Government funding saves Indonesian shipyard

The ailing state-owned ship builder PT PAL Indonesia is to get an injection of $44 million from the government to keep it afloat.

Saving PAL is in Indonesia’s best interests since 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. 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 ($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. The government plans to allocate Rp 40.7 trillion for defence in 2010.