Minang Jordanindo, an Indonesian-Jordanian joint venture company, invited a group of Indonesian journalists, including The Jakarta Post's Vincent Lingga, to witness the signing of its business deals and visit the the 220-hectare Uraltrac industrial complex in Chelyabinsk in the last week of May on the occasion of Uraltrac's 75th anniversary celebration on June 1.
ChTZ Uraltrac Ltd, one of Russia's largest manufacturers of tractors, bulldozers, pipelayers and engines, will soon enter Indonesia in an attempt to break into the heavy equipment market, which is now dominated by Komatsu, Caterpillar and Hitachi.
Uraltrac's 10-ton capacity B10MB bulldozer is now on its way to Sangata, Kutai Timur regency, in East Kalimantan. The 25-ton capacity D320 and 106-ton T-800 bulldozers will follow a few months later to meet the demand boom fueled by sky-high commodity prices.
The units will form the first batch of heavy equipment ordered by PT Minang Jordanindo, which also plans to eventually assemble several types of Uraltrac equipment in E. Kalimantan that has now become one of the world's largest coal producers and a major oil palm plantation center.
Minang Jordanindo, an Indonesian-Jordanian joint venture company, invited a group of Indonesian journalists, including The Jakarta Post's Vincent Lingga, to witness the signing of its business deals and visit the 220-hectare Uraltrac industrial complex in Chelyabinsk in the last week of May on the occasion of Uraltrac's 75th anniversary celebration on June 1.
The following is his report:
The mining and agricultural commodity market boom since the second half of 2006, combined with massive infrastructure development projects, started it all. The demand for heavy equipment has become so strong that buyers often wait up to one year for delivery from traditional suppliers in the United States and Japan, but have to pay in advance to secure delivery.
This was the opportunity that prompted Minang Jordanindo, which has a long experience in reconditioning and selling used heavy equipment, to seek new suppliers. Hence, emerged Uraltrac, virtually unknown in Indonesia, but one of Russia's largest manufacturers of heavy equipment and a long-time major supplier in East Europe, Africa, the Middle East and several Asian and Latin American countries.
"I realize it is an uphill challenge to bring in this new brand to our highly competitive market, but I see a great opportunity not only because Uraltrac guarantees deliveries within three to four months but most importantly due to its strong commitment to transfer technology," said Bonny Z. Minang, chairman of Minang Jordanindo.
The contract between Uraltrac and Minang Jordanindo was one of the four trade and investment deals between Russian and Indonesian companies signed in Jakarta early last September in the presence of then President Vladimir Putin and President Susilo Bambang Yudhoyono.
So highly confident have been Minang Jordanindo and Uraltrac that they have even started planning a joint-venture assembly plant despite having yet to make the first equipment delivery. "In so far as our relationships with Uraltrac are concerned, Minang Jordanindo is not a mere dealer in the real sense of the word. We have gained Uraltrac's commitment to transfer technology through training and investment right from the outset of our talks," Bonny added.He said Minang Jordanindo had prepared a 30-hectare plot of land on the bank of the Mahakam river in Kutai for its assembly plant and training center complex.
Uraltrac's chief executive officer Valeriy Platonov acknowledged that ChTZ brand name was still unknown in Indonesia's heavy equipment market, but he asserted his products have been quite popular in more than 30 countries for their high technical performance, relatively low prices and the reliability of repair service support and availability of spare parts. "We are the first to manufacture diesel-electric tractors, which can secure a high technical performance and guarantee a steady, continuous power supply. Yet, most important, we always commit to excellence in all our products ," Platonov said."Don't' ask me about the performance of our tractors, but talk to our dealers who are here for our 75th anniversary," added Uraltrac's deputy director for international marketing Vladimir O. Klein.
Uraltrac, which has an annual production capacity of 4,000 units of various types of tractors, bulldozers, pipe-layers and engines, invited 90 dealers from Russia and foreign countries to the anniversary celebration and to look at its new products. Indonesia's ambassador designate to Russia Hamid Awaludin considered the Minang Jordanindo-Uraltrac business deal a visionary agreement because it involved not only trading but, most importantly, the transfer of technology and expertise to Indonesia.
