Austmine members obtained two perspectives on the Indonesian mining market when Realm Resources’ executive chairman Richard Rossiter and Protecting Coatings’ manager engineering sales India, South East Asia and Australasia Jaimie Shaw addressed a meeting in Sydney earlier this month.
Realm has the Katingan Ria thermal coal project in Kalimantan while Jaimie oversees a significant team of technical sales executives throughout the South East Asia region.
Having two different perspectives on the same market proved invaluable for understanding the overlap in challenges a miner and a METS company would face engaging with the Indonesian market. There were also parallels between the opportunities both see for Australian METS who want to enter or expand their presence there.
Indonesia is an attractive market to Australian companies for several regions. It has significant mineral resources, most notably coal, but also copper, nickel, bauxite and tin. The cost of operations in Indonesia is vastly lower than in Australia, and the low resource prices of the past two or three years have forced down the rates of many local providers even further.
The sheer size of the rapidly growing population offers a huge opportunity for mineral projects as the government continues to pursue powering up the country. There are 35% of Australian METS companies already exporting to Indonesia and numerous Australian miners and explorers have interests and projects over there.
However, as became very apparent from both Richard and Jaimie’s presentations, Indonesia is a unique and challenging market to do business with. The key hurdles new entrants to the market have to face are:
- Local vendor/stakeholder engagement – whilst forging these relationships are critical to both project and business success, they are not easy. Richard in particular noted how important it is to get your legal representative or team in place from the start to help smooth your way forwards.
- ‘Rubber time’ - traffic in Jakarta is a nightmare, so expecting more than one or two meetings to be achieved in a day is unrealistic. Even without the issue of traffic, the concept of time for meetings can be less fixed than in Australia. Don’t be surprised if you’re still waiting for your 2pm meeting at 4pm!
- Labour cost balance – local vs expat. While local labour can seem to be significantly cheaper, sometimes going that route could mean you need 10 staff instead of two! Jaimie also made specific mention of the difficulty of hiring technical staff, once taking nine months to hire a junior technical sales executive. Labour hire is an ongoing challenge, despite having a young and often highly educated population.
- Population diversity – Indonesia is a country of many cultures and religions, with a lot of variety from region to region. Understanding the different values and customs of the different regions is important for working harmoniously with the people in that area.
- Communications networks are not reliable, so telephone and internet is not the solid backbone of your business as it is in Australia. However, Richard made mention of using Skype very successfully in Jakarta and utilizing it for weekly executive meetings, saying it was far more reliable than the telephone networks!
- Ongoing political/legislative instability – whilst Indonesia is better than many other South East Asian countries, certain changes recently surrounding export limitations have caused some uncertainty.
A requirement for lots and lots and lots of patience…
These are major issues but Jaimie and Richard provided some advice to Austmine members about how they could try and best mitigate these:
- Lock in local partners early. If you can get some impressive local partners on your side from the start, this will significantly help smooth your path through.
- Hire a mix of locals and expats, depending on which roles you require. You absolutely must have some people in your team who understand the local culture and ways of doing business.
- Always prioritize health, safety and security. Do not head into an unknown situation (particularly in reference to exploration and development projects) without first understanding the local community’s sentiment towards you. If in doubt – do not proceed!
- The best prospect for Australian METS in Indonesia really lies in being able to help identify cost reduction or productivity improvement opportunities for project owners, as much of the resources currently don’t require really advanced technology to extract.
- Your entry strategy really is key, and unless your value proposition is a cheap product, it will take you a long time to get off the ground and running. Therefore allow for this in your business strategy.
- Leverage local friendlies to start building networks early on. Recommended friendlies from Richard included the Djakarta Mining Club organised by Mining Media International (publishers of The ASIA Miner), Austrade and the Australian Mining Chamber in Indonesia.
If you’re interested in exploring further the Indonesian market, Austmine is planning a mission to Indonesia later in the year. Email [email protected] to receive more information when it becomes available.