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					M               BAM Section

   INTERNATIONAL MARKET

Indonesia’s Construction Market Opportunities

A
         delegation from Indonesian
        Contractors Association (ICA)
        comprising Ir. Robert Mulyono
Santoso (Chairman), Ir. Muhadjir Manan
(Vice Chairman), and Ir. Sudarto (Secretary-
General) paid a courtesy visit to MBAM on
August 22, 2005. The ICA delegation was
received by MBAM Vice Presidents Dato’
Low Keng Kok and Aziz Bahaman,
Honorary Life President Siah Kwee Mow,
and Honorary Advisor/Past President
Datuk Lai Foot Kong.

ICA was established in 1973 and comprises
123 contractors. ICA plays an important
role as a certification body under the         Table 1
Independent National Construction
Services Development Board (LPJK), an            Indicator                                2001        2002            2003          2004      2005 (f)
equivalent of CIDB, established by Law No.
18 year 1999 of Indonesia.                       Economic Growth (%)                       3.4         3.7             4.0           5.1           5.4
                                                 Inflation (%)                            12.55       10.03           9.00          7.50           7.50
Economic Prospects for Year 2001 to 2005         Rupiah Rate (USD1)                      10,241       9,311           9,000         9,400      9,400
is as shown in Table 1.

Growth in Construction Industry on
Property Sector at current price is as shown
in Chart 1.                                              Growth in Construction Industry on Property Sector at current
                                                                                    price
Total Construction Market based on
Current Price for Year 2002 – 2004 is as                         60
shown in Table 2.
                                                                 50

The sources of fund for the                                      40
abovementioned comprises the National
Government Budget (20%); Regional                Trillion Rp 30
Government Budget (6%); State Own
                                                                 20
National Company and State Own
Regional Company Budget (18%); and                               10
Private Sector Budget (56%).
                                                                     0
The value and growth rate of GDP for Year                                                 2000        2001            2002          2003            2004
2003 and 2004 by industrial origin is as                                                                       Year
shown in Table 3.
                                               Chart 1
The Construction Industry Outlook in the
Medium Term is shown in Table 4.
                                               Table 2
ICA informed that the Government of
Indonesia is aware of the fact that             Type of Project                                     2002                2003                2004
infrastructure development shall be             Construction Project                              USD9,752 b          USD11,848 b      USD14,218 b
emphasized in order to develop
Indonesia’s economy. One of the initiatives     Engineering Consultant Project                    USD2,438 b          USD2,963 b        USD3,554 b
adopted was deregulation on Road Sector


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                                                             3 r d   Q u a r t e r   2 0 0 5
M               BAM Section




of Law No. 38, Year 2004 resulting in          Table 3
separation of the regulatory body from          Industrial Origin                                         At Constant Price 2000     Growth Rate
the operational unit.                                                                                        (Trillion Rupiah)
                                                                                                           2003            2004         2004
In the past, Jasa Marga (a state own
                                                 Agriculture                                                243.1          252.9           4.06
company) was the only institution having
                                                 Mining                                                     168.4          160.7           -4.10
the right to operate toll roads in Indonesia
                                                 Manufacturing                                              441.8          469.1           6.19
in which every private sector should enter       Electricity, gas & water                                   10.4            11.1            5.91
into an authorization agreement with Jasa        Construction                                               90.1            97.5           8.17
Marga. With the new law as mentioned             Trade                                                      256.3          271.2           5.80
above, that regulation will no longer be         Transport and Communications                               85.0            95.8           12.70
required. Hence, prospects for                   Financial, Ownership & Business Services                   140.1          150.9           7.72
infrastructure (toll roads, harbours,            Services                                                   144.4          151.4           4.91
airports etc) are very promising and ICA         GDP                                                       1579.6          160.6           5.13
is extending invitations to foreign              GDP without Gas                                           1423.9          1551.8          6.17
investors to establish their enterprises in    Source: Berita Resmi Statistik No: 12/VIII/16 Februari 2006
Indonesia.       Such       infrastructure
development may be contributed either          Table 4
by domestic investment (Government
fund or corporate bond and bank loan) or        Constant 2003
foreign investment placement (FIP, PMA).        Real Prices                     2004          2005     2006       2007     2008     2009       2010
                                                Rp. Trillion
Opportunity arises for 1000 km of
Prioritized Toll Road Construction after        Housing & Other
2004-2005 as follows:                           Buildings                       26.832        28.354   29.961     31.660   33.455   35.351     37.356


