Glimmers of hope for small businnesses in crisis

JAKARTA (JP): Irwan Suryanto has made a name for himself in the West Java town of Majalengka.

The owner of a soccer ball business, Irwan can proudly claim credit for a welcome sign displayed on the road outside of the small town reading: "Welcome to the center of the soccer ball industry."

When the 48 year-old began the business in 1994, it might have never crossed his mind that the soccer balls made in his factory would be used in the World Soccer Cup this coming June in France.

He also probably never imagined that within four years after his business kicked off, State Minister of Youth and Sports Affairs Agung Laksono would visit his factory.

Business for Irwan has not always been a happy story.

When he started, he was supplying soccer balls for a South Korean company, earning meager production and labor fees.

"I was hurt after I found out that my products were sold at a multiplied price," Irwan says.

The partnership failed, resulting in over Rp 200 million (US$23,529) in losses.

But quitting was not his intention. After returning from a pilgrimage to Mecca, he was determined to continue the business.

With a new determination he relaunched the ball business, this time selling his own products bearing the brand name "Triple S", short for Sinja Santika Sport.

After failing several times to procure orders from domestic customers, Irwan shifted his market focus abroad although at the time he knew nothing about exporting.

"I was totally ignorant then. I didn't even know what a Letter of Credit was since I don't speak English," he says.

Target

Now his factory produces 30,000 balls a month and the entrepreneur expects output to rise to 50,000.

The balls are sold to Russia, the United States, Korea, the Middle East, Europe and Latin America.

While domestic demands for soccer balls total about 75,000 a month, the world soccer body FIFA estimates global demand at about 150,000 a day, he says.

With the crisis forcing many large factories to dismiss workers to cut costs, he often employs 750 temporary workers on top of 70 permanent workers.

Irwan's business is one of several smaller scale enterprises which continue to make profits despite the country's economic turmoil.

In Kali Malang, East Jakarta, PT Ekanindya Karsa relishes a similar success story from the export of reptile skin products.

While many producers of leather goods have been forced to shut down their businesses because the economic crisis has made imported components unaffordable, Ekanindya's earnings have actually increased.

Thanks to the rupiah's 70 percent drop in value against the U.S. dollar since last July and to the company's low import needs, Ekanindya's earnings cover the increased costs for its imported raw materials.

"The only imported raw materials we have are chemicals such as glue and accessories, which make up only 15 percent of the product," says company marketing executive Bahrum M.S.

The monetary crisis has helped boost incomes of some handicraft and furniture exports as well.

Devi Tana, owner of DC Interior House in South Jakarta's Kemang area, is one of those who enjoys the opportunities provided by the crisis as orders continue to multiply.

"Demand has been increasing over the past six months, from two containers a month to eight to 10 containers," Devi says, adding that each container is worth Rp 40 million.

Devi's gallery houses some 40 skilled craftsmen from Jepara, an area in Central Java known for its artistically crafted wooden furniture.

She has been exporting products since the business started seven years ago. Now her markets include Europe, the United States, Australia, Japan, Singapore, Malaysia and Tanzania.

Strategies

What do these three medium-scale businesses have in common?

Three things: exports, local components and good marketing management.

These factors are behind such success stories while the economic crisis threatens to bankrupt other businesses.

Atih Surjati Herman, who oversees the Small Scale Industry Development Agency in the Ministry of Trade and Industry, says companies that export goods with low import components are likely to progress faster than those which do not.

In time of crisis, their products become highly competitive.

Garment and handicraft company PT Wahyu Purnomosari in Bekasi proves that cheaper products can generate more orders.

PT Wahyu's director, Suprapti Wahyuni, says her company's exports of ladies garments to the United States, Dubai and other Asian countries has risen to 2,500 dozen pieces a month from 2,000 dozen in the last ten months.

"The orders started to jump after we offered a 25 percent discount to our traditional overseas buyers," Suprapti says.

"We get less dollars, but because the exchange rate has multiplied four times while production costs such as labor wages and power bills remain unchanged, our profit is higher in value," she adds.

Ekanindya's Bahrum says his company was luckier than other makers of leather goods, because it covers upstream to downstream operations, creating added value.

Bahrum says that when his business began in 1992, the company only exported reptile skin which was subject to government quotas.

Since 1995, the company began tanning alligator, snake and monitor lizard skins supplied by local producers, making them into handbags, purses and wallets. The products are now exported to Japan.

The company also provides services for Australian craft producers using alligator skin supplied domestically.

Good marketing networks and close relationships with buyers help strengthen bargaining leverage.

"We always deliver on time and replace damaged products right away since all handicrafts have been insured," Devi says.

Ekanindya developed this attitude to keep the loyalty of three buyers in Japan which have been customers since 1995.

"Pak Rachmad," Bahrum says referring to the company's owner, "always says: 'With Japanese people, if you haven't been invited to dinner at their house, they are not really your customers.'"

Ekanindya exports 85 percent, or 500 pieces to 600 pieces to Japan, which consumes about 70 percent of the world's reptile products.

It sells the remaining 15 percent locally in its five Jakarta stores and eight Bali stores. (43/byg/das/kod)