GAPENSI Optimistic To Increase Construction Services Sector Contribution

JAKARTA - The BPP Joint Indonesian National Construction Implementation (GAPENSI) is committed to national development. BPP General Chairperson GAPENSI Andi Rukman Karumpa hopes to sit together with the government to increase the contribution of the construction service sector.

"With a constructive dialogue between the government and construction service actors, the best solution can be found to overcome this challenge so that the construction service sector can still contribute optimally to national development," Andi said in a written statement, Wednesday, June 18.

Andi conveyed that the construction services sector is currently experiencing a number of challenges. First, the weakening of the rupiah exchange rate which is also followed by the strengthening of the US dollar significantly affects the cost of imported raw materials used in the construction sector.

"When the value of the rupiah weakens, the price of imported raw materials such as iron, steel, cement, and heavy equipment imported will increase," said Andi.

Andi said that this increase in costs had a direct impact on increasing overall production costs. As a result, the profit margin becomes smaller and project prices can increase if there is no budget adjustment.

"We from GAPENSI are very considering proposing an escalation of the project value to the government," Andi continued.

According to Andi, the letter from the Ministry of Finance Number S-940/MK/2022 regarding the proposed Minister of Finance Regulation (PMK) regarding price adjustments (escalation) on construction work contracts for the 2022 fiscal year due to the increase in fuel and asphalt prices, at the Ministry of Public Works and Public Housing (PUPR) has not had a positive impact on construction service actors. Andi assessed that the unexpected increase in raw material costs needs to be accommodated so that projects can run according to plan without lowering quality.

"We hope that the government can understand this situation and provide support through budget adjustments or policies that ease the burden on contractors," Andi continued.

In addition to the increase in raw material costs, Andi said, the weakening of the rupiah exchange rate also had several other impacts felt by construction service entrepreneurs, ranging from limited liquidity, project delays, credit risk, and inflation.

Andi explained that the increase in import costs could affect the company's cash flow, especially for contractors who depend on large amounts of imported raw materials. According to Andi, projects that are already running can experience delays because it is necessary to renegotiate the budget or find additional sources of funds.

In terms of credit risk, Andi continued, increasing costs can increase credit risk for companies that already have a commitment to pay third parties. Meanwhile, in terms of inflation, rising raw material prices and heavy equipment can contribute to inflation, which will also affect daily operating costs.

"The weakening of the rupiah could have an impact on increasing construction costs which are currently underway, we have met in 2022 and we have sent a letter to the Minister of Finance," said Andi.

Andi said the government had to prepare a scheme to reduce the weakening of the rupiah against the construction sector, one of which was the eskalsk or an increase in the contract value of a project which was then submitted to the Ministry of Finance to cover the swelling of construction costs due to the weakening of the rupiah against the US dollar.