East Java: 228.3 km, Rp. 29.98 trillion         Roads, Bridges,
G SS Waru – Tg Perak Stage 1 - 13.5 km
                                                Railways, Airports,
G Waru (Aloha) – Wonokromo –
                                                Bus Terminals                   35.164        37.158   39.264     41.491   43.843   46.329     48.955
     Tg Perak - 18.4 km
G Mojokerto – Surabaya - 37.0 km
                                                Other Construction              24.656        26.054   27.531     29.092   30.741   32.484     34.326
G Kertosono – Mojokerto - 38.0 km

G Gempol – Pandaan - 14.0 km
                                                Total Construction
G Pandaan – Malang - 30.0 km
                                                Works for Completion 86.653                   91.565   96.757     102.242 108.039   114.164 120.637
G Gempol – Pasuruan - 32.0 km

G Pasuruan – Probolinggo - 40.0 km
                                               Toll Roads proposed by Local Government include:
G Jembatan – Suramadu - 5.4 km

                                                Toll Roads/Bridge Segments                                      Length (km)
Middle Java: 150 km, Rp. 6.88 trillion
                                                Medan – Binjai                                                     20.5
G Semarang – Bawen - 24.0 km
                                                Pekanbaru – Dumai                                                 186.7
G Bawen – Solo - 56.0 km
                                                Palembang – Indralaya                                              28.5
G Semarang – Demak - 25.0 km
                                                Cikarang – Tanjungpriok                                            28.3
G Yogya – Solo - 45.0 km
                                                Depok – Cimanggis                                                  15.0
                                                Bogor Ring Road                                                    4.0
West Java: 320.2 km, Rp. 21.43 trillion
                                                Cileunyi – Sumedang – Dawuan                                       94.7
G JORR Section W1 - 9.8 km
                                                Total                                                             377.7
G JORR Section E2, E3, N - 13.96 km

G JORR Section W2 North - 7.2 km

G Bekasi – Cawang – Kg Melayu - 21.0 km        Besides toll roads infrastructure, the                      The Government of Indonesia will start
G Cikampek – Padalarang Stage 2 - 40.0 km      Government of Indonesia will also                           building dams, prioritized in Jati Gede,
G Ciranjang – Padalarang - 33.0 km             develop a Tunnel Project that will                          West Java, Karian in Banten, Bali, South
G Ciawi – Sukabumi - 54.0 km                   connect Java and Sumatra islands. This                      Sulawesi, NT T and in Lombok with
G Bogor REiang Road (ruas Sentul –             project is sponsored by the European                        investment cost up to Rp. 2.5 trillion
   Kd. Badak - 3.8 km                          Union Consortium. The tunnel will                           provided from           the National
G Cikampek – Cirebon - 114.0 km                have 33 km length and 55m width, and                        Government Budget, Regional Budget
G Cileunyi – Sumedang –                        will be constructed in year 2005 –                          and International Funding. At present,
   Dawuan Stage 1 - 23.4 km                    2006.                                                       Indonesia has 170 dams spread across


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                                                            3 r d   Q u a r t e r   2 0 0 5
M  TALK
                BAM Section




Table 5

 Power Supply Facilities           JAMALI       Outside JAMALI                    Indonesia

 Power Plant (MW)                  13,365             8,896                              22,261

 Transmission (km)                  5,493            11,577                              17,070

 Substation (MVA)                  39,379            10,870                              50,249

 Distribution
 a) 20 kV                          38,130            63,325                          101,455
 b) Low Voltage (kms)              39,638            42,866                          82,504
 c) Transformer
    Distribution(MVA)               7,049             4,325                              11,374
 d) Customer (Million)               11.3              8.5                                19.8
 Rural Electrification               472              8,375                              8,847

 JAMALI = Jawa-Madura-Bali
                                                                                                  Ir. Robert Mulyono Santoso

Table 6
                                                                                                  Financing for infrastructure is through
 Power Supply Facilities          JAMALI       Outside JAMALI                    Indonesia
                                                                                                  APBN (30%), Bank (15%), and Non-Bank
                                                                                                  (4%). Thus, there is still a financing gap at
 Power Plant                       9.986             6.430                         16.417         Rp. 670 trillion or USD67 billion.
 Transmission                      0.569             0.865                          1.435
 Substation                        1.230             0.837                          2.068         Conclusion
 Distribution                      2.721             2.493                          5.214
                                                                                                  The Indonesian Government will provide
 Rural Electrification             2.030             4.200                          6.230
                                                                                                  a conducive environment for attracting
 Total                            16.537            14.827                         31.364         investment from domestic and foreign
                                                                                                  sources for long term sustainable
                                                                                                  construction for Indonesia over the next
the nation. However, this number is          Total Investment Needs is as shown                   decade.
inadequate and Indonesia will need           below:
around another 100 dams for developing                                                            For further information, ICA can be
water resources.                              Road (Region/Cities)             USD24.9 billion    contacted at:

