Richard Borsuk – They were almost as close to former Indonesian President Suharto as his own family, and their business successes showed it: Beneficiaries of monopolies, state licenses and the strongman's generosity with national assets, Mohamad "Bob" Hasan and Liem Sioe Liong were billionaires during the 32-year Suharto regime.
Now, as Indonesia's crony capitalism comes under attack, the futures of Mr. Suharto's closest cronies look far more challenging than their pasts.
The 67-year-old Mr. Hasan, a gregarious ethnic-Chinese Indonesian who converted to Islam and who is Mr. Suharto's golfing partner, has been barred from leaving Indonesia. Meanwhile, assets of Nusamba Group, which he and Mr. Suharto's family used to take stakes or cuts of business projects, are being disassembled or given to the state.
The 82-year-old Mr. Liem, a low-key, China-born immigrant to Indonesia, probably won't return from overseas, where he was when rioters destroyed his Jakarta home on May 14. But his youngest son, Anthony Salim, respected for his business acumen, wants parts of the family's Salim Group – once one of Asia's biggest corporate empires, with interests from noodles to cement – to survive.
The past year's upheaval has nearly decimated Salim Group. In 1995, a group executive said annual revenue was headed to $10 billion. Business consultants now estimate – and a Salim executive doesn't dispute – that 1998 revenue might be less than $3 billion. The market capitalization of its PT Indofood Sukses Makmur, the world's largest instant-noodle maker, is about $900 million, compared with more than $4 billion in mid-1997. The group's bank, PT Bank Central Asia – 30% owned by Mr. Suharto's eldest son, Sigit Harjojudanto, and eldest daughter, Siti Hardiyanti Rukmana – was drained by a bank run of almost half of its deposits after Mr. Suharto resigned in May. Salim pledged shares in more than 100 group units as part of an agreement with the government on repaying loans made to shore up BCA.
But Salim Group remains a going concern, while Mr. Hasan's businesses are largely wrecked. The reason for the difference is that Mr. Liem's family ran the businesses that Mr. Suharto helped them start; Mr. Hasan mainly took shares of deals he brokered.
The common denominator for Messrs. Hasan and Liem was that they befriended Mr. Suharto in the 1950s. Although Mr. Hasan wasn't a soldier, then-Col. Suharto began his patronage of Mr. Hasan by making him assistant for his division's finance and economic affairs in 1958. "I learned business from Col. Suharto," Mr. Hasan said in 1994.
He put his learning to use in 1972, when Georgia-Pacific Corp. asked the Indonesian army to recommend a local partner for a timber concession on the island of Borneo. The US company, Mr. Hasan later recounted, "gave me a 10% share in its [operations]. I didn't have money to pay for it, so I paid out of future dividends." It was a practice that marked his specialty, deal making – and it made him rich.
As chairman of an Indonesian cartel in charge of wood, he oversaw collection of millions of dollars annually from timber concessionaires for every cubic meter they cut from Indonesia's vast rain forests. The money was meant for reforestation, but sometimes went elsewhere. In 1993, at Mr. Suharto's order, the fund lent $185 million to an aircraft factory run by B.J. Habibie – now Indonesia's president. And in 1996, President Suharto decreed that the fund lend about $120 million to Mr. Hasan's company, PT Kiani Kertas, to aid construction of a $1.3 billion pulp mill. Mr. Hasan contends Kiani Kertas didn't draw the funds, and in any case, Mr. Hasan has now ceded Kiani Kertas and many of his timber interests to the government as part of a deal to repay more than $500 million that Indonesian authorities injected into an ailing bank he partly owned, PT Bank Umum Nasional.
Rather than broker deals, Salim Group's strength was making the business opportunities it got both profitable and dominant in specific fields. The links between Messrs. Suharto and Liem were commercial, not emotional. Mr. Liem began by selling coffee, rice and other essentials to Mr. Suharto when the future president was quartermaster for an army unit.
Until the 1970s, only Mr. Liem and Mr. Suharto's half-brother, Probosutedjo, were allowed to import cloves, critical for Indonesia's distinctive clove cigarettes. A Salim company, PT Bogasari Flour Mills, was licensed to mill all the wheat imported by the country's sole importer. Mr. Liem made Mr. Suharto's cousin and foster brother, Sudwikatmono, a business partner – and Mr. Sudwikatmono still owns a $33.5 million stake in Salim's Hong Kong affiliate, First Pacific Co.
When Salim got into trouble, the state bailed it out. In 1985, Jakarta pumped $330 million into its cement unit, PT Indocement Tunggal Prakarsa, for a 35% stake. In 1994, Anthony Salim described help the group got in early years as a "first drink of water" that helped it get started. With Mr. Suharto gone, Salim Group may find itself feeling thirsty.