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.