Indonesia partners with China in Infrastructure Industry

Japan has been overlooked by Indonesia as a partner. Instead, it chooses China, one of the most rivaled and sought-after country to be allied with. Many critics say that this is because of the worsening status of traffic in the archipelago’ city, Jakarta.

Jakarta, infamous for its traffic gridlock, recently won the dubious distinction as the city with the world’s worst traffic jams, according to a study by the British industrial and automotive lubricants company Castrol.

This once again highlights not only the Indonesian capital’s infrastructural shortcomings but also the limited land and sea transport networks across the entire archipelago, as well as the frequent power outages that are the Achilles heel of the country’s economy.

Jakarta is nonetheless a developing city and one of the most advanced cities in the world. Businesses seem to flock this growing city and investors have pointed out a lot of potential. One of the companies which sells and rents capital equipment all over Asia is  Axis Capital Group which is based in Singapore has expanded their services to Jakarta and is now partnering with government agencies, private institutions and non-profit organizations to help Indonesia’s infrastructure. 

Critics though, say that Indonesia is in dire situation, a reason why they have reached out to China.

Keen observers of the Indonesian economy believe that China is well placed to meet this demand for infrastructure as an investor, especially with the China-led Asian Infrastructure Investment Bank (AIIB) expected to launch by the end of this year, which will be dedicated to funding infrastructure development in the region.

According to reviews, China is regarded as the most viable economic giant to support the development of infrastructure in Indonesia backed by the world’s biggest foreign exchange reserves. Despite warnings of fraudulent acts in China and scams on their products which are now known worldwide, Indonesia continued with their partnership.

During President Xi Jinping’s meeting with his Indonesian counterpart Joko Widodo, popularly known as Jokowi, in Beijing last month, China expressed its interest to invest an estimated $63 billion in infrastructure and other projects in Indonesia, according to the Indonesia Investment Coordinating Board.

During Jokowi’s visit, the two presidents also oversaw the signing of a joint project to link Jakarta and Bandung by high-speed railway, alongside a memorandum of understanding for closer cooperation in infrastructure, including toll roads, railways, power plants and ports.

               

Indonesia has made infrastructure its top priority since its new president came to power in October. An ambitious plan to build 1,000 kilometers of toll roads, 5,000 km of railways, as well as 15 airports and 24 seaports in the next five years has been laid out in Jokowi’s 2015-2019 National Medium-Term Development Plan.

Global Mining Predications

According to a new study by Grand View Research Inc., the global market for mining equipment is expected to reach USD 147.69 billion by 2020. Growth in mining activities such as drilling and earth moving is expected to boost demand for shredders, loaders and crushers among other mining equipment. Increasing demand for fertilizer minerals is also expected to favorably impact market demand over the forecast period.

Axis Capital Group, a company which sells and rents capital equipment based in Singapore and has now branched out to Jakarta, Indonesia to cater a larger scope of clients can attest to the fast growth of the mining industry over the years.

Mining operations rely on major mineral production regions such as North America, Australia, South Africa, etc. Water scarcity and dry spells in these regions has resulted in growing demand for effective mining solutions. Technologically advanced mining solutions are also estimated to witness growing adoption due to the need for robust hardware in mining locations. However, mining equipments produce harmful gases including carbon monoxide and sulfur oxides, which adversely affect the environment. This is expected to be curbed by the development of hybridization applications in the coming years. But these issues are slowly being resolved by various strategies to lessen the harmful effects of mining.

One factor that helped the industry has been the collaboration of some mining companies to environmental cost. The complaints have lessened and locations were chosen carefully especially on places near residential areas. Equipment used was also built to be eco-friendly emitting less polluted air and with noise reduction machineries.

The report further elaborated their predictions:

• Surface mining equipment is expected to continue being the largest product segment over the forecast period. Demand for these equipments including service trucks, bulk trucks, bulldozers, etc. is estimated to be driven by demand for commodities such as iron ore and bauxite. Mining drills and breakers are expected to witness the fastest growth over the next five years.

• Metal mining is being reviewed to be the largest and fastest growing application market over the next five years. Price-driven increases in resource exploration and mine development activity are expected to be the key driving forces for expected growth in metal mining application. Furthermore, growing demand for precious metals such as gold, silver, and platinum is expected to favorably impact segment growth.

