[Date Prev][Date Next][Thread Prev][Thread Next][Date Index
][Thread Index
]
Asiaweek: Children of a Lesser God
- Subject: Asiaweek: Children of a Lesser God
- From: bll@xxxxxxxxxxxxx
- Date: Mon, 01 Jun 1998 18:39:00
Children of a Lesser God
Indonesia sheds no tears as the Suharto empire crumbles
By Salil Tripathi in Jakarta
June 4, 1998
T he highway stretched to the horizon. It was empty save for some
shattered glass, burned tyres that had disintegrated into a heap of
ash, and
scattered bricks. The traffic lights at the toll plaza flashed amber; the
tollgates were raised skyward in abject surrender.
Snaking from Jakarta to its western suburbs, this was no ordinary toll
road;
it is owned by Siti Hardijanti Rukmana, daughter of former President
Suharto, through her company Citra Marga Nusaphala Persada. As Jakarta
burned on May 15, a cheerful toll-collector enthusiastically waved
through,
free of charge, the few cars that zipped along the highway. Further along,
newly jobless village ruffians had set up their own barricade and were
collecting an arbitrary toll, mocking the Suharto-family monopoly. For the
moment, at least a part of the multibillion-dollar Suharto money machine
had screeched to a halt.
Once order had been restored following Suharto's resignation, however,
the toll collectors were back in business, the makeshift barriers
dismantled.
But for how long will Suharto family members be able to cling to the
assets
they built up during his rule?
"Removing Suharto is a simple matter--relieving the children of their
businesses will not be very easy," warns Michael Backman, an Australian
economist who has written extensively about Indonesia.
An immediate expropriation of the family's wealth is unlikely, no
matter how
popular that idea may be among Indonesia's poor, who see the First Family
wallowing in the fruits of corruption and nepotism. Among the reasons are
the opacity of their business links and the implicit political protection
Suharto's successor, President B.J. Habibie, guarantees. Not only is
Habibie beholden to Suharto but also 20 of the 36 ministers in his
"reform"
cabinet served in Suharto's last administration.
Yet there is little doubt that Suharto Inc. will eventually unravel,
given the
family's inevitable loss of political clout and the iron laws of
economics.
Foreign investors and Indonesian tycoons alike will no longer feel it
necessary to team up with the Suharto children to get ahead in business,
and may try to pull out of current relationships. Nor can the family
expect
to win more juicy government contracts: Officials are already starting to
abrogate existing ones. And, like so many other Indonesian companies, the
Suharto children's businesses may simply not be able to survive their
crushing debt burdens.
But don't expect the country to sport a modern, transparent economy any
time soon: Its ruling class is teeming with politicians, bureaucrats and
generals who are keen to build their own empires. "The problems of
collusion, nepotism and corruption are not yet over," observes Syahrir, a
Jakarta-based economist.
Indeed, Habibie's own family empire, estimated to be worth about $60
million, extends into chemicals, construction, transport, communications
and real estate, notes Backman. (Those businesses include several joint
ventures with Suharto children.) And other key politicians, including
Ginandjar Kartasasmita, newly reappointed as coordinating minister for the
economy, finance and industry, and Hartarto Sastrosoenarto, coordinating
minister for development and national reform, have seen their families'
fortunes grow while they have been in office, Backman adds.
But their inroads into business pale next to those of the First Family.
Although Suharto himself doesn't have any known, direct business
interests, his six children, half-brother Probosutedjo and cousin
Sudwikatmono wrapped their tentacles around a sprawling array of
businesses during his 32-year rule. Their empire includes toll roads,
satellite communications, broadcasting, car-making, power projects,
domestic airlines, taxi services, water-supply utilities and trading
ventures.
The family has also formed joint ventures with prominent
Indonesian-Chinese groups such as Salim and Barito Pacific and with the
armed forces.
