"We will use our own cashflow as well as obtaining funds from our partners," Harry said after signing a Memorandum of Understanding (MoU) with state-owned land system and weapons maker PT Pindad president director Sudirman Said.

Harry said that the large amount of money was needed for the factory to work to full capacity. The factory is to be built in a 600-hectare plot of land alongside offices, laboratories and warehouses.

Sudirman said that his company had agreed to buy propellant from Dahana for Pindad's ammunition, having previously imported its propellant.

Pindad senior vice president for defense and security products, D. Bambang Muyono, said that the company needed between 200 and 250 tons of propellant to produce small-caliber ammunition. Pindad needs a larger amount of propellant as it also produces large-caliber ammunition.

Bambang added that he expected Pindad to sell more cheaply its products made with domestic propellant.

He said that propellant constitutes some 20 percent of production costs due to transportation and costly dangerous goods insurance.

Harry, meanwhile, insisted that Dahana would maintain the quality of its product and provide a competitive price and on-time delivery, even though the deal involved cooperation between state-owned companies.

"Our top priority now is to fulfill Pindad's needs," he said. (nvn)

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