Indonesia with infinite possibilities
- Environment & Infrastructure Business Unit
- Metal Products Business Unit
- Metal Products
- Real Estate
Indonesia is a tropical country, and has been attracting much attention around the world as one of the post BRIC* countries. With its economy growing at a rate of 5 to 6 percent per year, the country is now producing about 40% of the GDP (gross domestic product) of the entire ASEAN (Association of Southeast Asian Nations) member countries. In mid-October 2011, I visited Sumitomo Corporation's operating companies in Indonesia to see how Sumitomo Corporation is involved in this economic growth.
* BRIC is a grouping acronym for Brazil, Russia, India and China, and refers to major emerging economies.
Robust growth of Indonesia
What surprised me when I first visited Jakarta, the capital and economic center of Indonesia, in mid-October were the heavy traffic jams. I remember that I had a hard time with traffic jams when I lived in Jakarta ten years ago, but the jams I experienced during my business trip this time were far greater. Not even mentioning commuter rush hours, traffic was at a standstill even during daytime hours, after 14:00 p.m. Such is Jakarta's famous reputation as the place with "the world's worst traffic jam." Even motorbikes, which are supposed to be able to move between cars, cannot do so because there are simply too many of them. During my stay in Jakarta, I often had difficulties in estimating just how long it would take to go to a building even just a short distance ahead.
It's no wonder the above situation is occurring since Indonesia is now the second biggest auto market in Asia, following Thailand. Currently, 8 million motorbikes and 800,000 automobiles are sold per year and sales are likely to reach 10 million units and 1 million units, respectively in a few years time. The Indonesian market is in fact dramatically expanding.
To ease severe traffic jams caused by the explosive growth of auto sales, there are several zones in central Jakarta where only vehicles carrying three or more passengers, including the drivers, can pass through. This measure to relieve traffic jams is called "3-in-1." While this regulation is inconveniencing many people, some are taking advantage of it in order to earn a living—as a temporary passenger "jockey." They give a thumbs-up before control zones, like a hitchhiker, and receive money by riding in a car that is not carrying a sufficient number of passengers to meet the requirement. I didn't see any jockeys because I was fortunate enough to avoid travel during rush hour, but I was impressed by the toughness of people who transform regulations into an opportunity for business.
At the same time, despite the dramatic increase of cars, I felt that the air had become remarkably cleaner. Ten years ago, most of bikers in Jakarta were covering their mouths with a bandana to avoid breathing in exhaust gas. During my stay, however, I rarely saw black exhaust gas or people wearing bandana masks. Cleaner air despite worsening traffic jams. The only thing that remained unchanged since my last visit was the Jakarta-standard passenger capacity of bikes, which carry four people.
Besides traffic jams, I noticed another feature of Indonesian roads―too many Japanese cars, which made me feel as if I was in Japan. Reportedly, over 90% of the vehicles on the streets are Japanese cars. And Sumitomo Corporation is in fact contributing greatly to the production and distribution of Japanese cars in Indonesia.
Roads are clogged, day and night. Jams often worsen when it rains.
EJIP, an industrial park that supports economic growth
In less than an hour by car, after leaving central Jakarta, you will see seven industrial complexes along the highway. It is Asia's largest industrial district, where about 3,000 companies are providing over 1 million jobs. East Jakarta Industrial Park (EJIP)detail, for which Sumitomo Corporation serves as an agency, occupies a corner of the district. EJIP was established in 1990 as the first private-capital industrial park in Indonesia. Sumitomo Corporation's Overseas Industrial Park Department takes charge of all of its operations, from selection of the site to solicitation of tenant companies, and takes care of tenants after they move in. Indonesia, with a population of more than 200 million people and an annual economic growth of 5 to 6%, is one of Asia's largest markets. In recent years, companies from various business categories, particularly car-related companies, have been moving into the industrial park in order to access this huge market. For these tenant companies, the industrial park is a finely-tuned support system that holds to its motto of "The relationship starts when a contract is signed." It has developed both hard infrastructure, including water treatment facilities and optical fiber cables, and soft infrastructure, such as Japanese restaurants and a DVD rental store. Additionally, in light of the situation where roads linking the industrial complexes have not developed despite the increasing logistics between them, the EJIP is asking the Indonesian government to develop a logistics network to connect the North, South, East and West.
