Success story of a partnership program (1)

The Bali Declaration, issued late last month by the chiefs of the 100 biggest business groups in the country, addressed the need to enhance business partnerships between small, medium and large firms. The Astra International group, however, started its own small business development program more than 10 years ago. The following is the first of two articles based on Sri Wahyuni's interview with Rini MS Soewandi, who oversees the Astra program, and several small-scale entrepreneurs who have been assisted by the program.

JAKARTA (JP): Financing business partnerships with small firms has not been a major problem for large private and state companies, Yayasan Dharma Bhakti Astra's (YDBA) experience has shown.

"YDBA has received many requests from state enterprises to participate in our small business development programs or for cooperation in similar schemes," said Rini MS Soewandi, the chair of the YDBA management board.

According to Rini, many state enterprises are financially capable of helping develop small businesses, but lack the capacity or experience to implement such a program.

YDBA, known for its success in carrying out business partnership programs with small firms, has therefore been invited by other firms to implement such programs.

Pertamina and YDBA, for example, are now exploring a partnership project in Dili, East Timor. Together with a West Java venture capital company, YDBA is also studying a rubber training project and a product development and processing improvement scheme.

The foundation was set up in 1980 because of PT Astra International's commitment to help develop small and mid size businesses, as reflected in the Astra corporate motto: "Prosperous with the nation and being a useful asset for the nation and country."

"That is actually the basic philosophy which underlies the birth of YDBA," said Rini Soewandi.

In order to realize its commitment, Indonesia's largest automobile group has allocated 3 percent of its net profit for its business partnership programs, two percentage points of which are channeled through its venture capital company called Astra Mitra Ventura. The remaining 1 percent is extended through YDBA for financing training programs in production processes and the marketing, management and financial fields.

PT Astra International's net profit in 1994 amounted to Rp 242 billion.

"We estimate our net profits for this year at Rp 350 billion," said Rini Soewandi, who is also the financial director PT Astra International which has now become a widely-diversified conglomerate with stakes in heavy equipment, plantations, office machines, electronics, plantations and telecommunications.

YDBA initially organized training for small businesspeople. However, Astra subsequently realized that in order to become strong it needed supporting companies as vendors and sub- contractors.

It was this awareness that prompted Astra to launch projects to develop small enterprises in industries related to the automotive and heavy machinery industries. Since then YDBA has given special attention to the metal industry because it has the potential to be a sub-contractor for the Astra business group.

One place singled out at the outset was the small industrial center for metal casting in Ceper, Central Java. Having investigated the area in 1986, YDBA designed and carried out a training and apprenticeship program for small businesses in the region.

The apprenticeships took place at Astra's subsidiaries.

"Now the former trainees and apprentices have become Astra sub-contractors and vendors," said Rini.

According to Rini, not all small and medium businesses under YDBA's program automatically become Astra sub-contractors. Many of them also sell their products to other companies or business groups.

In this case, Rini said, apart from training and apprenticeship, we also provide assistance in the form of seed and working capital.

This capital aid is channeled through Astra Mitra Ventura or Bank Universal, a commercial bank owned by the Astra group.

YDBA has helped 787 small and middle businesses under its business partnership program. They are located in Greater Jakarta, Bandung, Sukabumi, Tegal, Semarang, Surakarta, Sidoarjo and Surabaya.

Of the total, 277 are now sub-contractors to the Astra business group, 208 are vendors and of the remaining 197 manufacturers, 105 businesses are totally unrelated to Astra's line of business.

"We are of the opinion that partnership programs need not always be implemented with related businesses," said Rini.

Many of the unrelated businesses have become successful. For example, the hand pumps manufactured by Rumini have penetrated the markets of several Asian countries.

Many of the vendors and sub-contractors -- 286 small-scale and 199 mid-scale enterprises -- manufacture motorcycle components.

"This type of industry isn't difficult for small and middle businessmen," said Rini.

Linggo Suprapto, the 47-year-old owner of PT Adhi Wijaya Sentosa, booked a turnover of Rp 4.5 million a month when he started his business in 1985.

Adhi Wijaya has become a sub-contractor for Astra and now has a monthly turnover of more than Rp 300 million.

"The orders I receive from Astra are based on pure business considerations. They are not for charity reasons," insisted Linggo Suprapto who graduated from a technical high school.

The same feeling is shared by 54-year-old Rasyidi, who has been successful with his PT Lencana Madya. This manufacturer of badges, who once only made Rp 500,000 a month, is now able to produce 25 motorcycle, automobile and musical instrument components. His monthly turnover ranges between Rp 25 million and Rp 30 million.

"I have reaped great benefits from YDBA's program," Rasyidi told The Jakarta Post.

Rasyidi said the training and other forms of assistance he got from YDBA are very helpful for new businesspeople. He now knows about production tools, quality control and production systems.

"Without the business partnership program I might also be able to develop my business, but it would certainly take longer. YDBA has acquainted me with the business world in a quicker way. The quicker the acquisition of knowledge the quicker the yield," he regurgitated.

To support the partnership program for small and middle business, YDBA has set up a number of industrial clinics called small industry information units in some regions. They serve as centers for consultation and information.

The unit in Bandung organized a meeting last week which was attended by 20 potential small businesspeople and 60 established entrepreneurs from Jakarta.

The meeting was designed to promote the small businesses' products to the big businesspeople to expand their markets.

At present YDBA has information units in Jakarta, Bandung, Ceper and Surakarta, and Waru in East Java. Four other units are scheduled to open in Bukittinggi, Jambi, Riau and Dili.

YDBA will open a similar information unit in the United States but its exact location has yet to be chosen.

According to Rini Soewandi, the American unit will find market openings for small and mid-size enterprises focusing on products unrelated to the Astra group.