Cement price increase gets mixed reactions
Cement price increase gets mixed reactions
JAKARTA (JP): The government's recent decision to increase the local reference price of cement by 40 percent was received with mixed reactions by government officials and business people.
Minister of Public Works Radinal Moochtar said yesterday that the increase would not affect the development of the government's public works projects.
"The cement price increase will not affect any of our on-going projects because the contracts were signed long before the increase," Radinal told journalists after meeting with visiting South Korean Minister of Construction and Transportation Myung Oh at his office yesterday.
Radinal said the price increase, effective last Friday, was made just in time, when the new fiscal year of 1995-96 started. Therefore, contractors will be able to use the new prices as their reference in their bidding for the government's new projects in 1995-96.
"What I'm worrying about is that, even though the reference price has been increased, cement producers still cannot not provide enough supplies on the market," Radinal said.
Last year, the country's nine cement producing companies, with a joint annual production capacity of 22.9 million tons, could not yet satisfy the growing domestic demand, which significantly surpassed the projected demand of 20.9 million tons.
The government was then forced to import about 1.4 million tons of cement and clinker -- a substance used in the production of cement -- to meet the increasing demand. However, the imports did not force the price to decline.
Data at the Ministry of Trade show that the average cement prices at market places in January were recorded at Rp 9,026 (US$4.08), well above the government-set prices of Rp 6,555.
Investment
Maryadi Darmokumoro, president of the state-run toll road operator PT Jasa Marga, said the official increase of cement prices will force his company to reevaluate the investment value of toll roads.
"The increase of cement prices will, of course, result in the escalation of costs for the construction of toll roads. Thus, it is necessary to adjust the value of investments in toll roads," Maryadi was quoted by Antara as saying.
He said that with previous official cement prices, the planned investments for toll road construction were estimated to average Rp 10 billion per kilometer. However, the exact investment value would differ from one toll road to another, depending on the amount of cement to be used.
The Indonesian Builders Association (Gapensi) yesterday voiced its concern over the new reference prices, saying that it can seriously affect the businesses of small and medium-scale contractors.
Gapensi's Chairman Agus Kartasasmita called on the government to revise the values of its projects which have been awarded to Gapensi members, saying that the official cement price increase will result in the escalation of costs in the construction.
"We have no problems with private-owned projects because we can renegotiate with their sponsors," Agus said.
He said the cement price increase will benefit only cement producers, not the consumers, especially those of Gapensi members.
He said that 85 percent of Gapensi's 37,000 members are small and medium-scale contractors.
Atyadi Mochtar, chairman of Gapensi's Semarang chapter, even called on the government to revise the new reference prices, saying that the 40 percent increase is too high.
"The ideal increase should be 10 percent, not 40 percent," Atyadi said.
Meanwhile, Faisal Basri, the director of the Management and Economic Development Institute of the University of Indonesia, said that the increase of cement prices will only create an oligopolistic market, where producers can set cement prices at whim.
He said the government-set reference price can not yet guarantee that cement producers will not sell their product above the set price. "A sanction should be given to those who violate the set price."
Retailers in a number of cities yesterday sold cement above the new reference price. In Semarang, for instance, cement was sold at between Rp 11,000 and Rp 11,5000 per 40-kilogram sack, well above the new reference price of Rp 8,290 for the city. (rid)