The emergence of a corruption case involving state-owned oil and gas Pertamina has created a new threat not only to former Mines and Energy Minister Ginandjar Kartasasmita, but also to other Suharto cronies and the former president's children.
Despite growing public skepticism over the seriousness of the government of Megawati Sukarnoputri in uprooting high-profile Suharto-era financial scandals, Emir Moeis, chairman of the special committee to investigate corruption at the state oil and gas company, has sent different signals.
A report submitted to the plenary meeting of the House of Representatives (DPR) has named Suharto and his four children, Sigit Harjojudanto, Bambang Trihatmojo, Siti "Tutut" Hardijanti Rukmana, and Hutomo "Tommy" Mandala Putra.
Tommy Suharto is implicated in deals over Perta Oil and the Cepu oil field, Bambang and Tutut in the Java oil pipeline network, while eldest son Sigit is also implicated in the Cepu case.
Ginandjar is not the only Suharto minister implicated in the Pertamina corruption case. Former Coordinating Minister for Economics, Finance and Industry Radius Prawiro and former Mines and Energy Minister and OPEC secretary general Subroto also win mentions. Former President B.J. Habibie is named in the pipeline case.
From the private sector, Bob Hasan, Aburizal Bakrie, Yoseph Dharpa Brata and Rosano Barrack achieve ranking status.
Despite the largesse of Pertamina that found its way to the Suharto gang, its members also inflicted enormous damage to Indonesia's economy, running up massive total debts of Rp43.4 trillion.
Companies owned by Tommy and Bambang account for the largest chunk of bad debt transferred to the Indonesian Bank Restructuring Agency (IBRA). Tommy's Humpuss Group, with 16 debt-laden subsidiaries, had "troubled" loans of Rp6.76 trillion, while the bad debts of Bambang's Bimantara Citra and Apac-Bhakti Karya, with their 23 heavily indebted subsidiaries, totaled Rp4.36 trillion.
This is a family whose combined wealth and reported fortunes vary depending on who is telling the story.
Forbes Magazine estimated the Suharto's were worth $16 billion, while Newsweek guessed $30 billion. Asiaweek, in 1998, reckoned their wealth at a measly $8 billion, and the US Central Intelligence Agency (CIA) said $30 billion. Nearer to home, the Indonesian Business Data Center said the clan was worth $20 billion.
How they did it
If the DPR special committee is serious in investigating the Pertamina cases, the modus operandi of the family and cronies may finally be fully revealed.
The Suharto children could command rights to any government project almost undisputed.
The Arab-led boost in oil prices in 1973 put massive additional resources at the disposal of Suharto and enabled him to consolidate and strengthen his power.
In 1974, the oil price surge produced a revenue windfall of $4.2 billion for Indonesia, then equivalent to about 18% of gross domestic product. Indonesia during the oil boom was like a man who has won first prize in a lottery. In the hands of a regime that was unaccountable to the people, the temptation of misusing this windfall was totally uncontrollable.
In the 1970s, when Suharto and former head of Pertamina Ibnu Sutowo shared control over the state-owned oil and gas monopoly, they used part of this windfall to complete the transformation of the company into a business empire that went far beyond oil production.
Sutowo was eventually fired by Suharto following revelations that Pertamina had run up debts of $10.5 billion, approximately 30% of Indonesia's GDP.
Sutowo's departure provided Suharto with the opportunity to seize total control of Pertamina and turn it into his personal money machine.
The position of minister for mines and energy became very strategic. Allegations of Ginandjar's involvement in the Balongan case demonstrate one element of the business conspiracy between Suharto and his minister.
British role
The detention of Pertamina operations director Tabrani Ismail revealed a link with British contractor Foster Wheeler.
Evidence of a deal between Foster Wheeler and Suharto surfaced when, on August 4, 1989, Suharto issued Presidential Decree No. 42/1989 on Joint Ventures between Pertamina and Private Business Agents in the Oil and Natural Gas Processing Sector.
In his position as Suharto's key minister, Ginandjar was in the right place to push Pertamina to speed up the Balongan deal.
In 1987 Foster Wheeler offered to construct the oil refinery for $3.5 billion, but Pertamina rejected the bid as far too high. Pertamina's estimate of the value of the work was only $1.623 billion.
In 1989, negotiations between Pertamina and Foster Wheeler reached an impasse. The British company turned to Suharto, and from this point Pertamina was locked out of the process.
Finally, under Ginandjar's instruction on August 10, 1989, Pertamina signed a contract for the Balongan Exor I project for $1.823 billion, a mark-up of approximately $200 million.
