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Fuel price hike affect Indonesian project development
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09:46, June 09, 2008

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Recent fuel price hikes would affect Indonesian construction projects financed with external loans, an official of Indonesian National Development Planning Board (Bappenas) said on Sunday.

"In general, construction projects which are multi-years in nature would be affected. Usually contractors have taken such a possibility into account as a price escalation when they are to take part in a tender for such project," Syarial Loetan of Bappenas was quoted by national Antara News Agency as saying here.

In this case, creditors usually made available a budget surplus for a price escalation based on the value of their appraisal.

"Such a surplus is not available for projects affected by policy reforms, however," Syahrial added.

He said that a price escalation could also happen due to increase in the inflation caused by factors other than a fuel price hike.

"We will ask for approval from the creditors to use the escalation price facility," he said.

On the occasion, Syahrial also said that the World Bank supported the government's step to raise subsidized fuel oil prices because the policy will help maintain the credibility of the state budget.

Syahrial made the remarks after accompanying State Minister for National Development Plan/Head of Bappenas Paskah Suzetta when receiving World Bank Representatives in Jakarta, Joachim con Amsberg.

Source: Xinhua

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