Saturday, July 30, 2011

Somalia's Sea Wolves


By Alex Perry / Galcayo
  Guarding the Loot A pirate in the Somalian 
  town of Hobyo stands against the backdrop 
  of a hijacked Greek freighter
  Photograph by Mo Dahir (TIME)
I have arranged to meet our pirate, somewhat incongruously, in the desert. I board a 1960s prop airplane that smells of goat and is piloted by four portly Russians. After a series of short hops across Somalia's northern wastes, we touch down on a red-dirt strip outside the town of Galcayo. The government in the capital, Mogadishu, doesn't control even half that city, let alone the hinterland, and the day before we arrive, seven people die in a gunfight in Galcayo. So at the airport, I hire eight men with AK-47s at $15 a day each, then drive across town to the high-walled aid-group compound where I'm staying. I am here to talk to a pirate king called Mohamed Noor, better known to his shipmates as Farayere, or Fingers. I want to ask Fingers why, when Somalia's pirates face an international armada at sea, when some 1,000 pirates have been arrested and scores more have died, piracy is still rocketing.
Fingers arrives alone. He is skinny and sun-creased for his 32 years. We introduce ourselves, tea is poured, and Fingers indicates I should start. How do you organize a pirate attack? I ask. There are no fixed pirate crews, Fingers replies. Instead, a few investors pool the money to hire two skiffs with fast outboards, employ five to 10 young men with guns — whoever shows up — and buy them enough food, water and fuel for a month. The investors then send their pirates out with orders not to return until they have captured a ship. That's it. Hundreds of pirates never return at all, says Fingers. Some drown at sea. Many more run out of food, water or fuel and die, starved and parched, adrift on the ocean. 
"One time there was this group I knew that ran out of food and a guy died — and the other guys ate him," Fingers says, speaking in Somali through an interpreter.
"They ate their friend?" I ask.
Fingers laughs. "It's not a crime if you're about to die," he explains.
Fingers says he has invested in scores of pirate crews. I want to know about the ships he has captured and ransomed himself. In five years, he says, there have been two. The first earned him a split of $75,000, the second $280,000. Of that $355,000, he invested $50,000 in a money-lending business in Nairobi, the capital of neighboring Kenya. That still leaves more than $300,000, a sizable haul anywhere but a fortune in Somalia, the world's most failed state, a place that has been at war with itself for 20 years and where annual incomes are normally measured in the hundreds of dollars. Yet when I examine Fingers, I see no signs of wealth. He is squatting on the floor and is dressed like any East African deckhand: cheap thongs, a thin shirt and an old kikoi.
"Fingers," I ask, "where did all the money go?" 
"Gone," he laughs.
"You spent it all?"
"I bought houses and cars. I bought a couple of Land Cruisers. I spent the money on friends. I enjoyed it. Now it's gone. That's why I'm still a pirate. I need the money. Besides, it's fun." Then Fingers shrugs and gives me a look that says: What did you expect from a pirate? Responsibility?
The Somalia Syndrome
straddling the trade route between East and West, the Indian Ocean has been a favored haunt for pirates for centuries, as pirate graveyards on RĂ©union and the Seychelles attest. But Somali pirates are a relatively recent phenomenon. When Ibn Battuta visited Mogadishu in the 14th century, it was the pre-eminent city of the Berbers and noted for its merchants and clothmakers — and Somalis would have been more prey than predator.
That's all changed now. Somalia hasn't had a central government since 1991. In some 20 years of civil conflict, the fighting has morphed from battles among local warlords and Islamist militias to war on the U.N. and the U.S. to, today, the African Union against al-Shabab, an affiliate of al-Qaeda. The chaos and lawlessness such a history implies inevitably reduce the chances of earning a legitimate wage and turn illicit trades like arms dealing, drug smuggling and piracy into industries.  read more...

(The story is taken from TIME Magazine)

Thursday, July 28, 2011

The King of Clicks



Andrew Darwis rejected a $50 million offer to keep his Kaskus site independent.

