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Infrastructure firms gloomy despite improving economic data in Indonesia

[JAKARTA] Stronger state spending lifted Indonesia's growth in the third quarter to its fastest pace this year but many of the companies involved in President Joko Widodo's infrastructure push say they are still waiting for business to improve.

The statistics bureau on Thursday reported Southeast Asia's largest economy grew at 4.73 per cent on an annual basis in the third quarter, up slightly from 4.67 per cent the previous quarter, but not enough to show a real turnaround has begun.

The government has made some progress overcoming bureaucratic obstacles that have stalled improvements to roads, ports and power plants, but firms say it is not enough. "For construction, it is still very slow," Singgih Prasetyo, general manager of PT Jaya Trade Indonesia, which supplies heavy machinery to building sites, told Reuters on the sidelines of Jakarta's largest annual infrastructure convention.

Hundreds of firms exhibiting everything from shiny bulldozers and electrical switches to safety vests and portable toilets turned up to at the convention but many were gloomy. "We hope there is more business coming because it's slow right now," said Marc Besserer, president director of PT Bonna Indonesia, which makes precast concrete pressure pipes for power stations, adding that government tenders took far too long.

Government capital spending rose to US$3.76 billion in July-September, double what was achieved in January-June, but after nine months, more than 70 per cent of the capital budget remains unspent. "I hope it will get better next year with new projects," Prasetyo said.

Parliament recently approved US$22 billion in capital spending as part of the budget for 2016, but lawmakers vetoed a series of capital injections for state-owned enterprises in a move that is likely to slow upgrades to the archipelago's crumbling infrastructure next year.

With the private sector under pressure and with PMI readings in October showing 13 straight months of deterioration, infrastructure firms are counting on government contracts to counter sluggish commercial sales.

Jokowi's administration has promised to dole out government spending on infrastructure projects much earlier next year, preventing a repeat of this year's delays. "It would be better if government projects are running faster, with no more delays, because all the other slices of the pie are gone," said Hardiman Utomo, General Manager of PT Steel Pipe Industry Indonesia, which is supplying parts for bridges and ports for the government.