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  But if licenses and monopolies were part of the explanation for the success of some Chinese immigrants, many displayed deep business acumen. Salim’s Bank Central Asia became regarded as a comparatively well-managed institution. His flour-milling franchise led to the development of the best-known international brand to come out of Indonesia, the instant noodles known as Indomie.

  In common with the region’s other emerging economies, Indonesia avidly took up the loans offered to its entrepreneurs by international investment banks during the 1990s. When Thailand ran out of money to prop up its banks in mid-1997 and unpegged its currency from the US dollar, the contagion spread. Indonesia’s rupiah began a slide from 2,500 to the dollar to 14,800 in January 1998. With some $80 billion in borrowings denominated in foreign currencies, it soon became apparent that the Indonesian corporate sector was beyond rescuing by the central bank, which had only $20 billion in foreign reserves.

  Suharto agreed to a $43 billion bailout from the IMF in October 1997, which was offered on the condition that he ended monopolies given to cronies and family—Bob Hasan’s plywood, Salim’s flour, Tommy Suharto’s cloves—and also ceased giving subsidies to Tommy’s national car scheme and B. J. Habibie’s aircraft venture. The IMF also demanded that sixteen insolvent banks be closed. It was not until two months later that Suharto signed on the dotted line, having dragged his heels on these “conditionalities.” Meanwhile, thousands of small and medium businesses collapsed, bank customers rushed to withdraw their savings, and the economy went into a 16.5 percent contraction within a year.

  The well connected managed to save themselves, at least from total ruin. Salim sold 40 percent of his Indofood Sukses Makmur (the maker of Indomie) to his majority-owned Hong Kong investment house, First Pacific. Even before the crisis, Salim had diversified some 40 percent of his total turnover outside Indonesia, pulled by the rising economy of his homeland and pushed by the end-of-regime feeling in Jakarta.

  Alongside his deal with the IMF, Suharto had quietly ordered Bank Indonesia to ramp up its “liquidity support” program to help out private banks. Eventually Rp 145 trillion was pumped in. But only Rp 50 trillion was disbursed to account holders. The rest is presumed to have been used by bank owners and related companies to buy foreign exchange and evacuate their capital, mostly to Singapore. One of Suharto’s favored business allies, Marimutu Sinivasan, of the textile group Texmaco, alone managed to secure $900 million. The bank liquidity loans were part of an overall domestic bailout of the banking sector that came to total Rp 644 trillion (roughly $77 billion, at an average exchange rate from 1997 to 2003). The funds were to be repaid by equity in the rescued banks and companies, held by a specially re-created Indonesian Bank Restructuring Agency (IBRA), which was to recover funds by selling shares when stability returned.

  By 2004 the crisis was over, and Indonesia’s gross domestic product had regained its lost size. The corporate landscape had changed. The old Hong Kong trading firm Jardine Matheson had gained control of Astra, the leading industrial company. The IBRA had taken over thirteen private-sector banks. Others were left to sink or swim, with some protection for deposit holders. In 2001–2 the IBRA began selling off equity in one of the larger private banks, Bank Danamon, with the Singapore state investment fund Temasek gaining what became a 67 percent stake. In other cases, the previous owners were allowed to continue managing their banks. Suspicions were voiced that this enabled them to take actions that lowered the attractiveness of shares when they were floated or put to auction, which permitted the original owners or their allies to recapture control at bargain prices—possibly with funds derived from the central bank’s bank liquidity program and spirited out of Indonesia. In the end, the IBRA recovered just $2 billion of the $77 billion it had shelled out.

  With Indonesia’s biggest private-sector group, Salim’s family had lost control of Bank Central Asia in the crisis. This was not, its executives still insist (though others would disagree), because of poor-quality assets, but because of a run on savings in which 50 percent of its deposits were withdrawn in two weeks. The bank and the Salims were too closely identified with Suharto: rioters were to wreck many of the bank’s offices, as well as the Salims’ home in Kota. The Salims handed control to the central bank, and their equity and that of the Suharto children went down from 100 percent to 5.4 percent.

