Mon, 21 Aug 2000

Sinar Mas launches web trading platform

By Johannes Simbolon

SINGAPORE (JP): Indonesian conglomerate Sinar Mas Group has established a joint venture with the world's leading information technology and trading firms to operate an e-business that allows it to operate more efficiently amid the global competition.

"The establishment of the e-business is part of Sinar Mas' consolidation program to survive the global competition.

Franky O. Widjaja, chairman of the joint venture Trade Alliance Ltd, told reporters during the launching ceremony of the joint venture here Thursday.

Sinar Mas owns 50 percent of the US$30 million joint venture in partnership with Japanese trading giant Nissho Iwai Corporation; American leading e-commerce firm Commerce One; China Internet Global Alliance Limited, which is a subsidiary of Sinar Mas.

Compaq and Microsoft the hardware and software for the e- business of the joint venture, while Citibank handles the payment system through internet, said Franky.

Sinar Mas operates in Indonesia, China, India and Singapore with a total assets of $15 billion. It is active in agribusiness, pulp and paper, property and finance.

Nissho Iwai is the world's 20 largest firm in 1999, according to American magazine Forbes.

Commerce One is the founding member of the world's largest business-to-business e-commerce business called Commerce One Global Trading Web.

"We are partnering with large business groups and leading technology providers to bring real sustainable, revenue generating business solutions," Franky said.

Franky said Sinar Mas was ready to reduce its shares in the future to allow more partners to join the e-business.

Trade Alliance provides a web-based platform allowing buyers and sellers to make deals real time more efficiently.

The Internet "marketplace" provided by Trade Alliance allows buyers to find the best and cheapest products and sellers to find buyers who are willing to pay the best price for their products.

Thus, Trade Alliance diminishes the role of brokers, who stand between producers and buyers in daily trade and raise the operation costs of both producers and buyers.

"Trade Alliance enables trading partners to reach new markets, reduce transaction costs, achieve better price through higher market transparency and provide access to new business opportunities.

The large pool of buyers and sellers offers a wider choice, thus providing greater operating efficiencies to both buyers and sellers," Trade Alliance's chief executive officer (CEO) Anthony Peake said.

Thus far Trade Alliance offer two "marketplaces", that is eFoodAlliance, specialized in food products, and ePaperAlliance specialized in paper industry.

"ePaperAliance will be the first business-to-business pulp and paper exchange in Asia for trade among the worldwide businesses in paper and pulp," Peake said.

According to Peake, Trade Alliance recorded an online transaction worth $500 million on the first day of its operation.


Franky said he was optimistic that Trade Alliance would be profitable in 18 months with revenues generated among others from transaction fee.

He said Sinar Mas wished to develop Trade Alliance to become "The Asian gateway to global e-business" and planned to list its shares on the Nasdaq Stock Exhange after it becomes profitable.

He noted however Sinar Mas mainly benefits from Trade Alliance in that the latter allows the former to considerably reduce its operating costs.

Sinar Mas targets to save US$500 million in costs in three years thanks to Trade Alliance, he said.

"That's why we internally call this project the $500 Million Mega e-Transformation," Franky said.

First, Franky said Sinar Mas expected to reduce its purchasing costs to between five to 15 percent or between $150 and $200 million in three years thanks to transparent and efficient purchase through the forum provided by Trade Alliance.

Secondly, Franky added, Sinar Mas hopes to gain more customers as Trade Alliance eliminates the role of brokers and allows Sinar Mas to offer its products at lower cost and better service to its customers.

Sinar Mas expected to cut its sales cost by $200 million in three years, Franky said.

Besides, Franky said, Sinar Mas has also introduced an Internet-based system for internal communication and decision making to adjust itself to the Internet culture.

Previously, he said, it might take months for the company to process a purchasing order due to the conventional system implemented by the company in communication and decision making and the company's bureaucratic chain.

The Internet-based system considerably cut the bureaucratic chain and speed up the internal communication and decision making that the company can now quickly process its purchasing orders, Franky said.

"This can reduce the cost of processing orders to one-tenth of what they used to be. Together with other such efficiencies, this will represent another $100 million in savings," Franky said.

Franky said Sinar Mas started internet business last year as it realizes that it had to engage in the business to survive the global competition.

"In today's world, we have no alternative but to get into Internet business to survive. Otherwise, we lose out to companies who operate more efficiently," Franky said.

Sinar Mas has invested less than $20 million to set up several websites.

"After setting up some websites, Sinar Mas decided to focus on business-to-business e-commerce rather than business-to-consumer e-commerce. We have learned from American experiences that none of the internet firms of the latter category makes money," Franky explained.

Franky further said Sinar Mas chose Singapore as the headquarter of Trade Alliance given the city state's excellent telecommunication infrastructure and the Singaporean government's supports for the development of Internet firms.