These ties form a tangled web. Suharto's eldest son, Sigit Harjojudanto,
runs the Hanurata Group with his brother-in-law, Lt.-Gen. Prabowo
Subianto, the ambitious officer whom armed-forces chief Gen. Wiranto
demoted after Suharto's resignation. Second son Bambang Trihatmodjo
controls the Bimantara Group, the biggest of all the known family
businesses. Youngest son Hutomo Mandala Putra, or Tommy, runs
Humpuss. Suharto's daughters are also in on the act. The eldest, Siti
Hardijanti Rukmana, or Tutut, controls the Citra Lamtoro Gung Group,
which includes the Jakarta toll road. Second daughter Siti Hedijanti
Herijadi
runs a finance company and chairs the Capital Markets Society of
Indonesia, while youngest daughter Siti Hutami Endang Adyningsih
co-owns Tutut's Citra group.
Few of the hundreds of family-owned companies are publicly traded,
though, forcing analysts to guess at the Suharto clan's total worth. In
1996,
SocGen-Crosby Securities estimated the family's business assets in
Indonesia at about 11 trillion rupiah, or $5 billion at the then
exchange rate.
An estimate from the American Central Intelligence Agency puts the
family's total wealth at about $30 billion.
Bankers believe most of the family's money has been transferred
overseas--to buy ranches, property in Singapore and negotiable
instruments with private banks. Although Probosutedjo says all of the
children are in Indonesia, well-informed sources say Tommy was in
Singapore the week his father stepped down and that Sigit has been in
London for some time.
Many of the Suharto businesses are classic rent-seeking activities: The
children simply acted as middle-men, collecting money without
contributing much. They injected little management expertise and
capital--but proffered free access to the corridors of power, making it
easy
to win government contracts and licences. Now, they face a backlash.
Most of Tommy's businesses--the clove monopoly, the almost-defunct
domestic airline, Sempati, and the Timor car plant--fall into this
category.
The International Monetary Fund's bailout programme for Indonesia
specifically demands that several of these monopolies should be opened to
competition. Similarly, Bambang and Tutut supply state oil monopoly
Pertamina's refined products to international markets, and own pipelines
that distribute oil and gas within the country. In the last days of the
Suharto presidency, parliamentarians demanded that these lucrative
contracts be scrapped. Habibie may be complying: The mines and energy
ministry has just called for a review of Pertamina's oil procurement and
exports, which could put paid to Bambang and Tutut's sweet deals. And
days after his father stepped down, Sigit's contract to supply water to
the
capital was cancelled by Jakarta's municipal government.
A former research head of a Jakarta brokerage says Tutut's toll-road
business is particularly susceptible to takeover: The state owns the land,
the investment is complete, the road is built and the traffic is
guaranteed.
What's more, the business is profitable. Moreover, Tutut's ability to
secure
new roads is now weakened, and the existing contracts diminish in value as
they edge closer to their expiration dates. Her investment is
relatively small,
which might make it easy for someone to make her an attractive buyout
offer.
Indeed, without the shade of the banyan tree that guarded them, the
children are now uniquely exposed. Future business opportunities for the
children will likely dry up. By law, most multinationals in Indonesia were
required to have a local partner. And in Indonesia's impenetrable business
environment, the Suharto name spelled access, prompting dozens of
foreign companies to sign up with the family. A few examples: Lucent
Technologies, Siemens, Freeport McMoRan, Edison Mission Energy and
NEC.
In the post-Suharto era, though, being identified as one of the children's
partners will likely be a liability. Bruce Gale, regional director of
the Political
and Economic Risk Consultancy in Singapore, says multinationals will be
exploring ways to cut their ties, perhaps offering to buy out the
children.
The family might leap at such proposals: The children's companies are
swimming in debt. Wilson Nababan, president of CISI Raya Utama, a
Jakarta-based credit-analysis firm, estimates that they could owe as much
as 40 trillion rupiah--$4 billion at current exchange rates. Local
banks which
have previously been strong-armed into providing seed capital to kickstart
the children's businesses (and, later, working capital) aren't likely
to write
off the debts--especially now that Suharto and the leverage he could bring
to bear are gone.
