The Richest Indonesians & The Ironies

What a coincidence! Out there, Dow Jones quoted Forbes Asia's rich list, naming Sukanto Tanoto (owner of Raja Garuda Mas/RGM) as its Indonesia richest. At home, newspapers quoted SOE Minister Sugiharto pledge his support for state bank PT Bank Mandiri Tbk to take legal action toward recalcitrant debtors. Mandiri had named RGM as one of the debtors with no good faith.

While it's difficult to verify the exact figures, Sukanto's wealth according to Forbes reached US$2.8 billion, well above Putera Sampoerna (2.1), Eka Tjipta Widjaja (2), Rahman Halim (1.8) or R. Budi Hartono (1.4) and Aburizal Bakrie (1.2). In the previous list, Forbes named Halim as Indonesia's wealthiest while Sukanto was not even in the top five list. Wondering how the Forbes list has changed so significantly in the last few months.
Detik.com reported Sukanto is still in the police's fugitive list. But I'm not sure whether he is listed there still.
It's true that Sukanto once named a fugitive. His name also linked closely with Unibank which was closed down in 2001 but none held responsible for third party liabilities in the bank. The case isn't closed yet.
Sukanto's wealth mainly derived from palm oil business. He has pulp & paper empire, and recently oil and gas as well.
Surprisingly, no Sjamsul Nursalim in the top 10 list. Riady family, Tommy Winata, and Mum'in Ali Gunawan are out of top 10 as well. Riady family is partnering with Forbes for Indonesian edition, scheduled early next year.
Like it or not, agree or disagree, Forbes list could help Indonesia's tax officers chasing their tax payments or Bank Mandiri's bargaining position on bad loans. The list also useful for politicians, regent, governor candidates, or hopeful president candidates.
If you follow years of Forbes’ rich list, there is no significant change on the names of Indonesian richest. The difference is only on the amount of wealth & the rankings. The wealthy Indonesians could be categorized in several groups based on how they got their fortunes.
First, cigarette groups. We have Sampoerna family (even though they sold out the cigarette business to Phillip Morris), Wonowijoyo (Gudang Garam), Hartono (Djarum), and Peter Sondakh (Bentoel).
Second, forestry & plantation groups. We have Eka Tjipta Wijaya family (Sinar Mas Group), Sukanto Tanoto (Raja Garuda Mas), & Prajogo Pangestu (Barito).
Third, consumer goods. We have Salim and Wings Group.
Fourth, energy & engineering groups. We have Bakrie family, Panigoro (Medco), Kris Wiluan (Citra).
Fifth, property group. In this group we have Tan Kian (Dua Mutiara), Haliman Trihatma (Podomoro), Tommy Winata-Sugianto Kusuma (Artha Graha), Riady Family (Lippo).
Sixth, manufacturing. In this group we have Nursalim (Gajah Tunggal) for example.
So, mainly they got the fortunes from Indonesia’s rich & cheap resources (natural & human).
While most of these groups have expanded overseas (mainly China, India, or Brazil), Indonesian operations are still their main source of wealth. Most of these conglomerates were hurt by financial crisis, with the exception of cigarette groups.
But they have recovered in the last few years, thanks to the generosity of Indonesian people, the taxpayers. The state bailed out their bad debts. Some surrendered assets, but others managed to escape the financial responsibility easily.
Salim Group, for example, surrendered assets in 107 companies to pay around Rp56 trillion (US$6 billion) debt following the turmoil at Bank Central Asia (BCA). Government sold almost all the pledged assets with recovery rate of around 35%. Nursalim also did the same to pay his Rp28 trillion (US$3 billion) debt, with lower recovery rate.
Government also spent almost US$2 billion to bail out Bank International Indonesia (previously owned by Eka Tjipta’s Sinar Mas, currently controlled by Temasek).
That’s why there is almost no significant change in names listed in Forbes, the latest edition and in 1990s. The fact that Sukanto & Eka Tjipta are listed as number one and third in the ranking sparked criticism about how they created the wealth.
Both Sukanto & Eka Tjipta have strong pulp/paper & plantation (mainly crude palm oil) businesses through APRIL (RGM) Holdings & Asia Pulp & Paper (APP) respectively. Both groups have been the subject of continues allegation of environmental groups over massive deforestation in Sumatra Island.
WWF report few months ago said that APRIL and Asia Pulp & Paper (APP), the Indonesian paper producers, are accelerating the deforestation of Sumatra's jungles in spite of a bid to portray themselves as green.
According to the report, APP has been responsible for about 80,000 hectares of natural forest loss every year, equivalent to roughly one-half of the Indonesia province of Riau's annual forest loss since 2002. As of 2005, the company controlled nearly one-fifth, or 520,000 hectares, of the natural forests left on Riau's mainland. All these forests are under threat, as are any additional forests that APP acquires in its quest to fill its wood supply gap and expand pulp production.
WWF didn't publish the same press release on APRIL. But WWF Monitoring Brief June 2006 elaborated the organization's analysis on APRIL's activities.
Jikalahari (Riau NGO alliance) investigators have found evidence that APRIL's mills accepted wood from legally questionable third party source as late as May 2006. WWF admitted in the report that it calls APRIL to stop sourcing timber from this area until completion of the government legal verification process.
One NGO leader wrote cynically in Indonesian media recently that if you want to be rich, do the forestry business in Indonesia like Sukanto & Eka Tjipta. Other names listed in the Forbes report also have been regularly accused of various illegal practices such as fraud on reforestation funds or involvement in drugs & narcotics trading, gambling operation, or fishy deals with government and the military. But none of them convicted or worse various interest groups make huge chunk of money from the allegations on these richest men.

