Bandung. Sudirman Said, the newly-installed president director of state weapons manufacturer Pindad, is planning to expand the company’s commercial activities to prevent over-reliance on military contracts.
In an interview with the Jakarta Globe, Sudirman said that around 15 percent to 20 percent of Pindad’s revenue comes from sales of commercial, or non-military, products. However, he explained, “if commercial products can contribute around 30 percent to our revenue then our cash flow will be more balanced.”
Sudirman said that the biggest challenge for Pindad was capital. Most of its orders are paid through the state budget, which means bills would be paid only after the budget was approved. In the mean time, the company must incur debts to cover its expenses.
Pindad secured contracts worth Rp 1.8 trillion ($150 million) in 2013. It has secured Rp 1.2 trillion worth of contracts so far this year, out of the targeted Rp 2 trillion.
Aside from producing military equipment and vehicles like the Anoa armored personnel carrier and the SS2 assault rifle, Pindad also sells commercial equipment like power generators, commercial explosives, and other products used for railway systems and ship manufacturing.
“We just signed a memorandum of understanding with [state utility firm] Perusahaan Listrik Negara for revitalization and maintenance of power generators,” Sudirman said.
The room for growth in commercial products looks to be quite substantial, driven mostly by the nation’s strong emphasis on infrastructure development, said Sudirman.
Producing and marketing commercial products would have the added advantage of instilling “confidence” in Pindad’s engineers, according to Sudirman. “But, our core business and competence will remain producing weapons for the military,” he added.
An accountant by education, the director spent most of his professional live as an executive with Indika Group, an energy-focused conglomerate.
He also worked for state energy firm Pertamina for two years and was involved in several programs of the Indonesian Armed Forces (TNI).
He has been Pindad CEO for a month.
Sudirman stressed his belief that Pindad is strong enough in terms of production and engineering capabilities.
“What I can bring is a touch of corporate management — commercial aspects of an enterprise,” he said. “While in terms of production, engineering and research and development, I trust the people at Pindad,” he added. “Pindad has never failed the TNI.”
Still, the company is lacking specific budget allocation for research and development, another area that Sudirman looks to improve.
“We used to develop new products by taking an old machine and upgrading it. While this proves the expertise of our engineers, things must change,” he said.
Pindad and the government must also think about the company’s future, Sudirman said.
“Financially, Pindad is very healthy. But we don’t want to be merely surviving, we have to improve and expand.”