Bosowa Cuts 40% Capital Expenditure in 2015 Citing Weak Government Spending
Jakarta. Bosowa Group, a Makassar-based conglomerate with interests ranging from cement production to car distribution, cut capital spending by 40 percent this year as slowing infrastructure development has cut demand for the group's cement, Bosowa's chief executive Erwin Aksa said.
Investment reduction by one of the country's major cement producers reflects a ripple effect of slack government spending and further undermining the country's growth.
Bosowa would reduce its 2015 investment to $300 million from $500 million planned earlier this year, Erwin said, after it became clearer that country's economy growth might barely accelerate from its 4.7 percent pace in the first quarter.
The government has been slacking in realizing its infrastructure spending so far this year, with only 8 percent of its Rp 290 trillion ($21 billion) infrastructure budget disbursed amid red tape barriers and bureaucratic bickering. This dragged the economy which was already suffering from lower consumer spending, weakened commodity prices and slowing investment.
President Joko Widodo vowed the spending would radically accelerate in the second quarter after government cleared all paper work for its projects, but Erwin remains unconvinced.
"We still wait and see, because the economy are still like this. We have to implement efficiency measures," he said.
Erwin, who is also a deputy chairman at the Indonesia Employers Association (Apindo), said government officials were taking more time in tendering the project, due to uncertainty in law enforcement.
He said actions in the old administrations are heavily scrutinized now by law enforcers, not necessarily based on correct reasoning, and that creates distress among the officials. "So, it's important to uphold the law certainty," Erwin said.
At Bosowa, Erwin said the company are now focusing on completing four cement packing plants in eastern Indonesia to anticipate rapid construction growth in the region in the future.
The plants costs Rp 400 billion in total and are located in Pontianak in West Kalimantan, Samarinda in East Kalimantan, North Sulawesi and Kupang in East Nusa Tenggara.
Earlier this year, Bosowa said it targets to increase cement production capacity to 12 million metric tons over the next three years from just 3 million tons now. The group is building cement plants in Maros, South Sulawesi; Ciwandan, Banten; Banyuwangi, East Java; Rembang, Central Java; and Sorong, West Papua.
Indonesia Cement Association (ASI) estimates cement sales to grow 5.5 percent this year to 63 million metric tons this year. It was down from ASI's perediction early this year that expect cement sales to reach 66 million metric tons.
Cement sales fell 2.8 percent to 23.13 million metric tons in the January to May period from 23.78 million tons in the same five-month period in 2014.
Investor Daily
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