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An Asian family values bailout

Wall Street Journal - November 5, 1997

Holman W. Jenkins Jr – Not often do you hear an Asian dealmaker wishing an unpleasant fate on the head of one of the biggest founts of Asian dealmaking, the Suharto family circle of Indonesia.

Last week just such a fellow told me if there was to be a silver lining to the region's economic troubles, "the whole lot of them would be lined up against a wall."

Here we come to one of Asia's open secrets, that the Indonesian elite are not well liked. Second only to Mobutu of Zaire and possibly ahead of Marcos of the Philippines, the Suharto crowd has laid its hand on every good thing the country has to offer, making themselves impossibly rich and, also, just impossible.

The stories told over drinks about their behavior on commercial air flights, their business dealings and their personal deportment are not for the children's bedtime. And almost everyone who sallies back and forth among Asian capitals doing business seems to have one.


Not that these weigh heavily on the governments now moving to rescue the Jakarta regime. While most of us were sleeping Sunday, the U.S., Japan and Singapore were mounting a concerted defense of the Indonesian rupiah in world currency markets. Malaysia, in the soup itself, has managed to scrape up $1 billion for its much bigger neighbor. Tiny Singapore has pledged $10 billion.

Add to this the $23 billion promised by the IMF, and $6 billion courtesy of American and Japanese taxpayers, and you have a pretty impressive display that at least somebody loves the Suhartos.

This may be one instance where private financiers are more hawkish in demanding reform in return for IMF largesse than the donors themselves.

In consigning the country's debt to junk status because of its currency debacle, Standard & Poor's emphasized what it called "pervasive favoritism throughout the public and private sectors." Putting an even finer point on the obvious, a fund manager in Singapore lamented to the Journal's Richard Borsuk that President Suharto has "always been stubborn in not realizing how much unhappiness his family causes."

That little will change was already the conclusion of the markets, which is why the rupiah turned south again this week until global central banks showed up with help.

Investors were only mildly heartened by the decision to bounce Tommy Suharto, the littlest one, from his job as titular boss of a joint venture with Kia Motors of South Korea. He'll still remain a key shareholder, and still benefit from tariff preferences and mandatory bank loans that give him a nifty profit of 100% per vehicle, while Indonesians pay two or three times as much as Americans do for a car.

There will certainly be no end to the tradition by which nearly every foreign company investing in Indonesia has to assume the added role of adoptive parent to one of Suharto's children.

Lucent Technologies, which until last year was the equipment division of AT&T, had to take on the care and feeding of "Tutut," nickname of the president's eldest daughter. When she isn't telling the former AT&T personnel everything she knows about phone technology, she's showing General Dynamics how to sell fighter planes.

Another daughter, "Titik," has become the ward of General Electric and Edison Mission Energy, which benefit from her insight on how to build and run a power plant. She has also been adopted by Merrill Lynch, whom she instructs on the ins and outs of high finance.

If one of the Suharto brood stands out, though, it would be Bambang, who is said to actually show up at an office occasionally.

He has permitted South Korea's Hyundai to benefit from his expertise in car building, Deutsche Telecom from his wisdom in satellite matters, and Hyatt from his insights on running a chain of hotels. And he still finds time to run the giant Chandra Asri petrochemical complex, which managed to lose $400 million last year despite being granted a virtual national monopoly for its plastics and resins.

Proof that nothing lucrative goes down without their involvement, the Suhartos were knee-deep in this year's most spectacular business fiasco. The scene was the allegedly record-breaking Bre-X gold find in Busang, which turned out to be a fraud. One reason the fraud took so long to be exposed was a drawn-out squabble between two Suhartos over who would collect the family's cut from the international mining companies vying for the rights, as detailed by the Journal last March.

It was then that "Bob" Hasan, Indonesia's No. 1 golfing buddy and timber magnate, came into his own as the new arbiter of Suharto sibling rivalries. As widely reported, he helicoptered in with Freeport McMoran's Jim Bob Moffett to explain to the president why his children were making the country ridiculous in the eyes of foreign investors.

For some it was already too late. Ford and Motorola have reportedly been driven away. In the annual surveys of business folks by Transparency International, the clean-government lobbying group, Indonesia invariably ranks on a par with such showcases of peculation as Nigeria.

The paradox is that Indonesia under the Suhartos has enjoyed a genuinely rising standard of living. Some even discern a subtle Javanese way of reconciling the political correctness of Third World overregulation with the demands of global competitiveness – i.e., the overregulation exists, but a Suharto family member can always be enlisted to make it go away.

Yet Mr. Suharto cannot fail to be aware of the fate of Mr. Marcos, hounded out of office and his relatives prosecuted because his countrymen didn't look kindly upon his stealing. Nor can he fail to be aware of the many South Korean notables, including two former presidents and the son of the current president, who've been indicted for corruption as that new democracy feels its oats.

The Suharto children, meanwhile, cannot have failed to notice that their own future might be precarious without "Pak Harto" around to protect them. And the ethnic Chinese billionaires who've held their hands in so many business ventures cannot have forgotten the last upheaval, after the Sukarno regime in the mid-1960s, when resentment of the Chinese boiled over into communal bloodshed.

Lastly, in coming to the rescue of all of the above, the U.S. and the IMF cannot have failed to notice that Mr. Suharto has not allowed institutions to emerge that would ensure stable governance in so large and rowdy a country.

All are agreed that there is only one thing to do, and that's to go on living dangerously in the world's fourth most populous nation.