Vietnam, Indonesia build cooperation in real estate

According to Ambassador Ibnu Hadi, private and foreign investments in the Vietnamese and Indonesian construction sectors are helping the two countries develop infrastructure.

The Indonesian construction sector is forecast to grow an average 8.1 percent annually in the 2017-2026 period. The non-residential market segment is expected to grow most strongly due to the effects of monetary and investment policies, infrastructure development and middle class growth.

The Indonesian government recently proposed an ambitious infrastructure development plan worth US$420 billion, which will be implemented through public-private partnerships (PPPs) to build 3,650km of roads, 24 new seaports, 3,258km of railway, 49 dams, power plants with total capacity of 35,000MW, water systems, more than 5,000 residential areas, trade centers, and to promote urban and rural development.

Meanwhile, the Vietnamese construction sector is forecast to grow 9.7 percent in 2018 and an average 8.2 percent in the 2017-2021 period. Strong foreign direct investment (FDI) flows and vibrant mergers and acquisitions (M&A) activities in late 2017 have increased the demand for infrastructure development and construction of housing and manufacturing facilities.

Ambassador Ibnu Hadi said he hoped construction and property cooperation would contribute to the realization of the US$10 billion bilateral trade target set for 2020. In 2017, trade between the two countries reached US$6.50 billion, a rise of 16.36 percent compared with 2016. This included US$3.63 billion of Indonesian exports to Vietnam, up 22.51 percent, and US$2.62 billion of imports from Vietnam, up 9.37 percent. Also in 2017, Indonesia invested US$45.84 million in Vietnam. Currently, Indonesia has 69 investment projects in Vietnam with total registered capital of US$477.02 million. For its part, Vietnam has eight investment projects in Indonesia, worth US$51 million in extraction industries, communications and manufacturing industries.

Although Vietnam’s investment cooperation with Indonesia remains modest compared with some other countries, such as the Republic of Korea, Japan and Singapore, Indonesian investment in Vietnam is growing and additional investors are displaying an interest in the Vietnamese market.

Successful construction and property cooperation projects between Vietnam and Indonesia include Ciputra International City in suburban Hanoi, invested in by the Ciputra Group (Indonesia) and the Urban Infrastructure Development Investment Corporation (Vietnam). In 2012, Semen Glesik, Indonesia’s largest cement group, spent US$230 million to buy 70 percent of stocks at the Thang Long Cement Joint Stock Company.

Budiarsa Sastrawinata, Chairman of the Ciputra Group, believes developing countries share similarities in terms of real estate market potential, because economic development has direct impact on property projects.

Budiarsa believes Hanoi is a potential market for complex investment projects, while Ho Chi Minh City is also a major real estate market but the competition among those seeking to invest there is tougher. Hanoi is a developing city and therefore investment in major development projects around the capital is promising, he said.

Meanwhile, Tran Dinh Thai, Deputy Secretary General of the Vietnam Federation of Civil Engineering Associations, believes there are opportunities for Vietnam and Indonesia to boost cooperation as both countries participate in implementing the ASEAN Economic Community’s orientation.

“In the era of economic globalization, especially in the context of preparations for the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) agreement to take effect, Vietnam needs to put in place suitable policies and mechanisms to facilitate foreign investment, as well as to create favorable conditions for domestic companies to invest abroad,” Tran Dinh Thai said.