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Bob Hassan emerges as arbiter of the Suharto families business

Far Eastern Economic Review - February 20, 1997

John McBeth and Jay Solomon in Jakarta – It's hard to get any closer to the top. Timber tycoon Mohamad "Bob" Hasan and Indonesian President Suharto have been friends for more than 30 years and they play golf together twice weekly.

It has been a fruitful match-up. Not just for their golf games, though Suharto has a handicap of 10 and Hasan's is even lower. Hasan also manages the investments of the president's huge charitable foundations, and Suharto regularly turns to him for advice.

But now, Hasan's role has grown larger than ever. In the past few months, he has embarked on a string of corporate acquisitions that have put him at the crossroads of Indonesia's biggest business developments. These include stakes in car maker Astra International and in the giant Freeport Indonesia copper and gold mine. Most importantly, he has emerged as arbiter of the hottest question in the world of mining: Who will get the rights to develop the giant gold deposit in Busang, East Kalimantan?

Hasan has become the man in the middle of Indonesia's economy, and analysts believe that's just where Suharto wants him to be.

Following the death last April of the president's wife, Siti Hartinah, Hasan seems to have assumed another unofficial role: arbiter for the Suharto family business interests the person who can keep the Suharto children in line at a time when they have a finger in just about every pie.

"He's come in due to the combination of squabbling within the family and the need to placate public pressure," says Rizal Ramli, managing director of the Econit advisory group in Indonesia. "If something becomes controversial, Suharto now goes to Bob. If the children are squabbling he now goes to Bob. Hasan is the fix it man. He represents what Suharto has in mind. He is the one who sets out to find a win win situation."

What's more, Hasan's recent investment efforts, which have often involved funds from Suharto's foundations, could be read as securing his and Suharto's financial position. Some analysts wonder whether these moves could challenge the conventional wisdom that Suharto will stay in office for life.

Certainly, Hasan is the one Suharto would turn to in challenging times. Born The Kian Seng, the son of an ethnic-Chinese wholesaler, his links with Suharto began when he was made the godson of the late Gen. Gatot Subroto, one of the founders of the Indonesian armed forces. It was through Subroto that Hasan came into contact with a number of young officers serving in Central Java in the mid-1950s. The then Col. Suharto was one of them.

Recounts Soyfan Wanandi, head of the Gamala group and the spokesman for Indonesia's ethnic-Chinese business community: "Hasan had the power to get Suharto into the good graces of the general and eventually helped him secure his position at the Army Strategic Command (Kostrad)." It was that position which provided him with his springboard to power in the mid-1960s. Unlike Suharto's other long-time friend, Salim group founder Liem Sioe Liong, Hasan is a Muslim whose interests remain within Indonesia and extend beyond business into sports and active social work.

Under Suharto's New Order government, the largely self taught Hasan has parlayed his father's business as a supplier of food and clothing to the military into an empire that ranges from timber (he controls the Indonesian Wood Panel Association, the plywood monopoly known as Apkindo), banking and general contracting to oilfield engineering, bottle-making and transportation. Although he projects a laid-back persona, he is feared by business competitors as a financial hard man but a man who will stick with a deal once it's made.

Nowhere has Hasan's recent growth in influence been more evident than with the Busang affair. Of all the unseemly scrambles to snatch part of Indonesia's riches natural or otherwise the recent battle for East Kalimantan's Busang gold deposit, one of the world's largest, needs a steady hand. "Hasan fits that role that's why he's involved in Busang," says Indonesian business consultant Christianto Wibisono.

The Mines and Energy Ministry struggled for months to enforce a settlement over who would be able to exploit the reserves. Moreover, Suharto became annoyed at the way the controversy spun out of control. With the president's backing Hasan has effectively taken over the ministry's role.

As the clock ticks down towards the latest government-imposed deadline over which players will get a share, Hasan will almost certainly determine which of the two rival Canadian mining giants, Barrick Gold or Placer Dome, gets to develop perhaps the biggest motherlode on Earth.

At the heart of the affair is Bre-X Minerals, a small Canadian company that discovered the deposit. Mining giants Barrick and Placer Dome are bidding to be the majority partner with Bre-X and local companies to exploit the find. Hasan has played a key role as an intermediary, and his team of advisers appears to have developed a new ownership formula for Busang that will give the Indonesians 20%-30% more control.

Bre X President David Walsh makes no secret of his relief that Hasan had taken over, leaving the ministry in what amounts to a supporting role. "I think Mr. Hasan's interest in the project going forward is going to be of great benefit to the partners," he says. "We're very pleased with his involvement."

Embattled Mines and Energy Minister I.B. Sudjana is circumspect about Hasan's place in the scheme of things, but left no doubt over who is calling the shots. Asked in late January whether a bidding process was now possible to select a major operator for the project, he replied: "The president will decide." The minister also acknowledged that Placer Dome sent its recent offer for the mine directly to the palace.

In the months before that, Mines and Energy Secretary General Umar Said and Sudjana's personal adviser, Adnan Ganto, had both openly supported Barrick's bid along with foreign heavyweights like former United States President George Bush and former Canadian Prime Minister Brian Mulroney. After one parliamentary hearing in December, Ganto contemptuously called Bre X a "$2 company."

The battle for Busang had become political long before Hasan's intervention. It began when Barrick Chairman Peter Munk formed a partnership with Suharto's eldest daughter, Siti Hardijanti Rukmana, or Tutut, in an effort to force Bre X into what Walsh and his shareholders considered an unfavourable deal. As the pressure built, Bre X finally took a lesson from the same corporate playbook and brought in Tutut's brother, Sigit Harjojudanto, for protection, raising the prospect of an ugly intra family squabble.