/Named a Suspect/
Apart of environmental concerns, the Forbes report has also been responded by Indonesia’s largest lender (by asset), Bank Mandiri, which happens to be the largest lender to Sukanto’s RGM. The bank has, several times, classified RGM as the debtor without good faith in settlement of almost US$500 million debts. Mandiri demands an increase in debt installment following the huge jump in pulp prices worldwide.
The day Forbes announced the rich-list, Indonesian minister for state-owned enterprises (Mandiri’s shareholder) pledged his support for Mandiri’s plan to take legal action against recalcitrant debtors, especially RGM. RGM denied all the charges arguing it follows the debt restructuring agreed upon few years ago.
A director at Mandiri was quoted by Indonesian newspapers saying, “You may rich, but pay your debts,” responding the list.
But it’s the police who surprised many when it announced the plan to reopen the investigation on Sukanto, not for the alleged environmental crime or his debts at Mandiri, but on a suspected banking crime that almost untouched in five years.
Just days after Forbes published the list, Indonesian police announced that it has resumed the investigation on Sukanto, named a suspect in a banking crime few years ago. Police declared that the case, involving Unibank---a bank initially owned/controlled by Sukanto and his wife Tinah Bingei, has been reopened after five years of almost no significant progress in investigation despite the fact that Sukanto had been named a suspect.
Unibank was closed down in 2001 leaving the state paying all third party liabilities (Rp3.9 trillion, almost US$400 million) with no shareholders held responsible. Sukanto was named a suspect on irregularities of export L/C worth US$230 million.
"Based on a meeting between Police Chief and Attorney General in August 2006, Sukanto's case has to be reopened and his status is still as suspect. The case is being handled by police team for corruption crime (Tipikor)," Paulus Purwoko, chief of public relations division at National Police Headquarter as reported by Indonesian media.
The sudden announcement failed to surprise the media at the time of eroding trust on the country’s campaign to fight corruption. Many raised the question, would the police be serious this time? Why the police reopen the case after so long? Could this be just part of ‘political’ game?
"Whatever the results might be, the reopening of the case has made Sukanto, well-known for his generosity overseas, shivering," a journalist from respected magazine commented the move. So far, police has not confirmed yet on when they would summon Sukanto for investigation.
The fellow journalist mentioned about Singapore-INSEAD's Tanoto Library or Carnegie Mellon's Tanoto Professorship. The owner of Raja Garuda Mas (RGM) also established Tanoto Foundation, which provide scholarships.
It’s not about his donations that make people doubt the investigation, but mainly the power politics in the country’s corrupt-legal system. Police might finalize the investigation, but state prosecutors may drop the case like what’s happened with the recent corruption allegation on Eddie Widiono (state-owned electricity company PLN).
Other intriguing issue is the unavailability of legal cooperation between Indonesia and Singapore. While Sukanto normally come to Indonesia, he stays in Singapore. “The problem, we have no bilateral agreement on this,” sighed the deputy attorney general Basrief Arief, who is also the Chief of Corruptors Hunting Team.
Besides, the five-year time lag since the Unibank’s closure in October 2001 is critical especially when it comes to witnesses. That’s why Attorney General’s Office said they would start the investigation all over again. This is clearly a big test for the country’s tattered image on corruption eradication campaign. Without serious efforts to end bad governance in Indonesian business, we can’t expect a cleaner sheet in the future rich lists.

