(Construction) - Japanese government's strategy of exporting high quality infrastructure systems is being forced to change course.
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| Japanese companies signed O&M contract to develop Dubai Metro. |
This is because the COVID-19 pandemic has worsened the financial situation in many countries and material prices are soaring worldwide. According to Ministry of Land, Infrastructure, Transport, and Tourism, there is a trend among countries to avoid foreign debt.
Regarding the infrastructure investment mindset of governments around the world, MLIT explains that some countries are reviewing the plans and considering reducing the scale of projects and changing performance requirements. The background to this is the global surge in prices of steel, concrete, and other materials. As Russia has invaded Ukraine amid the pandemic casting a shadow over the global economy, procurement of raw materials and logistics have been delayed.
According to MLIT, there is a global standard model for construction contracts, which also stipulates a price indexing clause. If the price of an item not on the list of the contract rises, the contract is not subject to change, putting pressure on the contractor's profit. The ministry predicts that soaring material prices will soon become a major problem in infrastructure projects around the world. It is prepared to "urge the partner country at the government level to agree to contract modifications.
MLIT has set forth a new policy in its "Infrastructure System Overseas Development Action Plan 2022," which was decided in June. It recognizes the need to find a way to make a difference other than price competitiveness. O&M (maintenance, management, and operation) technologies will be positioned to the forefront as a new added value, and it will be proposed to partner countries as a package with the construction technology Japan has focused on in the past. (2022/07/14)
The Daily Engineering and Construction News of Japan
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