Joint venture set up to produce industrial gears

Joint venture set up to produce industrial gears

JAKARTA (JP): State-owned PT Barata Indonesia signed a joint-
venture agreement here yesterday with PT Prakarsa Rekaroda and
David Brown Engineering Group Plc. of Britain to manufacture
industrial gears in Surabaya, East Java.

State Minister of Research and Technology B.J. Habibie, who
witnessed yesterday's signing, said the three firms will
establish a joint venture, called PT Barata David Brown Gear
Industries, with an investment of US$10 million.

At the initial stage of its operation, the joint venture is
expected to reap a 10 percent share of Indonesia's increasing
industrial-gear market.

This market, which is currently valued at around $60 million
per year, is now dominated by imports, leaving about 5 percent to
10 percent to a number of small domestic manufacturers.

"If we can capture 10 percent of this market, Indonesia can
save some $6 million annually in its import expenditures,"
Habibie announced after the signing ceremony.

In the long run, he said, Barata David is expected to have an
80 percent share of the domestic market, saving about $48 million
in import expenditures.

Yesterday's joint-venture agreement was signed by Chris J.
Brown, the joint chief executive officer of David Brown
Engineering Ltd., I. Kartono Wardoyo, the president of PT Barata
Indonesia, and Andre Pondaag, the president of PT Prakarsa
Rekaroda.

Barata Indonesia is managed by the Management Board for
Strategic Industries (BPIS), a division overseen by the State
Ministry of Research and Technology. BPIS is chaired by Habibie.

Prakarsa Rekaroda is the representative of David Brown in
Indonesia and has businesses in the marketing and distribution of
industrial products.

From the project's total investment of $10 million, which will
be provided over a five-year period, 51 percent comes from David
Brown, 36 percent from Barata Indonesia and 13 percent from
Prakarsa Rekaroda.

Manufacture

Habibie explained that the new venture will manufacture gear
drives, transmission gears and replaceable gears, all of which
are used in a wide range of industries.

These include the material industry, such as cement, mining,
iron and steel; agro-industry, such as pulp and paper, sugar and
irrigation works; the maritime industry, including dredging, bulk
transshipment and shipping equipment; the transportation sector,
which includes trains and automotive vehicles; and the
petrochemical industry, such as gas and oil, and off-sea
refineries.

Habibie said the industrial-gear industry complies with the
vendor system that the government is developing.

The vendor system, he pointed out, is beneficial not only
because vendors' individual products and their assembled output
can reap more taxes than that of built-up imports, but also
because the system can provide numerous job opportunities.

Habibie said he would suggest a tax incentive for the
development of the new plant.

"We will make a request...I am sure the minister of finance
will take this into consideration, because he is the one who is
most concerned in tax revenue. People can only pay taxes if they
work, and to work they need jobs, which we must create," he said.

However, he acknowledged that the most important incentive in
a vendor system is the confidence that there is a captive market
for its products. In this case, this is an assembling company for
industrial equipment. (pwn)