With Sudjana under fire for his handling of the issue, most notably in the Hasan-owned Gatra weekly, an angry Suharto initially turned to Coordinating Minister for Production and Distribution Hartarto to sort out the mess and head off any sort of controversy that could envelop the family. But after devising an ownership formula in which Barrick got 75% of the deposit and Bre X 25%, with both companies contributing to a 10% government stake, Hartarto just as quickly dropped out of the picture possibly because his son, Airlangga, was representing Barrick and Tutut.

By intervening, Hasan was essentially arbitrating between the Suharto children a role that he, as an outsider may be able to play better than Suharto himself. "The children are more likely to come to an uncle because they can't discredit each other in front of their father," says business consultant Wibisono. He has also steered the dispute towards open bidding, a step applauded by most foreign investors.

Hasan's role became apparent in early December when he and another presidential acquaintance, James "Jim Bob" Moffett, chairman of the Louisiana based Freeport McMoran Copper & Gold, met with Suharto at his Tapos cattle ranch outside Jakarta. With the president listening attentively, both men expressed their concern at the effect the issue could have on foreign investment in Indonesia and urged him to consider a more open bidding process.

The affair dragged on for more than a month, however, before Hasan finally disclosed that investment company Nusantara Ampera Bakti, or Nusamba, of which he is chairman, had purchased 50% of Askatindo Karya Mineral. That company has a 10% stake in the so called Southeast Zone, or Busang II, where proven and probable gold reserves now stand at 57 million ounces. That move propelled the president's confidant into a commanding position, similar in many respects to the way he entered Astra.

Also significant was that Hasan's entry drew the media's attention, keeping the spotlight well away from the First Family's business activities.

Shortly after the December meeting at Tapos, Hasan met for the first time with Placer Dome President John Willson. Willson was angry. He had been in serious negotiations with Bre X for a $5 billion merger when the government suddenly pulled the plug and announced that Barrick had been chosen as the majority partner.

Both Willson and Freeport's Moffett have a healthy distaste for Barrick's methods, the latter because of a dispute over a confidentiality agreement covering an Irian Jaya concession.

But whether this will influence Hasan is open to question.

Hasan's investment in Busang was just the latest in a string of acquisitions that he has made with Nusamba, an investment vehicle formed in 1982. At that time, three charitable foundations headed by Suharto controlled 80% and Hasan and the president's eldest son, Sigit Harjojudanto, owned 10% each. (The secrecy surrounding Nusamba often makes it difficult to assess who now owns what. The company's most recent articles of association, in August 1996, actually have Hasan in possession of all but one of the 3 million shares. That leaves open the question of why Suharto is no longer directly investing in Nusamba.)

Another key move was Nusamba's acquisition in October of a 10% stake in Astra formerly held by Indonesian state banks and pension funds. It effectively headed off a takeover bid late last year by cigarette magnate Putera Sampoerna. It leaves Hasan as head of a consortium of Suharto allies which now controls nearly 51% of a company whose products, Toyotas and Isuzus, still maintain a tight grip on the local car market.

Among the other shareholders in the newly revamped ownership formula are Liem's Salim group with 7.37%, banking group Danamon with 7.33%, Barito Pacific's Prajogo Pangestu with 10.86% and finally Putera with a personal 15% interest. On February 19, several months after his intervention, a meeting of the management board should finally appoint Hasan as chairman of Astra in what is expected to herald a major restructuring of Indonesia's largest vehicle assembler.

It has subsequently been disclosed that Salim's under utilized Indomobil will help in assembling knocked down kits of the Timor national car, an exclusive joint venture between Kia Motors of South Korea and the president's son, Tommy Suharto. But analysts are still waiting to see whether Hasan and the new board of commissioners will also add some of Astra's car making assets to the controversial programme.

Hasan declined to talk to the REVIEW about the recent flurry of business activity, saying he didn't give interviews during the Muslim holiday of Ramadan. That rule apparently didn't apply in the United States, where he played in the recent Pro Am Bob Hope Golf Classic competition in Indian Wells, California. Questioned by Toronto's Globe and Mail newspaper, he said he had only begun his investment spree because Suharto wanted to generate more capital and protect the charitable foundations under his control from inflation.

Gamala group's Wanandi says it's important not to underestimate the bond between Suharto and Hasan: "Everything Hasan does is by the design of Suharto. He has been chosen (to act for the president) because he has the best ability to squeeze the most out of foreign companies."

Hasan's choice of safe parking places for his latest investments has even led some in Indonesia to wonder whether Suharto is thinking of stepping down. The sheer weight of business reorganization in Indonesia recently could be a preparatory step for a handover. Other anecdotal threads can be made to fit the same scenario not least the frenzied business activity of the Suharto children. After all, if anyone is likely to know what is about to happen, it's Hasan and the president's children. "What we may be seeing," says one well connected Jakarta businessman, "is the last hurrah."

Former Mines and Energy Minister Mohammad Sadli thinks there may be a simpler answer. "He is out to get the best deal for himself and for Indonesia," he says. "It is clear that behind Hasan is Number One [Suharto]. Together they are hunting for the shares. They did it with Astra, and now they have done it with Freeport and Busang. They are looking for the best yields they can get." After all, that's what good friends are for.