Charting new horizons

By webadmin on 12:03 pm Apr 27, 2012
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Albertus Weldison Nonto

With its interests in the cement, energy and automotive industries leading the charge, the homegrown Bosowa Corporation now has its sights set on becoming a major player in 10 core businesses. HM Aksa Mahmud, its founder and chairman, spoke with GlobeAsia.

Over a casual dinner at a Central Jakarta restaurant, Bosowa Corporation founder and chairman HM Aksa Mahmud, 67, is an open book, clearly and knowledgeably discussing anything from business to politics with ease.

After his meal, he whips out a small notebook to demonstrate some simple financial calculations for GlobeAsia. Comparing the toll road construction and cement industries – his group is involved in both sectors – his conclusion is that investing in the cement industry will realize a quicker and bigger return on investment.

“With the same amount of investment, the cement industry creates 18 times more profit, as compared to toll roads,” he points out, before going on to do a similar comparison of the crude palm oil (CPO) and rice estate businesses.

The calculations are not aimed at scaring other businessmen off; Aksa is merely comparing and contrasting the risks and returns in each sector. “In the end, it all depends on your business plan, the business environment and each businessman’s perception of prospect and risk,” he notes, adding that each sector has its own character and complexity.

It is knowledge that he has garnered over the years as his Bosowa group as grown. Aksa established it in 1973; since then, it has invested in the Jakarta Toll Road, a 17km-long highway in West Jakarta in partnership with Jasa Marga. In his hometown of Makassar, Aksa initiated the Makassar Toll Road and has operated a 6km stretch since 1998; a separate 11.57km section is in progress.

Off the toll roads, he also controls and manages a sprawling conglomerate which includes interests in the cement, banking, financial service, car dealership, property and energy sectors.

On the back of strong foundations and continuous innovation, Bosowa group booked about $630 million in revenue last year with an annual growth of about 15%. Some observers believe it grew more than 30% compared to the previous year, thanks to solid management.

All in all, the group does some 80% of its business in eastern Indonesia, with Sulawesi, Maluku and Papua forming Bosowa’s platform for growth. With total assets of about Rp15 trillion, the family business is now setting new a direction – to be a leader in sectors essential for Indonesia’s business landscape in the future. “We are in the business of basics,” says Aksa. 

Building blocks

Semen Bosowa, through PT Semen Bosowa Maros and Semen Bosowa Indonesia Batam, produced more than 3 million tons of cement last year – this figure will soon grow to 6.3 million tons with the addition of a new plant in Banyuwangi, eastern Jawa, making the group the country’s only single-share-holder player.

The group currently controls some 5% of the national cement industry. Aksa, as well as Bosowa Group’s managing director Sadikin Aksa, believe that the brand and its strong foothold in the region will propel it to greater heights. “We estimate that by 2014, if Semen Bosowa Maros is completed, the group will produce of more than 7.3 million tons of cement and will control of more than 15% of national market share,” says Aksa.

Sadikin lets on that in 2006, Bosowa had targeted a production of 5 million tons by 2012. However, the group met with a series of roadblocks and obstacles. Despite the difficulties, he says, it is now primed for new developments in the next five years.

Economist Marsuki believes Bosowa’s success in eastern Indonesia was made possible by the region’s strong economic development. Even though general growth in that part of the archipelago stood at about 5%, lower than western Indonesia, some regions, including Sulawesi, Maluku and Papua (Sulampua) grew about 8%. For this reason, Marsuki is optimistic that Bosowa’s expansion, notably in its cement business, will yield good results.

The company’s solid performance has attracted significant interest from foreign groups seeking strategic partnerships, but Aksa is confident that the group’s own coffers, together with local banks, will more than back up its expansion plans. He has cooperated with foreign players before, citing a longtime Jordanian partner in his shipping arm and the re-naming of his Bank Kesawan to Bank QNB Kesawan to reflect its partnership with Qatar National Bank, and he says there will be other opportunities for foreign collaborators in the future

Fueling Indonesia’s development

Aksa has always believed that Indonesia’s development relies heavily on its energy supply. When he entered the cement industry 20 years ago, he found prices in his home region of Sulawesi far too high, due to bulk of the commodity being produced in Java. And when he was in a position to increase his production capacity, there wasn’t enough power to drive the expansion.

In 2010, he initiated a new $200 million steam power plant in Jeneponto, South Sulawasi. The 2 x 120 MW power plant was finally inaugurated early this year, making Bosowa one of the private companies to fulfill its promises to the 10,000MW plan first drawn up during President Susilo Bambang Yudhoyono’s first term in government. Unfortunately, during a recent site visit, GlobeAsia found that PT PLN has yet to complete the transmission tower that will connect the plant to customers.

Aksa says that more is to come. There are plans to initiate another 1 x 300 MW plant to supply the same region, plus a new smelter for the organization’s nickel mining activities. Bosowa Corporation’s president director, Erwin Aksa, has said previously that the group needs a large amount of energy in the region to support its new cement plant, Semen Bosowa Unit II, and its tin smelter, which will create more value for from its mining products.

With its electricity plans in place, a $50million, 10,000-metric-ton-capacity
gas terminal is underway to address the soaring demand for gas in the area, as well as act as a hub for regional gas distribution.

