The local advantage in Indonesia

August 3, 2020

Harsono Salim, managing director of Kotaminyak, talks to The Energy Year about the advantages of having a localised workforce and how the Indonesian government has responded to the Covid-19 crisis. Kotaminyak is an integrated supply, engineering, manufacturing and services company.

This interview is featured in The Energy Indonesia Special Edition: Crisis and Resilience in the Covid-19 Era.

Which is your main area of activity at the moment?
We are lucky because we have many offices outside of Jakarta so they can operate fully during this Covid-19 crisis. In Jakarta, a lot of people are struggling and they have a problem opening their offices because there is no mass business in Jakarta. I still have offices in Balikpapan, Pekanbaru, Duri, Palembang, Surabaya. Those are the ones with action now as they are places with oil and gas activity.
We also do exports to Vietnam, to Malaysia. Now we are talking to Oman and Kuwait.

What is the biggest impact that this crisis has had on your business?
We don’t have many new orders coming in. New orders have gone down 70%. We have a backlog, meaning orders that have not been delivered, and a lot of maintenance work. Having maintenance shops is very helpful so we are using the opportunity to complete the backlog now because the maintenance work lasts two to three years and you cannot operate an oilfield without it.

Sending maintenance teams out to locations in those conditions must be an interesting challenge. How do you go about it?
What happens is that we have offices in many areas already. So, I always make sure that I use the local people instead of sending people from Jakarta. Besides, it is also cheaper to work with local people than to send people from Jakarta. So localised manpower is very helpful. Otherwise we would have problems because there is no airline operating now.

You seem quite well positioned compared to other players who may not have all those outposts and the associated capacity to service clients out there.
Yes, some of my friends who are only relying on supplying products, buying and selling are seeing few new orders coming in because oil prices have become so low that there is no new purchasing going on now. But for maintenance, we always have something to do. Clients have to buy spare parts; they have to buy some small items.
In some areas they are running at full speed, in others at half capacity. And in some areas, they have closed down because of the coronavirus. If the plant has a coronavirus-infected person, then they have to close that place, do distancing and run tests, to investigate what happened. That’s the way the Indonesian government is trying to limit the contagion.

 

How do you rate the quality of the response of the government to the crisis?
I think on a scale of 1 to 10, they can be given a 9. They are doing very well because they prepared hospitals for 15,000 patients in Jakarta and they have prepared around 20 hospitals in Jakarta that are designed to help all those who have Covid-19. Then we have a few different classifications like ODP and PDP for people under monitoring, people under observation and people who are infected. By using these classifications they are controlling those who tested positive in the rapid test. I think there are many things that the government is doing to try to reduce the impact.
Actually, if you see the reports on Asia, the countries that are still experiencing economic growth are only China, India and Indonesia. The rest of Asia is in negative growth. Why? It’s because the Indonesians are spenders. They don’t sit on money that they have in Indonesia. That helps the economy a little bit.
And because Indonesia consists of many islands, all the islands are still operating as normal. There are still manufacturers, and the mining industry is still running at full steam. The oil and gas operations are still running. Only the hotels and the tourism sector are closing. The cinemas are closing, the whole entertainment sector too. Only the restaurants are still open but you cannot eat there; you have to take away the food.
So, I think the Indonesian government is lucky because we have many islands and we don’t have a lot of infections like in other countries.

Do you think the experience of the crisis is going to help you change some of the ways that you do your business and learn different ways of approaching operations, organisation and management styles?
We are trying to do physical distancing in the company, and to have good air circulation in the office, for example. We are installing fans to send out the air, to circulate the air in the office. We will forbid people who are coughing from coming to work. If they are sick, they should stay home. And we are not extending the work of any of those who retire unless we need the person very badly because old people are very much affected by the virus.
Even before the crisis, every floor had fans and we had established the practice of cleaning hands; we already do that in our office. So now we are doing even more. We have reduced the operating hours of the office. People must live healthily and not work too hard. This is what the coronavirus is teaching us!

Do you think it might help your business further down the road?
We use Microsoft Teams and Zoom. We do a lot of sales meeting simulations, teaching our salespeople to understand the products better. So, we are using simulations between the end user, the client and ourselves almost every day. We are using the lockdown and the slow business activity to do a lot of training in the company. We are studying our management, our accounting system, our finances. We spend time studying the procedures, to make sure our people are more qualified by getting some training. That’s the only way to improve your company performance; get your people to be more qualified.

What is the biggest threat in the current situation? Is it the Covid-19 disruption or the oil prices, which have hit unprecedented lows in the past few months?
I think it’s both. The oil prices are low because of Covid but in Indonesia, the oil industry is controlled so we are lucky.

Have you received good support from the financial institutions, banks in particular?
The banks are still maintaining the loans because we are paying them, so they are extending all their services to us. The banks are businessmen; if you don’t pay them, they will not give new loans – you know, they are like that.

What has been the main lesson you have learned during this crisis?
This is the time that you have to be more competitive. In order to be more competitive, you have to have well trained staff so that you don’t make mistakes. Mistakes can be expensive, so the customer will want to have discounts, better alternatives, better pricing, better design. So, your staff must be better trained.
Most of my products are of the protection type. Flare is especially for the environment. I do control systems to protect the plant, as well as lightning protection systems and fire protection systems. Most of my business is to protect the plant. So in a way, that helps me a lot too because I am selling insurance to the oil and gas and the general industrial plants. A lot of our clients, when they buy our product, buy safety and protection too.

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