THE EFFECTS OF THE CONSTRUCTION PROCESS ON THE LOCAL ECONOMY IN INDONESIA: A SYSTEM DYNAMICS APPROACH

ABSTRACT

The construction industry is a significant contributor to the process of development in developed and developing countries.  The construction products (roads, railways, schools, offices, shops, factories) provide the necessary public infrastructure and private physical structures for many productive activities such as services, commerce, utilities and other industries.  The industry is not only important for its finished product.  It also employs a large number of people (directly and indirectly) and therefore has an effect on the economy of a country/region during the actual construction process.

This paper examines work done to determine the detailed effects of investing in construction.  The effects considered are those on the micro-economy of the people directly employed by the construction industry through to the macro-economy of the region.

The work is based on surveys, which were carried out in Indonesia to investigate how the money invested in construction flows through the economy.  It also examines at which point in the construction process income is received, and at which point it is spent.  The results of these surveys were analysed using statistical methods and were used to build a system dynamics model.

A system dynamics is a methodology for analyzing and understanding how complex systems change over time.  This technique is developed to model the effects of the construction process on the local economy. Its use to compare labour intensive and equipment based construction methods.  It was found that the construction sector provides a very important contribution to the national and local economy through its job generating ability for local people as multiplier effects.  A system dynamics model developed is able to predict the effects of changes in policy on expenditure in the micro scale.

Key words: construction industry, system dynamics, labour intensive construction, micro and macro economy

"THE EFFECTS OF THE CONSTRUCTION PROCESS ON THE LOCAL ECONOMY IN INDONESIA: A SYSTEM DYNAMICS APPROACH"

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MODELLING of CONSTRUCTION MIGRANT LABOUR

INTRODUCTION

The globalization that happened in the world at this time did not only cause the rotation of investment and fast information, but also can be related to the problem of labour. Today, the world's population in great numbers leave their homeland to fill up the work in other countries which offered much higher wages. In Asia, according to the data from the Newsweek magazine the edition on October 17th  1994, millions of foreign labour (the Asian peer) filled up sectors of economics in this territory. These migrants generally come from countries where the level of the labour’s wage is low. Tobing (2004) recorded that most of them are from Indonesia (800 thousand), followed the Philippines (600 thousand), Bangladesh (400 thousand), and Thailand (400 thousand).

The labour migration flow was basically the result of three conditions, which were different in developed countries, the newly industrialized countries,  as well as the poor and developing countries. The success of economy in developed countries pushed the wage and the working condition to the higher level. In the newly industrialized countries, the acceleration of economy caused the demand of skilled, semi skilled and low skilled labour increasing significantly. Generally, skilled labour was brought in from developed countries, whereas the low skilled labour came from the poor and developing countries. In the meantime, in the poor and developing countries, the difficulty to get a job and the low wage pushed the migration to the other countries (Suharto, 2005).

The number of labour in Indonesia during 2006 was 106,281,795, of which 11,104,693 people were unemployed (BPS, 2006). The increase of number of the migrant labour could become a temporary solution for this unemployment problem. Indonesia sent approximately 500,000 labours overseas, and approximately only 0.5% of them went through the legal route each year. During this year, Indonesia was a country which had the biggest number of labour in the construction sector. BPS (Statistics Indonesia) recorded in February 2006, the number of Indonesian construction labour was 4.47 million people. Considering the slow growth of the Indonesian economy, the construction industry in Indonesia became not more developing. This condition proportionate was inside out with the number of construction labour that was available. Therefore, remembered employment opportunities in Indonesia that very few, then Indonesian construction labours afterwards tried to look for the work to neighbouring countries that had bigger work opportunity, like Malaysia and Singapore (Tejo, 2003).

Malaysia was a country that often used construction labour from Indonesia. During 2005, Malaysia used 300,000 labours in the construction sector from Indonesia. Most of them generally have low skill level. Malaysia also employed construction labours from Singapore and the Philippines, but labour from these countries generally gets the higher wage than labour from Indonesia. This could be caused by the fact that they generally have the registration and certification of construction skill that was acknowledged in Malaysia (Moedjiman, 2007). In contrast, BPS recorded in February 2006, there were only 100,000 out of 4.47 million Indonesian construction labours which had joined construction trainings, and there were only less than 10,000 who had the certificate of work skills or the expertise (BPKSDM, 2006).