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Jonan resigned, Mukijat the new Bahana CEO

Ignatius Jonan had tendered his resignation as CEO of state-owned investment bank company PT Bahana Pembinaan Usaha Indonesia (BPUI) after five years in that position.

Jonan managed to save the company from bankruptcy of huge bad loans to big boys like Peter Sondakh (Rajawali), Prajogo Pangestu (Barito), Arifin Panigoro (Medco), Agus Anwar (fugitive), Mohamad S. Hidayat (Chairman of Indonesian Chamber of Commerce & Industry, owner of MSH Group), and Hashim Djoyohadikusumo (Tirtamas, currently Nations Energy) following the financial crisis in 1997.
"Shareholders accepted his resignation and appointed Boyke WE Mukijat as the new CEO," said an official at Bank Indonesia, the central bank, which owns 80% shares of BPUI. Government owns the remaining 20% shares.
But people close to Jonan said BI and MSOE are just about to decide whether to accept or not Jonan's resignation.
It is not clear why Jonan resigned. But some sources said he felt no more chemistry with officers at the ministry of state owned enterprises who represent government as the shareholder of BPUI.
Boyke was BPUI's managing director BPUI, a key ally of Jonan when the company restructured the massive debts of Rp9.1 trillion (US$1 billion) back in 2001.

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Cemex rejects government's proposal

Cemex Asia Holdings has decided to reject Indonesia government's proposal for an extension period of 60 days to exercise its first right of refusal or to acquire the cement giant's 25.5% shares in PT Semen Gresik Tbk.

"Cemex rejected the 60 days extension. So, Indonesia government should exercise its right to acquire Cemex shares in the time frame available, 30 days since Cemex sent the notification letter. Somehow, Indonesia government should learn something out of this saga," said people familiar with the issue.
Bisnis Indonesia reported on Saturday that SOE Minister Sugiharto had sent a letter to Cemex demanding an extension of 60 days to exercise the acquisition. Sugiharto claimed a consortium of state-owned enterprises would act on behalf of government to acquire the shares, just two weeks after Cemex signed a conditional sales and purchase agreement with Rajawali Corporation, a company led by tycoon Peter Sondakh. Rajawali agreed to pay US$337 million for Cemex's 24.9% shares of Semen Gresik.

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Gov't want to buy, Cemex rejects

Indonesia government had decided to exercise its rights to acquire Cemex SA's 25.53% shares in state-owned cement maker PT Semen Gresik Tbk through a consortium of SOEs, but Cemex is most likely reject the offer.


SOE Minister Sugiharto told the press after a meeting with coordinating minister for the economy Dr Boediono that government had sent the letter of intent to Cemex.
"But it's up to Cemex to decide," he said.
Bisnis Indonesia reported that Sugiharto asked Cemex to give two months time to exercise the right.
"The problem, legally according CSPA between government and Cemex in 1998, government can't transfer the right to buy. The legal opinion is that government has no legal basis to assign rights and to seek extension," source at the ministry said.
So, it's a matter of interpretation of the CSPA. Sugiharto (and Vice President Jusuf Kalla) argued that government could buy the shares outside the budget mechanism deploying SOEs.
SOEs like Jamsostek, Taspen, and Danareksa---all fund management companies would act on behalf of the government to buy after government decided to use its first right of refusal. This is not a surprise. Jamsostek led by Iwan Pontjowinoto (Sugiharto's colleague at Sharia Economy Society) claimed financing support for government to rescue the ailing flagship carrier Garuda Indonesia just days after Sugiharto openly said about the option to divest up to 49% shares of Garuda.
Minister of Finance Sri Mulyani Indrawati had turned down Sugiharto's proposal on Cemex arguing no state budget allocated but she said that she could understand if Sugiharto take another options.
But even if these SOEs would be allowed to buy, it's not easy to raise equity or to rely on their own funding. Bisnis Indonesia reported that Sugiharto have approached international lenders such as Macquarie Bank, UOB (Singapore), West LB (Germany), and Presidio Advisors (in partnership with PT Andalas Tuah Sakato, a company owned by West Sumatra administration). These companies claimed US$400 million funding in hands.
Cemex, reportedly, rejects the offer and only want to sell the shares to Indonesian company Rajawali Corporation owned by Peter Sondakh at US$337 million. Cemex and Rajawali had signed the conditional sales and purchase agreement (CSPA)to bring an end to long legal dispute with government.
So, the card is in Cemex's hands now. If the company reject Sugiharto's proposal and go ahead with the deal with Rajawali, I think Rajawali would feel the heat. But definitely it's also depend on how Rajawali deal with the government officers like Kalla and Sugiharto at the national level and local leaders in West Sumatra, East Java, and South Sulawesi---the locations of Semen Gresik's operations.

