To keep the company afloat, the government has agreed to inject US$44 million into the ailing state-owned ship manufacturer PT PAL Indonesia.

Saving PAL is in the government’s best interests as the government aims
to meet military procurement demand through sustainable means, and
reduce dependency on imports to strengthen archipelagic security.

“The finance minister has issued an approval letter and the money will
be disbursed in September after we have finished completing the
necessary paperwork,” PAL president director Harsusanto told reporters
at the state-owned enterprises ministry on Friday.

PAL has been under the care of the state asset management firm PT
Perusahaan Pengelola Aset (PPA) since it defaulted on its business
obligations due to mismanagement and currency losses following the
financial crisis.

The obligations include meeting deliveries of 18 vessels, including
military ones, ordered by domestic and foreign firms in 2006. PAL
Indonesia posted a total loss of Rp 443 billion (US$44.74 million) in
2007 and Rp 46 billion in 2008.

Harsusanto said the fresh funds would assist the company’s internal
restructuring and the construction of the ordered vessels, six of which
are to be delivered by the end of the year.

“We handed over a navy vessel to the military earlier this month. We
are planning to hand over three 38-meter boats ordered by the customs
and excise agency in September ,” Harsusanto said.

The Indonesian Navy relies heavily on PAL to meet annual vessel
procurement. Based on military data, the Indonesian Navy currently has
148 navy vessels and 317 patrol boats, below the minimum fleet required
by a country with a vast sea territory such as Indonesia.

Ideally, Indonesia as an archipelagic nation with 17,500 islands and a
maritime area covering 7.9 million square kilometers, requires at least
367 vessels, including several submarines, the Navy said.

The government plans to allocate Rp 40.7 trillion for defense in 2010.

Source: The Jakarta Post

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