Local contractors face bleak future

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)