Local contractors face bleak future

JAKARTA (JP): Contractors in the country face a gloomy outlook, as the lack of growth in the property sector could leave many businesses idle for at least the next two years, the Indonesian Association of Contractors has said.

The association's chairman, Fatur Rochman, said in a House of Representatives hearing yesterday that the delay of projects due to the government's cutback program and a lack of funding would cause a 30 percent drop in construction next year.

"This year we've had to endure substantial losses due to the currency crisis, next year we'll suffer unemployment," Fatur told House Commission IV for public works.

This would trigger the fall of many contractors, especially small and medium-scale ones, as many of them would not be able to maintain their businesses any more, he said.

Small and medium contractors only made marginal profits of between 0.5 percent and 1 percent, he said.

The currency crisis, which has caused the rupiah to drop by over 35 percent against the U.S. dollar since July, has cost many contractors their savings from profits they have saved over the years.

"The money they accumulate in eight to 10 years is gone within three months," Fatur said.

He said many developers of private and government-related projects had delayed paying their contractors because of project delays.

At the same time, capital costs and material prices had shot up, while materials must be paid in cash, he said.

The tight money policy imposed by the government in August had caused interest rates to soar and further burdened contractors, he said.

Contractors would not be able to keep their businesses if the condition persists, he said. Many had begun to let go of their workers.

He said about two million workers in construction-related sectors had lost their jobs.

Fatur said the cost of contractor services must be adjusted. Another alternative was to optimize jobs on projects with limited funding, meaning contractors could be paid the same amount but with less work.

He also appealed to the government to allow contractors to delay the payment of their income taxes until next year.

The head of the Indonesian Builders Association (Gapensi), Agus Kartasasmita, predicted yesterday that next year's growth in the construction sector would be lower than the annual average of 12 percent.

The head of the Indonesian Association of Consultants, Poedji Rahardjo, said yesterday the crisis had raised the project's operation costs for consultancy companies in the country.

Poedji said many consultancy companies were also idle as a result of the project delays. The study of projects was behind because of late payments, he said.

He called for an adjustment to consultancy rates in accordance with the fluctuation of prices.

He said the companies must also be able to charge interest for payments that have been delayed. (das)