Infrastructure projects accelerated, steel and construction machinery imports boosted
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Investor Daily - Proyek infrastruktur dikebut, impor baja dan mesin konstruksi terkerek
28 June 2023
By: Tri Murti
Jakarta - The acceleration of the completion of infrastructure projects increased steel import from January to May 2023 to US$4.9 billion or by 6.3% from the previous year. In May, steel import specifically increased by 33.4% from April 2023. The import of construction machineries that are in the capital goods category also increased from January to May 2023 to US$15.6 billion or by 17% from the previous year.
“Regarding the role of domestic products in infrastructure construction, the multiple impacts expected are less than optimum,” Centre of Economic and Law Studies (CELIOS) Director Bhima Yudhistira Adhinegara said to Investor Daily on Monday (26/6/2023).
Meanwhile, the government through the Public Works and Housing (PUPR) Ministry is continuously boosting domestic product purchases by using the state budget (APBN) to boost national economic growth. With the target to spend 95% of the budget ceiling for goods and services on local products, domestic industries and micro, small, and medium enterprises (MSMEs) are expected to survive and develop.
“In 2023, the PUPR Ministry is committed to spending 95% of their budget or Rp135.6 trillion on domestic products. Meanwhile, the budget ceiling for 2023 is Rp142.7 trillion. Imports are being minimised. Currently, the realisation is only 0.21% of the budget or Rp296 billion,” Construction Development Director General Rachman Arief Dienaputra said in his official statement in Jakarta recently.
Last year, according to the e-monitoring data, local product utilisation in the PUPR Ministry’s infrastructure expenditure reached 93.4% or Rp112 trillion from the plan to spend Rp120 trillion. The PUPR Ministry was also acknowledged as the ministry that uses the most domestic products at the Increase in the Use of Domestic Products (P3DN) event in Jakarta that was held recently.
In line with the effort to boost the use of local products, at the National Movement Reactivation: Proudly Made in Indonesia and Proud to Travel in Indonesia event that was held at Jogja Expo Centre in Yogyakarta recently, PUPR Minister Basuki Hadimuljono mentioned the obligation to use domestic products.
The national movements, Proudly Made in Indonesia and Proud to Travel in Indonesia, are some of the movements that are part of the 2023 Road to Indonesian Construction programme that is expected to advance creative economy and tourism by prioritising small-medium businesses and cooperatives (UMKKs), especially in the procurement of goods and services as well as labour-intensive activities.
“The PUPR Minister ordered and obligated the use of domestic products, which include UMKK products that meet the specifications, in the activities performed by third parties or service providers,” Rachman Arief said.
Furthermore, the commitment of the PUPR Ministry to using domestic products is a follow up to President Joko Widodo’s direction during his visit to the Indonesian natural asphalt (asbuton) industry on Buton Island in September 2022 in relation to the use of asbuton.
“The PUPR Ministry is committed to purchasing all pure asbuton products. The Minister said that he would replace all of his subordinates and institutions who do not want to use asbuton,” Rachman Arief said.
During the National Movement Reactivation: Proudly Made in Indonesia and Proud to Travel in Indonesia event in 2023, asbuton provision contracts were also signed for 10 national road construction packages for 6,839 tonnes of asbuton for 63.7 kilometres of roads. The national movements of Proudly Made in Indonesia and Proud to Travel in Indonesia are some of the movements that are part of the 2023 Road to Indonesian Construction programme that will be implemented in November 2023 themed Digital Transformation Acceleration in the Construction Sector to Realise Sustainable Infrastructure Construction.
Local products in IKN
On the other hand, Nusantara Capital City (IKN) Infrastructure Construction Implementation Task Force Chairperson of the PUPR Ministry Danis Hidayat Sumadilaga ensures that construction projects in IKN will prioritise the use of domestic products.
“In IKN, there is an obligation to use domestic products. It has been stated in the tender process, so it will automatically be included in the construction contract,” Danis said recently.
Danis said that IKN construction project players must use domestic products with components that can be produced domestically.
“In the contract, there are options of domestically produced materials or goods. So, domestic products must be used and included in the contract,” he stated.
At every IKN project pre-construction meeting, the IKN Task Force always emphasised the use of domestic products. It is in line with the direction of President Joko Widodo to prioritise domestic production.
“Our obligation is related to domestic production or TKDN (local content rate). [Domestic products] must be included in the contract,” Danis said.
