BAT backs worker cooperatives

JAKARTA (JP): PT BAT Kareb, a joint venture between PT BAT Indonesia -- a major Indonesian cigarette producer -- and Kareb, a cooperative of workers in Bojonegoro, East Java, has proven that a partnership between a multinational company and a local cooperative can be a mutually beneficial relationship.

"Many multinationals are reluctant to foster relationships with cooperatives because they assume local cooperatives lack the professionalism and capability to manage large-scale businesses," BAT Indonesia said in a statement on the development of the joint venture near Surakarta, Central Java.

During a visit to the BAT Kareb threshing facility on Friday, BAT Indonesia president Mark Jennings said BAT Kareb proved this assumption was incorrect.

BAT Kareb, which is a tobacco processor, was founded in 1995.

The partnership, however, does not simply encompass supplying tobacco to cigarette producers; BAT Indonesia and Kareb also formed a limited liability company which generates proportional profits for both parties, BAT Indonesia said.

"The joint venture has gained steady growth of over 23 percent in revenue and almost doubled its production output," Jennings said during a meeting with the cooperative's employees.

BAT Indonesia said the joint venture's production over the past three years increased from 2,595 tons of tobacco in 1996 to 4,440 tons in 1998.

BAT Indonesia and Kareb are equally represented on the board of directors of the joint venture, with each contributing half of the members, the statement added.

"In this partnership, both parties are equal partners, so neither party controls or is controlled by the other," Jennings said.

BAT Indonesia holds 70 percent of the shares in the joint venture, while Kareb holds the remaining 30 percent.

Jennings said BAT Indonesia helped transfer technology and management know-how to the cooperative.

The partnership, in return, provides BAT Indonesia with access to a threshing facility and a continuous supply of quality tobacco which meets the company's standards, he said.

Besides providing services for BAT Indonesia, Kareb also works with other cigarette manufacturers.

The joint venture's assets amounted to Rp 14 billion, including a 6,830-square meter factory, two 5,264-square meter warehouses and a tobacco processing facility.

BAT Indonesia, established in 1917, was listed on the Jakarta Stock Exchange in 1979. The company is now a leading cigarette producer with a number of familiar international and local brands, including Lucky Strike, State Express 555, Kent, Benson & Hedges, Ardath, Commodores and Escort. (02)