The cost of doing business in Batam


Something I wrote for this week’s newsletter (www.smilinghillbatam.com/newsletters.html):

Business seems to be bursting the seams at PT Petrus Indonesia’s warehouse facility in the Batam Centre area. The “front yard” of the facility has been taken over by crews working on giant machines, barely feet from the front door of the office area. A new warehouse location has already been lined up.

For Managing Director Kevin Koh, such activity is something of a salve for a man who has

Kevin Koh

Kevin Koh

often found himself, and his family owned business, at odds with Batam and its governing class. The sailing has not always been smooth since Koh moved the company from Singapore in 2003, but the benefits of that move have certainly outweighed any bureaucratic frustrations he has endured in the years since.

Petrus was founded by Koh’s grandfather in 1976 as a small electric motor rewinding shop. In the years since, it has expanded into generator remanufacturing, mechanical and engineering contracting, marine and offshore repairs, and equipment trading.

Among the services it offers are overhauling generator sets and engines, rewinding of alternators and motors, rebuilding of mud pumps, fabrication and machining, load testing, fabrication of coils, fabrication of main switchboards and distribution panels, and equipment rental.

“Load balancing is our top business segment,” Koh explains. “We are the only company on Batam providing this service and we have 80 percent of the market.”

Batam’s burgeoning oil and gas and shipbuilding industries prompted Koh to relocate across the Malacca Strait. The company’s client list reflects that business – ASL Marine, Drydock world, Global Industries Asia Pacific, Global Marine System, Hercules Offshore, Jaya Asiatic Shipyard, Navigat Energy, Nippon Steel, Saipem Indonesia, Shelf Drilling and Technip Batam among its long list of clients.

Koh’s company has grown from that small mom-and-pop shop in Singapore to now employ 120 people, eight of them expats. Its proximity to its customer base has been a key to the company’s success, Koh contends from his second-floor office, where he can view all areas of the warehouse facility from a dozen video feeds.

But the road traveled has not always been smooth, and it is still marked with challenges. He sill bitterly remembers difficulties with Batam police, who on one occasion detained him for days without rest, resulting in a long hospital stay. And don’t even mention bureaucratic corruption, which will bring out a litany of examples.

Even the most mundane part of his operation – bringing equipment over from Singapore – is subject to great problems and stresses.

“It takes one to two months to get most shipments over here from Singapore,” he explains, but if a customer needs something right away, he adds, officials often ask for inducements to make it happen. “It’s part of the cost of doing business here.”

The Batam business advantages, however, apparently make up for the difficulties. In Batam, Koh says, there is not much competition for the services he provides, real estate costs are lower than in Singapore, as are construction costs and salaries. He says the lower salaries are more than compensated for by the lower productivity he gets from his Indonesian employees.

“Batam is not impossible to do business,” he says, when asked what advice he would give others considering the island as a business location. “It’s a good location if you have the right business.

“There’s no sense fighting against the system,” he adds. “You can get very frustrated. Follow the rules; fighting will not stop the problems. But verify any information with others and do not believe the locals.”

A man Koh depends on to deliver the company’s services is Marco Baldini, a native of

Marco Baldini

Marco Baldini

northern Italy and a longtime Batam resident. Baldini once worked for the Saipem shipyards in Batam, until they moved to Karimun. Now, he is operational director, supervising much of the company’s services.

Baldini offers a positive appraisal of business opportunity in Batam.

“Batam is one of the best places in Indonesia to do business,” he says. “The country is quite stable politically, as well, and has been doing very well economically under SBY (Indonesian president Susilo Bambang Yudhoyono). And the duty free status of Batam is a plus.”

And while he admits that corruption can be a problem, he offers that “Things are getting better here all the time.”

With business overflowing into its front yard, a new warehouse on the map, and the still bustling oil and gas and shipbuilding industries close by, things are getting better for PT Petrus Indonesia, as well. – KA

About 2bagsandapack

Lifetime journalist, author, magazine editor and publisher, now semi-retired and traveling the world. My plan, after living in Costa Rica for 14 months, was to visit a new country in southern Europe every three months to experience the culture and the challenge of adapting to a new environment, while on a fixed income. That plan was sidetracked when I was offered a job in Indonesia, providing an opportunity to explore Asia. Indonesia lasted for a 4 wonderful years but I have now moved on to Hua Hin, Thailand.
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