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Vessel production up 50% at Indonesian shipyard

Interview - November 22, 2013
President Director of PT Palindo Marine Shipyard Batam (PMSB), Mr. Harmanto attributes Indonesia's greater capabilities and his dedicated workforce as two major factors in seeing his company's production rising rapidly this year. He also provides an overview of the nation's shipbuilding industry and of his company's evolution by using the latest technology to build vessels with reliable strength, stability, speed, and easy maintenance
How did you start your business and what vision did you have when you established PT Palindo Marine Shipyard Batam (PMSB)?

Indonesia is the biggest archipelago in the world, so to get from one small island to another we must use boats. I was born on Bintan Island (one hour from Batam Island), and I have always been surrounded by water and ships, so I started by constructing small wooden boats. At the beginning, we were making wooden boats for ourselves, but eventually it developed into a business. The first company I established was in 1985, on Bintan Island, and it was called Fiberindo. We started producing fiberglass ships.  
In 2003, I came to Batam Island and established PT Palindo Marine Shipyard Batam (PMSB). I chose Batam because it is a very strategic location. As a free trade zone (FTZ), it offers many tax incentives, so for example, we do not have to pay taxes on the imported material from Malaysia and Singapore. This is a great opportunity for us to make profit through the import and export of vessels. The FTZ makes it possible for us to thrive in both local and international business  
What are PT Palindo’s main products and who are your most important customers? 

Our products include patrol boats, fast passenger ferries, crew boats, rescue boats, barges, and various boats made of steel, aluminum, GRP (glass-reinforced plastic), and a combination of steel and aluminum. We also produce low/moderate speed boats, such as pilot boats and shipping boats. 
Our main customers are shipping companies in Indonesia, Malaysia, Singapore, and Thailand. We also cooperate with different government institutions in the country, like the Navy, the Ministry of Maritime Affairs and Fisheries, the Ministry of Forestry, the National Search and Rescue Agency, and other institutions. 
How much of your business is targeting the local market compared to the products that you sell externally?

About 70% of our products are sold locally, while the remaining 30% are exported mainly to Malaysia and Singapore. We export only commercial products. Out of the 70% of the local business, about 50% is commercial, while the remaining 50% of our products are sold to the government, mostly to the Ministry of Defense. Nevertheless, from year to year this percentage differs. For the last two years the percentage for defense has gone up, because we have had increased activity in the field of guarding the coasts of Indonesia. 
How has the Indonesian shipping industry evolved over recent years? How did the Asian crisis affect the sector and your business in particular?

The situation in the shipping industry before the big Asian crisis was quite stable. We built ships for our neighboring countries like Malaysia, Singapore and other countries. We operate in an industry where there is broad support in business for private companies – companies that are both domestic and international. With the crisis all industries were beaten down, but with our human resources and a good location, we were able to weather the crisis. After the crisis the situation got better and new opportunities arose – for example, we got the trust and support of the government to build vessels for the national defense industry.
One advantage our domestic shipping industry had here during the crisis was the geographical position of Indonesia. Being a country that consists of thousands of islands, and covers a big area of sea, there is a big demand for vessels and boats to protect the borders of the country. 
What are the main competitive advantages of PT Palindo Marine Shipyard Batam (PMSB) that distinguish you from other shipbuilding companies in Batam?

At the moment there are more than 100 shipyards in Batam, and many of them are big companies, so competition is very strong. To be competitive, we strive to deliver high quality products on time or even before the scheduled time, because ‘Time is Money’. For example, one of our most popular products for the local market is the fast passenger ferry. With this product we put much effort in ensuring safety and speed. It usually takes one year to make a vessel like this, but we often deliver it to our customers within 10 months. So we try to deliver ahead of time, without compromising on the quality of our products. 
We are able to perform like this because we have good manpower that works very hard. In fact, we have more between 600 and 700 professional workers that are experts in their respective production facilities, allowing us to create very high quality vessels. They all work with a common goal – to deliver the best product in the shortest period of time possible. 
We can say that the motto of our company is ‘Time is Money’ and we all work with this motto in mind. According to our vision, we want to deliver the best product with the best price, the best delivery, and the best after-sales service. After-sales service is very important to us and is where we stand out from our competitors. The standard is a guarantee of one year and we give extra support through maintenance. With this we hope to realize that customers are satisfied and want to continue placing orders with our company. 
I do my best and always strive to improve the company. Also, we are constantly trying to improve our products in the field of defense. The Government of Indonesia has been good to us, so we want to create the best possible products in the defense industry by improving our vessels, and delivering the very best. 

Can you tell us more about the quality and design of your ships?

We have a naval architect and engineers who are responsible for the design of our vessels, and if needed I make corrections. The most important characteristics in the design of a good vessel are strength, stability, speed, and easy maintenance. We use the latest technologies for the design of our vessels, and our vessels are tested extensively. The technology we use in our shipyard comes from Indonesia.
We also gain a lot of experience from those customers that use our products, especially from the Indonesian Navy. They have a lot of expertise in the field of large vessels, particularly battleships, and give us very constructive feedback. 
We have about 12 designers and in the last 10 years we have designed around 30 different vessels. Our most popular model is the fast passenger ferry. In the beginning we designed models using fiberglass as the primary material, but over time we made a shift in material to aluminum, which is much stronger. In 2005, we built our first aluminum vessel. Up until today, we still produce some fiberglass vessels, but nowadays most of the customers prefer aluminum vessels as they are stronger.
From where do you source the material for the construction of your vessels? 

The materials we use for our vessels are steel and aluminum. We buy all the steel here in Indonesia, but we still have to import 50% of our aluminum from Australia and other countries. A few years ago, we had to import up to 70% of aluminum, but now the amount we import has decreased, because the capability of our country to produce aluminum has increased. 
As far as production is concerned, in 2012 we produced around 20 vessels. This year the projection is 30 vessels, which is a 50% increase. We got many orders from the Ministry of Defense and other local companies. For example, for the Ministry of Defense this year we are producing the fast missile boat: KCR-40. By the end of 2013, we will have delivered in total six of this type of KCR-40 to the Ministry of Defense. We expect to get more contracts like that in the future from the Ministry of Defense.
What plans do you have for the future of the company?

Our plan is to continue to support the development of the economy by developing, selling, operating, and performing good maintenance of our vessels. For the future, we want to anticipate the need for transportation domestically and internationally. There is a need to increase the connection between our islands, which will call for an increase in the production of fast passenger ferries. 
We will sell part of the production of fast passenger ferries to customers. Another part we will use to cooperate in joint ventures to operate the ferries locally between the different islands domestically, but also internationally with Singapore and Malaysia. 
Do you plan to increase the capacity of your shipyard as the company grows?

Currently, we can build 20 or 30 vessels at the same time, so we have no expansion plans in terms of our facilities for the coming two or three years. 
Aside from the design and construction of vessels, we also do repair and maintenance of domestic and foreign vessels that come to our shipyard, because the cost is lower in Batam compared to Singapore and Malaysia. 
As I said before, the location of Batam is very strategic due to the FTZ. However the profit from the repair and maintenance business is quite small, so we would rather focus on developing our shipbuilding activities in the future.