Indonesian Businesses Grind to a Halt From Mount Kelud's Eruption
Jakarta. As volcanic ash from Mount Kelud has yet to subside, Indonesian companies brace for potential losses from damaged corps, disrupted distribution and fleeing customers.
Kelud in East Java erupted on Thursday, sending millions of cubic meters of ash over Java, blocking sunlight, covering roads and suspending airline flights. Tens of thousands of people were evacuated from their homes.
Franky Sibarani, the secretary general of the Indonesian Food and Beverage Association (GAPPMI), said that the impact of eruption of Kelud would be immediate, cutting supply of foods and beverage from the impacted area.
"Our industry is vulnerable to contamination such as volcanic ashes, especially small- and medium-enterprises that rely on sun to dry their produces," Franky told Jakarta Globe on Friday.
Malang is home for producers of raw food commodities such as vegetables, chicken and eggs.
Coordinating Minister for Economic Affairs Hatta Rajasa said on Friday that the eruption had a significant impact on economic activities.
"We haven't calculated the loss, but it must be huge as the economic activities on Java island is high," Hatta said in Jakarta.
The ash cloud from Thursday night's eruption of Kelud has moved westward over the densely populated island, affecting cities like Solo and Semarang in Central Java and Yogyakarta.
Economies in East and Central Java, as well as Yogyakarta, produced $154 billion worth of goods and services last year, according to data from the Central Statistics Agency (BPS).
The government has ordered several airports to suspend their operations temporarily.
"Some airports have been ordered to close their operations," Bambang Ervan, the spokesman at the Transportation Ministry.
The affected airports include Juanda Airport, Adi Sucipto Airport in Jogyakata, Adi Sumarno Airport in Solo, Ahmad Yani Airport in Semarang and Abdurahman Saleh Airport in Malang. Hundreds of flights were canceled with airlines such as flag carrier Garuda Indonesia and Lion Air rescheduling their passenger flights or returning fares.
Grahawita Santika, the company behind Santika Indonesia Hotels and Resorts chain, predicts a drop in occupancy throughout its hotels in Yogyakarta, Surabaya and Malang.
"We cannot give the exact number yet, but we have seen cancellations on Friday as flights to those cities were canceled," said Guido Andriano, corporate director of sales and marketing at Santika. Santika's average occupancy rate was 85 percent in the three cities, Guido said.
"Some of our customers decided to lengthen their stay, but more decided to leave anyway as the trains are still operating," he said.
Yogyakarta was among the badly hit cities as more than a fifth of its $5.4 billion economy came from trade, hotels, and restaurants, according to data from the BPS.
Guido said that in the Mount Merapi eruption in 2010, which lasted for a week, the occupancy rate at Santika's hotels dropped to 50 percent.
"It took up to a month to recover to normal operations back then. Hopefully, this time it would not take that long to recover," he said, noting that Kelud is farther than Merapi to its hotels and Kelud's eruption is less likely to last as long.
Mochammad Cholidi, the corporate secretary of state-owned plantation company, PTPN X, said that Kelud's eruption harms the firm's planted area.
"Our crops were covered by ashes and volcanic cloud blocked the sun. Crops are not able to do photosynthesis," he said.
A large chunk of PTPN X's plantation was affected by the eruption. PTPN manages an area of 78,000 hectares in East Java mostly used for sugar.
Meanwhile, Semen Indonesia, with its main operation in Gresik, said it has not been affected as operations are still running normally.
Agung Wiharto, corporate secretary at Semen Indonesia, said that the company's plant in Gresik and Tuban are operating normally despite the Kelud's eruption. Gresik is located more than 100 kilometers to the northeast from the peak, while Tuban is more than 150 kilometer to the north.
"We get limestone, clay, gypsum, and fly ash from the region around the plant. Only a small amount of silica sand comes from Blitar, but we have enough of that in stock," Agung said.
East Java accounts for about 13 percent to 14 percent of the nation's cement market, Agung said. For the Kediri regency alone, it is 2 percent to 3 percent of the national market.
Agung also said that Semen Indonesia has spent Rp 2.7 billion ($223,000) on the first day of Kelud's eruption on food, drinking water, masks and shelters for the refugees.
As for other state firms, Ali Mundakir, spokesman for state energy company Pertamina, said that the eruption has yet to disrupt the operation of its refinery in Cilacap, Central Java.
"We have prepared air filtration equipment should they be needed to protect the refinery's equipment to continue operations normally," he added.
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