Daekyung reaps benefits of transferring technology

Daekyung reaps benefits of transferring technology

Last Friday Korean-Indonesian joint-venture PT Daekyung Indah Heavy Industry unveiled its first products for export, with executives paying tribute to the success of the three-year-old technology transfer enterprise.

Ready for shipment at the company's plant in Cilegon, West Java, the 22 heat exchangers were inspected by Mr. Yoon Soonyong, Vice President of LG Engineering of South Korea, which is purchasing the units.

Established in October 1992, PT Daekyung Indah Heavy Industry is 60 percent owned by Korea's Daekyung Machinery and Engineering Company. The other 40 percent is owned by PT Barito Industries, a subsidiary of the Barito Pacific Group. The group is active in the forestry, agriculture and petrochemical sectors.

PT Daekyung Indah Heavy Industry, with a paid up capital of $2.5 million, has invested $13 million in the Cilegon operation.

The company employs 11 South Korean nationals in management and supervisory capacities. The Cilegon plant employs 163 Indonesian staff in positions which include design engineers, draftsmen, estimation and fabricator personnel.

Production at PT Daekyung Indah Heavy Industry's plant began in May 1994.

PT Barito Industries President Director Ir. Suwoso Sindredjo joined Mr. Yoon Soonyong in cutting the red ribbon on the heat exchangers, the first ever to be exported from Indonesia.

Managing Director Kim Dooyoung said the company had been supplying the heavy industry equipment to the domestic market for some time but this was its first export.

"Overseas technology has always been more advanced than Indonesia's, but now Indonesia is starting to catch up," he said.

In addition to training in Indonesia, all Indonesian staff employed at the Cilegon plant regularly receive intensive training in South Korea for between three and six months. Mr. Kim Dooyoung said the program was expensive but the benefits to the company of highly-skilled labor outweighed the cost.

"Through such programs the Indonesian technicians' quality and training has improved," he said.

"As a result, Indonesia has acquired technology from Korea and, in a short period of time, we are exporting back to Korea. The technology transfer has been very rapid, smooth and successful."

Heat exchangers are used in chemical and petrochemical engineering to heat and cool chemicals and create chemical reactions.

The 22 heat exchangers, worth US$400,000, are bound for LC Engineering's Yeo Chun chemical and petrochemical plant in South Korea. They will be used in the production of octanol (ethyl hexanol).

Inspecting the finished equipment Mr. Yoon Soonyong paid close attention to the welding. He said he was very impressed with the overall quality of the job.

"I am very happy to see it is a good product," he said. "Because it is the first time we have dealt with this company in Indonesia, I was a little worried about production delays or the quality at the time of ordering. But today I found the quality of the product to be very good and also delivery will be earlier than scheduled."

Mr. Yoon Soonyong said that after the completion of the Yeo Chun project in May next year, his company would consider ordering more industrial equipment from PT Daekyung Indah Heavy Industry.

"This is our first purchase from Indonesia but if we are doing overseas projects we will definitely consider this a source.

"Of course we will make the decision after evaluation of the equipment but this company will be top of our list."

The firm's most sought-after products are its heat exchangers, pressure vessels and reactors. However, it also produces towers, columns, storage tanks, steel structures and air-cooled heat exchangers.

Recent additions to the firm's output include boilers and mills for processing crude palm oil on a turn-key basis.

Mr. Kim Dooyoung said: "In the future more automation will be adopted here, making us more competitive."

The company used local materials in production, he said. However, some materials, such as stainless steel still had to be imported.

"We import raw materials from Korea, Japan, America and Germany but where raw materials are available from Krakatau Steel we try to use it to support localization."

The Daekyung Machinery and Engineering Company has been operating in Korea for 17 years and now has four factories there.

The Indonesian joint venture was the brainchild of Company President Kim Souk Ghee. The plan was realized by Director Cho Sam Hyun, who oversees the Cilegon plant.

Mr. Kim Dooyoung said the company was looking forward to achieving further milestones in the coming year.

"Our company will be the first in Indonesia to manufacture floating-head type heat exchangers which are very high-tech, complicated and difficult to manufacture," he said.

Pertamina's Balikpapan Oil Refinery in East Kalimantan has ordered 22 sets of the floating-head type heat exchangers worth $1.5 million. The order is due to be filled in April next year.

The production of the floating-head type heat exchangers was a breakthrough in Indonesian manufacturing, he said. Previously, such equipment had to be imported, because Indonesia did not have the technological expertise to manufacture that type of heat exchanger.

Although exports are important, this company's commitment to serving the local market is strong.

"We are an Indonesian company, so the marketing share will be 60 percent Indonesian, 40 percent export," Mr. Kim Dooyoung said. "We are currently manufacturing pressurized vessels and heat exchangers worth around $1.5 million to be exported to Singapore, Thailand and India in April/May next year."

Furthermore, PT Daekyung Indah Heavy Industry is also considering the establishment of another plant in East Java.

The joint venture's location in Indonesia is strategic for gaining access to the Southeast Asian market. It also represents a good opportunity for developing business in Indonesia.

"The product's volume is large, so transport is expensive. This makes Indonesia's location important," Mr. Kim Dooyoung explained.

PT Daekyung Indah Heavy Industry is one of only four Indonesian heavy industrial manufacturers in similar fabrication businesses authorized to use the symbol of the American Society of Mechanical Engineers.

Mr. Kim Dooyoung said that while the export to South Korea of the heat exchangers marked an important step for the joint venture, 1995 had been a challenging year for the industry.

"Petrochemical investment here has been delayed slightly due to loan arrangements. We expect another boost next year," he said.