Having reaped billions of rupiah in profits from the 240 million residents of the archipelago, a number of state-owned firms are now turning their attention to neighbouring countries.
From a cement maker to an airline, they aim to tap into neighboring markets ahead of the Asean Economic Community, which is set to kick off next year.
Cement producer PT Semen Indonesia is in an ongoing discussion with Myanmar conglomerates to acquire a cement factory in that country.
The company, which has allocated US$200 million for the acquisition, however, may not be able to complete the process this month as previously expected.
“We’ve conducted due diligence and we are now reviewing data from the field,” Semen Indonesia corporate secretary Agung Wiharto told The Jakarta Post recently.
“We don’t need to hurry because we want to get the best deal.”
Agung said Myanmar was a “big potential market” for his firm as Myanmar’s economy was starting to grow as the formerly reclusive nation would need more cement to construct new buildings.
Myanmar is in the process of opening up its economy following its transition from a military junta to a civilian government in 2011. It has recorded economic growth of more than 6 per cent since 2012, according to the World Bank.
Agung said Myanmar’s cement demand stood at between 8 and 9 million tonnes per year, while its cement makers could only meet half of that.
“They’ve imported cement from Thailand and China. We want to capture that market with our presence,” he said.
“We aim to go regional,” Agung said, adding that his firm had successfully operated in Vietnam through its joint venture with Thang Long Cement Joint Stock Company (TLCC).
Semen Indonesia is not alone in its regional mission.
State-run lender Bank Negara Indonesia’s (BNI) construction firm PT Wijaya Karya (WIKA) and oil and gas firm PT Pertamina have joined forces and established a representative office in Myanmar.
State-Owned Enterprises Minister Dahlan Iskan previously urged 15 state-owned firms to expand their business to Myanmar because its economy was booming.
He said the Myanmar government had so far granted business permits to several state-owned firms, including the three that jointly established a representative office.
BNI international division head Abdullah Firman Wibowo said that for BNI, the representative office was currently collecting market intelligence to get a comprehensive picture of the prospects and business culture in Myanmar.
“About two weeks ago, we met with the Central Bank of Myanmar [CBM] to discuss our plan to open a branch there,” he said.
“They welcomed our initiative positively.”
Firman added, however, that BNI would not open a branch in Myanmar anytime soon because CBM was still reviewing some regulations.
CBM was just granted operational independence in July last year after being controlled by Myanmar’s government, according to a report by the US Central Intelligence Agency (CIA).
“We will probably open our own representative office after everything is fixed in Myanmar,” Firman said.
BNI currently has several overseas branches — including those in Singapore, Tokyo and Hong Kong — that generally provide services on trade finance and remittance transfer.
Firman said that BNI recorded total remittance transfers amounting $19.83 billion in the first quarter this year, a slight increase from $19.79 billion in the same period last year.
The bank served international trade transactions with a total value of $7.3 billion in the first quarter this year, a 28.4 per cent surge from the same period last year, he said.
Firman said that BNI would probably also jump into South Korea and Taiwan to capture a bigger portion of the market due to the many Indonesian migrants living in the two countries.
Joining the fray in expanding overseas business, WIKA also aims to enter Myanmar.
The company allocated 300 billion rupiah ($26.26 million) for its subsidiary, WIKA Beton, to build a concrete factory in Myanmar.
The company has also received an offer to develop a real estate complex in Myanmar through WIKA Realty.
“We’re still discussing our expansion plan in Myanmar,” WIKA corporate secretary Natal Agrawan said recently.
Besides expanding its wing to Myanmar, WIKA is also aiming to widen its overseas portfolio in, among other countries, Brunei Darussalam and Saudi Arabia.
Meanwhile, national flag carrier Garuda Indonesia, which already has 36 international destinations spanning across the globe, will open two new flight routes this year.
Garuda marketing and sales director Erik Meijer told the Post that Garuda would open the Jakarta-Manila (the Philippines) and Jakarta-New Delhi (India) routes by the end of this year.
The carrier already serves the Jakarta-Manila route, but through a code share agreement with Philippine Airlines.
Garuda spokesperson Pujobroto said that Garuda targeted to increase the number of its passengers by 10 to 20 per cent this year, from almost 25 million last year.
Trading consultant firm PT Astronacci International president director Gema Goeyardi said overseas expansion to newly developing countries, such as Myanmar, would provide state-owned companies with very good markets because the countries could still potentially grow for the next 20 years.
“In addition, overseas expansion will also help state-owned firms prepare to face regional and global free trade zones,” he said.
Gema said that by operating in a regional scale, the companies would be stimulated to advance their benchmarking strategies, institutional managements and human resources.