"Russia has high a technology capability, expertise and a huge sum of international reserves to invest overseas, and Indonesia needs a lot of capital and heavy machinery to explore and develop its rich natural resources. This is a strategic synergy," added Hamid, who also attended Uraltrac's anniversary celebration and visited its product exhibition in Chelyabinsk. Hamid said economic relations therefore would be the focus of his attention in Russia as both countries have all the fundamental prerequisites for mutually beneficial relationships.
Uraltrac, which operates foundry, forging press, welding, machining, coating and thermal and galvanic production units, paraded and displayed several of its products, including its first tractor called Stalinets 60 made in 1933 and a Stalinets-2 military tank made in 1939, both of which ran well.
Alexander C. Setjadi, senior vice president for asset-based finance at Bank Danamon, one of the largest lenders to heavy equipment users in Indonesia, emphasized the crucial role of high technical performance, reliability and after-sales service in the marketing of heavy equipment. Since the price tags of heavy equipment range from US$100,000 to $2.5 million per unit, credit financing is always an integrated part of the transaction. Banks or finance companies will not be willing to finance equipment that cannot show high technical performance, Setjadi added. "Certainly banks will not finance a machinery that has a lot of down time because that will affect the commercial viability of the whole project," he said, adding that the first batch of Uraltrac bulldozers to enter Indonesia should be able to demonstrate excellent performance to gain user confidence.
Setjadi and Bank Mega's credit officer Michael A attended Uraltrac's 75th anniversary celebration in light of exploring lending opportunities generated by the Russian company's entrance to the Indonesian market. PT Kutai Timur Energy, a general trading and mining company owned by the Kutai Timur regency administration, will be the first operator of the first three Uraltrac bulldozers. Quick delivery, competitive prices and a firm guarantee of after sales service are the main factors that have prompted Kutai Timur Energy to make the plunge to buy Uraltract's bulldozers from Minang Jordanindo.
The waiting time for new purchases now often takes up to one year while "we need many of them urgently for our natural resource development projects," Kutai Timur Energy's president Anung Nugroho said. Anung expressed high confidence in Uraltrac's competitive advantage in the Indonesian market after inspecting its production and quality-control process. "I am especially optimistic because all of the equipment I ordered will be supported by a comprehensive technical assistance package directly from Uraltrac," Anung added. Setjadi pointed to the dramatic growth in Indonesia's heavy equipment market due to the massive expansion in oil plantations in various provinces and coal mining in Kalimantan. "I think our heavy-machinery market will expand this year to around 10,000 units from about 7,000 to 8,000 units last year due to the big increase in demand from the mining, plantation and infrastructure development sectors. Our oil palm and pulp plantations alone will expand by around 1.2 million hectares this year."Setjadi said Bank Danamon expected to increase its lending portfolio in heavy equipment and other asset-based financing this year to Rp 4 trillion from Rp 3 trillion last year.
The market is almost 70 percent controlled by Komatsu and Caterpillar with the remainder shared by many other brands from South Korea and China.
But Bonny was highly confident about making a significant dent on the market, especially as the domestic demand for heavy machinery will continue to expand and the prices of Uraltrac's equipment are on average 30 percent lower than those of its competitors in Japan and the United States.
"Uraltract's strong commitment to transfer of technology to Minang Jordanindo through technical assistance and eventual joint-venture assembling and manufacturing will make our business deal outstandingly different from our traditional heavy equipment suppliers," Bonny added
PT Minang Jordanindo is a partner of ChTZ Uraltrac, a giant company from Russia that manufactures heavy equipment, such as tractors and tanks during World War II. They work together to set up factories in East Kalimantan, and also include cooperation in technology transfer. The memorandum of understanding on the cooperation was signed by the presidents of both countries, namely Susilo Bambang Yudhoyono from Indonesia and Vladimir Putin from Russia in October 2007.
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CTZ URALTRAC AND MINANGJORDANINDO SIGNED A USD. 200 MILLION CONTRACT
During the Russian-Indonesian business forum timed to Vladimir Putin's visit to this country, Chelyabinsk Tractor Plant signed an agreement for the supply of Indonesian partners to its traditional products - bulldozers, pipe layers and loaders, thus opening a new and promising market for South Ural art. Another feature of the signed contract is its record high cost - $ 200 million. Such astronomical amounts primarily in the southern Urals could wipe unless steelmakers .
