Gajah Tunggal to boost exports to Asia and Middle East

Gajah Tunggal to boost exports to Asia and Middle East

Tire producer PT Gajah Tunggal Tbk (Gajah Tunggal) will further boost its exports to reduce the impact of a weakening domestic market due to the prolonged economic trouble at home.

"The domestic tire market has dropped for various reasons, particularly because of Indonesia's economic problems, which has reduced greatly the movement of goods and people over land. Other reasons include the increasingly lower cost of air transport tariffs and rampant tire smuggling," said A. Aziz Pane, Gajah Tunggal's Adviser to the Marketing Director, last week in Jakarta.

In spite of all these factors, Pane expressed optimism that Gajah Tunggal's business performance would keep growing via its exports. Gajah Tunggal currently exports its products to 123 countries in Asia, the Middle East, continental Europe, the UK, and the U.S.

The Asian market, including the Middle East, absorbs 60 percent of the company's total export, while the Philippines, Thailand, Vietnam, Laos, Myanmar and Cambodia are emerging markets for Gajah Tunggal tire products.

"We can boost our exports to offset the decline in domestic sales. As a fully Indonesian-owned company, we have no need to ask permission from foreign principals to expand our overseas market," Pane said.

Nowadays, Gajah Tunggal exports 82 percent of its tire products and sells the remaining 18 percent on the domestic market. The current domestic demand for tires reaches 9 million units. Pane hoped improvements in the economy would enable the company to increase domestic sales to 30 percent.

Gajah Tunggal, an integrated company that controls tire production from the downstream to the upstream levels, is the largest local tire producer and is also known internationally. The company is among the 19 biggest tire producers in the world.

"We have no problem with the standard requirements of export markets, since our tires exceed international standards in terms of strength and durability. We produce extremely strong tires because we know that local vehicles are usually overloaded and therefore require above-standard quality tires," he said.

Aside from tire production, Gajah Tunggal runs a vocational college that grooms and trains the company's future human resources. Established by renowned businessman Sjamsul Nursalim, Gajah Tunggal is one of the most productive assets acquired by IBRA (Indonesian Bank Restructuring Agency) in the repayment of debts incurred during the Indonesian banking crisis of 1997.

Pane said that the entry of smuggled tires from China posed another problem to local producers. Sold at far lower prices, the smuggled tires have not only grabbed the market share of domestic producers, but have also resulted in great revenue losses for the state revenue.

"I do believe the smugglers have a lot of money to protect themselves. But I do hope they realize that what they are doing is actually depriving many of their fellow citizens of their jobs in domestic tire industries."

Indonesia has issued the Obligatory Indonesian National Standard (SNI-Wajib) decree to protect domestic market from substandard imported tires. Almost all domestic producers meet the SNI-Wajib standard, but the decree has no power over smuggled products.

A source at the Indonesian Tire Producers Association (APBI) said Jambi, Sumatra, was the main point of entry for smuggled tires from China, and that at least four smugglers were operating in the region. He also expressed his dismay that local authorities had not taken any action against the smugglers.

According to this source, every week Jambi receives three containers containing 3,000 smuggled tires each. This means that approximately 36,000 smuggled tires enter the country monthly, and 432,000 smuggled tires per annum.

To control the distribution of tire products in the domestic market, APBI has proposed that the government enforce the Exporter's Special Identification Number (NIPK) on all tire importers. Such a move would enable the country to monitor tire imports and ban the import of poor quality tires.

"Tire importers should be required to have the NIPK, because tires concern the health and safety of our customers. Every month, people die or are injured because of substandard tire products," said the source at APBI.