Government sector and investment policy that will be carried out by government in construction sector is very clear, as delivered by the government in Infrastructure Summit I, that within 5 years ahead infrastructure is expected to become the locomotive of the National development.
Due to 1997 crisis some infrastructure projects including new development projects were postponed. But then, after the crisis it brings new hope to Indonesia as some of the projects that were postponed are starting again, such as:
1.   Road development projects (1,500 km highway in the next 5 years 17,270 km road rehabilitation and improvement in some provinces 121 km road in regencies and cities including infrastructure in villages).
2.  Telecommunication, electricity, clean water, housing, harbor and airport development.
3.   Irrigation infrastructure, rehabilitation of irrigation network development to support National food endurance.
4.   Rehabilitation for Nanggroe Aceh Darussalam (NAD) and Nias.
5.   In Energy sector, especially gas pipeline for Java-Sumatra-
The new problem in the government sector is how to finance new development infrastructure project. For illustration : Dr. Ir. Suyono Dikun, Deputy V of Coordinating Minister for Economic Affairs mentioned that to support the future economic development for average 6,6% per year, we need US$ 80 Billion investment. The estimation exclude rehabilitation of infrastructures damage such as roads in provinces and regencies, airport, harbor, irrigation and others. The total investment needed for the next 5 years US$ 145 Billion. In other words, we need USD 29 Billion or equivalenttoRp. 290 Trillion every year excluding NAD and Nias rehabilitation. According the Government of Indonesia optimist that Government has prepared budget amount of US$ 4.6 Billion and budget from loan multilateral and bilateral side amount of US$ 2 Billion/year, and from the public sector will be US$ 33 Billion.
Besides, we still have potential budget source from the Domestic Capital Market which consists of : Bank, Insurance, Pension Budget and Capital Market a round US $ 6 Billion/year or US $ 30 Billion in 5 years.
Government of Indonesia realize that there is still a financial gap amount of US $ 67 Billion (or USD 13,4 Billion peryear). It is expected from the private investor (Equity, Strategic Operator and Equity Investor).
To encourage investment from outside, the Government conducted the Infrastructure Summit II (Indonesia Infrastructure 2006) on 1- 3 November 2006 and reached a new regulation that were published and take side to the investor or known as a "Investor Friendly".
The main policy that should be done to encourage investment accord ing to Deputy V of Coordinating Minister for Economic Affairs a re as follows:
1.   To reduce regulation obstacles.
2.   To unbind and liberate Infrastructure.
3.   To create a healthy competition.
4.   To  create  competition   model/shape  of  Public  Private   Partnership  (PPP),   Risk  Management and Infrastructure Developmentfunds.
(for more detail issue on result of the Indonesia Infrastructure 2006 please contact National Committee for the Acceleration of Infrastructure Provision (KKPPI) on www.indonesiainfrastructure.org).
Construction Projects in Private Sector
The private sector will be concentrated on the housing and property sector such as Flats, Apartments, Condominiums, Ruko (House and Small shop), Rukan (House and Office), Off ice/bus in ess centers, Shopping malls, Hotels and Resorts in the specific area in some prospective provinces.
Besides property sector, there are renovation projects and revitalization of traditional market to be modern market in big cities.
Bilateral cooperation projects for private and government, in the form of Built-Operate-Transfer(BOT) and or Built-Operate-Own (BOO) to optimize Pemda (Provincial Government) assets will be a trend in the future.
As an illustration, accordingto Bank of Indonesia (in June 2006) private sector sources of fund as follows:
1.   Share         Rp. ll,4Trillion (USD  1,2 Billion)
2.   Obligation   Rp.     8 Trillion (USD   0,8Billion)
3.   Private Equity         Rp. 100Trillion (USD 10,8 Billion)
4.   Bank          Rp.27,lTrillion (USD  2,9 Billion)
5.   FDIInflow  Rp.60,6Trillion (USD  6,6Billion)
Construction sector is very sensitive to external influences, especially macro economic (such as loan rate and exchange rate), tax, safety factor, unstable politic condition and Government Policies all together will create high cost economy.
Government of Indonesia aware that construction industry donates big contribution to the increase of GDP and also job opportunity. This is basic capital to construction development growth in Indonesia. Indonesia believe the construction industry prospect in years ahead will be very promising and challenging at the same time.
National Committee for the Acceleration of Infrastructure Provision (KKPPI)
Deputy V of Coordinating Minister for Economic Affairs
Bank of Indonesia
Central Bureau of Statistic (CBS)
Sudarto/AKI Data Base (Author)
Photos by Hardini