Tommy's plan to assemble Indonesia's national car, the Timor, with help
from Korean car maker Kia, epitomized the rampant cronyism that Suharto
Inc. represented. The project has crashed, and the site of the planned
car-assembly plant is no more than an empty parking lot. When Tommy
sought loans of 750 million rupiah last year to build the plant, four
state-run banks were expected to take the lead in its financing--and did,
offering 385 million rupiah. According to SocGen-Crosby, 12 private banks
picked up smaller instalments. With his father no longer at the helm, even
Indonesia's timid state bankers may summon up the necessary courage to
call in Tommy's loans.
Overwhelming debt threatens to topple even the children's value-added
companies, such as Bambang's Bimantara group, which has earned
grudging admiration from consultants and brokers. The company hired
skilled managers and engineers but still it faces daunting problems. In
January, Hyundai Motors postponed indefinitely an expansion of its
joint-venture car plant, citing poor market conditions. Bimantara was to
make an advanced-model Cakra car, based on Hyundai technology.
Meanwhile, Bambang's petrochemical plant, Chandra Asri, which makes
ethylene and polypropylene, will find it difficult to survive because of a
global glut of such products, business analyst Nababan says. World Trade
Organization strictures against protective tariffs will merely
complicate its
task.
Even Bimantara's most promising venture, the television network, Rajawali
Citra Televisi Indonesia, could be at risk. Manggi Habir, research
director
of Bahana Securities in Jakarta, gives the good news: "They are leaders in
advertising revenue, they have good programming skills, and they enjoy
good ratings from audiences." But the bad news is that advertising
spending in Indonesia fell 90% from a year earlier in the first quarter,
according to a Singapore-based advertising agency. Another reputable
company in Bambang's stable is Satelindo, the mobile-phone operator in
Jakarta. It gets top marks from executives who use its service, which is
based on advanced technology from Deutsche Telekom, one of its foreign
investors. But like other Indonesian businesses, it has huge foreign
debts.
The family's banks are in trouble, too. The Suharto family owns 30% of the
Salim group-controlled Bank Central Asia, Indonesia's largest private,
unlisted bank. More than 120 branches of the bank were targeted for
looting in Jakarta's recent unrest, and rioters smashed more than 1,200
automatic teller machines. Later, rumours that the bank was unable to pay
depositors triggered a run of withdrawals. Industry analysts estimate its
unhedged foreign debt to be about $1.5 billion--enough to wipe out its
balance sheet, Nababan says. BCA owns stakes in other Suharto
family-owned banks that are saddled with bad debts.
Few Indonesians will shed tears over the Suharto children's losses.
Ordinary people now bear the burden of the worst excesses of the Suharto
era, which saw their average per-capita income drop to $300 after boosting
it as high as $1,200. "It is back to Bangladesh for many of them, and that
hurts," says Kevin Evans, research director at ANZ Grindlay's
Securities in
Jakarta.
Now many Indonesians are crying out for revenge. Gobind Dayaldas, an
exporter who saw his $500,000 consignment of textiles looted in Chinatown
during the riots, says adamantly: "The family must apologize to the people
and return to the people what they took from them." He's not alone. Tuti
Indrawati, a 20-year-old biology student who camped out at parliament in
the days leading to Suharto's downfall, says: "There should be a public
trial of Tommy, Tutut and Bambang. They've got rich and we got poor and
now we Indonesians have to face the crisis and pay for their loot."
Still, the country has more pressing needs than bringing the Suharto
children to justice. "This is not the time for a witch-hunt," stresses an
Indonesian-Chinese banker, dismissing calls for a public trial and jail
terms
for the children. "This is the time to convince the rest of the world
that we
are a mature nation and that we can responsibly negotiate our way out of
this crisis."