In the area of electricity generation, the    Power Plant                      USD33.5 billion    Indonesian Contractors Association (ICA)
power plant capacity in Java, Madura and      Telecommunications USD17.0 billion                  Wijaya Graha Puri Block D-1
Bali islands (JAMALI) at present is 19,500                                                        Jl. Darmawangsa Raya No. 2
MW comprising of 16,300 MW power              Drinking Water                   USD4.1 billion     Jakarta 12160, INDONESIA
plant by the Government and 3,200 MW                                                              Tel: 00 62 21 720 0794
power plant by the private sector. Power     The investment as stated above is not                Fax: 00 62 21 720 6805
plant capacity outside of JAMALI is 5,700    inclusive     of    investment       for             e-mail: akinet@pu.go.id
MW. Assuming electricity growth at 6.6%,     maintenance, toll         roads, gas                 website: www.aki.or.id
the required installed capacity is 54,500    transmission, pipelines, water resources
MW in the year 2013. Committed projects      and irrigation, sewage and solid waste,
                                                                                                   Recommendation: MBAM and ICA to
at present for year 2004 are 8,800 MW.       and housing.
                                                                                                   sign a Memorandum of Understanding
                                                                                                   (MOU) attached as per Appendix 1.
Demand for power supply facilities in        The National Development Planning
                                                                                                   MBAM to organize a trade mission to
2003-2010 is shown in Table 5.               Agency (BAPPENAS) stated that
                                                                                                   Jakarta on 2 nd – 4 th October 2005
                                             investment for infrastructure for the
                                                                                                   (Sunday – Tuesday). ICA will co-ordinate
An overview of Investment Needs for          next five years will contribute 6.6% to
                                                                                                   itinerary for meet with relevant agencies
2003 – 2010 (USD Billion) is as shown in     economic growth requiring Rp. 1.300
                                                                                                   in Indonesia. MBJ
Table 6.                                     trillion or USD130 billion.


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                                                       3 r d   Q u a r t e r   2 0 0 5
M               BAM Section

   HUMAN RESOURCES

Implementation of New Procedure for
Foreign Workers’ Recruitment

T
       he 33 rd meeting of the Cabinet        Conditions that employers must comply with and criteria for consideration regarding
       Committee on Foreign Workers           application for work permits for foreign workers are as illustrated below:
       (JKK-PA) chaired by YAB Dato’ Sri
Mohd Najib Tun Abdul Razak, Deputy            Basic Formula of Calculation
Prime Minister of Malaysia on July 5, 2005
agreed to the implementation of new           G   Based on Project Value (material + labour)
procedures for foreign workers’
recruitment by the establishment of the       Project Value    x 15% x 1 month
One-Stop-Centre (OSC) with .effect from       Duration (month)        Worker Salary
August 1, 2005.
                                              G   Based on Labour Cost
Prior to August 1, 2005, employers in the
construction sector had to forward            Project Value    x 70% x 1 month
application for work permits for foreign      Duration (month)        Worker Salary
workers to the Secretariat at the Ministry
of Home Affairs, Malaysia (KHEDN). The        Estimation of workers requirement is illustrated as below:
application will be discussed in the weekly
Technical Committee (JKT) meeting that                Type of Construction Project                   Factor of Gross CL
involves representative from the                                                                        Requirement
Construction Industry Development Board                                                          Per RM1.0 m Project Value
Malaysia (CIDB). Processing of each
                                               Low Rise Building (4 storey and less)           150 x PV
application from submission till the
                                                                                                D
approval by KHEDN took about four weeks.
                                               High Rise Building (above 4 storey)             150 x PV
                                                                                                D
With the approval letter from KHEDN, the
                                               Infrastructure Works                            100 x PV
employer could choose suitable foreign
                                                   • Road/Highway                               D
workers and submit their names and
required documents to the Department               • Bridges
of Immigration Malaysia (JIM) for the              • Piping Works (>1350 mm dia.)
application of Visa with Reference (VDR)           • Retaining Walls
together with the necessary levy                   • Sewerage
payment. KHEDN and JIM stipulated that             • Land Reclamation
each application should be managed by              • Overhead Transmission Power Line
employers or authorized personnel.                 • Underground Cable
                                               Building Services                               80 x PV
New Procedure for Foreign Workers’                 • Electrical Wiring                          D
Recruitment                                        • Fire Fighting Installation
                                                   • Telecommunication
The One-Stop-Centre (OSC) was                  Landscape                                       80 x PV
established under the Foreign Workers                                                           D
Management Division, KHEDN whereby
complete and eligible applications will be    Note: CL = Construction Labour
processed and approved on the same day.             D = Duration
Under the OSC, officers from related                PV = Project Value
agencies including CIDB for the
construction sector will be placed at the     Estimation on construction labour requirement is based on the formula below:
OSC acting as panelist. Eligible employers
will be issued with approval verification.            GCLR - TACL = EGLR
Approval letter will be issued upon
payment of the necessary levy. Employer       Where
who had paid the levy and submitted
foreign workers’ name list through a copy             GCLR = Gross Construction Labour Requirement
of their passport will be issued visas on             TACL = Total Available Construction Labour (Local + Foreign)
arrival at the designated point of entry.             ECLR = Estimated Construction Labour Requirement


