A worker punches a fitting for a street lamp at a metal workshop in Ngingas village, Waru district, Sidoarjo regency, East Java, Friday (4/11/2016). Despite being a very small-scale business, the workshop is capable of handling orders for armatures from various regencies and cities in Indonesia.
The metal industry in Ngingas village, Sidoarjo regency, East Java, is driven by home-based businesses. The products do not just dominate local and national markets. The business players are making efforts to create high-quality products to rule the global market in the age of the ASEAN Economic Community.
A Monday in late February was a historic day for the cottage industry in Ngingas village – or, at least, for four business players, namely UD Karya Jaya owner Yogi Hermanto, UD KS PRO owner Kasiyadi, CV Borneo Putra owner Mashudi and PT Elang Jagad owner Bambang Budiarto.
For the first time, the four companies delivered 80,000 automotive parts to PT Rachmat Perdana Adhimetal, a vendor for giant manufacturer PT Astra Honda Motor. The delivery was part of an effort to fulfill an order of 200,000 automotive parts this year.
“For small industries, orders for automotive parts from large manufacturers are a form of extraordinary appreciation. There was a time when the only thing in our minds was how to sell our products. There was no record and no administrative procedure in place,” Bambang said.
The acceptance of cottage industry products by huge manufacturers is recognition of the industry’s production capability and product quality. Such recognition enables the cottage industries to expand their networking within the market. If once their products had only been marketed locally and as part of after-sales services, now the products can serve as main automotive parts.
Bambang is just one of hundreds of cottage metal industry players in Ngingas village, Waru district. The industry center, believed to have existed since the 1930s, is located just 2 kilometers from the Waru traffic circle.
Just take Jl. Raya Sidoarjo and turn left right below the Waru overpass. Next, take the road until you find a signboard for the industry. If you are having difficulties finding the sign board, just observe the houses on the side of the road.
The houses will be filled with iron and metallic materials, production machines and a number of busy workers. Take a peek inside the houses and you will be amazed at how precious every inch of the land is. Almost all areas of the houses, from their porches to their kitchens, are used as a workshop.
The home industries employ anything between two and hundreds of employees. PT Elang Jagad, for example, has 30 employees and a monthly production capacity of 30,000 components. Established in 2007, the company could produce 18 types of products, including pipes for electric stoves, stove grates, hangers, fence ornaments and automotive parts.
UD Borneo Putra, established in 2010, produces 31 types of components, including air conditioner spare parts, car spare parts, brake pedals and television brackets. The company has 24 employees and a production capacity of 57,900 components per month.
The Ngingas metal industry is like a massive factory capable of producing various parts, including farming tools such as hoes, paddy reapers and grain threshers, as well as electrical components, street lighting poles and solar panels.
Unfortunately, the Sidoarjo regency administration does not have the data regarding the local industries’ production. There is no exact data on the number of small and medium metal industries in Ngingas. Waru Buana Putra cooperative head Malik said he estimated the number of local businesses to be between 400 and 500. The cooperative itself has 300 member companies, 70 percent of which are small industries.
The companies’ revenue varies between Rp 500 million (US$37,571) and billions of rupiah per month. The industry center can absorb between 1,000 and 1,500 workers directly and thousands more indirectly – not to mention its effects on the local economic activities such as the mushrooming of food shops and low-cost apartments.
Assuming that each worker has three family members, there are more than 6,000 individuals who financially rely on the small metal industries in Ngingas. As the industry becomes increasingly developed, more and more people will reap the economic benefits. On the other hand, if the industry suffers, many will fall victim to poverty.
Supervision
Considering its important role in economic development, the government should give more attention to metal industry players in Ngingas. Many of them learn the ways of the business on their own. Only a few of them apply a professional business management system.
Yogi, Kasiyadi, Mashudi and Bambang are among these few. They were supervised by Dharma Bakti Astra Foundation (YDBA) in collaboration with the Industry Ministry in its effort to strengthen small and medium industries’ competitiveness.
The supervision program at first involved 13 small industries. However, many quit half way due to the complicated and difficult efforts to increase product and human resources quality. Strong will alone is not enough. Strong determination, hard work and tenacity are also important.
Industry Minister Airlangga Hartanto in a visit to PT Elang Jagad in late February said he promised to continue the ministry’s supervision of small industry to help them grow and foster a high spirit of competitiveness. He said metal industries must advance from local markets to the global market.
Apart from providing technical supervision and National Working Competency Standard certification facilitation, the Industry Ministry also helps local small industries in obtaining raw material supply at competitive prices. This is done by initiating the establishment of a raw material wholesale center.
PT AjiBatara Perkasa Mandiri owner Samsul Anam said obtaining raw material supply had been a huge problem among small metal industries since 2015, as prices had continued to increase by 30 percent each year. Product prices increase by 10 percent at maximum due to stiff market competition, especially as imported products flood the market.
“To give you a picture, the price of standard steel plate has increased by 30 percent from Rp 7,400 per kilogram to Rp 10,500 per kilogram in the last three months. My place needs 30 tons of steel plates per month. All members of the cooperative need a total of 500 tons of steel plates a month,” Samsul said.
Apart from raw material, industry players are also experiencing difficulties in licensing, such as in obtaining an industrial registration license. East Java industry and trade agency head Ardi Prasetyawan and Sidoarjo industry and trade agency Feny Apridawati said their agencies would assist small industries in arranging licenses so that their businesses would be legal and could expand their markets.
As small industries flourish, appreciation from huge industries will hopefully continue. Such appreciation will drive the small industries to continuously improve their product quality and human resources to expand their markets.