By Aditya Wikrama and Ardian Wibisono


Last year, a major international internet company offered Andrew Darwis $50 million to buy his Kaskus.us site, which would have been the most ever paid for an Indonesian website. After a few weeks of talks, Darwis told them no thanks. (The company was reportedly Yahoo but neither Andrew nor Yahoo would comment.)
Crazy? Perhaps. But Andrew is fiercely independent. “I didn’t like the offer because I’m afraid our brand would have been diluted if we had been bought,” he says, “I cannot accept that.” Andrew says he has rejected no less than six offers in the last few years.
The investor interest in the site is obvious. Kaskus is the biggest internet site in the country, with 2.5 million registered users, 288 million posts and a reported 17.5 million page views a day. It ranks as the country’s sixth most popular site—lagging only global giants Facebook, Blogger, Yahoo and Google (both Google.com and Google.co.id), according to internet ranking company Alexa. Kaskus is well ahead of its nearest rival, Detik.com, which ranks number 11.
Kaskus has estimated revenues of Rp 36 billion, which increased 250% in 2010. Asked about the $50 million valuation, Andrew said the price included factors such as number of unique visitors, membership size, and potential added revenue streams such as payment systems. Another site, 411sites.com, puts an even-higher value of $66 million on Kaskus.
The biggest evolution of Kaskus may be just starting: e-commerce. The site had always had informal buying and selling, with members posting things for sale that others would buy. Now the site is beginning to build its e-commerce capabilities and make them mainstream. Its forum for transactions, called FJB, is strictly between users and Kaskus doesn’t get any revenue from the transactions. However, Kaskus last year introduced Kaspay, which provides secure online payments for users. The site also sells e-pulsa, online credits for prepaid mobile phones, reportedly $3.6 million a year. It has also just added KasAd, which allows smaller advertisers to place ads on the site. The company says its system, similar to Facebook’s ad system, could be used by traders or small businesses to sell goods through the site.
Kaskus has humble beginnings. Andrew, 31, started Kaskus in Seattle in 1999, with two other Indonesian students as cofounders while he was studying multimedia and web design at the Art Institute of Seattle, later getting a Master’s degree in computer science from Seattle University.
Kaskus was initially meant as a simple forum for Indonesian students overseas. Andrew’s startup capital? A web hosting fee of $7 a month. The name is an abbreviation of “kasak-kusuk” or chit-chat.
However, the site long remained a sideline for Andrew, who took a job as a programmer with the Seattle-based site Lyrics.com. The site generated a small profit as Andrew sold banner ads to pay for the hosting and other costs. Users created the content for free. Two other co-founders left to pursue other interests.
Everything changed in 2008, when Andrew’s cousin Ken Dean Lawadinata visited him from Indonesia. He urged him to move back to Jakarta and run Kaskus as a serious business. Ken sensed that Indonesia’s internet community was on the verge of a major boom. The site was morphing into one used primarily by Indonesians back home rather than overseas students, and had 350,000 registered members. Andrew was reluctant: “I had a good living in Seattle, working as programmer for Lyrics.com. So why I should leave behind all these good things in Seattle?”
Andrew agreed to come back but only if he didn’t need to manage the daily operation. “So Ken become the CEO, I’m the CTO [Chief Technology Officer], and Danny become the CMO [Chief Marketing Officer],” Andrew explains. That year, PT Darta Media was incorporated, and the site was located on servers inside Indonesia. Andrew owns 41% of Darta Media, Ken 39%, with the remaining 20% owned by other partners of the site.
The site immediately ran into trouble with the government, which had just passed Law No. 11/2008 against Indonesian sites carrying porn. The Kaskus home page says that it stands for “freedom of speech.” One of the most popular forums on Kaskus at the time was BB17, which included pornographic images and discussions. Other forums posted pirated software, encouraged gambling, or held wide-open discussions on sensitive topics like race and religion, which was also forbidden in the new law.
Andrew took the difficult decision to close down the discussions, ban pornography and hire monitors, known as momods, to keep the site clean. Instead of hurting usage, membership grew and, importantly, Kaskus started attracting top-tier advertisers such as Toyota, Indosat and Bank Central Asia. Before this move, most advertising had come from online gambling sites.
“We had to change from being a community forum filled with porn content, and kick out major advertisers that were online gambling firms,” says Andrew. To also spiff up its image, Andrew moved offices. “We first had our offices in the Kota area of North Jakarta but no advertising agency would come there, so we moved to Melawai in South Jakarta, which is more acceptable,” says Andrew.
This year, Kaskus plans to do major upgrading of the software engine that runs the site, one which was developed inhouse. “Our own engine will give us more scalability,” says Andrew.
To support the upgrade, Kaskus plans to hire more staff, from 40 now to about 100 by the end of the year. Andrew intends to remain profitable, despite the new expenses. “We’ve always been profitable from the start, but most of our profits are reinvested to buy and upgrade our servers to keep up with user growth and traffic,” he says.
Although Andrew doesn’t want to sell the entire company, he is not against selling a piece of it. “We are working on a deal to sell a minority stake to a local conglomerate, which we cannot name yet. The transaction should be completed in a couple months,” says Andrew. “Most investors we’ve met insist on a quick return on investment. We were surprised that this local investor shares our vision to develop Kaskus over the long term.” The local investor is rumored to be the cigarette maker Djarum, although Djarum declined to comment. 
Andrew says the upgrade and added staff will keep Kaskus competitive. Among his rivals are some with deep pockets and major resources, such as a planned local e-commerce site by Japanese e-commerce giant Rakuten in partnership with media group MNC. Another is Plasa.com, owned by PT Telekomunikasi Indonesia. Despite saying no to his own buyout, Andrew is glad Yahoo acquired local site Koprol, as it’s a good sign for the future of Indonesia’s internet community. “We like the Koprol deal, as it will motivate local startups to work harder,” says Andrew. 
(the story is taken from Forbes Indonesia Magazine)

Success in the Bag

©Jonathan Kantor/Getty Images
 In less than a year, Sugianto Tandio has captured 80% of the market for shopping bags used by Indonesia’s biggest retailers. Now he’s breaking into the U.S. market.  
By Ardian Wibisono

