Construction Costs Surge Due to Geopolitical Tensions, Gapensi Urges Government to Adjust Prices

The Indonesian National Construction Contractors Association (Gapensi) assesses that the global situation, which has impacted the rise in energy prices, particularly industrial fuel, has triggered a significant increase in construction costs over the past few months.

Gapensi General Chairman Andi Rukman Nurdin Karumpa expressed concern over the pressures facing the national construction services sector, due to rising operational costs and dynamics in government project procurement policies.

“In the period from February to April 2026, we see that construction costs could rise by 3% to 8%, and have the potential to increase even higher if this situation continues,” Andi said in his statement on Friday, 10 April 2026.

He stated that the increase in industrial diesel prices, which is currently in the range of Rp 21,000–Rp 23,000 per litre from the previous Rp 18,000–Rp 20,000 per litre, is also driving up the prices of materials such as asphalt, cement, and steel.

In response to the situation, Gapensi has urged the government to immediately carry out price adjustments (escalations) for projects that have not yet been contracted.

“This is considering that the reference prices used are still based on the previous year’s conditions,” he said.

In agreement, Gapensi General Secretary La Ode Safiul Akbar emphasised that without price adjustments, contractors could face significant losses.

“We request that projects that have not been contracted be given room for price adjustments so that business actors do not bear costs that are not in line with the current real conditions,” said La Ode.

In addition, he also stressed the importance of equalising work opportunities for national construction business actors, particularly association members.

Some of the main points conveyed by Gapensi include the following:

• Construction projects should be tendered openly, not through large-scale self-managed schemes

• Large-value work packages are expected to involve national private entities, not just SOEs

• Self-managed practices are assessed as potentially hindering contractor participation and causing payment uncertainties

“Gapensi reminds that the dominance of certain schemes can impact the decline in the number of construction business actors, as reflected in the national decline in membership numbers in recent years,” he said.