PAL to be restructured, but calls for govt help

PAL to be restructured, but calls for govt help

JAKARTA (JP): Although the financially-troubled shipbuilder PT
PAL stated yesterday that it will soon carry out a major
restructuring, it still emphasized the need for a government
subsidy to cushion it from regional competition.

"We have set a long-term plan to make PAL a healthy business
consistent with the normal financial norms and to make it a
responsive organization to all changes in the global market,"
PAL's vice president, Suleman Wiriadidjaja, told members of
Commission X of the House of Representatives in a hearing
yesterday.

Part of the restructuring plan, Suleman said, is aimed at
increasing overseas sales to Rp 460 billion (US$209 million) by
1999.

Various economists, including some at the World Bank, have
criticized PAL -- which is controlled by State Minister for
Research and Technology B.J. Habibie in his capacity as its
president and the chair of the Agency of Strategic Industries --
due to its failure to generate profits and its heavy
expenditures.

Suleman conceded that PAL has been operating at a loss, which
was "mostly caused by depreciations, overhead costs and scores of
unfinished government projects assigned to the firm."

Suleman also said that up to last year, all marketing efforts
to boost overseas sales had failed and production targets were
not met.

He blamed those shortcomings on a lack of "package financing"
and difficulties regarding PAL's ability to secure contracts.

The executive also said yesterday that the restructuring plan
will soon remedy sales.

"Through our more intensive marketing plans, our sales target
is Rp 185.56 billion for 1995, Rp 270.59 billion for 1996, Rp
349.34 billion for 1997, Rp 413 billion for 1998 and Rp 460
billion for 1999," Suleman said.

However, he did not clarify the feasibility of the sales
targets. No exact figures on past production, sales or finances
of PAL, or of any other strategic industries for that matter, are
available.

Subsidy

Despite the restructuring plan, which covers financial,
marketing and management areas, Suleman hinted yesterday that PAL
will still require a government subsidy to cushion it from
increasing regional competition.

"The reality of the situation, in relation to government
subsidies for shipbuilders, is that other countries are doing
it...Subsidy must be given serious attention, especially in our
efforts to built a strong shipbuilding industry," Suleman said.

The executive also presented the House members with a table
stating that Indonesia's shipbuilders do not receive any subsidy,
as opposed to shipbuilders in Switzerland, the United States and
Brazil which do.

However, in an apparent contrast to his statement, Suleman
also said yesterday that since Minister Habibie has chaired PAL
from the late 1970s, the shipbuilder has been exempted from any
levies on imports of components and materials. (hdj)