Suharto's business empire
By George J. Aditjondro
Seeking an "official" mandate for his seventh term through the puppet Congress (MPR) on March 11, Indonesian President Suharto is currently facing the strongest opposition from within his own country.
Despite this, on January 20, the MPR's chair, Harmoko, announced that Suharto had accepted the ruling Golkar party's nomination for president.
Without naming names, Suharto stated that his running mate as vice-president should be somebody with a deep understanding of technology. This, the media immediately pointed out, means Baharuddin Jusuf Habibie, the German-educated aeronautical engineer, Suharto's longest serving minister, holding the lucrative portfolio of minister of research and technology, in charge of the Technology Assessment and Application Body (BPPT) and director of 10 strategic industries.
This may be good news for some US aircraft factories and airlines, such as Boeing, Lockheed and the Miami-based Gulfstream International Airlines, with whom Habibie has began to cement some business — and personal — ties.
The minister's son, Ilham Akbar Habibie, who also studied aeronautical engineering at his father's alma mater in Aachen, Germany, and was appointed to direct the N-2130 national jet project, did an apprenticeship at Boeing's headquarters in Seattle in 1995.
Ilham and his younger brother, Thariq Kemal Habibie, who is in charge of promoting the aircraft company IPTN's products in Europe, are business partners of Bambang Trihatmojo Suharto and Tommy Suharto on Habibie's free trade enclave on Batam island, near Singapore.
The market, however, responded with a further rush for US dollars as soon as Suharto's formal acceptance was announced. For the second time in January, the rupiah crashed through the psychologically important 10,000 to the US dollar mark.
Suharto's main concern at this stage is safeguarding his family's business empire, which he built by taking over the businesses of his predecessor's friends. This is now concentrated in a business conglomerate, the Berdikari Group, owned by three Suharto family foundations.
Hence his choice of a running mate and potential successor who is also a close business partner of his family's business empire.
Their joint ventures operate an industrial estate, a huge integrated piggery cum poultry farm cum crocodile ranch cum orchid farm on Bulan island (near Batam), which supplies 10% of Singapore's pork demand, and an aircraft maintenance centre for Tommy's Sempati Air.
These Batam-based businesses are only the tip of the iceberg of the Habibie family's Timsco Group, directed by the minister's youngest brother, Suyatim Abdulrachman ("Timmy") Habibie.
The Timsco Group also has numerous joint ventures with Bambang Trihatmojo's Bimantara Group in chemical industries on Java and Sumatra.
Timsco was also supposed to be involved in one of the mega-projects cancelled by Suharto under IMF pressure, namely the Manggarai triple-decker integrated transport terminal in Jakarta, which was to be directed by Suharto's eldest daughter, Siti Hardiyanti Rukmana, also known as Tutut.
Timsco is involved in a joint venture with Tutut as an agent for AT&T. This joint venture was formed several years ago due to former US President George Bush's phone calls to Suharto, supporting AT&T in a fight against Japan's NEC in a huge telecommunication project. NEC also won half of the contract, with Bambang as its partner.
These corrupt and nepotistic business practices are deeply rooted in Suharto's personal and public history. His absolute political power has been translated into wealth of US$16 billion, according to one (Forbes) estimate, or US$35 billion, according to another (CIA) estimate.
Suharto began to transform politico-bureaucratic power into business deals in the early 1950s, as commander of the Diponegoro Division in central Java.
That is when he formed personal bonds with two young Sino-Indonesian businessmen whose names appear again and again, nearly half a century later: Liem Sioe Liong and Bob Hasan. They supplied whatever the Diponegoro commander needed for his soldiers, from rice to uniforms to medicine. In 1950, the newborn army was so underfunded that divisions had to set up foundations or companies, which in turn gave special deals to professional businesspeople like Liem Sioe Liong and Bob Hasan.
However, not all Suharto's superiors approved of the way the young colonel carried out his businesses, which enriched him more than they improved his troops' welfare. In 1959, he was transferred by the army chief of staff, Nasution.
From Semarang, the capital of Central Java, Suharto eventually landed in Makassar, the capital of South Sulawesi.
This assignment lasted only for a year. During that one year, Suharto got involved in his old habit, smuggling. Nasution punished Suharto by moving him to a "dry" and less powerful post, as commander of the Army Reserve Command (Kostrad) in Jakarta.
Here he set up another army foundation, the Darma Putera Kostrad Foundation, which was later to become his first business instrument after he became Indonesia's second president.
In 1965, fortune was on his side. Insulated in the totally unpretentious Kostrad headquarters, Suharto was saved from the putsch commanded by the leftist Colonel Untung, and launched a counterattack which ended with the slaughter of between 500,000 and 2 million suspected Communists.
Suharto and Liem Sioe Liong's first major money-makers were the giant Bogasari flour mills in Jakarta and Surabaya, set up in 1971-1972 to mill all US PL-480 (foreign aid) wheat. A potential competitor from Singapore was forced out to Ujungpandang (formerly Makassar) and allocated the meagre east Indonesian market by decree of the National Logistics Body (BULOG). The lucrative west Indonesian market, which consumes 80% of the flour, became Bogasari's monopoly.
Having consolidated his presidential power, began to develop his civilian cards. The Kostrad Foundation was handed over to his successor in Kostrad — and lost its stakes in the Bogasari flour mills. Now, Suharto and his wife, Suhartinah Suharto, began to set up their own foundations.
After 32 years in power, the first family control at least 20 foundations which own stakes in numerous large companies, including cement factories, fertiliser factories, toll roads, timber concessions, oil palm plantations and many others.
This is when Suharto's second long-time business friend came into the picture: Muhammad Hasan. Having converted to Islam in his youth, Hasan, popularly known as Bob Hasan, is the opposite of Liem Sioe Liong. He speaks fluent Indonesian, even with a Betawi (Jakarta) accent, plays golf twice a week with the president, presides over several national sport associations, jogs with fellow athletes, and has set up several news media to defend his patron.
His Nusamba Group is another major money-maker for the Suharto foundations, where Bob holds only a minority share.
Liem Sioe Liong, who still speaks with a heavy Chinese accent after migrating to Indonesia in 1938 at the age of 22, is the international face of an older Suharto-linked business empire, the Salim Group. The Suharto family was first represented in this group by Sudwikatmono, a step-brother of the president.
After the separation of Lim and Suharto from the Kostrad Foundation, they founded Bank Central Asia (BCA). Its majority shareholders are Suharto's eldest daughter, Siti Hardiyanti Rukmana, and her brother, Sigit Harjojudanto. Together they control 32% of BCA shares, while the Liem family control 24%.
In 1979, the Salim Group formed the Hong Kong-based First Pacific Group, which operates in Asia and Australia. From Hong Kong they moved to San Francisco, where they bought the 12th largest bank in California, Hibernia Bank, for US$11 million, in November 1982.
By controlling this bank with its 35 Bay Area branches, they could hit two birds with one stone: first, access many Asian-American customers, and second, keep the US$330 million annual wheat trade for Bogasari in their own bank, thereby creating an annual profit of US$2million.
To complete their access to the western market, in January 1983, the First Pacific Group acquired majority stakes in an old Dutch trading firm, Hagemeyer, which was founded in Surabaya, East Java, in 1900, and had branches in 25 European and Asian countries.
[Next week: the businesses of Suharto's children.]