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
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