PT PAL Indonesia (Persero) (“PT PAL”) is an Indonesian state-owned enterprise that is best known for manufacturing state-of-the-art ships for military and civilian use. The company is also very active in energy and electrification projects and is currently developing a second Indonesian Navy hospital ship, a critical asset for an archipelagic country that sits on the Pacific Ring of Fire and is prone to natural disasters. President Director Budiman Saleh discusses the company’s wide portfolio of products and explains why their competitive pricing and adaptability to client needs makes PT PAL an ideal partner

PT PAL is known for being the top producer of ships in Indonesia, but you are also involved in other activities. Can you briefly describe your products and services?

Our business portfolio has two main sectors: defense and non-defense. The first mainly fulfills the defense requirements of Indonesia following instructions from the president, and also serves international markets with a range of fully equipped warships, such as Frigates, Offshore Patrol Vessel (OPV) with guided missile, or Landing Platform Dock (LDP) variants. In the non-defense sector, we build commercial, merchant and fast ships, from ferries to bulk carriers to research ships, and we also provide repair and maintenance as well as general engineering services. And because Indonesia is in the process of developing or getting more submarines, some of our vessels such as LPD 143 meter with submarine tender capability to provide bunkering services by carrying fuel, freshwater and still water for the battery. But in the non-defense sector, we are currently really focused on energy.

What kind of energy projects are you involved in? 

We are involved in the national electrification effort to bring electricity to remote areas and increase energy production. Among other things, PT PAL builds 60 MW and 30MW Dual Fuel Engine Barge-Mounted Power Plants, and we have both onshore and offshore projects. We have to educate the people that we are not only a shipbuilding company but also involved in electrification, which is particularly helpful in eastern Indonesia and remote areas and also in areas that suffer large natural disasters like the island of Lombok did in August 2018, as the barge-mounted power plant can also be towed to wherever it is necessary.

You touched on disaster relief. Can you tell us about the hospital ships built by PT PAL?

We make so many variants for the Landing Platform Dock (LPD) because Indonesia is a huge archipelago and if something happens that causes a massive impact, you need the capability of rapid mass evacuation, search and rescue, and hospital capabilities as well.  Indonesia is a large country with just one hospital ship, but we are now building the second one. Following the earthquake in Lombok, the President asked us to convert a support ship LPD KRI Semarang-594 into a hospital ship. It’s a tough job that needs to be done quickly, but we have the capability and the technology, and the way we do the construction is through a compartmentalized method, a bit like Lego blocks. For the landing platform dock, we designed a simple one based on our experience with evacuation, when the land collapses and safe transportation no longer exists, the best thing to use is helicopters, and that is why we designed a 163-meter hospital ship that can house five helicopters, three of them on the deck. All of our LPD product and design available to carry helicopter.

And you are building one for the United Arab Emirates as well?

The one for UAE is 244 meters long, and we have already sent a team there for talks because they want to cut down the number of onboard personnel. But certain vessels require a specific amount of personnel to man them. So far we have reduced the crew from 254 to 160 and are implementing more automation. The vessel can be compartmentalized to carry medical but also military equipment because of its multi-role design.

How do your products also contribute to Indonesia’s counter-terrorism strategy?

It’s not recently used in Indonesia for counter terrorism, but rather in the Philippines. Our vessels allow for many military operations, including special missions, because these vessels can carry landing craft units with very low noise. You saw this in the southern Philippines, for example, where the government first sent in troops to fight the terrorists, and it went very badly, but then they used two of our vessels that help troops conduct early morning or night raids, and they took over the island. The idea is that when we develop a new vessel, the vessel needs a combat management system that can collect information, intelligence and reconnaissance using many sensors. All data can be gathered and our vessel can be regarded as a small carrier. It can house 120 crewmembers and up to 500 troops, and it incorporates the latest European technology to improve performance, speed, noise vibration, heat signature and so on.

What type of combat management systems are these warships equipped with?

We offer design flexibility, and we don’t have exclusivity to one or two combat management systems in the world. Instead, we are free to choose whichever one adapts best, and that’s the beauty of it. Combat ships have sensors, a platform, weapon, and command control. But if it is not well integrated it is just an island. The LPD Variant 3 three is nuclear and biochemical-ready, as this is a requirement of the Indonesian Navy. The Philippines asked us for a continuation of Variant 2 because they are already operating two of our vessels and they want another. And for UAE, Variant 6 is going to come with a combat system as well, as they need both offensive and defensive systems.

In Indonesia, we are more focused on expeditionary forces and evacuation. But our design will not take a long time to install guns and a weapons system, because the platform is already there. We use French surface-to-surface missile launchers. For guns, we use Bofors and Leonardos. For the combat system we can use Aselsan from Turkey, but not only. We can pretty much integrate any system and make it flexible. When we enter a market, we don’t tell our customers that they should use our product with this or that configuration – we let them decide, and we gain the experience from one vessel to another vessel. In terms of propellers and engines, those come from Europe and Korea. The sensors we buy in Europe. For the bridge system, we work with Canada, as we did for the submarine.

You are also producing submarines?

Yes. Even though Indonesia had the luxury of submarines since the 1960s, the Navy at first used the Whiskey-class from Russia, but in 1980 we switched to Germany’s 209 types. Now, in partnership with Daewoo Shipbuilding and Marine Engineering from South Korea, we have developed a different 209 model with a different design: Indonesia’s first ever submarine, Alugoro, a Nagapasa Class submarine.

How does PT PAL achieve competitive pricing?

We have learned a lot through technology transfer from bigger manufacturers, like Mitsui in Japan. We adopt the best from each company and then develop our manufacturing method and design. Then we can have a competitive product. We can test our models right here in Indonesia as we have the hydrology for it, but we also test in Europe, because they are a source of information and because we can compare our models. When we entered the Philippines market there were international tenders and we had to compete against other global companies, and in Malaysia as well.

How does PT PAL coordinate with the private sector?

Indonesian law says we have to be self-sufficient in the defense sector; we have three companies in the sector and I have the luxury to be the head of the lead integrator. We also must create a backward linkage with Tier 2 and Tier 3 SOE’s, and we have many supporting companies working for us: sometimes as many as 94 in the private sector. Any vessel that falls below 60 meters I leave to private companies, as I don’t want to compete with them. If they want the design, I will even pass it along to them.  

What is your final message for UAE investors in terms of what products to look for, and why you are the partner of choice?

There are so many opportunities that both countries can gain in this sector. Indonesia has the capability in terms of engineering, production, design, and manpower. I hope Indonesia’s PT PAL can supply the UAE’s patrol vessel, and if you are talking about the big support vessels, the LPDs, they can also be supplied by Indonesia. Our products are competitive, our designs are always evolving, we test our products, and we do not dictate specifications to our customers; instead, we let them choose their weapons, sensors, communication systems and so on.

This is very important, the fact that we are open. We understand that maybe somewhere in time, the relationship between the buyer and the supplier might not be good due to political circumstances, so it is better to be open like us. And the talks between Indonesia and UAE for the LPD are genuine and we hope that the contacts can be materialized soon.