Feeding the country

Aksa’s passion for the food business stems not only from his childhood in the Barru region of Sulawesi where he helped his parents in the rice fields; he adds that it makes good business sense. Where other conglomerates are in a frenzy to enter the palm oil business, for this year, Aksa will focus on developing rice estates in Kalimantan.

He simply does not understand why Indonesia, herself rich in natural and human resources and potential, needs to import rice every year – rice farming, he observes, can churn out healthy profits if it is managed properly. So apart from developing partnership programs with local farmers tending to about 3000 hectares of paddy fields through his Bosowa Foundation, Aksa is also engaging in serious talks with local Kalimantan governments to clear 20,000 more hectares of land for the purpose.

Through the foundation, Aksa has also developed his own seeds – mostly from local varieties – to be sold to participating farmers in Wajo, South Sulawesi. In return, the farmers share part of their harvest profits with the foundation. “Some farmers don’t’ even need to go out into the fields,” he points out. “They let us do it for them, because we already have planting and harvest machines that can help them work efficiently.

Aksa has also thought about creating value and other job opportunities for the farmers. In that same region, he has built a rice mill to produce rice powder. “I strongly believe that in the future, with advanced technology, rice powder can, for example, be used in bakeries to replace wheat flour,” he offers.

Locals are beginning to see the positive impact of a partnership with Bosowa Foundation, and more farmer’s groups (kelompok tani) are agreeing to work together with the company at harvest time.

Other organizations are following in Bosowa’s footsteps. Bustanul Arifin, professor of agribusiness at Bogor Institute of Agricultural (IPB), states that farmers need a minimum of 2 hectares of rice to improve their quality of life. Recently, Kadin initiated a national campaign to increase rice production nationally through partnership programs that provide innovative financing and marketing for farmers.

One independent observer in the agribusiness sector believes that Indonesia needs more to be done in this arena. “Kadin has only just started its partnership program, while Bosowa started it three years ago and other business group have simply duplicated it. Benchmarking in the palm oil business is all right, but palm oil and rice are two different things,” he argues.

Aksa, who initiated the scheme even before many businessmen were aware there was a problem in the area, says that the partnership should include encompass all aspects including production, financing and marketing. In his experience, by using high-quality seeds and instilling strong discipline, each hectare of land can be worked three times a year to produce more than nine tons of rice. With an eye to future demand, the group is also currently developing corn seeds.

Aksa’s win-win collaboration with farmers will help the group gather the competencies needed to develop its rice estate Nunukan Kalimantan this year. In other developments, the group’s corporate social responsibility program has built a  Rp6 billion dam to support farmers in Sulawesi.

“In my opinion, a nation’s wellbeing and welfare depends on its ability to fulfill its basic needs, especially food,” says Aksa. “Our efforts should be part of a wider campaign on the part of all parties to strengthen our food security, “ he says.
Bosowa’s property arm is also showing positive growth, with promising hotel projects in Bali, Bandung and several other major cities. A Novotel Hotel property is currently underway in Makassar.

Its hospital business kicked off last year and has already recorded outstanding performance, so Aksa is already planning ghis next move in the sector. He hopes to open more facilities to specialize in the care of middle-class women and children. “Rising incomes drive people to demand best-quality service and products,” he reasons.

Running Family Inc.

On the back of the foundations he has built and his children’s vision, Aksa Mahmud is confident that Bosowa Corporation will continue to flourish.

The day-to-day running of the Bosowa Corporation, which boasts a dynamic business empire spanning more than 40 operating companies and solid growth year after year, has now been taken over by Aksa’s three sons.

Erwin Aksa, 36, is chief operating officer and president director, while Sadikin Aksa, 33, is managing director and controls strategic corporate finance. His youngest son, Subhan Aksa, takes care of marketing and business development.

Each holding an equal number of shares in the company, Aksa has not made it a secret that the three brothers have a big responsibility to grow the business. The patriarch wants Bosowa not only to continue its upward trajectory in eastern Indonesia, but also wants the group to make significant headway into the rest of Indonesia and the world some day. He says: “I strongly believe that in my children’s hands, the group will keep growing, and consolidate and strengthen its foot prints in more than 10 core businesses.

“With interests in manufacturing, energy and lately the financial sector, I think we have a complete range of business units that will hopefully help the group grow steadily.” He adds that Bank QNB Kesawan has posted encouraging numbers, while its other business units, such as the car dealership and tin mining businesses, are showing similar promise. With a recent boom in car sales, Bosowa’s automotive business grew an impressive 80% last year, as compared to the previous year.

Despite his position within the company, Aksa retains a casual, outspoken approach when dealing with his staff, and will not hesitate to spontaneously direct or criticize if he sees a problem in company processes; he says he treats them not simply as workers, but as partners to grow his businesses with.

At 67, age is not hampering his efforts or vision. “When I initiated the company years ago, the only motivation is to fulfill my needs. I didn’t even think I could compete with the largest business groups in my hometown of Makassar,” he recalls.

How times have changed. For the first t10 years that he was in business, his aim was to become similar in size to other groups in his area. Later, a move to Jakarta opened his eyes to even greater opportunities and horizons for growth. Today, Bosowa Corporation has caught up, and even surpassed many of them. He says: “I never thought that Bosowa could become what it is today.”