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                                                         3 r d   Q u a r t e r   2 0 0 5
M                  BAM Section




                                                                           APPLICATION AT THE COUNTER


                                                                                             CHECKING
                           INCOMPLETE DOCUMENT                                                                    COMPLETE DOCUMENT

                                                            ACCEPTED                                                REJECTED

                                                  FOREIGN WORKERS'
                                                CONSULTING PANELLISTS


                                                            RESULT



                              APPROVED                                              REJECTED


                           PAYMENT OF LEVY


                       WITH FOREIGN WORKERS                                      WITH FOREIGN
                           INFORMATION                                        WORKERS INFORMATION                           Chart 1

                           APPROVAL LETTER                                     APPROVAL LETTER WITH
                                                                                   CONDITION(S)


                        ENTRY BY 'VISA ON                                      EMPLOYER MUST SUBMIT
                      ARRIVAL' AT KLIA ENTRY                                      FOREIGN WORKERS'
                       POINT OR BY REGULAR                                      INFORMATION 2 WEEKS
                             PROCESS                                               BEFORE ARRIVAL



Table 1                                                                                                           ECLR will be the guided figure to
      Sector                       Old Rate                                       New Rate                        recommend to the Technical Committee
                           Peninsular    Sabah &                          Peninsular    Sabah &                   (JKT ) at KHEDN after taking into
                                         Sarawak                                        Sarawak                   consideration other Government policies
 Manufacturing              RM1,200       RM960                            RM1,200       RM960                    formulated by the Ministry of Human
 Construction               RM1,200       RM960                            RM1,200       RM960                    Resources, Malaysia (MOHR).
 Plantation                  RM360        RM360                             RM540        RM540
 Agriculture                 RM360        RM360                             RM360        RM360                    Verification of Information
 Services                   RM1,200       RM960                            RM1,800      RM1,440
                                                                                                                  Whenever any uncertainties arise,
                                                                                                                  verification of information will be made
               Housemaid                                                                                          either by phone call or interview or visit
                301,669                                              Manufacturing                                to site/premise. In any event where the
                18.71%                                                 498,794                                    contractor is found to provide false
    Services                                                           30.94%
    126,653
                                                                                                                  information, then the contractor
     7.86%                                                                                          Chart 2       concerned will be blacklisted. In such a
                                                                                                                  case, any future applications from the said
                                                                                                                  contractor will not be considered by the
    Construction
      250,813                                                                                                     Technical Committee (JKT), KHEDN.
                                                       Plantation
      15.56%
                                                        434,334
                                                        26.94%                                                    The new procedure for foreign workers’
                                                                                                                  recruitment is as shown in Chart 1.
                                           Myanmar 69,444       Bangladesh 54,099
                                               4.30%                  3.35%                                       The new rate of levy for foreign workers
                                                                                        Lain-Lain 33,049
                                  Vietnam 73,629                                             2.05%
                                                                                                                  is as shown in Table 1.
                                       4.56%

                                India 100,062                                                                     Statistics according to Sector of
                                    6.19%
                                                                                                                  Employment as at 31.05.2005 is as shown
                           Nepal 164,579                                                                          in Chart 2.
                              10.19%
          Chart 3
                                                                                                                  Statistics according to Source Country of
                                                                                                                  Employment as at May 31, 2005 is as
                                                                                                   Indonesia
                                                                                               1,121,001 69.37%
                                                                                                                  shown in Chart 3. MBJ


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                                                                           3 r d    Q u a r t e r   2 0 0 5
M               BAM Section




Key Note Address
Editors Note: Extract of the Key Note Address prepared originally for Y.B. Dato’ Mustapa Mohamad Minister In the Prime Minister’s
department at the seminar on “Malaysian Construction Sector Review 2004 & Outlook, on August 8, 2005, PWTC Kuala Lumpur.
This address was presented by YB Dato’ Rahimah (MTEN).




