Salil Tripathi, Jakarta – The 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."