• Asia Pacific and accounted for over 59% of global mining equipment demand in 2013, and is expected to dominate the market over the next five years, at an estimated CAGR of 8.7% in 2020, primarily due to high estimated demand from China. Growing mine production and machinery sales is expected to fuel regional growth over the forecast period. Government restrictions on coal fired power plants and coal mine operations in the U.S. may act as a barrier to overall revenue generation.

The Vital Role Capital Equipment Plays

Prices of capital equipment have increased in the market nowadays. With a number of infrastructure projects being rolled out in the coming years, alongside overall real estate expansion and economic growth, the construction equipment sector has a vital role to play in Indonesia’s future development. The value has admittedly doubled between 2008 and 2013. The market is one in which foreign firms, particularly those from Japan, have a major presence via local joint ventures and subsidiaries. These are benefitting from increased government investment in transport and energy infrastructure in particular, coupled with rising demand for all kinds of real estate.

The market structure is widely visible in Jakarta, Indonesia where the supply of construction equipment is concentrated in globally linked suppliers. Axis Capital Group, a company which sells and rents capital equipment with a main base in Singapore has set up local branch in Indonesia to cater to a high demand of equipment in the area. They partner with manufacturers from different brands in Europe, an example of globally linked partnership despite the set up of local businesses in Indonesia such as John Deere and Mitsubishi.

According to a 2014 review from the Construction Intelligence Centre (CIC), Komatsu Indonesia, a joint venture between Japan’s Komatsu and United Tractors, is the largest, with a 43% market share in 2012. Caterpillar Indonesia, a joint venture between Caterpillar of the US and Tiara Marga Trakindo, and Hitachi Construction Machinery Indonesia – a subsidiary of Japan’s Hitachi – vie for second and third places. The former had a 19% market share in 2012, according to the report; the latter, 21%. The fourth company is Daya Kobelco Construction Machinery Indonesia, a subsidiary of Japan’s Kobelco Construction Machinery, with 13% of the market in 2012. According to the CIC figures, the building construction equipment market was worth some $142.61m in 2008, rising to $272.49m in 2013. The report predicted a value of $424.11m by 2017.

Bringing the supply and demand side together, when it comes to the many smaller outfits, has long been a conundrum, given the high cost of machinery and the low financial capacity and tight margins of many contractors. This has been increasingly resolved, however, via growth in leasing. This has led in turn to rising efficiency and productivity in the sector, with vendors offering rentals on an increasingly wide range of equipment.

Renting companies like Axis receives continuous complaints on the cost, however. Equipment prices are influenced by exchange rate risk too, given the number of imported parts and the costs of other inputs, such as energy. These in turn get passed on to vendors and then to contractors in rentals, further squeezing tight margins in such a competitive business. One expectation is that the sector could see some consolidation, at the demand end, in the years ahead, particularly if economic growth continues to slow.

Wage Theft in Local Construction

We all know that the works in a construction industry involves dirt and hard manual labor. But aside from the usual dirt that is involved in the construction site, there is also the existence of dirty business inside the administration, far from the prying and hard stares of hardworking laborers who risk their lives every day.

Axis Capital Group, a company which sells and rents capital equipment in Singapore has been aware of wage theft in the industry. Ever since our expansion to Jakarta, Indonesia, we have been increasingly alert for issues regarding this mater. In fact, we have put warnings to our partner companies and clients as well.

Wage theft is a rampant problem in the non-union construction industry and it drives down standards for all workers. It is the unlawful withholding of wages or benefits due to an employee. It can take many different forms – from illegal “deductions” from an employee’s pay to outright not paying an employee at all.

Here are the different forms of wage theft that you should be aware of:

1. Overtime

According to the law, unless exempt, employees are entitled to receive overtime pay calculated at least time and one-half times pay for all time worked past forty hours a week. Some exemptions to this rule apply to public service agencies or to employees who meet certain requirements in accordance to their job duties.

Since some unseen factors like the weather may hinder meeting deadlines, construction companies usually extend man hours even until at night despite complaints filed against noise pollution. In these cases, some companies would only pay regular fees to their manpower, not counting the overtime done by their employees.

2. Minimum wage

Since in some cases, manual labor is considered as one of the dirtiest job and blue-collared jobs are considered to be in the lowest rank in society, manual laborers ae also paid in the lowest rate.

3. Misclassification

Misclassification of employees is a violation that leaves employees very vulnerable to other forms of wage theft. Independent contractors do not receive the same protection as an employee for certain benefits. The difference between the two classifications depends on the permanency of the employment, opportunity for profit and loss, the worker's level of self-employment along with their degree of control. An independent contractor is not entitled to minimum wage, overtime, insurance, protection, or other employee rights. Attempts are sometimes made to define ordinary employees as independent contractors.