Podpisanie arrangements went smoothly, in a civilized way, without surprises, shares details General Director of ChTZ Valery Platonov. But this document was the final point set after a year of preparatory work. Our experts have visited Indonesia, explored the features of the market. I participated in the previous business forum of business circles of the two countries, which was held in Moscow during the visit to the capital of the Indonesian President Susilo Bambang Yudhoyono. In short, the beginning was not yesterday.
Vladimir Putin's visit to Jakarta was the catalyst for the incipient dialogue the business community, he paved the broad political track, in which you can develop mutually beneficial cooperation. Our relations have a complex history. After the historic visit to Jakarta Soviet leaders Nikitoy Hruschevym passed this island nation. But the Soviet leader's visit left then Indonesians pleasant experience. Today, interest in mutual contacts is very high. One of the central editions Indonesia the newspaper " The Jakarta Post " after a business forum held recently published an editorial that during Vladimir Putin's visit to Russia was reached historic agreement, listing names of "heroes of the day." Among the pioneers who have signed major contracts, the newspaper named the four Russian companies. So it was from Lukoil documents on cooperation signed by the head of the oil giant Vagit Alekperov, from the "Russian Aluminum" Deputy Director General of the company Alexander Livshits, from the "Alfa-Bank" its president Pyotr Aven. I had a chance to put his signature on behalf of the CTZ.
"Format business forum was traditional" continues Valery Platonov. From the Russian delegation to the podium raised by Moscow Mayor Yuri Luzhkov, who told about the investment climate in the golden-domed. Made and vice president of the South Urals Chamber of Commerce Igor Aristov. He spoke about the opportunities of the region. The information materials Chelyabinsk Tractor Plant was presented to diversify, has long become a hallmark of the industrial region.
Before the visit of the Russian President on 5 September, I have already met with representatives of business circles of Indonesia. This session was attended by seventy people. The participants were interested in what our competitive advantages in comparison with similar equipment from leading manufacturers - companies "Komatsu" and "Caterpillar", machines which are well represented in the local market. I am reminded of the ratio "price - quality". About Chelyabinsk tractor Indonesians are judged by how they work in Vietnam, in similar climatic conditions. Before you go out on the signing of the contract, the firm «Minang Jordanindo» analyzed the job. According to the Indonesians themselves, they were pleasantly surprised that the resources of the Chelyabinsk product is not inferior to the possible mechanisms of the world's leading tractor, but the machine is easier to maintain and cheaper. Parts costs are lower by 2-2.5 times, which also has great significance.
Today, Indonesia, with a population of over 220 million people, is experiencing an industrial boom. There being actively mining. The state is the largest world exporter of energy coal. But are explored new fields. Real natural "granary" of the country has become the island of Kalimantan, where search operations are carried out active natural larders. For there the standards is the hinterland, which can compare with the Russian Polar Urals and Eastern Siberia. Roads are in their infancy, so you need to create a physical infrastructure that is planned to do. In general, a great investment oriented precisely in this direction _ in exploration and field development, the construction of road and rail routes. And break the Chelyabinsk enterprises to the operating room of this area of the South Asian region could be the prelude of a large export flow technology capable of providing the demands of foreign consumers.
Ponimaya that this market we begin to learn the first time, we are going to prepare the staff of Indonesians to work in the Chelyabinsk machines _ clarifies CTZ head. In the next two months will come to us a group of experts, which will receive appropriate training in the factory. Of course, our staff will prepare properly. After all, let us not compete with the newcomers tractor and leading corporations. Therefore, one of our most important tasks the establishment there of a reliable service. So, spoken English language a necessary condition for the people who will represent the Chelyabinsk plant in Indonesia. In short, these experts also will be relevant courses. The first car will start its supply partners at the end of this year. On CTZ developed technical re-equipment program for 5-7 years, which involves an investment of 11 billion rubles. Proceeds from the Indonesian contract will contribute to the successful re-equipment of production.
However, apart from the agreements with the company «Minang Jordanindo» open other perspectives. In particular, in Jakarta, we have negotiated with the company Transasia to supply not only our machines, but also other Russian equipment manufacturers for the construction of a railway line in Kalimantan length of 900 kilometers. The company has asked the CTZ to mediate with the purchase of excavators, graders, dump trucks on their "construction of the century". Rosoboronexport signed a contract with Indonesia for the supply of certain types of weapons, including tanks. Engines in them will also Chelyabinsk.
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Russian Uraltrac equipment to enter Indonesia
Thu, June 5 2008 | 10:12 am