N

ew contracts awarded to the country'€™s two largest construction firms, Wijaya Karya (WIKA) and Waskita Karya fell short of their first-half targets amid slow disbursement of government infrastructure development funds.

WIKA was awarded contracts worth Rp 10.59 trillion (US$793.26 million) in the first six months of the year, an increase of nearly 70 percent from the Rp 6.7 trillion the company recorded during the same period last year, when growth in the construction sector was constrained by the political and economic uncertainties of the election year.

However, new contracts in the first half accounted for only 33.5 percent of WIKA'€™s annual target of Rp 31.64 trillion.

WIKA'€™s corporate secretary, Suradi, said that the company had recently secured contracting for works on the 90-kilometer Solo-Kertosono toll road '€” a project owned by Waskita and state-run toll road operator Jasa Marga '€” in Central Java.

The company was awarded Rp 625 billion of new contracts for the project, the latest addition to state-run builder January-June contracts. WIKA won a single-year contract to work on a 1.5 kilometer section of the project and three-year contract as a leader in a consortium of groups that will work on a 20 kilometer part of the road.

Waskita, meanwhile, recorded slightly better results, having been awarded around Rp 9.9 trillion of new contracts as of June, or around 43 percent of its annual target of Rp 22.7 trillion.

The first-half contracts showed a nearly 40 percent increase compared with the Rp 7.1 trillion the company registered last year, Waskita corporate secretary Antonius Yulianto said in a text message on Tuesday.

Anotonius, however, had previously said that Waskita might pocket up to Rp 48.8 trillion in new contracts this year, far above the initial target, if his company was given a state-capital injection from State-Owned Enterprises Ministry.

Waskita is among 34 state-owned enterprises under the State-Owned Enterprises Ministry that will obtain a combined capital injection of Rp 31.52 trillion through a rights issue plan.

The company has received Rp 3.5 trillion in state funds, and plans to sell rights shares of about 27 percent of its enlarged capital to boost the company'€™s capital. There will be 3.65 billion shares released, priced at Rp 1,450 a piece, meaning the company will pocket around Rp 5.3 trillion from the rights issue, including from the government.

The company hopes the rights issue would be rubber stamped by the ministry this month, and if so, the total new contracts will only make around 20 percent of the expected revised target.

Desmon Silitonga from Milenium Danatama Asset Management said that the first-half new contracts from two listed state-run firms were still beyond expectations, as there were high hopes on surging infrastructure projects earlier this year on boosted budget allocation.

'€œThe two firms are traditionally the biggest recipients of government projects, and their first-half contracts reflected the sluggish progress of infrastructure spending. Given the current spending, it might be difficult for them to wrap up their targets by the end of the year,'€ he said.

The Public Works and Public Housing Ministry, whose budget was increased by 66 percent this year to Rp 118.5 trillion, may disburse only 15 to 20 percent of its state budget allocation by the end of the first half, minister Basuki Hadimuljono had previously said. Basuki attributed the ministry'€™s sluggish spending to administrative delays caused by the merging of the previously separate public works and public housing ministries, but said he expected full-year disbursement to reach 94 percent of the ministry'€™s budget allocation.