Monday, January 26, 1998

Suharto Family Blamed for Indonesia's Woes

by Andreas Harsono

When it comes to cronyism, few can match Indonesia's first family


JAKARTA -- Indonesians still have different answers -- or perhaps, different questions -- about who should be blamed for the nation's ongoing economic crisis, but most analysts said that the 77-year-old Suharto and his children, whose business interests have periodically collided with the wider national interest, is a part of the problem, if not the main cause.

The Hong Kong-based Far Eastern Economic Review magazine commented earlier this month that when it comes to cronyism, few can match Indonesia's first family.

"The six children seem to have a finger in every corporate pie, thanks to the myriad contracts, equity stakes and exclusive licenses handed them over the years," the respected financial publication said.

Observers give three examples of the family's use and abuse of its vast influence.

A few days after Suharto asked the Washington-based International Monetary Fund (IMF) to bail out Indonesia's ailing economy, his aides announced that the government would scrap 75 huge projects. But after the IMF agreed to a $40 billion reform package , Suharto announced that 15 of those projects would continue, since they had already been started. He revoked that controversial decision only after Clinton personally made a 20-minute phone call. Critics note that most of those 15 projects belonged to the family business empire, including huge power plant projects cumulative worth almost $10 billion. Central players in the deals were two Suharto daughters and Suharto's close associate Bob Hasan.

In the second illustration, Suharto moved quickly when family banking interests may have been at stake, this time setting up a team of three businessmen and a old friend to help negotiate with foreign banks to roll over Indonesia's private loans - a move read by some to mean that the aging dictator even did not trust his own ministers to deal with the issue. (It's said that Indonesia actually has two cabinets: The de facto cabinet dominated by the children, and the official cabinet, which is toothless. )

As a third example, critics say that when Suharto's son, Bambang, decided to withdraw his suit against the Finance Minister for the closure of Bambang's bank, the son already had a license to start a new bank to replace the liquidated one. Suharto, apparently on the advice of his children, also dismissed four and arrested three high-ranking officials of the Central Bank -- the speculation being that Bambang wanted revenge for the embarrassing closure of his bank.

Such moves helped send the rupiah into a free fall, culminating in the recent 26 percent drop in the battered currency in a single day. Both foreign and Indonesian economists talked repeatedly about the need to restore public confidence in the government. But which government? The hidden, de facto government or the powerless de jure cabinet?

Government critics here jokingly talk about the need to openly fight and to expose the wrongdoing of the PPP. The abbreviation does not refer to the Muslim-based political party with those initials, but to "Putra Putri Presiden" -- which literally means, the sons and daughters of the President.

The presidential children, of course, fight back. Eldest daughter Rukmana, who controls the toll roads in Jakarta and had a road project scrapped because of the Clinton telephone call, launched a "Love Rupiah" campaign during which she changed $50,000 to the national currency.

It is anticipated that some of the family's insolvent companies will go bankrupt But of all the Suharto children, none matches their father for sheer nerve, independence and self-confidence like Hutomo "Tommy" Mandala Putra. Just three hours after Suharto announced that his son's pet project would be scrapped, the 35-year-old businessman arrived at a press conference in a sparkling royal blue Rolls-Royce.

Tommy Suharto is indeed not a low-profile executive who shies away from showing off his wealth, even amid Indonesia's most serious economic crisis, with inflation estimated to reach 20 percent this year in a corresponding period of zero economic growth.

It wasn't clear that the businessman understands that, directly or indirectly, history is knocking on the Indonesian door. When Suharto signed the 50-point IMF reform measure, it scrapped special taxes, customs and credit privileges given to Tommy's so-called "national car project," which manufactures a car called the Timor.

Automotive analyst Suhari Sargo said the elimination of tax and other incentives would force Tommy's PT Timor Putra Nasional to compete in the free market with the result, they predict, that sales of the Timor will shrink from 2,000 vehicles per month to around 400.

It is also not difficult to anticipate that some of the family's insolvent companies will go bankrupt.

Tommy's business group may be the most likely to break down, but there is still a question about whether son Bambang's widely-diversified company would follow suit. His core business is media, controlling two of Indonesia's most lucrative private television channels. Bambang's orange-producing monopoly is gone however, along with a $3.2 billion refinery project.

"It's like pulling the last string. If the structure is not strong enough, it will crumble. And it is likely to break down," said an analyst, referring to the business empires of Suharto's children and cronies.

Tommy, however, alleged that the IMF reforms might have been "politically motivated" as an effort to cleanse the economy of "first family-dominated industries."

"It had previously been agreed that the national car project would await the decision of the World Trade Organization, but maybe, the government is in desperate need of funds from the IMF and the World Bank, and maybe because it was politically motivated," he said.

He did not directly answer a question about whether the agreement between his father and IMF Managing Director Michael Camdessus is a kind of neocolonialism, but said, "I think it's a part of it."

When asked whether the "colonialist" is the IMF, he said, "You can guess."

Albion Monitor January 26, 1998 http://www.monitor.net/monitor