M
          alaysia experienced its most         continues to remain important in the           A total of 66 companies have been
          rapid growth in four years,          growth of the economy. The sector              involved in construction projects in 29
          expanding by 7.1% as a result of     provides pertinent support and                 countries such as India, Bosnia
robust growth in both global trade and         undeniably was the base to the socio-          Herzegovina, Sudan, South Africa and
domestic demand. Growth was led by the         economic development agenda since              China. To date, Malaysia construction
public sector, while the Government            Independence. We have built the basic          companies have completed 230 projects
made further progress in fiscal                infrastructure and many other new              amounting to RM11.3b billion and are
consolidation. In the first quarter of 2005,   amenities, like telecommunications and         currently undertaking projects worth
Malaysia’s GDP grew 5.75%. Current             intelligent buildings to improve the           RM1.2 billion. At this point in time there
account surplus grew by 62% to RM20.9          quality of life and the standard of living     are 25 Malaysian construction companies
billion due mainly to a larger surplus on      of the rakyat. The construction sector also    actually involved in the overseas market
the goods account. Malaysia’s trade            impacts and has direct-spill-over effects      proving that the export of construction
continued to be strong in the light of         on other sectors e.g. an increase in the       services generate wealth to our country.
recovery in global electronics demand          demand of factory products, heavy
and competitive exchange rate. A trade         industries and financial services.             I believe venturing construction abroad is
surplus of RM6.54 billion was recorded in                                                     no easy task This is because the
June, the 92nd consecutive trade surplus       In terms of job creation, the construction     environment, work ethics, legal and
since November 1997. International             sector plays a significant role by providing   political systems are different from ours
reserves since November 1997.                  jobs to about 538,000 people a year            at home. They also have to face
International reserves of Bank Negara          between 1990 and 1997. The expansion           competition from well established giant
increase further to RM286 billion and the      of construction activities between 1998        construction companies from other
reserves position is adequate to finance       and 2004, as a direct result of federal        nations, not to mention the risks, no
8.7 months of retained imports.                financial infusion of RM7.3 billion in 2001,   matter how calculated they can be.
                                               has provided ample job opportunities to
In terms of contribution by sectors to GDP,    827,000 people a year. So much so that as      We can also learn how other countries in
unfortunately the construction sector          people in Malaysia become more                 the region offer specific assistance
ranked last after services (53.4%),            selective in seeking employment, most of       programmes to help contractors secure
manufacturing (29.4%), agriculture (7.9%)      the jobs created by the sector were met        project overseas. For instance, the
and mining (6.5%). Between 1990 to 1997,       through foreign labour to fill up the          Japanese bank of International
the construction sector contributed an         vacancies. A commission by MTEN in 2004        Cooperation (JBIC) provides grants under
average of 4.1% to the economy, it’s           on the impact of foreign labor to the          its ODA financing to developing countries
highest at 4.8% in 1997. However, after the    economy showed that this sector                to undertake feasibility and technical
Asian Financial Crisis in 1998–2004 the        engaged about 70% foreign workers              studies. Though this initiative, the
contribution to this sector has shrunk to      particularly, unskilled labour.                Japanese contractors who carry out these
an average of 3.4%, declining 4% in 1998                                                      studies get a very comprehensive
to 2.9% in 2004. Consequently the growth       Venturing Construction Abroad                  understanding of the local business
of the construction sector contracted by                                                      situation. This puts them in a strong
1.9% in 2004 as compared to positive           Over the last two decades, Malaysia has        position to win bids for the actual
growth of 1.9% in 2003 and 2.3% in 2002.       built up a strong capacity in construction     construction work.
The contraction was a result of fewer large    in in terms of skills, equipments, processes
scale infrastructure projects following the    and technical capabilities and as a result     Another main problem faced by local
completion of many privatised projects in      raised the level of production. The market     construction companies venturing
recent years as well as slower Government      in Malaysia is becoming smaller for the        abroad is financial support. Construction
spending on new large infrastructure           increasing number of companies involved        firms operating abroad find banking
ensuing fiscal measures to reduce the          in construction. Effort must be made to        facilities in foreign currencies difficult and
country’s fiscal deficit.                      strategise, consolidate and be prepared        costly. They have to meet stringent
                                               for exit and displacement. Our strength in     requirements that may be met by larger
Although the contribution of the               construction services and products needs       construction companies. CIDB, as a
construction sector to the GDP was the         to be exported. We have to expand our          partner in the construction industry,
lowest as compared to other sectors, it        market by venturing abroad.                    could lead the way in forging smart


