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Jakarta Post

Construction work faces delays on weak rupiah

  • Nurfika Osman

    The Jakarta Post

Jakarta   /   Thu, September 26, 2013   /  01:10 pm

Construction projects across the country, particularly road improvement work, will face delays as the prices of imported materials skyrocket due to the weakening of the rupiah against the US dollar, an official says.

Tri Widjajanto, chairman of the National Construction Service and Development Board (LPJKN), said that many projects, especially road improvements, were delayed as the prices of asphalt shot up.

'€œWe have seen many asphalt pavement projects delayed because the price of this raw material has risen by at least 21 percent. This burdens the industry players because we still import more than half of asphalt demand at the moment,'€ Tri said on Wednesday.

Tri, who is also president director of the newly established state owned toll road operator New Hutama Karya, said the demand for asphalt in the country stood at 1.6 million tons annually for the past two years, with 900,000 tons supplied from other countries.

He said almost 60 percent of asphalt pavement work that should be completed today was hampered due to the price hike.

'€œThe construction business is facing a slow down because businesses aren'€™t able to work and accelerate their projects. We need the government to take concrete action immediately to help save the condition, otherwise we will suffer a lot of losses,'€ he said.

Aside from asphalt, other infrastructure materials like concrete and ready-mix concrete also saw price hikes of around 20 percent. The country still needs to import the raw material due to a lack of supply from the domestic producer.

According to him, there was a possibility that the nation'€™s construction market would see a slow down by at least 10 percent by the end of this year to Rp 360 trillion (US$30.96 billion).

Tri also said the weakening rupiah was not the only factor in slowing down the industry because the players had already felt the pinch from the previous regional minimum wage (UMR) increase and the fuel price hike.

Throughout 2013, the UMR across Indonesia rose by an average of 18.3 percent compared to the year before. The capital city tops the wage increase with 44 percent.

According to the Indonesian National Contractor Association (Gapeknas) chairman Manahara Siahaan, the combination of UMR, fuel and weak rupiah rate has forced some of its members, particularly smaller companies that work on single-year projects, to lay off employees.

'€œWe do not want to do this but we do not have other options. We want the government to intervene to help save the industry,'€ Manahara said, adding there were around 6.6 million construction workers in the nation nowadays.

Separately, Public Works Ministry construction department head Hediyanto Hussaini said the government was currently preparing some solutions to prevent more pressure on the industry.

He said some of the moves included the extension of the time span of a project and some project suspensions.

The government expects to make the decision in near future.

'€œWe hope the solutions will help reduce the impact of the weak rupiah on the industry. The players are allowed to halt projects that they are working on while waiting for our decision,'€ he said.

He admitted some projects that should enter the tender process in the fourth quarter of this year were delayed because parties involved in the process reached a good deal.

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