  The IBRA relisted the bank in 2000 and sold 20 percent of shares to the public. Then in 2002 it auctioned a 52 percent stake. Two bidders emerged: the British-Asian bank Standard Chartered, and a consortium of a Mauritius investment firm named Farindo and the ethnic-Chinese Hartono brothers, owners of the Kudus-based kretek cigarette manufacturer Djarum. The local team won with a $525-million bid, giving rise to recurring speculation that the Hartono brothers had benefited with some kind of blessing from the Salims, who of course had got their start in trading cloves at Kudus. Yet the founding family has only a symbolic 1.4 percent shareholding—held by Anthony Salim, son of Sudono Salim, who died in Singapore in 2012—and no seat on the board.

  Like many other New Order tycoons, the Salims took heavy blows during the crisis, selling off numerous companies and assets to pay back loans and retain control of their best businesses. Yet surveys of Indonesia’s corporate activity show that these tycoons still sit in the top strata in both size and market share of key sectors, though in a vastly more diverse group of business peers. A corporate “rich list” published annually since 2007 by the magazine Globe Asia (owned by the Riady family’s Lippo group) reveals miracles of commercial escapology.

  The most dramatic has been that of Eka Tjipta Widjaya (formerly Oei Ek Tjhong), a former partner of Salim who spun off his palm-oil and paper group, Sinar Mas, during the New Order. During the crisis, his Asia Pulp & Paper was discovered to have issued corporate bonds totaling $13.9 billion. In 2001 it announced it could no longer service these borrowings. Mysteriously, it was unable to collect $1 billion in cash owed by trading firms registered in the British Virgin Islands or $220 million from a bank deposit in the Cook Islands or indeed $220 million lost in foreign exchange dealings. Bondholders were further deterred when a Jakarta court declared that one $500 million issue had been illegal and therefore need not be repaid.

  It was found that while Asia Pulp & Paper owned various timber and pulp mills, the forestry concessions that supplied their raw material were held personally by the company owners. Appeals by the governments of the United States, Japan, Canada, and major European countries for the Indonesian government to intervene got nowhere. While looking after his investors and lenders in China, Widjaya steadily wore his other creditors down. After four years, most bondholders agreed to a deal that returned 18 percent of their money. In 2013 Widjaya was ranked number two on the Indonesian rich list, with his assets in palm oil, pulp and paper, property, finance, and mining estimated to be worth $13.1 billion.

  The Hartono brothers, Robert and Michael, were at the top of the list with $15.5 billion in assets, thanks to the combination of their Djarum cash cow with Bank Central Asia, by then one of the five large banks that together account for about half the financial sector, and further ventures such as the vast Grand Indonesia shopping mall in Jakarta and palm-oil plantations in Kalimantan. Anthony Salim’s group, by now operating under the name First Pacific, was at number three, with $10.1 billion in food and investment assets.

  Other names from the New Order cukong era and still in the top fifty in 2013 included the Riady family’s Lippo group (property, investment, education, and media), Sjamsul Nursalim’s Gajah Tunggal (tires, retail, and property), The Nin King’s Manunggal group (property, textiles, and other manufacturing), Ciputra (property), Edwin Soeryadjaya (not from his father’s Astra group but with his own coal-based conglomerate), Prajogo Barito’s Pacific group (petrochemicals), and the late Suharto-era figures close to the Indonesian military, Tomy Winata and his patron Sugianto Kusuma (A Guan), whose Artha Graha group includes hotels, entertainme
nt spots, and a bank.

