Construction firms get help as Indonesia plans US$2 billion injection

The state-owned enterprises ministry of Indonesia has announced plans to provide an added $2.05 billion in equity investments to two construction firms by 2024. This initiative aims to alleviate the financial difficulties faced by these companies. This announcement was made by an official on Monday (June 5) during a hearing with the parliament’s committee overseeing state investments. It is important to note that any capital injection into state-owned construction companies requires approval from Parliament.

The government’s intention is to inject 12.5 trillion rupiah (equivalent to approximately $1.4 billion) into Hutama Karya by early 2024. Hutama Karya is a government-owned construction entity. This capital injection will enable Hutama Karya to take over two toll road projects from Waskita Karya. Waskita Karya is a construction firm struggling to repay its debt. Deputy Minister Kartika Wirjoatmodjo provided this information. He emphasised that the capital injection is intended to support Waskita Karya’s financial situation.

However, the finance ministry is withholding a 3 trillion rupiah capital injection. This capital injection was previously approved for the debt-laden construction firm, Waskita. Waskita failed to obtain bondholders’ approval to defer a coupon payment that was due in May. Thus, the reason for the delay in the capital injection. The Jakarta Stock Exchange suspended trading of Waskita’s securities was suspended for the second time this year. This suspension was due to Waskita’s unsuccessful negotiations with bondholders.

Kartika acknowledges that there is a possibility of increasing the capital injection proposal to meet additional needs. However, this increase would depend on the restructuring process’s requirements. Both ministries are in discussions to determine the appropriate capacity necessary to restore Waskita’s financial health.

Initiatives to stabilize the construction industry

These initiatives by the Indonesian government reflect its commitment to stabilizing the construction industry. The Indonesian government desires to mitigate the impact of financial challenges faced by these firms. The injection of additional equity aims to facilitate their recovery and ensure long-term sustainability.

The government’s support for construction firms is crucial for the industry’s stability and overall economic development. The government seeks to bolster these companies by providing financial assistance. It also seeks to enable them to fulfil their contractual obligations and continue their operations effectively.

The capital injections will not only provide immediate relief to the construction firms but also have a positive ripple effect on the wider economy. The construction sector plays a vital role in creating employment opportunities, driving economic growth, and supporting infrastructure development.