Indonesia: Kalla calls for more local content in govt projects

  • Vice President Jusuf Kalla has called on officials in the government and state-owned enterprises (SOEs) to increase the use of local content in their projects to help reduce imports of raw materials.
  • He urged ministers to review the usage of local content in projects financed by the state budget and SOEs. “The list of projects is being prepared,” Kalla said in Jakarta on 4 Sep 18.
  • Kalla stressed the need to review projects handled by the Public Works and Housing Ministry, the Transportation Ministry, state-owned electricity company PLN and state-owned oil and gas holding company Pertamina.
  • Public Works and Housing Minister Basuki Hadimuljono said the amount of local content in his ministry had reached 86.6%, with 96.6% for water resource projects, 94.4% for sanitation and residential projects, 78.4% for road projects and 76.6% for housing projects.
  • He explained that domestic producers often failed to fully supply the ministry with materials. In one case, he said, the ministry needed 14.41 million tons of steel, but local producers could only supply 7 million tons, and it needed 8.26 units of heavy equipment, but only 4.48 million units were supplied.
  • Meanwhile, local content in the transportation sector reached 60%, Transportation Minister Budi Karya Sumadi said. (bbn)
  • The power ministry has also decided to postpone its plan to construct 15,200 megawatt (MW) electricity projects due to the rupiah weakening against the US dollar and the government’s policy to reduce imports.
  • Energy and Mineral Resources Minister Ignasius Jonan said electricity was one of the strategic government projects that would be rescheduled, while the government was now encouraging contractors to increase local content.
  • He added that the import limitation would also apply to the mining, oil and gas and renewable energy sectors. “The objective is to control imports. We will focus on using domestic products,” said Jonan.
  • The local content of electricity projects ranged between 20% – 40% and therefore the majority of the electricity components should be imported, he said, adding that to reduce the import burden, the government decided to slow down the 35,000 MW electricity program.
  • Jonan said the postponement would save between USD8bn-USD10bn in imports. “Initially, the projects were targeted to be completed in 2019. With this policy, the projects will be postponed to between 2021 and 2026,” he added, reiterating that the projects were not cancelled.
  • He claimed the electrification program was not affected by the postponement as currently it stood at 97.3% and by end-2018, it would reach 97.5% and 99% in 2019.

External Link: http://www.thejakartapost.com/news/2018/09/05/vp-calls-for-more-local-content-in-government-projects.html

External Link: http://www.thejakartapost.com/news/2018/09/05/govt-postpones-15200-mw-power-projects.html

5-Sep-2018


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