Contractor Association Says Middle East Conflict Delays Completion of Government Priority Projects

JAKARTA - The Indonesian Contractors Association (AKI) revealed that the impact of geopolitical turmoil in the Middle East on the completion of priority projects currently being worked on by the government.

Deputy Chairman of the AKI Member Inter-Member Cooperation, Ari Asmoko, explained that the geopolitical turmoil in the Middle East has a significant impact on the construction business in the country. The impact is the late completion of a number of priority projects.

The reason is, from February 28 to July 1, 2026, it is known that the price of oil has increased by 37.41 percent accompanied by an increase in the price of industrial solar by 41.52 percent, the price of concrete iron 27.78 percent and the price of asphalt 23.85 percent.

AKI assessed that this condition encouraged all components of the project implementation costs to rise simultaneously, ranging from energy costs, operational heavy equipment logistics, material transportation to construction material prices.

"Everyone knows that this geopolitical turmoil is quite significant and has an impact on business in the construction services with the dollar (US) getting higher, then fuel, especially that it must erode and quickly. And on the other hand, this must hinder the development of ongoing projects, that's for sure," said Ari when met by reporters at the Coffee Morning titled "Formulating the Value of Escalation of Construction Prices in the AKI Version" in Jakarta, Tuesday, August 4.

Ari ensured that almost all projects currently being worked on are affected by conflicts in the Middle East, one of which is the construction of the People's School (SR).

Based on AKI data, the estimated increase in construction projects reached 20 to 35 percent for building projects, 15 to 30 percent for infrastructure projects, and 10 to 15 percent for EPC and overseas projects.

The increase in costs is considered a challenge in itself because most of the work contracts have been signed with the assumption of the prevailing price at the beginning of the year, while changes in economic conditions occur in the middle of the project implementation.

"All (affected projects), everything.

Including, the people's school is affected. And the people's school is on average, the tender is late 2025," he said.

"This is geopolitics, right, the war broke out in February and immediately skyrocketed in March, April, May, it was like that. Then, especially (the increase) in fuel, yes, it is not under control. That's the impact, sih," he continued.

According to Ari, his party has applied to the government to adjust the construction contract price due to the surge in industrial fuel.

However, until now, the letter of request has not received a response.

"All contractors are again applying for compensation, but there is no agreement yet," he said.

Ari said, his party would collaborate with all AKI members to encourage the government to adjust the price of construction contracts due to the surge in industrial fuel.

"We want to collaborate with friends first, this must be together. We are trying, lah, so that there is that policy," he added.