Construction industry players complained about rising raw material prices triggered by the weakening of the rupiah against the dollar. They feel beaten three times as there was an increase in the UMP (Provincial Minimum Wage), subsidized fuel, and recently the weakening of the rupiah against the U.S. dollar. Given these problems, it is feared that layoffs and termination of employment contract will happen because of the rising prices of raw materials. The Indonesian construction sector has about 180,000 enterprises, 6,652 experts and 6 million skilled workers. The increase in prices of construction materials will also affect the competitiveness of the industrial sector in Indonesia in facing the free trade in 2015.
Therefore, the National Contractors Association of Indonesia (Gapensi) requested the Ministry of Industry to coordinate with manufacturing industry players to maintain stability of prices of construction materials Andi Rukman N. Karumpa, Secretary General of Gapensi, in Jakarta, Wednesday (March 5) said that construction industry players were facing major challenge in recent years, ranging from rising interest rates, scarcity of raw materials, raw material price volatility, and the swelling cost of project. According to him, the most pressing issue that must be implemented is the supply chain of availability of materials and price stability.
The reason is that what happened today is the price of construction materials such as cement, ceramic, iron & steel, and asphalt at the beginning of the year is always different from the price at the end of the year. Therefore, his party hoped that the Ministry of Industry will follow up this matter to the industry concerned directly. According to Ando, price instability and unavailability of raw materials could result in existing projects to become stalled. He predicted that the increase in raw materials price could cause prices of construction materials to rise within a range of 5%-20%. According to him, the increase is quite high. The peak of the price increase usually occurs in September to December.
Due to price instability, Andi said, often the project did not achieve the perfect-quality results. On the other hand, his party understood that the reason for the price increase is due to the conditions that afflict the industry today, ranging from wage increase to industrial electricity rate increase. In addition to price volatility, availability of raw materials in some areas is also a problem. He gave an example of Java which often runs out of asphalt.
Andi asked the government to maintain availability of construction materials throughout the year. This is because every year there is always an increase in prices of construction materials, especially near the end of the year. He said that his party will discuss the availability of construction materials up to the regions so that the prices will be affordable.
He gave an example of price of cement which is normally at Rp 45,000 per sack at the time of the signing of tender for the construction of a project at the beginning of the year, but the price could rice sharply to Rp250,000 per sack at the end of the year. According to him, the price increase usually occurs from September to October each year. The price increase is triggered by increase of demand, while at the end of the year, development projects must be completed, so many traders raise prices.
He saw that the rise of raw materials prices could also potentially trigger fraud in budget provision by reducing the quality of the raw materials whose prices are cheaper. The point, he added, is that his party asked the government to maintain stability of unit prices (of raw material) from the beginning until completion of the contract. “The point is there should be assertiveness of the government”, he said. (E)
Business New - March 7, 2014