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                                                          3 r d   Q u a r t e r   2 0 0 5
M              BAM Section




partnerships and synergising with their      The 9MP through the second phase will        expertise, world-class infrastructure,
foreign counterparts in Malaysian            take Malaysia towards achieving              including airport, sea and land network,
ventures abroad.                             developed nation status. In the first        telecommunications            and    the
                                             phase, emphasis has been on physical         Multimedia Super Corridor. This means
The Government has always played a           development in terms of infrastructure       that there is a huge untapped growth
facilitative role and always looked at the   that contributed towards economic and        in investment for growth in Malaysia,
private sector, especially after the         social development. The second phase         sufficient to cater for sustained growth
recession in mid 80s to spearhead the        will emphasise human development             in investment for the next few years. We
economy. As the engine of growth, for        aspects in order to optimize utilization     will push for optimization of the use of
almost two decades, the private sector in    of available physical development – or       our infrastructure facilities. We will
construction should be able to pave the      a people-centered development. With          continue to improve productivity.
way and complement and supplement            world class infrastructure, the 9MP
Government and also in many instances,       should produce world class human             Conclusion
lead the way. I put forth 10 areas for the   capital at all levels needed by industries
private sector and CIDB to undertake: -      and avoid a serious mismatch between         Several issues need to be managed for
                                             demand and supply in the labour              Malaysia’s economic prosperity.
1.  To further promote exports of            market.
    construction devices and products                                                     1)   Firstly, the aspect of risk
    towards becoming global champions        Taking cognizance of the external                 management. As we expect 2005 to
2. Comprehensive quality assurance in        environment, it is envisaged that the             be a tough and challenging year, we
    various aspects of the construction      9MP will be facing greater challenges,            can anticipate many risks to our
    industry                                 among which will be:                              economy. The less bright global
3. Innovation that encompasses                                                                 economic prospects could mean
    technology, processes and materials      G   To further enhance the performance            high risk for our growth. We must
    to get more out of less.                     and capacity of the economy, in all           be able to effectively manage our
4. To meet engineering and                       sectors, towards greater excellence;          risk, have a prudent fiscal policy and
    intellectually          challenging      G   To strengthen competitiveness and             increase exports.
    assignments in the market place.             resilience in more innovative ways,
5. Harmonising man-made structures               the construction sector included;        2)   Second, growth has to be
    with the environment                     G   To increase the level of productivity         domestically driven. Therefore, the
6. Combining resources through smart             and k nowledge content in the                 private sector needs to reassert its
    partnership for bids oversea                 economy, including construction               role as an engine for growth.
7. Develop creativity in ingenious               services and products;
    technology to leapfrog Malaysia          G   To further develop human resource        3)   Third, the cost of doing business.
    Construction Industry to new heights         that is skilled and knowledgeable in          While the Government is
8. Consistently assess existing policy,          line with local and international             committed to enhancing the
    legal and administrative instruments         market demand; and                            delivery system of the public
    to promote the construction industry     G   To provide high quality facilities and        service in the effort to reduce the
9. Continuously develop accreditation            services though an efficient and              cost of doing business, the private
    schemes to stay competitive and              effective system.                             sector must continue to reinvent
    sustainable                                                                                itself, improve its capacity and
10. Identify and continuously promote        The main thrust of the 9MP then will              capability to be cost effective. We
    the effective participation of           have to address the issues of                     must always be aware of the other
    Bumiputra contractors in all fields,     strengthening the economy to achieve              regional economies.
    levels and scales of construction.       higher growth and managing it
                                             effectively. Identification of new sources   4)   Fourth, benchmarking against the
The Ninth Malaysia Plan (2006-2010)          of growth and harnessing its full                 best. Malaysian businesses should
                                             potential regardless of sector, would be          no longer benchmark themselves
The Ninth Malaysian Plan (9MP) which         the preoccupation now as the global               among peers with the country. They
will be unveiled early next year is          economy gets more competitive and                 must now think global and compete
expected to meet head-on the                 technology driven.                                internationality. Indeed the
challenges of globalisation growing                                                            movement recognises that there are
competition and rapid technological          Another new dimension in the 9MP is a             quite a few Malaysian companies
advances. The 9MP is significant as it is    comprehensive presentation on the                 that have made good abroad, but
the first plan under Prime Minister Datuk    new sources of growth such as selected            they are small in number. We must
Seri Abdullah Ahmad Badawi , being           services, education, health and tourism.          double our efforts sot that we can
formulated by the Economic Planning          Malaysia still has a huge untapped                produce Malaysian companies,
Unit led by Dato’ Mustapa Mohamad,           capacity for growth, with abundant                which are globally competitive. It is
Minister in the Prime Minister’s             natural resources, and an educated work           time for Malaysia to produce some
Department.                                  force. We have built our industrial               global champions. MBJ



