Falling short of the growth target in 2020 which was mainly due to the ongoing Covid19 pandemic, Indonesia now wants to restabilise the country by achieving economic growth of 4.5% to 5.5% in 2021. Presently, Indonesia is already engaged at many business fronts such as transforming some parts of their economy into circular economy, transitioning into the renewable and clean energy industry, developing the eco-system for electric vehicles plus the digitisation of their government administration. All these initiatives, if implemented properly, could serve as enablers to creating more jobs and boosting their economy.
According to financial analysis, they would need to inject into their economy around USD65 billions in order to achieve an economic growth of 4.5% to 5.5% in 2021. Apart from the business activities that I have mentioned, I believe that Indonesia wants to achieve some quick wins now, similar to many other countries that are hit by the Covid19 pandemic too.
Why?
The government shared that they might want to build more houses and commercial properties moving forward. Such moves have traditionally been one of the main tools that government leverage on to improve the economy, during slightly difficult times. Construction generates businesses for many works along the entire built environment value chain which includes real estate developers, contractors, sub-constructors, consultants, material-suppliers, independent quality checkers, software developers (including AI researchers – Yes, there’s a lot of opportunities that AI researchers could work on in the built environment and could be transferred to other industries when ready), manual workers and many others.
Estimates are that Indonesia would be able to absorb as much as 1.2 million unemployed people through construction activities. Based on figures released in Aug 2020, there were 9.77 million unemployed then. Taking 1.2 million people away from the unemployed status would roughly translate to 12.3% reduction in the number of unemployed and that is quite impressive. If they pull it off.
Why?
For comparison, roughly about 900,000 people are unemployed and 18 million people are under-employed in Vietnam in Jul 2020. If Indonesia is able to help 1.2 million people through construction projects, it would be equivalent to finding jobs for all the unemployed in Vietnam and taking some more away from the under-employed chart as well.
I really applaud their efforts in rejuvenating their economy. They are very aggressive at many fronts as what I mentioned earlier, and all of them are huge challenges. Take for example their commitment to becoming a renewable and clean energy country. Transitioning to become a renewable and clean energy country is a promising idea but a very challenging one. To do so, they would need to reduce the equivalence of 20 million vehicles per year for the next 10 years, in order to hit their carbon emission target by 2030.
For better appreciation, Malaysia has about roughly 28 million vehicles on their roads now. In order to achieve Indonesia’s carbon emission target right now, you almost had to strip all vehicles from Malaysia roughly about 7 times. 7 times. Still, the transitioning is critical for the region’s future because it would create a lot of jobs in the long run and reduce the country’s reliance on fuel imports. Provided that the private sector whole-heartedly invest in the journey as well. Well, for them, construction could be the game in the short run.
Analysts have been warning broadly about the subtle changes in home consumers’ preferences and office workers’ working arrangement. These changes mostly arose from the restrictions brought on by the pandemic and working-from-home (WFH) arrangements (Sorry! No academic research on this part but really some researchers should study the link!). People are starting to express interest in bigger houses and also in those houses that are located away from the city area.
Based on statistics that focus on Indonesia, only slightly more than 30% of the population are having WFH arrangements therefore majority continues with their existing working arrangements. While mulling over using construction projects to prop the economy, I think it is also fair to pay attention to changing consumer behaviors and how companies are changing their workplace strategies.
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