"MODELLING of CONSTRUCTION MIGRANT LABOUR" (Case study Indonesia and Malaysia)
Henny Pratiwi Adi, Mochamad Agung Wibowo, and Jati Utomo Dwi Hatmoko2
Doctoral Programme Civil Engineering
Diponegoro University

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THE CONTRIBUTION OF THE CONSTRUCTION INDUSTRY TO THE ECONOMY OF INDONESIA: A SYSTEMIC APPROACH

ABSTRACT

Construction industry contributes significantly in terms of scale and share in the development process for both developed and developing countries.  The construction products provides the necessary public infrastructure and private physical structures for many productive activities such as services, commerce, utilities and other industries.  The industry is not only important for its finished product, but it also employs a large number of people (directly and indirectly) and therefore has an effect on the economy of a country/region during the actual construction process.

This research examines work done to determine the detailed effects of investing in construction.  The effects considered are those on the micro and macro economy of the people directly or indirectly employed by the construction industry

The work is based on surveys, which were carried out in Indonesia to investigate how the money invested in construction flows through the economy.  It also examines at which point in the construction process income is received, and at which point it is spent.  The results of these surveys were analysed using statistical methods and combined with results from economic input-output modelling.  The results were then used to build a system model.

A system model is developed to examine its use to compare labour intensive and equipment based construction methods.  It was found that the construction sector provides a very important contribution to the national and local economy through its job generating ability for local people as multiplier effects.  A system model developed is able to predict the effects of changes in policy on expenditure in the micro scale.

Key words: construction industry, labour intensive construction, micro and macro economy

"THE CONTRIBUTION OF THE CONSTRUCTION INDUSTRY TO THE ECONOMY OF INDONESIA: A SYSTEMIC APPROACH"
Ir.M. AGUNG. WIBOWO, MM, MSc, PhD
Construction Management, Civil Engineering, Department
Diponegoro University, Indonesia

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MODELLING CONSTRUCTION MIGRANT LABOR

The globalization that happened in the world at this time does not only cause the rotation of investment and fast information, but also it relates to the problem of labor.  Many decisive factor so as the Malaysian country became the choice of the migrant labor from Indonesia. Geographically, Malaysia was the closest neighbour of Indonesian country. Transportation were relative easy, cheap and fast. On the other hand, the community of the two countries came from the group of the Malaya ethnic group with the language that was similar and had a closed social relation and same culture since long ago, so as facilitated in interacting (Darwis, 2004)

A migration network has also been created between Indonesia and Malaysia that has increased the coexistence between worker s from the two countries. In building its economy, Malaysia was faced with the problem of labor shortage, especially in the sectors that require manual (unskilled) labor. This situation was made even worse by the fact that Malaysian labor, especially those who have attained medium or high education, could not accept to work in plantations, mines and construction. On the other hand, Indonesia was facing a problem of excess labor because of the limited opportunity in the labor market and the low per capita wages paid (Mantra, 1997).

This research will design particularly to develop a model in the quality and competence of Indonesian migrant labor in construction sector, especially through Competency Based Training.  The objectives of the research are (1) to identify the existing condition of Indonesian Labour Migrant in Malaysia, (2) to identify the general processes within the Indonesian migrant labor in Malaysia (3) to propose a model of the Indonesian migrant labor in Malaysia and (4) to calibrate and to validate the model developed

To identify element involved in migrant labor, System Theory is going to be applied.  A survey from public and private sector organizations which involved in migrant labor is going to be conducted and analyzed.  A conceptual model of migrant labor is developed through Focus Group Discussion (FGD).  The final steps are calibrated, validated and simulated the model developed.

Key words: migrant labor, construction, modeling and system theory

"MODELLING CONSTRUCTION MIGRANT LABOR" (Case study Indonesia and Malaysia)

Henny Pratiwi Adi and Mochaamad Agung Wibowo

Construction Management Division

Civil Engineering Department

Diponegoro University, Indonesia

MODELLING RISK MANAGEMENT IN BOT PROJECTS

Build-Operate-Transfer (BOT) is perceived as a risk sensitive procurement method. In a limited concession time, project sponsor (investor) is expected to achieve return on investment and profit by the end of concession period.  Theoretically, BOT investors have to manage greater scope of risks than the ones on traditional construction projects.  Various kinds of risk factors, such as public policy, economic, politic and environment issues of a country are to be considered.  The scheme is considered risk sensitive.  Akintoye (1998) suggests that a Private Finance Project (including BOT) should satisfy two fundamental requirements: secure value for money and allocate risks appropriately.

