Yuli Tri Sumarni, Bandung – Strategic industry firms are still seeking ways to do business with the Indonesian Military (TNI), which they hope will boost profits.
State aircraft manufacturer PT Dirgantara Indonesia (DI) is still not hitting its potential, with sales of planes to the military valued at only Rp 254 billion (US$25 million) between 2005 and 2009, while arms manufacturer PT Pindad, which received an order for 154 armored personnel carriers, is still seeking a solution on stalled payments.
DI aircraft integration director Budi Wuraskito said Friday aircraft purchases from the Defense Ministry over the past five years were relatively small, compared to orders from South Korea for six CN235 planes, worth $94 million, based on a contract period of three years.
South Korea had earlier bought six military and two VIP transport planes of the CN235 type from DI, while the TNI has only used seven CN235s and a maritime patrol aircraft, modified from a similar type.
That figure, Budi said, was almost the same as the eight CN235s used by the Royal Malaysian Air Force.
The Turkish government has also assembled six CN235 anti-submarine planes – built, designed and modified by 40 DI employees in that country over the last four years. Budi said financing was the main obstacle DI had faced from the TNI in aircraft procurement.
"Former finance minister Yusuf Anwar didn't approve management guidelines to finance the strategic industry," Budi said on the sidelines of a technology exhibition held at DI's CN235 hangar in Bandung. "If he had done so, more purchases would have been made."
Friday's event was held in conjunction with the handing over ceremony of 40 Pindad armored cars to the Defense Ministry, attended by President Susilo Bambang Yudhoyono.
From the aircraft service and product support sector, the TNI has only contributed 20 percent of around $13 million in earnings from both businesses to DI. DI's total income in 2008 stood at $80 million. It is expected to earn $110 million this year thanks to new purchase contracts for aircraft from South Korea, the Philippines and the Indonesian Navy.
DI's dependability in the eyes of other countries has further improved. It is currently involved in talks over eight CN235 anti-submarine planes for the Malaysian government, and the planned purchase of planes by the Philippines and Qatar.
"Our political will is strong now, evident from the message conveyed by the President and Vice President to buy domestic products," Budi said. "Only financing remains an obstacle." Pindad director Andik Avainto Sudarsono expressed similar sentiments.
The firm is currently trying to complete orders for 150 APS 6x6 armored cars and four 4x4 armored scout cars worth Rp 1.2 trillion for the Defense Ministry.
Andik said it was tough doing business with the TNI, due to the force's yearly allocation policy. He said this made it difficult to build the products, because orders for raw materials, engines and other materials must be prepared six months before production commences.
He pointed out his company had not received the down payment for 40 armored cars completed in the first half of this year, which it handed over to the Defense Ministry on Friday. The ministry should have paid the 20 percent down payment of the total Rp 317 billion bill by June this year for the order of 40 armored cars.
Pindad has had to part with 10 percent of its profit from the total transaction to pay interest payments to three state-run banks, now inflated to Rp 12 billion.
"This is why it's hard to support domestic products," Andik said. "We propose the President apply the long-term weaponry procurement system so financing can be done over several years.