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Speculation grows about Indonesian president's plans

New York Times - March 23, 1997

Seth Mydans, Jakarta – He owns forests, paper and plywood mills, airlines and banks, and last month he brokered a deal that gave him a major share in what may be the world's largest gold deposit.

But the biggest asset of Mohamad (Bob) Hasan is worth more than gold. As he said recently, "I've been friends with the president for more than 40 years."

The son of an ethnic Chinese wholesale merchant, Hasan, 66, has long been known as a trusted friend and golfing partner of President Suharto as well as the administrator of the president's multibillion-dollar charitable foundations.

But over the last year, since the death of Suharto's wife, Siti Hartinah, his role appears to have expanded as presidential confidant and peacemaker among the 75-year-old president's six powerful and sometimes feuding children.

And in the last few weeks his financial profile rose dramatically when he stepped in to secure a stake in the hotly contested Busang gold mine in East Kalimantan and a few days later became head of the country's biggest carmaker.

His increasingly prominent business dealings have fueled gossip over the country's prime topic of speculation, the plans of the president, who is widely expected to seek a seventh five-year term next year.

A question being asked in Indonesia is: Through his aggressive business moves, is Hasan helping to secure the Suharto family's financial future, and does this mean the president is thinking of stepping aside?

"If you are trying to read the president's mind, one way is to watch his friend Bob Hasan," said a foreign businessman who spoke on condition of anonymity. "And one way to look at what he is doing is that he is finding secure parking places for the family wealth."

Hasan has known Suharto since the 1950s, when the future president was a colonel serving in central Java. As the godson of a prominent general, Hasan was in a position to help further Suharto's career, and as Suharto ascended to leadership, Hasan's fortunes rose also.

His financial base is his position as chief executive and 10 percent owner of Nusamba, the investment vehicle for the president's three charitable trusts, with assets estimated at $5 billion or more. Suharto owns 80 percent of Nusamba and the president's eldest son, Sigit Harjojudanto, owns the remaining 10 percent.

Hasan's move to gain control of the automobile company Astra International was seen as a way to end a feud between two other Suharto sons over who would be in charge of a project to manufacture a national car.

Early last year, in a move that drew threats of sanctions through the World Trade Organization, Suharto handed a contract for a national car to his youngest son, Hutomo Mandala Putra, along with tariff exemptions for foreign-made auto parts that would allow it to undersell its foreign competitors in Indonesia by as much as 50 percent.

The contract upset another son, Bambang Trihatmodjo, who already had plans for an automobile project that he hoped would become the national car.

Both projects hurried forward, but neither seemed headed for success. Industry analysts now expect the brothers' projects to be consolidated under Hasan's company.

The struggle for control over the Busang gold mine also involved two Suharto children: Sigit and the oldest daughter, Siti Hardijanti Rukmana, who has substantial business interests.

It began in late 1994, when a small Canadian exploration company, Bre-X Minerals, discovered a deposit in East Kalimantan that by various estimates could be the richest gold find in history, perhaps worth $24 billion, perhaps much more.

Too small a company to develop the find on its own, Bre-X began merger talks with the giant Canadian mining company Placer Dome and, in a bid to secure the support of the Indonesian government, struck a multimillion-dollar consultancy deal with Sigit.

But another even bigger Canadian company, Barrick Gold Corp., entered the competition, signaling its seriousness by promising Mrs. Rukmana major construction contracts if it won the rights to the mine.

The clash of companies aligned with various Suharto children was a demonstration to other foreign contractors of the power of Suharto family interests and the insecurity of business dealings.

It was too much for Indonesian mining officials, who struggled ineffectually to find a formula that would include both branches of the family. And it roused complaints in the Indonesian press that the country's wealth was being handed away to foreign companies.

Late last year Hasan stepped in again to broker a deal. In December he met with Suharto and with James Moffett, chairman of the Louisiana-based mining company Freeport-McMoRan Copper and Gold, which operates the huge Grasberg mines in the eastern province of Irian Jaya.

In a complicated deal, Hasan apparently helped settle, for now, the competing claims of the mining companies, placated nationalist demands and, to all appearances, calmed the various branches of the Suharto family.

In the end, Bre-X – and its partner Mrs. Rukmana – got a 45 percent stake in the operation, considerably higher than seemed likely under deals that had been in the works.

Freeport, with its close government connections, won a 15 percent stake and will be the operator of the 4-million-ounce-a-year mine. The Indonesian government itself got 10 percent.

And the remaining 30 percent went to two Indonesian mining companies that are controlled by Nusamba, the foundation owned by Hasan, Suharto and his son Sigit.