FOCUS: Japan construction firms in Singapore hit by Indonesian sand ban
SINGAPORE, April 29 Kyodo
Japanese construction companies in Singapore have been hit hard by spiraling concrete and granite prices due to supply disruptions caused by Indonesia’s ban on sand exports.
More than 20 Japanese construction companies are operating in Singapore and are involved in more than 20 percent of current construction projects in the city-state.
Singapore, a wealthy but resource-poor island nation, depends heavily on neighboring countries for raw materials.
But since Indonesia banned exports of sand in January this year over environmental concerns, the price of sand in Singapore has jumped from S$25 (about $16.4) to S$60, while the price of concrete leaped from S$70 per cubic meter to a high of about S$200 at the end of last month.
Although Jakarta has not officially banned exports of granite, the Indonesian navy has detained more than 20 granite-laden barges and tugboats bound for Singapore on suspicion that they were smuggling sand.
Sand and granite are used in concrete. Singapore uses about 6-8 million tons of sand annually, most of which came from Indonesia before the export ban.
Some Japanese companies are complaining that they could lose S$20 million to S$30 million in current projects.
The Singapore government has agreed to shoulder to up to three-quarters of the increase in construction costs of ongoing public sector projects as a result of the hike in sand and granite prices, and is urging the private sector to do likewise.
But Japanese companies would like the government to shoulder more of the increase in construction costs.
The Singapore offices of the Japanese Chamber of Commerce and Industry and the Japan External Trade Organization wrote to the governmental Building and Construction Authority of Singapore to express their concerns earlier this month.
”It’s very serious,” said Noriyuki Fukuoka, an official for construction at JETRO’s Singapore representative office. ”We are pushing strongly for the government to compensate 100 percent of the increase in the concrete price.”
Currently, construction contracts do not provide for fluctuation in the price of sand and other raw materials required for construction. In the wake of the recent sand ban, Japanese companies here will expect future construction contracts to take into account the risk of price fluctuations, he said.
Japanese contractors are currently involved in big projects such as the construction of a commuter train line, while the private-sector projects involve residential and office buildings in Singapore’s currently recovering construction industry.
The ban on sand exports could not have come at a worse time. Singapore has just launched several big-scale projects to improve its attraction as a tourist destination and a financial and business hub in the region. This includes plans for its first two multibillion-dollar casino resorts.
Before the sand ban, most of Singapore’s sand supply came from Indonesia’s Rhiau islands, located in a far flung corner of Indonesia but only an hour by ferry from Singapore. Barges shipped sand, granite and other construction materials to Singapore.
A recent trip by a Kyodo News reporter to parts of the Rhiau islands where sand and granite have been excavated found serious environmental degradation there. Long abandoned sand mining sites showed vast areas of treeless land heavily scarred by long, deep gullies and cracks that snaked up to the roadside.
Observers say the sand issue underscores Singapore’s heavy dependence on its neighbors — Malaysia and Indonesia — for resources. They stressed the need for tiny Singapore to be more sensitive and humble in its relations with its two much larger neighbors.
Indonesia has said the sand ban was imposed due to environmental concerns over the effect of sand mining and fears that it could shrink Indonesia’s maritime borders.
But some Indonesian legislators had said it was also to put pressure on Singapore to sign an extradition treaty that Jakarta hopes would help it recover billions of dollars of government funds allegedly embezzled to the city-state by some wealthy Indonesians.
The two governments inked extradition and defense cooperation agreements Friday after years of wrangling. But it is not clear if the signing was motivated by the sand export ban or if exports of Indonesian sand will resume anytime soon.
Since the sand ban, Singapore has had to turn to its stockpile of sand and granite and look for alternative sources from more distant countries such as the Philippines, Cambodia, Vietnam and Myanmar.
The government has also said it plans to reopen a former granite quarry on an offshore Singapore island that has become a haven for nature lovers in recent years.
Recently, the government indicated it plans to halve concrete-based projects in the next five years. About 95 percent of construction projects in Singapore now depend on concrete and the government would like more steel to be used in construction projects.
It is also carrying out research to find substitutes for sand and granite.
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