Wed, 14 Oct 2009
From: The Jakarta Globe
By Teguh Prasetyo & Muhamad Al Azhari
Abuilding industry association said soaring cement prices have been seriously hampering the progress of construction projects throughout the country.

“The failure [by the government] to control cement prices is deplorable, as it affects small, mid-size and large-scale contractors,” said Ahmad Hanafiah, the secretary general of the Indonesian Builders Association (Gapensi).

Given the importance of cement as a raw material, he said, current price volatility means that contractors could be forced to put back the completion dates of projects and renegotiate project costs with developers.

Ahmad’s comments came after the Business Competition Supervisory Commission (KPPU) said on Tuesday that it would soon announce the findings of an initial probe into possible unfair practices in the cement industry.

According to construction industry figures, cement accounts for as much as 30 percent of total construction costs and 50 percent of raw-material costs.

Domestic cement prices have historically been significantly higher than in Malaysia, China and the United States.

In Java, the price of a 50-kilogram sack of cement currently hovers around Rp 60,000 ($6.36) per sack, up from Rp 40,000 to Rp 50,000 earlier this year.

Prices are higher outside of Java, with a sack of cement in Sumatra costing up to Rp 80,000 and up to an extraordinary Rp 1.8 million in Papua.

Arief Rahardjo, an associate director at international property firm Cushman & Wakefield, said that the surge in cement prices had left both contractors and developers in a quandary.

“Despite high cement prices and project costs, contractors and developers can’t just increase their prices because they must also consider the purchasing power of consumers,” he said.

The KPPU’s communications director, Ahmad Junaidi, said on Tuesday that the results of the watchdog’s probe into possible unfair practices in the cement industry would be made public at the end of November.

“After that, we will decide whether we can move ahead with a full investigation,” he said. “Three producers - Heidelberger, Semen Gresik and Holcim - control over 90 percent of the domestic market and are in a position to fix cement prices,” he said, adding that this was possible due to the lack of government price controls in the industry.

The antitrust regulator also suggested that the three companies could have conspired to divide up the cement market between themselves.

Sunardi Prionomurti, the corporate cecretary of the country’s largest cement producer, PT Semen Gresik, told the Jakarta Globe that the claims were not true.

“If cement is more expensive in some areas, that’s because Indonesia’s infrastructure is not as good as in neighboring countries, like Malaysia or Singapore,” he said. “If you want to transport cement, our poor infrastructure results in higher costs, which is why prices are higher.”



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