Ballooning costs are leading to delays in public construction projects, but government officials are hesitant to renegotiate budgets for fear of being accused of corruption, the Indonesian Chamber of Commerce and Industry (Kadin) has found.
In a bid to alleviate fears, Kadin representatives will meet with the Corruption Eradication Commission (KPK) early next month to explain the situation, caused by escalating costs of raw materials.
"We have noticed the unwillingness of government officials to renegotiate the budget for government construction projects with the developers. It may be partly because of their wariness about being accused of graft," Kadin chairman MS Hidayat said.
But renegotiations are clearly needed because the prices of steel and other materials have increased significantly, he said.
The lobby group hopes to be able to explain the situation on the ground to the KPK to relieve the tense atmosphere.
"We have invited the KPK to meet our businesspeople. We understand that on one hand we have to support the KPK in its anti-graft efforts but on the other hand we want to have a more conducive business climate," he said.
The two organizations have informally agreed to meet on August 5. Hidayat said the businesses would also raise other commercial matters related to law enforcement, although there were no expectations about what follow-up actions the KPK would take.
The swelling costs of materials for construction projects have led to disputes between the government and businesses over which party should bear the costs or how the burden should be shared.
It has been suggested that government and businesses pay half each, but no agreement has been reached.
Bintang Perbowo, chief director of PT Wijaya Karya Tbk, was quoted by Kompas on July 9 as saying some contractors had chosen to put their projects on hold and wait for revised forecasts because they did not want to bear the additional production costs.
Kadin's position is that no one party can bear the cost alone. The group has been pressing for open discussion between the government and businesses, under the supervision of the KPK and the Supreme Audit Agency, to speed up renegotiations.
The government has already had difficulties funding existing infrastructure construction plans. Around 10 percent of this year's projects, mainly transportation projects, have reportedly been postponed. Three highway projects almost certain to be delayed are the Solo-Kertosono and Cileunyi-Dawuan routes in Java and the Medan-Kualanamu route in Sumatra.
Public Works Minister Djoko Kirmanto has confirmed the delays in infrastructure projects are likely to continue into next year.
He said the Public Works Ministry would need Rp 58.7 trillion (US$6.38 billion) next year to fill the deficit in this year's budget, to compensate for escalating project costs and to recommence work on the delayed projects.
Only Rp 35.6 trillion is expected to be earmarked for the ministry, leading to deficits of Rp 23.1 trillion.(mri)
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