The objectives of the research are (1) to apply a system theory as a general frame work to approach the elements involved in the research area, (2) to identify the general processes within the risk management framework of BOT projects; and (3) to propose a conceptual model of risk management in BOT projects (4) to calibrate and to validate the model developed

A system theory could be used to investigate all of parties involved on such Build Operate and Transfer (BOT) projects.  A survey from public and private sector organizations which involved in BOT projects is going to be conducted and analyzed.  A conceptual model of Risk Management on BOT projects is developed through Focus Group Discussion (FGD).  The final steps are calibrated, validated and simulated the model developed.

Key words : BOT, risk management, construction, system theory and modeling

"MODELLING RISK MANAGEMENT IN BOT PROJECTS"
Ir. Mochamad Agung Wibowo, MM, MSc, PhD
Construction Management Division
Civil Engineering Department
Diponegoro University, Indonesia

MEMILIH KRITERIA PENILAIAN RESIKO BERDASARKAN TINGKAT FREKUENSI TERJADINYA PADA TAHAP PELAKSANAAN KOSTRUKSI PROYEK DENGAN METODA ANALITICAL HIERARCHY PROCESS

ABSTRAK

Makalah ini akan menguraikan bagaimana Analitical Hierarchy Process dapat memodelkan resiko-resiko yang ada pada tahap pelaksanaan konstruksi proyek dengan cara memberikan bobot penilaian atas frekuensi kemunculan resiko tersebut. Pembobotan bisa dilakukan dengan dua cara, yaitu : Pembobotan secara langsung atau dengan menggunakan Analitical Hierarchy Process. AHP merupakan suatu sistem pembuat keputusan dengan menggunakan model matematis.
AHP membantu dalam menemukan nilai skala prioritas dari beberapa kriteria penilaian resiko pada proyek konstruksi dengan melakukan analisa perbandingan berpasangan dari masing-masing kriteria. Sistem Pengelolaan Resiko yang dimaksud dengan kriteria tersebut adalah kejadian-kejadian yang sudah diidentifikasi sebagai suatu potensi resiko yang mingkin akan terjadi.

Key words: AHP, Analisis Resiko, Proyek Konstruksi

"MEMILIH KRITERIA PENILAIAN RESIKO BERDASARKAN TINGKAT FREKUENSI TERJADINYA PADA TAHAP PELAKSANAAN KOSTRUKSI PROYEK DENGAN METODA ANALITICAL HIERARCHY PROCESS"
Blair Arimaika Sutadi, M.Agung Wibowo
Program Magister Teknik Sipil, Universitas Diponegoro Semarang
e-mail : irsad_arimaika@yahoo.com


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THE CONTRIBUTION OF THE CONSTRUCTION INDUSTRY TO THE ECONOMY OF INDONESIA: A SYSTEMIC APPROACH

ABSTRACT

Construction industry contributes significantly in terms of scale and share in the development process for both developed and developing countries.  The construction products provides the necessary public infrastructure and private physical structures for many productive activities such as services, commerce, utilities and other industries.  The industry is not only important for its finished product, but it also employs a large number of people (directly and indirectly) and therefore has an effect on the economy of a country/region during the actual construction process.

This research examines work done to determine the detailed effects of investing in construction.  The effects considered are those on the micro and macro economy of the people directly or indirectly employed by the construction industry

The work is based on surveys, which were carried out in Indonesia to investigate how the money invested in construction flows through the economy.  It also examines at which point in the construction process income is received, and at which point it is spent.  The results of these surveys were analysed using statistical methods and combined with results from economic input-output modelling.  The results were then used to build a system model.

A system model is developed to examine its use to compare labour intensive and equipment based construction methods.  It was found that the construction sector provides a very important contribution to the national and local economy through its job generating ability for local people as multiplier effects.  A system model developed is able to predict the effects of changes in policy on expenditure in the micro scale.

Key words: construction industry, labour intensive construction, micro and macro economy

"THE CONTRIBUTION OF THE CONSTRUCTION INDUSTRY TO THE ECONOMY OF INDONESIA: A SYSTEMIC APPROACH"

Ir.M. AGUNG. WIBOWO, MM, MSc, PhD

Construction Management, Civil Engineering, Department

Diponegoro University, Indonesia

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THE CONTRIBUTION OF THE CONSTRUCTION INDUSTRY TO THE ECONOMY OF INDONESIA: A SYSTEMIC APPROACH

ABSTRACT

Construction industry contributes significantly in terms of scale and share in the development process for both developed and developing countries.  The construction products provides the necessary public infrastructure and private physical structures for many productive activities such as services, commerce, utilities and other industries.  The industry is not only important for its finished product, but it also employs a large number of people (directly and indirectly) and therefore has an effect on the economy of a country/region during the actual construction process.

