Richard Borsuk, Jakarta – The investigation of businesses linked to former Indonesian President Suharto's family and friends has widened, opening on several new fronts.
Mines and Energy Minister Kuntoro Mangkusubroto has broadened the scope of his department's probe into the Suharto family's sizable role in Indonesia's vital oil-and-gas industry. Cooperatives Minister Adi Sasono, a close aide to President B.J. Habibie, has told a Jakarta newspaper he wants an audit of a transaction early this month under which cooperatives bought 35% of a retail chain from Mr. Suharto's youngest son. Also, Investment Minister Hamzah Haz said authorities will review special tax breaks given to some companies, as these might have stemmed from "collusion and cronyism."
Also on Tuesday, Bank Indonesia Gov. Sjahril Sabirin confirmed that the central bank has been injecting funds into PT Bank Central Asia, which has been hit by a run on deposits; it is owned by the Salim Group and two children of Mr. Suharto. (The Salim Group is chaired by a longtime friend of Mr. Suharto, Liem Sioe Liong.) And French water company Lyonnaise des Eaux denied statements by Jakarta city authorities that its contract with the city water utility – which involves the Salim Group – has been canceled.
Prisoners freed
In political developments Tuesday, two prominent political prisoners – labor activist Muchtar Pakpahan and dissident Sri Bintang Pamungkas – were set free from a Jakarta jail. Mr. Habibie toured parts of Jakarta badly damaged in the May 14 riots, which helped lead to Mr. Suharto's resignation as president last week and the ascension of Mr. Habibie, his vice president, to the post. The new president's economic ministers prepared for talks with the International Monetary Fund over amending a $43 billion bailout package for Indonesia's staggering economy.
Tuesday's moves and statements affecting Suharto family-connected businesses indicate that the backlash against businesses linked to the former president is growing. This backlash, fueled by popular anger at Suharto government policies that enriched many of the then-president's family members and friends, is being anxiously watched by business executives, especially by companies that have partnerships with family members and close friends.
In the past decade, many foreign companies teamed up with Mr. Suharto's children and associates. In some cases, the foreign partner sought out family members as partners, seeking to cut through Indonesia's notorious bureaucracy. In other cases, foreign investors joined hands with the children on the belief that the only way to win needed licenses or be awarded a project was to team up with people close to Mr. Suharto. Data aren't available on how many companies have set up such ventures, but analysts say there are few sectors untouched by the practice.
Who's on the other end?
In one case so far in the oil industry, a US company has confirmed it is meeting with Indonesia's state oil concern Pertamina to disclose the shareholdings in its production-sharing contracts. A spokesman for Mobil Oil Indonesia Inc., a unit of Mobil Corp., said Pertamina "is checking who we are working with." The spokesman confirmed that PT Humpuss Patragas, a company controlled by Mr. Suharto's youngest son, Hutomo "Tommy" Mandala Putra, has a stake in one of Mobil's contracts for producing liquefied natural gas.
Pertamina is also looking into stakes held in three areas where contractors are exploring for oil and gas. These are an exploration area in Central Java, partly owned by Mr. Hutomo, and two – in South Sumatra and East Java – partly owned by Mr. Suharto's eldest daughter, Siti Hardijanti Rukmana. A local unit of Atlantic Richfield Co. of the US is a major shareholder in the East Java area.
Mr. Kuntoro, the energy minister, said Monday that Jakarta is reviewing oil-and gas-related marketing contracts between Pertamina and Suharto-family companies. On Tuesday, a Pertamina official said the minister has also launched an investigation into Suharto-family holdings in contracts for oil-and-gas exploration in general. "So far, we are only looking for data about the percentage holdings of these [Suharto family] members," the official said.
Mr. Sasono, the cooperatives minister, was quoted Tuesday in Bisnis Indonesia, a Jakarta daily, as saying his department is investigating another transaction involving Mr. Hutomo "for the sake of justice." On May 4, a group of government-sanctioned cooperatives agreed to acquire 35% of PT Goro Batara Sakti from Mr. Hutomo and another businessman for 140 billion rupiah ($13 million). Mr. Sasono said he suspects "irregularities" in the sale. One Goro outlet in Jakarta was looted and damaged during the May 14 riot.
'Review' of tax breaks
The "review" of tax holidays awarded to Indonesian companies by Mr. Suharto – announced by Investment Minister Hamzah – could potentially affect firms other than those linked to the former president and his friends. Mr. Hamzah said he will review the breaks "which may involve collusion and cronyism elements under the old government."
Last August, Mr. Suharto gave tax holidays to six projects including a $1.3 billion pulp mill led by his longtime friend Mohamad "Bob" Hasan and a $2.3 billion petrochemical project organized by businessman Hashim Djojohadikusumo, whose brother – Lt. Gen. Prabowo Subianto – is married to the president's second daughter.
The longest tax holiday, for 10 years, was given to PT Kiani Kertas, Mr. Hasan's project in East Kalimantan. Mr. Hashim's project, in East Java, got a seven-year exemption from tax. (Construction of that partly completed project was halted earlier this year because of financial problems.) Getting a seven-year tax holiday was a $715 million copper smelter under construction near Surabaya. Investors include Freeport McMoRan Copper & Gold Inc. of the US
In March, Mr. Suharto awarded tax holidays to an additional 10 companies, but this time the list wasn't announced. Businessmen say the 10 include several projects involving friends of the former president.
[Belinda Rabano and Tara Suilen Duffy of Dow Jones Newswires in Hong Kong contributed to this article.]