As stated by Tabrani Ismail in an interview with Tempo (March 10), Suharto and Ginanjar should be held responsible. "As Pertamina's director of operations, I could only make a decision if the value of the project was under Rp1.3 billion. That's why all results of such meetings were conveyed to my superiors."
"Looking at the project negotiations," added Tabrani, "the Minister of Mines and Energy and Former President Suharto are the ones who made the decisions."
The private sector figures allegedly involved in the Balongan deal were Tutut Rukmana and Rosano Barrack, the partner of Bambang Trihatmojo in Bimantara Citra.
Ustraindo
In the case of the technical assistance contract on oil production involving Pertamina and PT Ustraindo Petro Gas, worth $23.3 million, the role of Suharto and Ginandjar again comes into the limelight.
Application of the contract caused significant financial losses to the government. Ginandjar has denied he was involved, saying that when the contract took effect, he was no longer a minister, although he admitted the signing of the contract occurred under his watch.
Examination of the case shows that a technical assistance program was converted from its original goal of raising output and efficiency within Pertamina, and that Ginandjar as the minister who signed the agreement, cannot avoid responsibility.
A private company such as Ustraindo Petro Gas should not have been involved in a program involving a productive field in the first place. Such programs are only allowed in inactive fields.
The head of Pertamina at the time, Faisal Abda'oe, and then Mines and Energy Minister I.B. Sudjana have conveniently passed away, making the effort to reveal the case much harder.
BBG group
Other evidence suggests that the relationship between Suharto and Ginandjar was not as solid as it initially seems. At times they found themselves competing for business.
In 1988, with Ginandjar back in charge at Mines and Energy, he began to reinforce his own cronies, independently of Suharto. His main aim was to neutralize the grip of Pertamina over oil-related industries such as petrochemicals.
In March 1990, three of Ginandjar's allies, Aburizal Bakrie of the Bakrie Group, Fadel Muhammad of Bukaka Teknik Utama, and Imam Taufik of Gunanusa Utama Fabricators, set their sights on the design and construction contract for a giant export-oriented oil refinery, Exor 4.
They formed a consortium named BBG, and opened talks with two international engineering firms, Fluor of the United States and Mitsui of Japan. BBG, with Ginandjar's strong backing, intended to be the main domestic contractor in the $1.8 billion project.
In the meantime, a second consortium of indigenous-owned companies was making progress on a second petrochemical project. The CNT group, which consisted of Agus Kartasasmita and Ponco Sutowo (the son of former Pertamina head Ibnu Sutowo), was to be the main local partner of Mitsui and Toyo engineering of Japan in a $1.7 billion project to construct a residual catalytic cracking plant in Cilacap, Central Java.
The unit would produce naptha and high grade fuels from crude oil. In the negotiation process, it was decided that CNT would absorb about $400 million of the project cost.
Then Suharto interfered. He ordered Ginandjar to make two ethnic Chinese tycoons – Liem Sioe Liong and Prayogo Pangestu – the principal domestic partners in the projects.
Ginandjar was outraged, but finally had no choice but to implement Suharto's instruction, while trying to ensure that the indigenous groups would at least retain significant sub-contracting roles.
Other cases involved allocations of crude and other petroleum-related products by Pertamina to markets overseas or for distribution within Indonesia.
The controversial $1.6 billion Chandra Asri Petrochemical Center was a leading example of the partnership between Bambang Trihatmodjo and Prayogo Pangestu.
Former Chandra Asri CEO Peter F. Gontha, at a British business lunch in Jakarta last year, blamed "the founders" for enormous cost overruns that ended up leaving the government with the bill for the entire original project cost.
Where the buck stopped
The main conclusion is simple: in every contract to be awarded, Suharto was always consulted. State enterprises such as Pertamina, the state electricity utility Perusahaan Listrik Negara, the telephone company Telkom, and the national logistic board Bulog – were his principal providers of patronage funds.
Entering the 1990s, a fall-off in the price of oil and heightened competition in the regions for new foreign investment made it harder for Suharto's cronies to subsidize their money-losing enterprises.
Suharto instead turned to new avenues. State-owned companies were an easy target to be hijacked. The television and airline monopolies were broken and the children were usually the first to be awarded licenses.
Once the licenses were issued, the children then cashed out a proportion of their shareholdings. Various infrastructure projects, including toll roads and power plants, were classics of the genre.
In the end, Suharto's house of cards collapsed, but not until his children and friends had been greatly enriched by his political patronage and power over the centralized bureaucracy.