This research examines work done to determine the detailed effects of investing in construction.  The effects considered are those on the micro and macro economy of the people directly or indirectly employed by the construction industry

The work is based on surveys, which were carried out in Indonesia to investigate how the money invested in construction flows through the economy.  It also examines at which point in the construction process income is received, and at which point it is spent.  The results of these surveys were analysed using statistical methods and combined with results from economic input-output modelling.  The results were then used to build a system model.

A system model is developed to examine its use to compare labour intensive and equipment based construction methods.  It was found that the construction sector provides a very important contribution to the national and local economy through its job generating ability for local people as multiplier effects.  A system model developed is able to predict the effects of changes in policy on expenditure in the micro scale.

Key words: construction industry, labour intensive construction, micro and macro economy

"THE CONTRIBUTION OF THE CONSTRUCTION INDUSTRY TO THE ECONOMY OF INDONESIA: A SYSTEMIC APPROACH"
Ir.M. AGUNG. WIBOWO, MM, MSc, PhD
Construction Management, Civil Engineering, Department
Diponegoro University, Indonesia


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Risk Management : A Case study in Indonesia’s BOT Project

Abstract

The potential growth of economic of a country is influenced by availability of public infrastructure.  Private participation in the provision of public fascilities is essensial due to the lack of public financial resources.  Build-Operate-Transfer (BOT) has been a focus of the Government in privatizing those fascilities.  Under this scheme, risks are transfered in part from principal side to the investor’s. The BOT shares mutual benefits in respect to the decrease of the investment. On the other hand, investor have to deal with the risk of project failure or miscalculation of financial projections. Therefore, comprehensive knowledge and skill in managing risks is needed in the implementation of BOT projects.

This research aims to bring recommendations toward successful BOT implementation in Indonesia by developing risk management analytical framework. A survey through questionnaires and structure interview is targeted at experienced officials from public and private sector organizations, to elicit industry opinions and implementations of risk management. These will be combined with literature review in the area of corporate and project finance theories, to develop a framework of risk management which involves risk identification, risk analysis and risk response. This framework will also shows the quantification of each risk identified and the relation between risks and return. Comparison between literature review and implementation of risk management will be conducted to evaluate the implementation of BOT project and recommends for further improvement.


"Risk Management : A Case study in Indonesia’s BOT Project"
Andi Nusa Patria and M. Agung Wibowo


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Risk Management : A Case study in Indonesia’s BOT Project

Abstract

The potential growth of economic of a country is influenced by availability of public infrastructure.  Private participation in the provision of public fascilities is essensial due to the lack of public financial resources.  Build-Operate-Transfer (BOT) has been a focus of the Government in privatizing those fascilities.  Under this scheme, risks are transfered in part from principal side to the investor’s.  The BOT shares mutual benefits in respect to the decrease of the investment.  On the other hand, investors have to deal with the risk of project failure or miscalculation of financial projections. Therefore, comprehensive knowledge and skill in managing risks is needed in the implementation of BOT projects.

The objective of this on going research is to bring recommendations toward successful BOT implementation in Indonesia by developing risk management analytical framework.

A set of data, which is based on public infrastructure project in Indonesia, will be collected through questionnaires and structure interviews.  The data collected will be analysed based on the area of corporate and project finance aspect.  This analysis will be combined with a framework of risk management that involves risk identification, risk analysis and risk response.

The possible results could be a set of reccommendation that could be used for institutional body to deal with BOT projects in Indonesia.


"Risk Management :A Case study in Indonesia’s BOT Project"
Andi Nusa Patria 1 and Mochamad Agung Wibowo 2


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Teaching Grant

Abstract

Learning process needs improvement on the way to deliver the subjects to the students.  This is because the aspect surounding the subjects or the material are keep changing inherent with the dynamic social and economic change of the society.

There are many types of how to deliver the subjects to the students.  It starts from seminar trough discussion.  Among all of types, simulation is one of types where the students could participate actively to act as person on the real industry.

The simulation method is chosen to deliver a subjet of construction law including a procurement process to the students.  On the procurement method especially for government goods and services, there are many aspects that the student should know about it.  However, many terms are not easily figure out on some occasion during tender and bidding phase.  By doing simulation, the student could act as person who incharge on tender and bidding process whether as the committee or as the contractor, consultant and supplier.

A modul was developed as well as a student’s guidance.  This modul was based on some empirical investigation and previous literature review on the construction law especially on the procurement method.

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