President Toru Kawamura of EJIP that is managing the large industrial park
The Super Steel Group rapidly growing with both domestic demand and re-exports
With increased economic development, Suryacipta City of Industry, where Sumitomo Corporation serves as a sales agent, nearly tripled its tenants in the past one year. At this large industrial park, P.T. Super Steel Karawang (SSK)detail has operated its Karawang Plant for its coil center business since 1999. The plant cuts steel coils as raw materials into required sizes for customers to press. In addition to SSK, Sumitomo Corporation jointly operates other coil center, P.T. Super Steel Indah, with a local partners. A total of three Sumitomo Corporation plants account for about 40% of Japanese coil centers in terms of processing capacity and quantity share. The three plants are in full production to provide supplies to industries that have increasing demands, such as automobile, motorbike, home appliances, and electronic device industries. The plants are enhancing their facilities to meet demand, in particular, the demand for booming car-related industries. SSK is quickly building a new factory, which will house the company's second blanking press (a facility to press steel for automobiles), next to its Karawang Plant. Other than a large plant capacity, SSK's other strength is the fact that the plant is the only bonded coil center. By taking advantage of two pillars, Indonesia's domestic demands, particularly from car-related industries, and re-export from Indonesia to the world, SSK will continue to contribute to a stable supply of high quality products.
Karawang Plant filled with steel sheets for home electronics and electronic devices for re-export.
Local staff discussing in a kaizen meeting
P.T. Sumisho Global Logistics Indonesia, an unsung hero of the auto industry
Products and parts manufactured in industrial parks and other locations in Jakarta are transported by P.T. Sumisho Global Logistics Indonesiadetail. As an integrated global logistics service provider covering logistics center operations to customs clearance for import and export, it plays a crucial role in Indonesia's transportation industry that has been traditionally dominated by individual business owners. Particularly after the recovery from the Lehman failure, the company has been receiving a great number of inquiries due to its readiness as a general logistics company.
The company is carrying out the "milk run" distribution operation for auto manufacturers while responding flexibly to daily traffic jams. Milk-run is a "round trip" logistics system which facilitates both collection and distribution. Sumisho Global Logistics Indonesia continuously monitors its trucks, which are equipped with a global positioning system (GPS), by using location management monitors, as they pick up parts from suppliers and deliver them to auto manufacturers around the clock. This system allows the company to deliver parts just in time. Auto manufacturers need tens of thousands of parts to make even one vehicle, but many of them carry stocks for only several-hours worth of auto production. Therefore, the milk run delivery system plays the role of the unsung hero who works behind the scenes to support the explosive car demands in Indonesia.
Supporting smooth production and logistics by slipping through traffic jams
One of the company's centers, Karawang Center, which is located in the industrial park, has more functions than an ordinary logistics center. It assembles motorbikes and sells import stocks, mainly for Japanese motorbike and auto parts manufacturers. Currently, the development of new factories and the expansion of existing factories are increasing in Jakarta along with the growth of car-related industries. That move is intensifying employee headhunting; however, the company focuses on developing human resources with sensitivity and maintaining and improving motivation, rather than getting caught in a wage war. The company employs about 550 people from diverse racial and religious backgrounds, which is typical in Indonesia, and therefore faces difficulties in management. Due to years of effort put forth by the company, exemplary local staff members have developed to perform management duties admirably. Additionally, Director Takashi Koide works on equipment production to cut costs and optimize the center's operation. Inside the vast center, assembly facilities that the company jointly developed with customers, as well as internally designed and produced equipment and devices for cargo handling, play important roles.
On my way to the airport after finishing a series of visits to the operating companies, I became stuck in another traffic jam. I couldn't remember how many traffic jams I encountered during my stay. Behind the world's worst traffic jam lies an Indonesian economy that is fast-growing with domestic demands and exports, and companies trying to meet a variety of needs. After traffic jams ease up, probably years in the future, what role will Indonesia play in the world economy and industry? How will Sumitomo Corporation be involved? I wanted to re-visit the country at the end of my business trip to Indonesia.
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