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Semen Gresik posts US$104 million profit

The largest cement producer PT Semen Gresik Tbk reported net profit of US$104 million last year, doubled from Rp508 billion in 2004, thanks to improved margin and lower interest expenses.
According to its financial report published today, Semen Gresik recorded total sales of Rp7.53 trillion last year, a 24% growth from Rp6.067 trillion in 2004.
Even though its operating expenses increased significantly from Rp1.09 trillion to Rp1.328 trillion, Semen Gresik managed to book operating income of Rp1.56 trillion, jumped 62% from Rp965 billion in 2004.
The state-owned company's interest expenses also reduced significantly from Rp238 billion to Rp157 billion.
Cemex SA is about to sell its 25% shares in Semen Gresik. Rajawali Group owner Peter Sondakh was reportedly the strongest candidate to acquire Cemex shares in Semen Gresik.

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Richest Indonesians, My List

Below is my list of the richest Indonesian, based on their net worth in Indonesia and other countries:

1) Eka Tjipta Widjaya (major source of wealth: APP, Asia Food & Property, and finance)
2) Rahman Halim (Gudang Garam)
3) R. Budi Hartono (Djarum Group, properties, and 10% shares in BCA---the largest private-owned bank in Indonesia, Bank Hagakita, and Bank Haga)
4) Sukanto Tanoto (RGM International, APRIL)
5) Lim Sioe Liong (First Pacific, Indofood, Bogasari, Unggul Indah Cahaya, properties etc)
6) Sjamsul Nursalim (Gajah Tunggal tire, GT Petrochem, Singapore assets, Jakarta properties)
7) Soeharto & Family (Humpuss, Citra Group, Hanurata etc)
8) Putera Sampoerna
9) Mochtar Riyadi (Lippo properties)
10) Peter Sondakh (cash in hands, Bentoel)
11) Hashim Djoyohadikoesoemo (Khazakhstan and Azerbaijan oil and gas operations)
12) Aburizal Bakrie (Bakrie & Brothers, Bumi Resources, Energi Mega Persada, etc)
13) Paulus Tumewu (Ramayana)
14) Edwin Soeryadjaja (Adaro, MGTI, etc)
15) Sudwikatmono (Indika Group)

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What's weird with Forbes' Indonesia rich list?

We knew from the Forbes that Rahman Halim and family (Gudang Garam) is the richest in Indonesia followed by R Budi Hartono (owner of Djarum Group), Putera Sampoerna, Aburizal Bakrie, Lim Sioe Liong (Salim Group), Eka Tjipta Widjaja (Sinar Mas), and Paulus Tumewu (Ramayana Group).
1) Rahman Halim = US$2.3 billion
2) Budi Hartono = US$2.2 billion
3) Sampoerna = US$1 billion
4) Aburizal Bakrie = US$735 million
5) Lim Sioe Liong = US$655 million
6) Eka Tjipta Widjaja = US$515 million
7) Paulus Tumewu = US$500 million

