Indonesia National importers’ Association (GINSI) urges the government to evaluate the management of Krakatau Steel (KS), saying the performance of this state-owned steel producer is far from expected. Though the state has provided completed facilities, but KS has not been able to supply all steel raw material for national demand.
“Government has extensively provided facilities to KS for long time. Let us say facility of KITE (Ease of Import for Export Products),” GINSI Vice Chairman Erwin Taufan.
Taufan also reminds the KS’ communication model, which he says not transparent and unfamiliar. “Usually, we (importers) only communicate with the agents appointed by KS,”Taufan said, noting that KS has not optimally run the business, though it gets a lot of facilities from the state.
The import quota facility granted to KS is not necessarily well monitored, so it is prone to fraudulent practices. On the other hand, there is shortage of steel raw materials as KS cannot supply for it, Taufan revealed.
“Industry players sometimes find it difficult to get stock of raw materials from KS. Moreover, the price is not necessarily fair, so in the end we choose to import it ourselves,” said Taufan.
Taufan reminds KS on the vision of Founding Father, Soekarno, to build this steel producer. “This is for sovereignty, to independently supply steel for our owned needs.”
Unfortunately, KS is only processing steel with importing raw materials. It failed to supply domestic raw materials.
He recalls KS back to its vision and mission. Established in 1960s, KS is expected to produce steel raw material as mother of industry.
Taufan also criticizes the model KS supply and distribution, in which buyer cannot directly buy steel from KS, but via some appointed distributors or agents. “The price from distributors is much higher, more expensive. That is why small industries choose to import.”
KS Fails to Meet Demand
to Supply Earlier, public policy observer Fernando Emas underlined that existing importation of steel proves inability of this state-owned enterprises (KS) to supply steel raw material for national industries. Fernando, who is also from ‘Activists 98’, is so regretful with it as the state has actually invested trillions rupiah to KS.
Fernando names the case of PT. Meratus Jaya Iron and Steel, a subsidiary of KS in Tanah Bumbu, South Kalimantan. He said, this KS subsidiary has absorbed trillions of state funds, even Rp 2 trillion over the target of 3.9 trillion. With this investment, KS should be able to stock supply for national steel demand.
He said, if realized, the factory can produce slabs, billets, and blooms from iron ore processing. Currently, national imports of slabs, billets and blooms reach 3 million tons with worth reaching billions of dollars per year. Slabs, billets, and blooms are the main raw materials for the steel industry and all of them cannot be produced domestically. “This proves KS failure,” Fernando said.
KS, now led by Silmy Karim, is also unable to produce engineering steel products needed as raw materials for high value-added products such as automotive, machinery, aviation, oil drilling and special equipment, according to Fernando.
These industries will grow optimally as long as the raw materials for steel cannot be supplied from national steel producers. Instead of trying to diversify products, KS even expanded into the construction sector, which is the downstream sector. This potentially create an unhealthy business climate in the downstream sector, in view of the fact that most of downstream sector players small-medium scale industries (IKM).
Echoing Fernando’s view, Taufan said, “It can be understood if public urges the government to evaluate the management of Krakatau Steel (KS).”