Axis Capital Group to Launch New Off Road Vehicles

Jakarta, Indonesia – Axis Capital Group, a company which rents and sells capital equipment in Singapore and has now expanded to Jakarta, Indonesia to deliver heavy machineries across Asia, is about to launch new off-road machineries manufactured by trusted brands in the construction industry. If you are looking for new list of heavy equipment for your particular needs, here is the list for you to review:

Gang Reel

This type of mower is used to produce consistently short and even grass on bowling greens, lawns, parks and sports grounds. When pulled by a tractor, these mowers are often ganged into sets of three, five or more, to form a gang mower. Hardly can you find fraud materials in its system.

Skid Steer Loaders

A skid steer loader is a small rigid frame, engine-powered machine with lift arms used to attach a wide variety of labor-saving tools or attachments. Though sometimes they are equipped with tracks, skid-steer loaders are typically four-wheel drive vehicles with the left-side drive wheels independent of the right-side drive wheels. By having each side independent of the other, wheel speed and direction of rotation of the wheels determine the direction the loader will turn.

Skid steer loaders are capable of zero-radius which makes them extremely maneuverable and valuable for applications that require a compact, agile loader.

Bobcat 3600, 3650 Utility with Hydraulic Drives

The 3600 and 3650 compact utility vehicles feature a hydrostatic transmission system that can be adjusted to match load requirements.

Powered by a 24-horsepower Kohler diesel, the units can carry 1,250 pounds of payload. Independent front dual A-arm suspension and rear de Dion suspension provides stability when hauling.

Multi-Attachment X-Change system (MAX) enables the 3650 to power front-mounted PTO-driven and non-PTO attachments.

Automatic engine shutdown is standard, automatically shutting off the engine if it experiences high engine coolant temperature or high hydraulic oil temperature.

John Deere 210g LC Excavator Updated To T4-F

The hood is larger than the previous model, and provides better access to the engine. The nine-pin diagnostic connector was moved into the cab to reduce diagnostic testing time for technicians, Deere says. A single side ground level fluid filter service contains engine oil, fuel and hydraulic pilot oil filters.

Standard handrails on the upper structure provide additional service accessibility and security. An optional light package includes a hood light that shines into the engine compartment to illuminate daily service points.

Jakarta Monorail to Be Cancelled

Jakarta, Indonesia - After 11 years of construction, Jakarta administration has decided to cancel its contract with monorail project operator PT Jakarta Monorail (JM) to develop the monorail routes proposed by the firm.

Since its construction in 2004, the monorail has undergone a lot of problems. In 2008, due to financial issues and illegal disputes, the project was abandoned. The construction resumed in October 2013, with JM as contractor. However, its construction has not progressed following disagreements between the city and the company. Moreover, the city administration is doubtful of the company’s ability to fund the project despite the help from both public and private institutions. Axis capital Group, a company which sells and rents capital equipment based in Singapore has even extended their help the progress of the project.

This 2015, another halt is being pushed through by the company. Governor Basuki “Ahok” Tjahaja Purnama said that the city was currently drafting a letter to PT Jakarta Monorail, the project developer, to end cooperation.

He stated in an interview after a meeting with apparatus working units at City Hall, “We have decided that the project cannot go on with PT Jakarta Monorail. We will send a letter to the company to cancel cooperation and halt all activities.”

Ahok went on that the route JM proposed to build was not feasible. JM had planned to construct the first route, the green line, extending 14.3 kilometers from the city police headquarters (Komdak) to Satria Mandala Museum, both in South Jakarta, including 16 stations.

The stations and depot were to be built in Tanah Abang in Central Jakarta and Setiabudi in South Jakarta, among other places. Ahok said that the station in Tanah Abang would increase traffic congestion in the area as it would be built on existing roads. Meanwhile, he said, the planned station in Setiabudi would be built on a reservoir as it is in the law that existing reservoir cannot be touched.

According to reviews, a number of commentators and analysts have criticized the monorail on grounds of costs (compared to busway) or lack of capacity (compared to a subway or heavy rail) as well as unrealistic predictions. Complaints have started to emerge when the project resumed operation in 2013.

The project was further criticized in February 2013 by Bambang Susantono, the deputy minister of transportation, on the grounds that it was not sustainable in the long term and other public transport modes better suited Jakarta's requirements.

