funds and equipment. This would allow them to use the equipment supplied by Chinese manufacturers, and help them penetrate the Indonesian market.
The Bakrie Group, the parent of Bakrieland, had decided on a shared venture with China’s state-owned company a little over two decades ago. It had marginal equity in the joint ventures but failed to increase their capital when the Indonesian rupiah went down during the Asian financial crisis. This also forced the company to sell its shares in the joint projects to its Chinese partners.
Indonesia’s economy which is at US$1 trilllion is expected to grow by more than 5% this year. China is the third-largest investor, having invested US$2.3 billion so far this year. This venture is Indonesia’s attempt to entice foreign investors in the development sector to invest in infrastructure projects, which would further advance the country’s economic growth.
The property market in Jakarta is profitable for investment giants thanks to Indonesia’s flourishing economy and continued urbanization of the city. Add to that the country’s youthful populace and it becomes an enticing hub of opportunities for land developers.
There is a shifting in shopping trends, with the younger individuals preferring to shop online rather than go the conventional route. Barkieland fully plans on embracing this change. They plan to design their malls in a way that they would cater to the needs of all sorts of shoppers, including those who go to malls for a fancy meal rather than to shop.
More and more Indonesian property firms are partnering with overseas companies to work on such ventures, especially the Chinese companies, with the aim to be more efficient and plan the projects to be more cost effective and in line with the changing trends.