                                                                      18

                                                        3 r d   Q u a r t e r   2 0 0 5
M  MEETING
                BAM Section




Malaysia Incorporated Officials Committee

Y
       Bhg Tan Sri Samsudin Osman, Chief       under the FWCS at RM750 but subject to        billets and steel bars until further review
       Secretary to the Government             a maximum annual limit of RM5,000 per         to ensure sufficient domestic supply as
       chaired the MIOC meeting on             year.                                         follows:
August 29, 2005 at the Perdana Putra
Building, Prime Minister’s Department,         MBAM contended that the MAA’s                 G   No quantitative restriction on imports
Putrajaya. MBAM President Dato’ Ir. Goh        scheme operates as an excess clause and           of billets and steel bars;
Chye Koon represented the Association at       payout from the said scheme is only for       G   Import duty exemption is given on
the meeting.                                   an amount in excess of RM750. MBAM                billets and steel bars; and
                                               instead proposed that foreign workers         G   Only manufacturers are allowed to
The following items under matters arising      should have the flexibility in choosing           export billets and steel bars
related to the construction industry were      the amount insured under a rider scale
reported:                                      basis.                                        Meanwhile, CIDB has completed a study
                                                                                             on “The Supply and Demand of Steel
Foreign Workers Compensation                   Price Imbalance of Material                   Materials in the Malaysian Construction
Scheme (FWCS)                                  Components in M&E Works                       Industry for the Year 2004–2009” It      .
                                                                                             includes recommendations on Automatic
Under existing practice, any cost in excess    CIDB had formed a committee to address        Pricing Mechanism (APM) for the
of the maximum amount payable by               the issue of price fluctuation due to price   formulation of pricing of steel bars and
insurers for hospital charges incurred by      imbalance of material components in           billets. The Ministry of Domestic Trade and
a foreign worker as stipulated in the          M&E works. The Electrical and Electronic      Consumer Affairs, Malaysia (MDTCA) is
Workmen’s Compensation Act 1952 (Act           Association of Malaysia ( TEEAM) will         studying the recommendations. In
273) will be borne by the worker’s             submit a proposal paper to determine          deciding the ceiling price for steel bars
concerned.                                     components in M&E products in addition        and billets, the calculation of the average
                                               to preparing a draft clause on Variation      industry cost formula will take into
Due to increase in medical fees for foreign    of Price ( VOP) by taking into                consideration the elements of raw
workers and in order not to burden             consideration provision in the JKR form       materials cost (scrap iron), labour cost,
employers with increased medical cost for      of contract pertaining to VOP as practices    electricity cost, water and fuel (includes
employing foreign workers, the Ministry        in building works.                            diesel and petrol) cost, factory cost (ferro
of Human Resources, Malaysia (MOHR)                                                          alloys, electrodes, flux etc). Local
has suggested to the 10 insurers               Amendments to the Money                       manufacturers have been advised and
appointed under the FWCS to propose a          Lenders’ Act                                  strive to improve their competitiveness
scheme to cover the cost of                                                                  and should not depend on protectionist
hospitalization and surgical fees for          An Exemption Order for companies not          measures by the Government.
foreign workers. They are given the choice     primarily involved in money lending
to buy additional insurance whereby            activities has been signed by the Minister    Certificate of Completion
employers will advance the premium paid        of Housing and Local Government,              and Compliance
and are allowed to make equal monthly          Malaysia and was gazetted on July 14,
deductions from the workers’ wages. A          2005. The said exemption order would          CIDB informed that it has established a
blanket approval to facilitate the giving of   facilitate companies in providing inter-      mechanism (Contractor Disciplinary
advances and deduction of wages will be        company loans, loans to directors,            Committee) to control and monitor the
given to employers who want to                 officers and staff as well as other types     performance of its registered contractors
participate in this scheme.                    of loans on an en-bloc rather than a case-    in which non-performing contractors will
                                               to-case basis.                                be subjected to disciplinary action. The
The Malaysian Assurance Alliance Berhad                                                      said mechanism is currently operational
(MAA) has developed a scheme known as          Current Measures on Billets and               and to-date 401 contractors have been
Foreign Workers Hospitalization and            Steel Bars                                    summoned by the Disciplinary
Surgical Insurance Scheme (SKHPPA).                                                          Committee for investigation into issues
Essentially, the said scheme stipulated        The Ministry of International Trade and       such as non-performance, early
that for employment injury, it will cover      Industry, Malaysia (MITI) is continuing       termination, defective quality, and breach
the amount in excess to that claimable         implementation of current measures on         of employment contract.