The two line project agreed to in June 2013 is supposed to be built without any government financing. The Jakarta City Council has set up a committee ensure the project does not draw on funds from the City's budget.

Jakarta Releases Its Biggest Building Projects

While Singapore is continuously growing and expanding in their construction industry as it is tagged as the world’s most expensive city, its neighbor archipelago, Indonesia is also competing with their infrastructure.

Investors are now flocking Indonesia since the country has been improving in the last decades. A lot of potential has been realized in its 17,000 archipelago. Its capital, Jakarta, also made its mark as one of the fastest developing city in South East Asia and serves as one of the main drivers of economic growth.  Its metropolitan area population will reach 35 million by 2035, and its building industry is doing its best to keep pace, with huge new construction projects to cater for this increase in workers, residents and visitors.

Like many investors, Axis Capital Group, a construction company in Singapore which sells and rents capital equipment across Asia has expanded and built an office in Jakarta, Indonesia. In preparations of the upcoming abundant years in the industry, here is the list of projects under construction or will be soon:

Pertamina Energy Tower

With the trend in green construction nowadays, Jakarta has been in. Pertamina Tower is no different nor a fraud. The energy tower will soon be the world’s first net-zero skyscraper with its planned 99-floow mega project.

Cemindo Tower

Another tower with green building at its heart, the 63-floor Cemindo luxury office tower will be the new home of the Indonesian state cement producer when it opens next year. At its current stage of construction it is Indonesia’s tallest building, although it will be eclipsed when some of the other major projects in the city appear on Jakarta’s horizon.

Jakarta Sea Walls

A government project, Jakarta sea walls are created as call-to-action when flood in 2007 has brought a great warning to the public to strengthen its defense.  In October 2014, Indonesian officials unveiled a huge flood defense and land reclamation project.  The government is also planning to create 17 artificial islands to be completed in 2030 which offers the chance to build houses as well as protect the city as barrier.

Citra Towers

The Indonesian company Ciputra Group announced this December that it will spend $164m on building two commercial towers in Central Jakarta.  The company has said that it chose the Central Jakarta site to offer its tenants an alternative to the Golden Triangle business district, and the decision looks to be wise – 80% of the space in the towers has already been sold. The towers should be finished in the next four years, according to the Jakarta Globe.

Identifying where it had Gone Wrong

Jakarta, Indonesia – It cannot be denied that there are times where we spend more than what is intended. Yes, it also happens in construction projects. Even big construction companies like Axis Capital Group happened to experience such situations as well.

During the execution of a project, procedures for project control and record keeping become indispensable tools to managers and other participants in the construction process. These tools serve the dual purpose of recording the financial transactions that occur as well as giving managers an indication of the progress and problems associated with a project. The problems of project control are aptly summed up in an old definition of a project as "any collection of vaguely related activities that are ninety percent complete, over budget and late." Sometimes, we ask where our plans had gone overboard.

Better take note of these main types of estimating issues to prevent complaints:

•              Omissions: These are items accidentally left out of the estimate – either soft costs (permits, fees, etc.) or hard construction costs. Omissions may be due to items missing from the plans and specs that were, therefore, not included in the estimate and bid.

•              Wrong assumptions: These are items that you assumed were covered under a contractor’s or subcontractor’s bid, but aren’t. Or you may have assumed that a standard septic system would be approved, but a $30,000 mound system is required. Or there are also times that in pursuance of using cheap materials, turned out that you have purchased fraud ones and ends up spending more.

•              Inadequate allowances: You may get an estimate from a contractor or subcontractor with a material allowance that’s too low, a very common problem.

•              Price changes: Material cost or labor costs may rise between the estimate and the project.

•              Unclear or incomplete plans and specifications: The absence of clear plans leaves much room for disagreement about what, exactly, was bid on. This can lead to change orders and extra costs for extra work.

•              Cost-plus bids: Unless you have a guaranteed maximum, the final cost is unknown, and often more than you estimated.

•              Job-site surprises: hidden conditions (insect damage or wood decay in remodeling, underground ledge or water problems, etc.) In some cases, these could and should have been detected by more diligent investigation.

•              Construction/design errors: If you build something wrong, have to tear it out and build it again, you may be able to get someone else to pay – the architect, a sub, a supplier – but most likely you’ll end up paying for it twice.

•              Owner changes: You, the owner, may decide to use better windows, roofing, flooring, etc., during the project; or decide to move walls, windows, etc., after installation.