Sugianto Tandio has risen far fast. In less than a year, his company PT Tirta Marta has become the largest maker of plastic shopping bags for major retailers like Carrefour and Hero, controlling an estimated 80% of the market. His edge? Tirta Marta’s bags are 100% degradable using proprietary technology developed by Sugianto, yet cost almost the same as conventional plastic shopping bags.
To spiff up their eco-credentials, the country’s biggest retailers, including Alfamart, Bata and Giant, have all signed up for the bags, marketed under the Oxium brand. As upscale grocer Kem Chicks says on its bags: “Switch to our eco-friendly fully degradable plastic bags.” Also driving the switch was an agreement signed February by the Indonesian Chamber of Commerce and Industry (Kadin) and the Jakarta city administration to encourage retailers to phase out regular plastic bags starting next year, and instead offer non-plastic bags or degradable bags. Sugianto’s bags perfectly fulfill the latter guideline.
Now that Sugianto has captured a big chunk of the Indonesian market, he is eyeing the even-bigger U.S. market. After regular trips to the U.S., he’s already gotten some impressive customers, such as the Mall of America, retailer Club Monaco and sportswear maker Hurley. In the U.S., Sugianto is selling a different bag, the Ecoplas, made from tapioca and which biodegrades in ten weeks. To prove it, Sugianto sometimes buries his Ecoplas bags in the ground, and then dig them up a few weeks to show the degradation.
The bag is also price competitive, costing one third that of rival bags made from corn starch -- although Ecoplas still costs about 15% more than ordinary plastic bags. Oxium bags, in contrast, are close to the price of regular bags, but not as eco-friendly. They are only “degradable,” meaning they will crumble into a fine powder in two years but don’t fully disappear like a Ecoplas bag (see illustration).

Source: Tirta Marta
Sugianto is no stranger to plastic. His family company Tirta Marta, of which he owns 60%, has been in plastic manufacturing since 1971, making everything from traditional shopping bags to agricultural seed bags. With 300 staff, it has sold to clients such as Unilever, Motorola and Hitachi. Sugianto learned to appreciate innovation from U.S. manufacturer 3M, where he worked as an engineer for five years in the U.S. before returning to Indonesia in 1994 to take over the family firm (3M is known for innovative products like Post-it Notes).
In 2000, he started work on his bags. The lack of demand for such bags back then didn’t bother him. “Green business will eventually be a good business as awareness of environmental issues grows,” says Sugianto of his rationale for starting the research. Still it took eight years and millions in research to develop the technology. Eventually he developed a special additive, which makes up about 10% of the plastic used in the bag, that speeds up the breakdown of the plastic from hundreds to just two years. The Ecoplas bag, in contrast, is a more straightforward mixture of tapioca starch and other ingredients to form a plastic. To make the bag more politically correct, Sugianto uses only organic tapioca bought from farmers under fair trade principles. Sugianto claims it is also more durable than the corn starch-based competitor.
Development of the bags also came at a heavy cost to the company. In 2006, high oil prices drove up plastic manufacturing costs that, combined with the millions spent on research, put a huge strain on Tirta Marta’s finances. That year he sold 40% of his company to U.S.-based private equity firm Aureos Capital for $5 million, valuing the company at the time at $12.5 million. “We were facing difficulties because price hike of raw materials,” says Sugianto. “So we decided to seek a partner.” The Aureos involvement provided not just cash but also marketing expertise, and Aureos hopes one day to take Tirta Marta public. “We're lucky to find this company and have the opportunity to invest in it. It has strong potential since it developed a product that no other Indonesian company has,” says Aureos spokesperson Harianto Taruna.
Sugianto’s breakthrough came in June 2009 when one of the country’s largest convenience store chains, Indomaret, became his first customer. His sales pitch was simple -- just try the bag, it won’t cost any more than a regular one. So Indomaret did, and discovered that sales improved when they used the Oxium bags. Today Indomaret buys 201 tonnes of Oxium bags a month to supply to the 4,200 stores in its chain.
All told, Sugianto is selling more than 3,000 tonnes a month of Oxium bags, and revenues have hit $10 million. Demand is so strong that he has had to farm out production to ten other companies to meet his targets (Tirta Marta gives them the special additive to produce Oxium bags). Rivals, however, have noticed Tirta Marta’s success. A competing degradable plastic made by Canadian firm EPI is being used by upscale grocer Ranch Market in its bags. Petrochemicals giant Chandra Asri is said to be developing its own degradable plastic. “Competition is always good, it makes us more motivated,” says Sugianto, who closely guards his technology, discouraging reporters from visiting his factory where he makes the bags. He also has to monitor his quality control – once discovering a wholesaler had branded ordinary plastic bags as Oxium (the wholesaler was promptly fired).
Sugianto says the market has been barely tapped in Indonesia. After dominating the major retail market, Sugianto is looking to sell his bag in other sectors that use plastic bags, such the huge informal retail market. He estimates that he has tapped a mere 2% of the total potential market in the country. He is also applying his Oxium technology to other forms of plastic beside bags. “We are currently developing molded products using degradable plastic to be marketed soon,” says Sugianto. With his newfound success, Sugianto has learned that his plastic is fantastic. 
(the story is taken from Forbes Indonesia Magazine)