                                                                        36

                                                          3 r d   Q u a r t e r   2 0 0 5
M               BAM Section




The following papers were tabled for           The MISC reported on the “Freezing of         boundary construction works due to
discussion:                                    Permits for Sand Excavation in Selangor”      permitted delivery hours for quarry
                                               issue with clarification from the             materials.
G   Report of the Malaysia Incorporated Sub-
                                               Selangor State Government that there
    Committee (MISC) by the Malaysian
                                               is no freezing of permits for sand            KHEDN representative gave an outline
    Administrative Modernization and
                                               excavation from private land as long as       on “New Procedure for Recruitment of
    Management Planning Unit (Mampu)
G   New Procedure for Recruitment of           the operator adhere to conditions             Foreign Workers”
    Foreign Workers by the Ministry of         stipulated by technical departments
    Home Affairs, Malaysia (KHEDN)             such as DOE, DID, JKR and local               REHDA’s memorandum outlined the
G   FMM Issues by the Federation of            authorities concern.                          following   issues:  Solicitors’
    Malaysian Manufacturers (FMM)                                                            Remuneration Order (SRO) and the No
G   AMCHAM Issues by the American              On the issue of “Permitted Delivery           Discount Rule (NDR); Private Areas in
    Malaysian Chamber of Commerce
                                               Hours for Quarry Materials in the State       Cases of Gated Communities/Common
    (AMCHAM)
                                                          ,
                                               of Selangor” it was agreed to convene a       Property Developments and Proposed
G   Issues on the Property Industry by the
    Real Estate and Housing Developers         meeting among Selangor State                  Amendments to the Strata Titles Act
    Association (REHDA)                        Government, DBKL and MBAM                     1985; and Implementation of the
G   BMCC Issues by the British Malaysian       representatives to resolve the said           Stormwater Management Manual
    Chamber of Commerce (BMCC)                 issues to minimize disruption of trans-       (MASMA) by DID. MBJ




Building Industry Presidents’ Council

M
         BAM Deputy President Patrick          Completion and Compliance (CCC). The          workmanship could be further
         Wong and Secretary-General            following proposals were deliberated:         deliberated in another forum as root
         Yap Yoke Keong represented                                                          causes are many including clients, SOs,
MBAM at the 11 th Building Industry            G   Fees shall not be paid upfront            designers, contractors, sub-contractors,
Presidents’ Council (BIPC) meeting             G   Scale of fees payable should be based     workers, materials etc.
hosted by REHDA on June 22, 2005.                  on agreed contracted rates between
                                                   vendor and consultant, which in turn      The meeting agreed that quality issue
The meeting deliberated on the                     are guided by the regulated scale of      involved sub-contracting system; pricing;
following issues:                                  fees under the respective professional    skills of workers; materials; supervision,
                                                   bodies                                    etc., and accepted the proposal that
Build & Sell (10:90 Variant)                   G   Proposal for payment to be made to        MBAM organise a forum among
                                                   the respective professional boards will   stakeholders to deliberate on
It was agreed that the Build & Sell or             be explored                               accountability and quality issues and
the 10:90 variant should be market             G   Proposal for a payment bond was not       come up with proposals to address the
driven rather than a regulated                     accepted                                  present state of the construction industry.
approach where incentives can be               G   Practice of making payment in kind        The proposed forum could review action
given to those willing to promote the              instead of in cash should be left to      plans formulated by CIDB to-date such as
said scheme.                                       market forces, provided both parties      QLASSIC; IBS Road Map; Construction
                                                   agree to such an arrangement              Industry Master Plan (CIMP) etc.
Payment of Professional Fees
                                               Accountability and Quality Issue              It was further agreed that CIDB Board
The proposal on payment of                                                                   members from the private sector raise the
professional fees upfront is meant to          MBAM reiterated its objection to the          subject matter at the CIDB Board meeting
ensure certainty of payment arising            statement “…lack of effective regulation      and urge CIDB to take a proactive role to
from the move by the proposal to               of contractors…” and stated that              resolve the issue. Representatives from
replace the issuance of Certificate of         provisions for delivery of quality are        PAM, ACEM, REHDA expressed views that
Fitness for Occupation (CFO) with the          already adequately covered in contracts       contractors be regulated with possible
proposed professional Certification of         with clients. The issue of shoddy             amendment to Act 520. MBJ



                                                                        37

                                                          3 r d   Q u a r t e r   2 0 0 5

				
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