INDONESIAN CONTRACTORS STILL HESITATE TO ENTER MIDEAST

Jakarta, Apr 17 (ANTARA) - Indonesian contractors still hesitated to enter the Middle East to seek projects because of their fear that to minimize payment risks, local investors may even act as sub-contractors.

"They admitted they had no experience in undertaking construction projects in the Middle East, so no wonder that they became very cautious," head of the Construction and Human Resource Development Agency Sumaryanto Widayanti said here on Thursday.

It was true that offers for construction projects from United Arab Emirates, Kuwait, Saudi Arabia, Qatar, Iran, Oman and Bahrain, are very attractive, as the project costs may reach over US$1000 billion, which is the equivalent of Rp10,000 trillion, he said.

These did not include the rehabilitation and reconstruction projects in Iraq which will cost US$150 billion, and US$7.7 billion in Palestine, which will be provided by the the UN and donor countries.

In Africa, the value of construction projects in Algeria worth US$35 billion, in Jordan US$80 billion, and in Lybia US$200 billion, he said.
Another worry was for reluctance of national banks in Indonesia to finance the projects in other countries.

"A Bank Indonesia regulation prohibits to provide credits for projects in other countries, as it is often considered as a capital flight," he said.

This condition was also exacerbated by the reluctance of insurance companies to cover projects in other countries. If any, the premium would be very high, and prices would therefore lose competitiveness.
"Because of these constraints, Indonesian contractors preferred to act as sub-contractors in other companies handling projects in the Middle East," he said.

Sumaryanto suggested that the government increased the powers of the Indonesian export bank (BEI) in financing projects in other countries at least in the issuance of letters of credit (LC).

According to him, at least there were three infrastructure to finance the construction market in other countries, such as capital support, banking guaranty and tax agreement on the prevention of double taxation.