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Driving road transport forward

Interview - April 29, 2014
As one of the largest state-owned enterprises (SOE’s) in Indonesia, DAMRI – or the Bureau of Motor Transport – aims to provide road transport services that are safe, affordable, and of superior performance to the people of the country and the ASEAN region. In an interview with United World, President Director of DAMRI Mr. Agus Suherman Subrata talks about his personal journey, as well as what the future has in store for the expansion of the company
Could you describe to us how you came to be President Director of Bureau of Motor Transport of the Republic of Indonesia (DAMRI), one of Indonesia’s largest state-owned enterprises (SOEs)?
I studied finance at the University of Dallas, Texas and returned from America in 2000. Prior to joining DAMRI I was head of the procurement division in the Ministry of Transport. DAMRI itself was established in 1946 and I joined in 2004 as the Director of Finance, Human Resources and General Administration. I was effectively juggling two director positions and DAMRI was in a poor condition then.

I moved from the Ministry of Transport because the Minister for SOE believed I could improve the situation at DAMRI. Back then if the Director of Commercial Operations needed a new bus they would ask for a budget from the Director of Finance and in turn the Director of Finance would ask the Director of Commercial Operations where the capital was coming from. It was senseless. 
I slept at the office for days while studying how to solve the structural and financial problems facing DAMRI. One key problem was that the company had been making budgets based on fleet plans for 60 years. Fleet plans simply looked at how many buses DAMRI had and what we could do with them. I wanted to change the principle of our budgeting; I moved to base it on the demands of the market, not the capacity of the fleet.

By my second year the DAMRI head office were on board with my plan to base our budgets on market demand. After 2 years I made another decision to refine our budgeting further and set fresh financial targets. We needed to halt costs and start generating a profit. In fact our office in Jakarta used to run at a loss of 10 million but we have steadily decreased this amount since my stewardship of the financial department. We’re still an SOE, so I’m only talking about making a standard minimum profit. After my 2 years as the Director of Finance the banks started to trust us more and three years ago. Then in 2011, I became the President Director of Perum DAMRI.
What direction did Perum DAMRI then take under your leadership?
When I became President Director I decided to adopt a policy of aggressive expansion. We now have city and inter-city busses, an airport service, cargo busses, 2,600 total passenger busses and 59 offices across provincial Indonesia. Only our city buses are running at a loss, losing $20 million a year. I believe they should be subsidised by government, as is standard around the world. 
In terms of regulation we are operating under two government supervisors at the moment. The Minister of Transportation monitors our technical operations and the Minister for SOE supervises our management. It’s difficult because the Minister of Transportation wants us to provide excellent services and the Minister for SOE wants us to turn a profit. 
Starting this year our suggestion to government was that they encourage corporate social responsibility and convince large corporations in Indonesia that it is in their interest to subsidise bus services. We’ve trialled free bus services for students in Bandung, running on Mondays and Tuesdays, and that has been publically well received but is not financially sustainable. Getting major companies on board is tricky but it would be possible, again in Bandung for example, to have free bus services for students every day. Ultimately it’s up to the government to make and implement those sorts of plans. 
How do you plan to implement DAMRI’s expansion plans?
The focus for the company this year is on aggressive strategy targets. There are 349 routes all around Indonesia. You can imagine that for each route we need at least one service. We wonder whether or not we should adopt a low-cost, high-coverage strategy or a differentiation strategy. This year we are surveying our options and drafting a long-term plan. We want to deliver an excellent product, simplify our portfolios and centralise operation control. In 2018 we want to be the leader of land transportation in Indonesia, the leader in terms of routes and performance. The potential for our business in the future is huge. 
We would like to enter into interstate operations and are interested in sharing in the national branding that companies like Garuda Indonesia enjoy.
For us, human resources are a very important because our people are our assets. With better staff comes better performance. In two years we have sent 63 employees to receive Masters degrees related to the transportation industry. We’ve also cooperated with the police and worked on improving the driving discipline of our staff. DAMRI has plans to implement E-Office ticketing systems and overhaul our CCTV and monitoring system as well. Last year, one of our cargo buses was hijacked in Bali. Fortunately, we retrieved that particular bus an hour later, in part thanks to our IT systems. 
I feel now, every year, the business is becoming more complex. Human resources will be critical to helping DAMRI manage this complexity. Finding the right mechanics for our gas engines is just one challenge, for example. The lack of infrastructure is another hurdle. Without gas refuelling stations around Indonesia we will not be able to operate our advanced busses. The government has committed to expanding gas refuelling infrastructure but we don’t want to have to rely on the government. DAMRI is about the begin construction of a trial refuelling station, built in partnership with an Indonesian natural gas SOE, for the exclusive use of our busses. 

Is expansion of interstate routes, such as into East Timor, likely in the future? 
It is, especially in East Timor. The only problem with entering into East Timor is the foreign regulation and the lack of a memorandum of understandings (MOU). Nonetheless, both DAMRI ministerial supervisors have encouraged us to invest in Dili regardless. We have team members currently there looking at the foundations of a Kupang, or Kefamenanu, to Dili route. 
After East Timor, we’re looking at the state of regulations, infrastructure and land transport in Papua New Guinea. 
Do face any issues with parts supply or technology?
Business and competition with China is tough and it mainly centres on supply issues. We have to be careful about the quality of their busses, parts and purchasing schemes. We’re quite tight in our bus specifications though. We only use Korean Doosan gas engines in our newer busses and source other critical parts from manufacturers in Germany.
China is funding electric busses and we have considered those briefly. The conclusion was that the costs outweigh the benefits. 
How will the coming formation of the ASEAN Economic Community effect DAMRI?
It will predominantly impact our logistics. Say, a container in the Philippines could one day be managed from Indonesia. It comes back to the problem of infrastructure. We want to be the unopposed leader in land transportation in Indonesia, but need more support from the government to make that happen.
What will the next government of Indonesia have to do to improve the land transport sector?
They will need to look at developing routes and infrastructure across Indonesia. Land transportation is critical to the economy of Indonesia. Indonesia consists of 18,000 islands, so we have to handle the logistics of supplying goods and services to all those islands. Whoever the president is, they should focus on infrastructure. 
Do you have any closing remarks on business in the country?
Business in Indonesia will only grow in the future. Indonesia is preparing for the future and we do not need CEOs who are still learning. Indonesia needs established experts to head our expanding businesses and enterprises. Leaders in Indonesia will need to be able to motivate and guide their employees to success. For instance, all of my senior managers pushed me to make the best of DAMRI when I started here. Land transportation is competitive and there are 23,000 bus companies around the world. It is a more competitor rich environment than the airline sector for example. 
Innovation and expansion is critical to serve this market. Last year we replaced and reconditioned over 1,000 of our busses and launched 40 of our royal buses, which offer premium services along 5 key routes. If you want to succeed in this industry, you need to think out of the box.