Andrew Higgins in Jakarta on the tycoon who plays golf with Suharto and keeps a firm grip on Indonesia's timber industry

Behind frosted-glass doors on the ninth floor of a Jakarta office tower, the command centre of one of the world's most reviled and resilient cartels has been gutted. The filing cabinets have been removed, the desks carted away and the phones unplugged. Gone too are the staff who managed billions of pounds of business each year for President Suharto's golfing partner.

"When they left they were crying," said Tjipto Wignjoprajitno, a former naval officer and the current commander of the crumbling linchpin of Indonesia's huge timber industry. "Outside it is difficult to get a job now. They thought they were secure. All of a sudden there was a decree from the minister and they had to leave."

Wrenching indeed has been the assault on the Indonesia Wood Panel Association (Apkindo), the innocuous cover for one of Asia's best connected agents of crony capitalism. In a country where cartels have long controlled products ranging from cloves to cement, Apkindo reigned supreme as the model of a system the International Monetary Fund wants dismantled – a system built on sweetheart deals for the friends and family of the president.

At the apex of Apkindo stood Mohamad "Bob" Hasan, General Suharto's closest crony and regular companion at Jakarta's Ramawamangun country club. He personifies the relationships which, according to a World Bank report last year, "significantly raise the cost of doing business in Indonesia, lower efficiency, undermine international competitiveness and contribute to inequity".

Other cartels have cornered markets but none matched Apkindo's breathtaking range of operations. It decided not only how much wood companies could export and at what price, but also which shipping company, which insurance agent and which overseas distributor they used.

Mr Hasan was well placed to benefit: he has his own timber company, the Kalimanis Group, and large stakes in a shipping line, an insurance company and various overseas agents. Other key players include two of Gen Suharto's children and the military, which runs a timber business alongside its more conventional ventures suppressing rebels in East Timor, Irian Jaya and northern Sumatra.

With Indonesia plywood exports worth more than £2.5 billion last year, it was a lucrative franchise. So important is plywood to Indonesia's economy that the government classifies a product trampled underfoot on wooden floors from Tokyo to Toronto as a "strategic commodity".

In the IMF, though, Apkindo has met a powerful foe. Forced to choose between a coterie of friends and family and an offer of £25 billion to salvage the economy, Gen Suharto decided in January to plump for the money. The government ordered Apkindo's emasculation.

The removal men arrived to empty seven offices on the floor occupied by Apkindo's joint marketing boards, the enforcer of Bob Hasan's will in the timber trade.

But as with many other reforms scripted by the IMF, it has proved far less decisive than the Washington technocrats planned. A deal reached in January quickly fell apart and is being renegotiated. The IMF's hostility to Apkindo remains – but so too do the imperatives of greed, family and friendship that underpinned its success.

Mr Hasan has given up his post as Apkindo chairman – and taken up a new one as minister for trade and industry. He has joined the Indonesian team negotiating with the IMF and has been put in charge of a working group on structural reforms whose task is to tackle the cartels and the restrictive trade practices he helped create.

Many suspect he will try to recreate the old cartel from his new cabinet office. The temptation is strong: like most Indonesian companies, his businesses are heavily in debt. He can ill afford to surrender the privileges that made him rich.

"Bob Hasan was leader of Apkindo and now he is a minister. Do you think he is going to give up what he has? I don't think so," said Nawir Messi, programme director at the Institute of Development of Economics and Finance.

"This is a characteristic of Indonesia – the difference between formal and informal. Don't watch what they say but see what they do."

Mr Tjipto, the secretary-general of what remains of Apkindo, insists that "nothing has changed". He denies that Apkindo operated as a cartel and claims that the now-empty premises of the marketing boards were never part of the association.

He is unable to explain why the Apkindo logo adorns their doors. "We were just friends," he said, "but of course we worked closely together."

In Indonesia, friendship counts far more than form. Mr Hasan's own intimacy with Gen Suharto dates back to the 1950s. The son of a Chinese trader, he supplied the then army quartermaster in Yogyakarta with provisions and, if normal practice is any guide, generous kickbacks.

He later converted to Islam, cementing his ties to the ruling elite – and consolidating a reputation for opportunism. Even critics acknowledge his brash, can-do flare and say his appointment as minister has a certain logic. "He knows every scam in the book and has done most of them himself, so if anyone understands this economy he does," said a Jakarta executive. After coming to power in the 1960s, Gen Suharto repaid Mr Hasan's favours by giving him forestry concessions and helping him to expand into steel, mining, insurance and shipping.

As well as ruling the plywood cartel, Mr Hasan secured similar privileges for paper, wooden furniture and rattan. When commercial banks declined funding for a £800 million pulp mill, state banks stepped in to help. Gen Suharto attended its opening last year in Kalimantan.

Apkindo has refused to go quietly. Plywood producers can now deal directly with their customers instead of going through the association, but they are encouraged to stick together.

"Apkindo is not compulsory, only voluntary. But everyone wants to be a member," said Mr Tjipto, "If you stay outside Apkindo maybe you will have no friends. This is an association of millionaires. Rich people like to stick together."

Old instincts die hard. Soon after the government bowed to IMF pressure to trim Apkindo's role, the association announced what was widely seen as new form of extortion. Its 111 members – plywood producers controlled by a handful of conglomerates – were ordered to pay a supposedly refundable charge of 50,000 rupiah (about £3.50) for every cubic metre they exported.

Apkindo said it needed the cash to keep its statistics up to date. Its members were also told to stick with Apkindo-sanctioned shippers, prominent among which is Mr Hasan's Karena Lines. The demands provoked an uproar and were dropped.

After joining the cabinet Mr Hasan voiced support for the IMF's stand against cartels and promised timber exporters a free hand, then promptly undermined the message by insisting that monopolies were sometimes necessary. Apkindo, he said, was not a cartel but a self-help association.

The problem in Indonesia, and much of Asia, is that some helped themselves far more than others.

Set up in the late 1970s to control exports, and thus prices, of plywood, Apkindo became the overlord of Indonesia's entire timber industry. It was in many ways a success: it kept prices stable and defeated the divide-and-conquer practices of Japan's cartel-like conglomerates.

But it also profited some far more than others. As well as steering business towards favoured firms, it set up Apkindo-sanctioned distributors in Japan, South Korea, China, Hong Kong and Taiwan. These, too, are linked to Mr Hasan's business empire. All still have offices in the same tower block as Apkindo.

In return for such services, members had to pay Apkindo a £6 fee for each cubic metre of plywood they exported. More importantly, most producers had no idea where their wood was going or whether the money they got from Apkindo corresponded with what had been paid. "You took what they gave you and shut up," said one timber executive. "If you didn't they could take extreme measures." Producers who disobeyed could find their share of the export quota suddenly pulled or their credit lines squeezed.

The system did more than distort the market and punish would-be rivals to Mr Hasan and other well-connected holders of forest concessions. Fattened by the cartel, timber companies built far more plywood mills than the forests could sustain.

As demand for logs outstripped supply, illegal logging burgeoned. Legal operations also spun out of control, leaving vast tracts of Kalimantan and Sumatra ablaze as timber barons rushed to clear their land for industrial forests.

Ministers for forestry and the environment periodically tried to impose some order but rarely had sufficient political clout.

Whether the IMF can change this is doubtful. Apkindo is clearly not the force it once was. Mr Tjipto's remaining staff seem to spend much of their time playing computer games or reading.

But the habits of a country that revolves around golf club outings with President Suharto and his loyalty to family and friends are still alive.

"It is like in a village," said Mr Tjipto, "If you have only one cow nobody listens. If you have 100 cows you have influence and may become the village chief."