Indian businesses find success in Indonesia
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.