Indian businesses find success in Indonesia

Adianto P. Simamora The Jakarta Post/Jakarta

Many Indonesians would recognize the name Texmaco but not Ispat Indo. Both are Indian companies, each with different fates, and between them they represent the wide range of Indian businesses in Indonesia.

Texmaco is a business group that still has massive debts following the monetary crisis. One of its subsidiaries, Polysindo Eka Perkasa, has recently been declared bankrupt by the Supreme Court.

Ispat Indo, however, is little-known among Indonesians. Nevertheless, it is a one of a few Indian businesses here that has gone global from Indonesia.

Established in Waru, East Java, in 1976, Ispat Indo has brought such fortune to its owner, Laksmi Mittal, that those in his industry now call him the "King of Steel".

The firm, which started with one 60,000-ton capacity steel plant, now has operations in 12 countries -- Algeria, Canada, the Czech Republic, France, Germany, Kazakhstan, Mexico, Poland, Romania, South Africa, the United States and Trinidad -- with more than 135,000 employees on its payroll.

Data from the Coordinating Investment Board (BKPM) show that Indian investments in Indonesia stand at about US$800 million.

Indian investors first began coming to Indonesia following the signing of a trade agreement between India and Indonesia in 1978.

Most of the first wave of Indian companies set up here in the late 1970s and 1980s. Many of these focus on processing raw materials to make textiles, rayon, polyester yarn, viscose, staple fibers, cotton yarn and steel.

Later a follow-up agreement on the promotion and protection of investment in 1999 prompted a new wave of entrepreneurs as the Indian economy began to boom.

According to the Indian Embassy in Jakarta, there are currently at least 14 Indian joint ventures operating in Indonesia.

Indian joint ventures in Indonesia include Ispat Indo, Indo- Rama Synthetics, Five Star Industries Ltd., Indo Bharat Rayon, Elegant Textile Industry, Sunrise Bumi Textile industries, Gokak Indonesia, Jaykay Files Indonesia, South Pacific Viscose, Lotus Indah Textile Industries, Bitratex Industrial Corporation, Kewalram Indonesia, Essar Dhananjaya and Indo Liberty.

Unlike other international ventures, none left Indonesia during the crisis. Some of them even expanded their operations in Indonesia, including Indo Bharat Rayon.

Indo Bharat Rayon, the first entity to produce viscose rayon staple fiber in Indonesia, is expanding its installed capacity from the current level of 320 tons per day to 425 tons per day.

Indo Bharat Rayon is the local flagship of the Aditya Birla Group, one of India's largest business houses. The group has a total of five factories in Indonesia, producing viscose rayon staple fiber, carbon disulphite and three spinning units.

But the nature of business being done here is also changing, with more Indian software companies entering Indonesia.

NIIT, LCC Infotech and Aptech have established computer education centers in Indonesia and plan to extend their networks, as others look ready to follow.

IRCON, a major Indian public sector company, is carrying out a road construction project in Indonesia, and is actively seeking railway projects.

Meanwhile, in the oil and gas sector, the Hindustan Petroleum Corporation has shown interest in entering the Indonesian market.

Analysts say the presence of more Indian companies in Indonesia will improve trade and investment relations between the two countries.

The increased investment has led to a substantial spurt in bilateral trade. While two-way trade reached US$2.4 billion in 2003, it is expected to cross the US$3 billion threshold for last year.

Mathew Ninan W., a technology adviser working at a locally owned company Matracom Indo Sejati said cultural similarities and a shared history helped business relations between the two countries. Indians had a good record of success in Indonesia, which caused more companies to follow them here, he said.

"Historically, we have had trade relations and we even share some common religious backgrounds" he told The Jakarta Post recently.

Most Indians picked up the Indonesian language quite easily and many could quickly begin talking with Indonesians without much accent.

"When they can communicate well and freely without any risk of misunderstanding, then half the battle is won," he said.

The acceptance level among locals of Indians was also higher than expatriates of other nationalities working in this country, he said.

The difference between the Indian businessmen and other expatriates may be that we can easily understand the working system in this country, as there are a lot of similarities between the two nations," he said.

Corruption was also a common part of life in India as it is here and Indians could deal with this fact of life more easily than other nationalities, he said.

Meanwhile, president director of textile company Five Star Industries Ltd,. Manjit P. Chaudhury said Indians developed similar strategies for running business across the globe.

"Indian businesspeople are focussed and hard-working, and they know how to achieve their targets," he said.

"They are also very cost-cautious, they are good at accounting so that they know where the losses (in the company) come from," he said.

Many Indian Marwari business groups still apply the age-old cost accounting system known as the Partha. Under the system, the profit and cash flows of the company are calculated and analyzed daily.

Chaudhury said Indian businesspeople were also creative at cost-cutting aimed at maintaining prices of products at competitive levels.

They were generally computer literate and had a good understanding of English, which allowed them to get the latest market news and business trends from around the globe, he said.

"As a result, when the Indonesian markets slump, we become exporters," he said.