Pekka Hemmi's involvement in SE Asia in the early 1980s positioned him to be in the right business at the right time to take advantage of growth in the region. Today, as Founder and Managing Director of Nordic Ventures, he is once again using his experience and knowledge to ride the new wave of expansion in Asia.
In the early 1980s, employed as a Consultant with Jaakko Poyry, Mr Hemmi worked in SE Asia where he was to get a solid grounding in the regional pulp and paper industry. "We worked on several feasibility studies concerning green field pulp mills. We looked at the industry from all angles when we were carrying out a World Bank funded Master Plan for Indonesian Pulp and Paper Industry in 1983-84. We visited all the mills and took in macro economic considerations."
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Pekka Hemmi
Founder and Managing Director of Nordic Ventures
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Despite their thoroughness little came from their efforts, "At that time it was too difficult to raise the funding so the projects never went forward." Mr Hemmi says. While others, such as the Widjaya and Tanoto families, were beginning to get into the industry or planning further expansion. "We at Jaakko Poyry didn't fully realize the boom that was about to come in the pulp and paper industry even though we knew well the potential."
But the boom did come and Mr. Hemmi got involved with it by selling the first fluidised bed boiler to Indonesia while he was working for a Finnish boiler company.
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That contract was going to influence the course of Mr Hemmi's career. His company asked him to settle down in Indonesia to supervise the project and get others. "We introduced peat as a fuel and soon sold large multi-fuel boilers to Indah Kiat, Indorayon and Riau Pulp." Previously the mills had been burning valuable woodchips.
When Ahlstrom - later to become Foster Wheeler - acquired the boiler company Mr Hemmi worked with he decided it was time to move out on his own. "In 1991 I started my own trading company, Nordic Ventures," he explains. "It was a difficult time to start a business as there was a recession in Finland and major investments in Indonesia only started a bit later. However I had made connections and had a good track record of sales. I got reasonable products to represent in Indonesia, although we had to start without references.
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Nordic Ventures Jakarta Office in the Grha Telkom Building
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"I started by representing smaller and medium sized equipment suppliers from the Nordic countries in Indonesia." But he did more than just sell equipment. "My idea was to bring Nordic know-how to Indonesia." Preventative maintenance was a concept that had to be taught to many of his customers.
"They didn't want to change a part before it broke," he says. "That caused them indirect damages and shut downs."
Pekka Hemmi in front Nordic Ventures booth
in China Paper 2001 in Beijing
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Looking at the bigger picture was something that Mr Hemmi found that many of his clients also needed to do. Too often they would simply look at the initial cost of a product and buy it. "I tried to show them that it was cheaper in the long run to buy quality products rather than the lowest priced item. For instance, companies would buy coal-fired boilers from low-cost suppliers. We demonstrated that if they bought high efficiency boilers from us, they would realize huge savings in annual coal purchases. In many cases we did not succeed in sales but planted the seed that later flourished."
Over the past 10 years of selling Finnish and Swedish products that have low lifetime costs rather than low initial purchase costs Nordic Ventures has thrived. "Producers here have come to realize the value of taking the same approach as Western papermakers in their thinking."
The time spent in Indonesia was also of personal benefit. "I've had a very good time here. I got off to a flying start with Nordic Ventures. Doing those studies and sales contracts in Indonesia in the 80's gave me a great insight into the industry, the region and the country. I've learned the language. It has been a very fruitful time."
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Mr Hemmi was in Indonesia at a very propitious time. "I saw the whole Indonesian boom and now I am getting to witness the changes that are happening in China. Indonesian groups were pioneers in setting up large-scale paper mills in China. They showed the way for other investors and they opened the eyes of the Chinese government. The huge modern mills changed the whole investment policy in China, and they brought in advanced technology that the country didn't have before. In my opinion, it was the investments by the Indonesians in China that triggered the changes in China's paper industry."
With the rapid expansion of the paper industry in China the European machine suppliers came along in a big way. "When the Asian Crises hit in the autumn of 1997 I decided to put more emphasis in China. Our well-established operations in Indonesia, providing spare parts and maintenance, carried us through the financial crises. With the overheads made in Indonesian projects before the crisis I started operations in China with the same suppliers that I had in Indonesia."
Nordic Ventures has been established in China for almost five years in both Shanghai and Beijing. "We had been having success for many years in Indonesia with some products and I wanted to see if they would succeed in China as well."
Tanlipoto Tandiono,
Chief of Nordic Ventures Indonesia |
Suppliers, however, have faced a completely different market in China compared with South East Asia even though the customers in Indonesia and Thailand are also mainly of Chinese origin. "China is a difficult market from a suppliers point of view. Companies in Indonesia are not keen on copying or manufacturing parts or machines. In China they have a reputation for that. China is already producing a great deal of such equipment and components. They make electric motors, gearboxes, whatever. Often they are not a match, quality wise, but there is still a big price difference, so it makes sense for them to use it.
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Suppliers should be quite conservative in their estimations concerning spare part and after sales business. Some 20 years ago most paper mills manufactured even their own screws and nails, and imported spares would take years to get."
However, Mr Hemmi does believe it is possible for Western companies to be successful in China. "The Western companies that have done very well in China are those that have continual product development and technology that is protected in some way. The copiers will always be behind and without profound knowledge of the products."
Eddy Lu from Nordic Venture's Shanghai
office in front of combined stretch film and kraft wrapping machine for paper rolls. This Pesmel machine was delivered to UPM Changsu mill. Around 12 fully automatic machines are now in operation in new paper mills in China. |
Nordic Ventures has had a great deal of success in supplying equipment to China, such as fully automated roll handling systems and roll wrapping systems. "They serve as an example to the local industry as to how highly automated our equipment can be. In China paper rolls are still rotated and wrapped by hand but large capacity machines make it impossible however many people you would employ for those tasks. "
By gaining an in-depth knowledge of the paper industry in Asia Pacific Mr Hemmi has been able to grow his business from a one-man operation to one that employs people working in five offices in Asia and one in Europe. Nordic Ventures is located in Singapore, Jakarta, Pekanbaru, Beijing and Shanghai,.
Nordic Ventures started an office in Thailand at the beginning of 1997 but the timing was really bad as Thailand sparked the Asian Crisis when its currency collapsed. "We froze the operation at the end of 97, but are now planning to start again in a small way."
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The economy has improved in Thailand, but China keeps him sufficiently busy at the moment. "New projects are coming up like mushrooms in the rain and we go after them," he smiles.
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