German firms to go ahead with RI high-tech expo despite crisis
By Reiner S.
BERLIN, Germany (JP): German high-tech companies will proceed with plans to hold a major exhibition in Jakarta despite the ongoing political unrest and economic crisis in Indonesia in a move to reaffirm a long-term commitment to the country.
A total of 200 German companies are expected to participate in the DM 9 million (US$5.43 million) TechnoGerma exhibition on March 1-7 at the Jakarta Convention Center.
"We aim to strengthen business relations between Indonesia and Germany," says Gunther Graf, managing director of IMAG (International Exhibition and Fair Service Ltd.), the organizer of the exhibition.
"The target is to make as many business contacts as possible, not business contracts," he adds, pointing out that transaction deals could not be expected due to the economic crisis.
TechnoGerma is Germany's largest overseas exhibition held every four years, and is financed by both the government and the business sector.
Participants in next year's event are mostly medium-sized industries with leading edge technology obtained partly through massive spending on research and development at an average of 10 percent of turnover per annum. The logo for the exhibition says: "There's no substitute for German technology."
"We discussed the Indonesian crisis issue with participants and the government in June 1998 and we decided to proceed with the plan," Graf said, adding that preparations for next year's exhibition started two years ago and that a lot of money had already been spent since then.
"Delaying it will not be good for improving relations with Indonesia," he adds, suggesting that such a move may harm confidence in Indonesia.
Many German companies regard Asia, and particularly Indonesia, as their most important export market. They have suffered a significant drop in sales this year due to the economic crisis in the region.
They say that Indonesia -- and the rest of Asia -- has to recover from the crisis or they would be in serious trouble.
Sales drop
Alexander Batschari, executive director for press and public relation at the German Machinery and Plant Manufacturer's Association, says that the association's combined turnover in 1998 is expected to drop by more than 60 percent to DM 275 billion due to the Asian crisis.
The industry is Germany's second largest exporter after the auto industry.
Werner Schmidt, managing director of German Electrical and Electronic Manufacturing Association, says that exports to Indonesia are also expected to drop to DM 700 million this year from DM 1.2 billion in 1997.
"We expect a recovery in the year 2000," says the executive of the 1,420 members association with a combined turnover of DM 245 billion and exports of DM 136 billion last year.
Harry J. Hackl, executive vice president for marketing and sales of Voith Sulzer Papiermaschinen GmbH, a medium-sized paper machine maker says that his company, with 64 percent of business volume coming from Asia, had not suffered much from the Asian crisis because of its significant share in the European market.
"But this can't go on for a longer period. Asia has to recover, otherwise we'll be in trouble too," he says
He says that his company will soon open a service center in Indonesia to enlarge business volume and contacts in the country, Hackl says.
Indonesia's paper market has a substantial potential, pointing out that paper per capita consumption here is only 19 kg, which is far below the 100 kg/capita in Hongkong, Taiwan and Thailand, he says.
"An increase of 10 kg/capita will require five to six big paper machines," he points out, adding that this can only happen at a GDP growth of 4-5 percent.
Hackl also says that the local paper makers greatly benefit from the large raw materials provided by the vast forest resources.
"So Indonesia remains our priority market," he adds.
Voith's largest customer in the country is Sinar Mas Group's Indah Kiat Pulp and Paper manufacturer with total orders amounting to nearly DM 1 billion.
Martin Lange, a member of the managing board of Man Roland Druckmaschinen AG, a high speed printing machine manufacturer, also expects Indonesia to recover soon to maintain its market share as the relatively small DM 10 billion worth worldwide demand for printing machines is being pursued by many competitors.
He says that during the 1997/1998 business year ending in June the company received DM 50 million in order from Indonesia's giant stationery maker PT Tjiwi Kimia who bought 20 units. The company is a unit of the country's second largest conglomerate, the Sinar Mas Group.
"This is one of the largest overseas orders ever awarded to MAN Roland," he says.
Order falls
Fritz Lohr, a key executive at the world's leading telecommunications system and data networks company KRONE Aktiengesellschaft, says that exports to Indonesia are expected to drop by 80 percent this year.
The crisis has caused orders for its latest wireless technology to be canceled by the country's joint operation fixed lines telecommunications providers (KSOs), he points out.
The company, which exports 80 percent of its products, also regards Indonesia as one of its important export markets. It also has a US$5 million plant in the country manufacturing telecommunications optic fiber components.
"Our Indonesian operation can survive because it has managed to export its products to Europe and Australia," Lohr says.
German companies believe in the prospects of doing business in Indonesia.
He also believes in similar prospects for the country's telecommunications sector which only has a telecommunications penetration rate of less two lines per capita, the lowest in the region.
He says, however, that gaining good business in Indonesia will require a stable exchange rate of the rupiah against the U.S. dollar.
But a sustainable stability in the currency, and economic recovery, will very much depend on the return of confidence in the country.
"The implementation of the general election and its outcome will be important in bringing back confidence," says Erich T. Geis, chief economist at Kreditanstalt fur Wiederaufbau (KfW), a state-owned bank which has been active in making loans to the Indonesian government and private sector.
Indonesia is expected to hold a general election in June next year in a more open political environment resulting from the fall of former president Soeharto.
Geis, however, stresses that KfW will not close down projects financed by the bank despite the mounting social unrest in the country.
"We are a long-term investor, and our commitment to the country is always on a long-term basis," he adds.
KfW has so far provided Indonesia with a total of DM 3.8 billion, mostly in soft term G to G loans. The bank recently channeled DM 300 to the Indonesian government, of which DM 250 million is expected to help local exporters in buying imported raw materials.