Asea Brown Boweri seeks to expand RI operation
By Sona Vora Blessing
ZURICH, Switzerland (JP): Asea Brown Boweri's (ABB) presence in Indonesia dates back to before the merger of its parents BBC Brown Boweri and ASEA in 1988.
Both were active in the country for many years through representative offices and local partners. Today, the Zurich- based ABB has become one of the world's leading companies as well as one of the world's largest electrical engineering groups. It operates in Indonesia through various platforms.
These include a joint venture with the state-run PT PAL, which owns a large shipyard in Surabaya, and through a joint venture with CCM, owned by the family of Murdaya Poo; it also has an agency agreement with PT AB.
Goran Lindahl took over as president and chief executive earlier this year when he replaced Percy Barnevik.
He was previously executive vice president and a member of the Group Executive Committee, responsible for the power transmission and distribution segment, with additional operational responsibility for the Middle East and North Africa.
Lindahl seems well settled in his new role at the helm of the Fortune 500 and $35 billion group that has interests in electric power generation, transmission and distribution; industrial and building systems; and rail transportation.
Bullish on Asia, the 54-year-old Swede explains the company's plans for Indonesia, his vision as president and CEO, and why he believes ABB will not make forays into areas such as aerospace and aeronautics.
Q: What are the main projects ABB has undertaken in Indonesia. and how much has been invested in Indonesia?
Answer: The main projects implemented by ABB in Indonesia have been in power generation (Mrica Hydro Power Plant, Muara Tawar Combined Cycle, Tanjung Priok Combined Cycle, Paiton Thermal Power Plant) and in the transmission and distribution field - it has set up 500KV transmission lines.
ABB has invested over $200 million in developing its asset- base in Indonesia, and it is committed to further investments. ABB hopes to not only expand its existing ventures, but intends to identify new areas of operation as well. ABB's presence in Indonesia today includes some 1,500 employees.
Q: What has ABB's track record been in Indonesia? And what is its projection for the future?
A: The order volume varies from year to year depending on the number of large projects secured, from $500 million to $1 billion per annum. The local added value business is steadily increasing with the continued expansion of our local operations and has reached $100 million per annum.
Q: What is your vision as CEO of ABB?
A: I will encourage growth and management through innovation. Research and development will remain a high priority, with technology innovation a key for growth in both mature and emerging markets. In 1996, our R&D expenditure amounted to $2.6billion, double the 1988 level. ABB's strong technology base supports the technology-sharing that is key to our local manufacturing and service build-up in emerging markets. Today some 20,000 people are involved in R&D on the corporate and business levels.
Innovation is key to growth in other ways as well. The large markets of the industrialized world, the dynamic emerging markets of Asia and Latin America, and the transition economies of Central and Eastern Europe all have something in common: rapid change.
For ABB, innovation must be a core part of our activities. We must continue to shift away from just reacting to the present and work harder to shape the future, creating tomorrow's markets, not just competing for today's.
In Asia, we have managed to move from an export-based business to a more local value-added one, developing the kind of personal customer relationships that are vital to doing business successfully in the region.
Our ambition is that by 2000, Asian orders will surpass $15 billion. Latin America is already close to $2 billion in orders, and the Middle East and Africa are approaching $2.5 billion,
Q: What were the major obstacles you think ABB faced in the emerging markets? Which will it still encounter in the future?
A: I've always been interested in Asia. When I started to work there, and when I started to really push our business in Asia- Pacific, I found that wherever I went, I stumbled over business opportunities - in India, Indonesia, Thailand and China. There was business, business, and business! And the problem then was securing resources.
What could we offer? We didn't have the sales people in place. We had organizations everywhere, but far too few sales people. We didn't have locally added value. Everything was imported and that was of gold-plated design not fitting the local needs. Those were the real bottlenecks. The hurdles for our penetration were resources, human resources, and that we did too little inside these countries.
That's why we started to discuss joint ventures with local partners. Through them we would have access to existing factories, engineering offices in order to ensure a quick start- up, because you start with an already established set-up and not from scratch. So that was the real move that I tried to initiate. I felt we succeeded fairly well in getting that going.
The hurdles today are two-fold and partly the same as before. The resources again. It is not a matter of expatriates, because they also enable a quick start. They come with the technical knowledge, they know our products and they start up local businesses. But now it is more a question of how can we groom the local people, so they can take over. We do that in many places and they are coming up the line, slowly, but surely. These people know the establishment; they have a local angle, local values and an understanding of the local culture.
There are many people on the way up. This is critical. We need to train more people in management issues. We need to train them in our technologies and in our processes to bring them up to management positions. To facilitate this we have an extensive exchange program where we take people from the emerging markets to Europe and North America.
The other part of the hurdle is slightly different. We have one thing in common in our group and that is broken English. No two people, or very few, have the same English. So what is said, is perceived differently from one individual to another. We tend to use words differently.
So how can we create respect for these different perceptions? The idiosyncrasies do not mean the individuals have different views, it's only because they come from different environments. Each individual gives different meanings and words different emphasis. Therefore we need to have people who take that into account, that people perceive a situation, language, communication, everything, differently.
We must try and find out why we have those differences and find a common understanding. That's the second hurdle, which I would say is extremely important today. In the beginning it was more to get the business moving and then you didn't have to care so much about perceptions. It was better to get it done, than to be 100% right. But now we have to refine.
Q: Are there differences in your approach to Asia as compared to Latin America and Africa?
A: You know it is not a case of either or. We have to be everywhere. We are a global company and must have a presence everywhere. In the West, typically, it may be 1 percent to two percent if we are lucky. But then if I look at Latin America, they also have tremendous growth potential. You have in Latin America almost 500 million people. So the need is there. Now it is a matter of demand.
They have sorted out their debt crisis with North America. Now they are starting to get loans from the International Monetary Fund and World Bank to support their development. And that is finance which will be used to build infrastructure there. More hydropower plants, more steel plants, oil and gas sector exploration, and so forth.
These are also local needs, and ABB can serve them locally. As regards Africa, it has a fast-growing population, also in the Arabic countries of northern Africa and the Middle East, which will boost the demand for infrastructure equipment.