Is it true that Bakrie is wealthier than Lim or Eka? Eka's net worth in 1999 Forbes list was at US$2.5 billion. It's true that the company struggled with the crisis at Bank International Indonesia (BII) in 2001 and the huge bonds at Asia Pulp & Paper. But the company survived and aggresively expand its business in the last four years.
Could it be possible that Tumewu or Bakrie are richer than Sukanto Tanoto who has US$7 billion investment in Brazil and China?
"No way that Bakrie could match Sukanto. I would say Eka Tjipta is the richest for Indonesia," said one investment banker in Singapore.
Where is Hashim Djoyohadikoesoemo with his US$2.5 billion worth of oil and gas assets in Khazakhstan & Azerbaijan?
How about Mochtar Riyadi family with their Lippo Group? How about Peter Sondakh who got US$800 million in cash from the divestment of Excelcomindo to Telekom Malaysia?
How about Soeharto? Where is Soeharto family's money which Time magazine estimated at US$15 billion eight years ago? The Soehartos' net worth was put by Forbes at $1.7 billion in 1999 and $4 billion in 1998. I just can't believe the family's wealth had dropped to below US$500 million.
What about Sjamsul Nursalim?
While he once had US$3 billion debts to government and pledged some key assets like Gajah Tunggal (the largest tire manufacturer), GT Petrochem (petrochemical company), and Dipasena (the largest shrimp farm in Asia), I believe that Sjamsul regained control over two of these companies, not to mention other assets in Indonesia and Singapore.
So many questions I can't answer myself. But I tend to believe that the Forbes list could help some of Indonesian richests who still owe the state or those who bought back their pledged assets to keep away from tax officers or those who want to squeeze their money for various reasons.
Last year tax officers questioned Paulus Tumewu over his personal income tax. Tax officers claimed Tumewu had cost the state losses of Rp355 billion (US$40 million). But no further investigation since September 2005 as Tumewu left the country to Singapore for 'medical treatment'.

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Malaysia’s year of acquisitions!

I should say this year is Malaysia’s year in Indonesia’s investment, just like 2003 and 2004 for Singapore. A lot of acquisitions with totally different reaction from Indonesian.

Singapore investors were facing intense opposition and criticism, sometimes out of proportion nationalism sentiment during major acquisitions by Temasek on Indosat, Bank Danamon, and Bank International Indonesia (BII). That’s not the case with Malaysia’s acquisitions, at least in the last 12 months.
Last week, Santubong Investments BV, a wholly-owned subsidiary of Khazanah Nasional Berhad, completed its proposed acquisition of a 52.05% equity stake in PT Bank Lippo Tbk from Swissasia Global for approximately US$330 million.
Santubong is also planning to make a tender offer for the remaining shares in Lippo Bank it does not own. Lippo Bank is one of the largest private banks in Indonesia initially controlled by Riyadi Family who owns Lippo Group.
Khazanah is the third Malaysian investor to acquire Indonesian banks after the 1997 financial crisis. Commerce Berhad was the first major investor when it acquired Bank Niaga (2003) followed by ICB Group which controlled Bank Bumiputera since last year. ICB is in the process to raise the capital of its Indonesian subsidiary through rights issue sometimes next month.
Khazanah’s name also tipped in the possible acquisition of 71% shares of smaller size PT Bank Tabungan Pensiunan Nasional (BTPN) worth US$90 million. Yesterday, Khazanah denied the report, but people close to PT Perusahaan Pengelola Aset (PPA) said Khazanah is one of investors that expressed interest to acquire PPA’s 28% shares in BTPN.
Late September, Khazanah, the investment holding arm of Malaysian government, subscribed to a 16.8% stake in PT Excelcomindo Pratama for a total cash consideration of approximately US$234 million.
Excelcomindo is the third largest cellular telecommunication provider. Telkom Malaysia, where Khazanah has 40.64% shares, acquired 27% shares of Excelcomindo early this year leaving the founder PT Telekomindo Primabhakti (subsidiary of Rajawali Group led by Peter Sondakh) with the remaining 47.92% and Asia Infrastructure Fund (AIF) with 10%.
With the latest move, Malaysian control 41.8% shares of Excelcomindo, almost the same size with Temasek’s control over Indosat (formerly a state-owned telecommunication company and the second largest in the market).
Khazanah also has indirect investment in Indonesian telecommunication and multimedia market through Astro All Asia Networks where it has 21.52% shares. Early this year, Astro established a joint venture with Lippo Group to develop pay TV business. The new joint venture will invest US$1 billion in Indonesia in the next few years.
Early January, Malaysian telecommunication giant Maxis Communication had acquired a 51% shares of another Lippo subsidiary PT Natrindo Telepon Seluer for US$100 million and announced its plan to turn around the loss-making cellular operator by as early as 2010.
Right before entering the new year, Malaysian YTL Corporation Berhad fired the investment market with its surprise acquisition of 35% stakes in PT Jawa Power for US$139 million. PT Jawa Power is an independent power plant producing 1,200 MW of electricity. Siemens and Powergen are other major shareholders. I bet, a lot more Malaysian investment to come.

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