Global Business Guide Indonesia

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Joint Venture | Technology Transfer
Vinilon Group | Mr Sandy Susanto
Mr Sandy Susanto

We expect to see our industry benefit from the government’s removal of fuel subsidies on the lowest grade of gasoline, which will open up a substantial proportion of the budget for the country to spend on much needed infrastructure projects

Mr Sandy Susanto, President Director

Vinilon Group has a long history in Indonesia as a leading manufacturer and distributor of pipes and fittings. What more can you tell us about your group’s background and its main strategies going forward?

Vinilon Group was founded as a family-owned business in 1979. Prior to establishing the group, we were involved in the trading business for piping materials from overseas. As Indonesia’s economy grew, my father saw the potential of entering the manufacturing industry as a means of taking advantage of new opportunities in the local market but also to lessen the need for imports that had become more costly. This coincided with Indonesia’s move towards industrialisation in the late 1970s. We have since grown from being a manufacturer of PVC pipes through an expansion of our product portfolio that now includes polyethylene [PE]. Our group first introduced PE pipes in the 1990s, at a time when demand for this material was still relatively limited, and from 2000 onwards has seen a steady growth in the product’s popularity due to its greater flexibility and suitability for potable water.

Our strategy in the long-term is centred on the goal of positioning ourselves as one of the top three manufacturers of pipes in Indonesia. To reach this target, there are many things for us to do going forward including expanding our network and distribution channels. We also plan to continue to improve upon the quality of our services for customers, so as to ensure that we differentiate ourselves within an industry in which the products offered by competing manufacturers look the same and have the same function. Our group has thus sought to stand apart by making available superior services to complement our extremely reliable pipes.

Your industry is closely linked to developments in the property and infrastructure sectors, which should both experience a shift in line with the policies of Indonesia’s new government. Given this context, what is your medium-term outlook for the pipes manufacturing industry?

Our outlook is very positive, though we expect to see a period of consolidation within the property industry following the central bank’s decision to raise interest rates and impose new regulations on minimum down payments. On the other hand, we also expect to see our industry benefit from the government’s removal of fuel subsidies on the lowest grade of gasoline, which will open up a substantial proportion of the budget for the country to spend on much needed infrastructure projects.

The ASEAN One Market is expected to open up opportunities for manufacturers in Indonesia able to provide its products to similar markets on the regional level. With this in mind, what can you tell us about your group’s international plans and priorities from an export point of view?

Opportunities of this nature are at present quite limited. As previously mentioned, there is only a small amount of PE and HDPE pipes being imported into Indonesia, due to the transportation costs, and the same constraints hold true for exporting into other ASEAN markets as well.

The pipe industry within ASEAN countries therefore tends to be dominated by local players. Even within the domestic market, it can be difficult to compete in provinces that are further away from manufacturing facilities because customers in these areas will typically be served by companies located nearby instead.

Vinilon Group takes pride in its use of advanced machinery and the latest technology. What is your strategy when it comes to pursuing innovation for the future?

We view innovation as a process that we will continue to prioritise to ensure that we are always improving as a company. In addition to investing in new machinery, this process involves finding ways to become more efficient and effective within our business operations through better management. Innovation in this particular field will be our focus going forward.

We are also currently exchanging some ideas with overseas partners to develop new products that we can introduce to the local market. This is in keeping with our strategy to position ourselves as a total solutions provider for piping systems offering services tailored to unique customer needs. Should the market continue to grow, we intend to initiate a joint venture with international partners to set up new manufacturing facilities to fully take advantage of the demand for custom piping systems in Indonesia.

How is your company positioned towards working with international investors and foreign entities looking for a skilled local partner in Indonesia?

We have been approached by a number of different companies, especially over the past two years. Multiple venture capital firms have been among those that have sought to become part of the company in light of our potential for further growth and development. Frankly speaking, we are not very interested in this type of cooperation given that we are financially secure. Instead, we are more drawn to partnerships with companies able to offer added value in the form of new technology and product knowhow. For example, we are open to forming a joint venture with international pipe companies that have products they wish to introduce to the Indonesian market. Prospective partners should take note of the many opportunities to be had in addressing Indonesia’s need for infrastructure and housing. Moreover, it is very important that we work with a company that shares in our vision for the future, adheres to the principles of accountability, responsibility, honesty and sincerity, and is driven by long-term results.

As a final message, what would you like Global Business Guide’s readers to remember about Indonesia?

Indonesia is a country with a lot of opportunities but foreign investors looking to enter the country need to be conscious of the political situation and the propensity for the business climate to change quite considerably from administration to administration. I expect that things will be secure over the next 4-5 years under the presidency of Joko Widodo and as such think that now is the best time for investors to explore the opportunities that Indonesia has to offer.

Global Business Guide Indonesia - 2015

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