TEMPO.CO, Jakarta - Sudirman Said's career path has gone through a variety of changes. He has worked as anti-corruption activist, disaster area construction worker and oil and gas executive. His latest profession, however, has nothing to do with his previous experiences. He now produces arms and ammunition. In June, he was appointed CEO of Pindad, a state-owned company manufacturing weapons and related items that was on the verge of collapse.
Pindad employs some 3,000 employees, but it gets just a fraction of its arms budget from the Defense Ministry. Its share of the export market is equally dismal. "Exports represent less than 10 percent of our market," said Sudirman.
Not surprisingly, Sudirman must move fast to stop any further decline. One way is to collaborate with international players. Last September he flew to Pretoria, South Africa, to sign an agreement with Rheinmetall Denel Munition (RDM), an ammunitions manufacturing joint venture between German and South African interests. In Indonesia RDM is best known for its Scorpion tanks recently ordered by the Indonesian Military (TNI). Besides RDM, Pindad is looking into cooperating with similar companies from Turkey, the United States and Belgium.
With the entry of international players, Sudirman hopes it will lead to new sources of funding and much-needed transfer of technology. By emulating the work ethics of the industrial world, he is also hoping Pindad's corporate culture will improve. No less importantly, Sudirman hopes his company can produce comparative data so the country's dependence on arms brokers can be minimized. "Brokers have helped themselves to irrational levels of profit," Sudirman told Tempo journalist Arif Zulkifli, in the midst of his trip to South Africa.
You were once an anti-corruption activist, and now your main job at Pindad is to battle the arms syndicate.
Transactions or economic activity in big volumes and involving many people tend to attract many interest groups. I once worked in the energy sector. The problem of oil and gas syndicates has not been able to be resolved. If the arms industry is still controlled by traders, it may be because the country's capacity is still very limited.
Traders? Do you mean crime syndicates?
I don't want to describe them in that way.
How do you get rid of those 'traders'?
We are unlikely get rid of such rent seekers if our capacity is not strong enough. Pindad needs major investment to reduce its dependence on them.
So, how exactly do those arms mafias work?
They gain profit from asymmetrical information. The less people know about a certain product, the bigger their chances of making irrational profit.
So, in addition to producing arms, Pindad will also act as an 'informer' to the Defense Ministry so the syndicates won't be in control?
Just imagine. If only Pindad had a network of industry players from all over the world. We would know the specifics of the most modern weapon, where it is sold and how much it's going to cost. The traders have the right to sell, of course, but they should do their business fairly. Because we have access to comparative data, no item that costs Rp100 will be sold for Rp800.
It's an open secret that the Defense Ministry knows about and allows the importation of weapons with such irrational prices.
That is why we need to look for information as much as possible on a particular product. So that when a trader offers a product to a user (the Defense Ministry, the TNI or the National Police) we can offer comparative prices from our database. Everyone has a right to make a living, but we were given the mandate to save the state's finances.
But that's not Pindad's task, is it?
Of course not. But the attitude of a businessman must be built.
Are you convinced the Defense Ministry will listen to Pindad?
I will share with you a comment made by a number of decisionmakers at the Defense Ministry and the TNI. They said Pindad does not socialize enough. I interpret those criticisms as, "Pindad is not as active as the traders."
Does that mean Pindad will set up a trading division?
It's not banned. For example, the Defense Ministry needs ammunition with the caliber we haven't been able to produce, so Pindad will offer to import them from a company that works with us. That will expand Pindad's business volume.
Is that the reason you are initiating collaboration with international companies, including with RDM?
Germany, France and Belgium are countries that regard Indonesia as a potential market. Before I joined Pindad, the previous management had been corresponding with them. But the CEO position became empty for a year, so the management had no authority to continue with it. Today, we are responding to those offers, one by one. (*)
Read the full interview in this week's edition of Tempo English Magazine