  Five of the Suharto family remain on the Globe Asia rich list: son Tommy (Hutomo Mandala Putra), with his Humpuss investment and shipping interests put at $550 million; in-law Sukamdani, with hotels and other businesses worth $367 million; son Bambang Triatmodjo, with Asriland property worth $220 million; daughter Tutut (Siti Hardijanti Rukmana), with her toll roads and other investments worth $150 million; and Agus Sudwikatmono, son of Suharto’s cousin, with his Indika coal and oil venture that has an estimated value of $665 million. In March 2014 Tutut won a legal case that regained her control of the Media Nusantara Citra television network, in theory ousting the tycoon-politician Hary Tanoesoedibyo, running mate of the former general Wiranto in the presidential race, though the ruling was not immediately enforced. Other scions of powerful figures in the New Order include Pontjo Sutowo, son of the late Pertamina chief Ibnu Sutowo, whose Nugra Sentana group is active in hotels and property, and former president Habibie’s sons Ilham and Thareq, whose Ilthabi Rekatama group is invested in plantations and technology.

  It was a wary return to wealth and power for the ethnic Chinese. In the last throes of the New Order, they had been the scapegoats for the plummeting currency. Military and police commanders had stood back as preman led rioters on an orgy of pillage and rape through Jakarta’s main district of Chinese businesses and homes. It even looked like a deliberately instigated riot to blacken the prodemocracy uprising: calls for an investigation into the matter are still stonewalled (and, as Prabowo Subianto earlier remarked to author Ken Conboy, the Indonesian military didn’t leave written orders).

  Estimates of the funds held in Singapore by ethnic Chinese and other Indonesians go as high as $200 billion, more than double Indonesia’s foreign exchange reserves at the height of the first resources boom. Perhaps $30 billion of that came from capital flight around the collapse of the New Order. For the middle-class Chinese-Indonesians who decided to get out, to Australia and elsewhere, the move was often permanent. Much of the capital held by the big tycoons has flowed back, being used to reinvest in old businesses or to acquire new ones. They kept their feet in the game in Indonesia, but their children and primary homes remain in Singapore and Taiwan.

  In 2006 President Yudhoyono tackled the long-unsettled issue of the place of the Chinese in Indonesian society. A new citizenship law revised the definition of indigenous Indonesians to include all citizens who had never assumed foreign citizenship. This eliminated—in theory, at least—the need for ethnic Chinese to show a “citizenship certificate” whenever they needed government services. These certificates were often withheld arbitrarily by officials. Several discriminatory laws and regulations have remained on the books, including a 1967 decree that bars ethnic Chinese from the armed forces, and identity cards still carry a number that identifies race. But combined with the freedoms already granted by President Wahid—to practice Chinese religions, study Chinese at schools, celebrate the lunar new year, and publish in Chinese—the new law promised to lift decades of discrimination.

  The profile of the ethnic Chinese was blurred also by the survival of some of the leading pribumi entrepreneurs from the Suharto era. In Hashim Djojohadikusumo’s case, it was a return from the corporate dead. The son of the economist, rebel figure, and minister Sumitro Djojohadikusumo, Hashim had built up the Tirtamas group (turnover of $7 billion a year), centered on a large cement maker, Semen Cibinong. When the 1997 crisis hit, building stopped, no one bought cement, and his company was left with $1.2 billion in mostly foreign debt. In addition, Hashim had a problem recovering money from remote tax havens: $250 million had disappeared from Semen Cibinong into small banks in Vanuatu and the Cook Islands. The Tirtamas group collapsed, but fortuitously Hashim had just bought into an oilfield in Kazakhstan for about $200 million, a stake in what was called Nations Energy, which he was able to sell for $1.2 billion in 2006. He returned to the corporate scene and built up his new Arsari group, with assets put at $1.05 billion.

  Aburizal Bakrie had a narrow escape from bankruptcy in 1997. His group had been built up largely on the engineering and construction contracts awarded by government agencies under the various pribumi preference schemes. The crash left him with share prices at rock bottom and $1.7 billion in debt. It was not entirely his fault. Bakrie had attempted to corner the Indonesian market for the seamless pipes and casing used in the oil industry, through a partnership with Krakatau Steel and the Asian Development Bank called Seamless Pipe Indonesia Jaya, while the state oil firm announced that all piping would have to be locally sourced. But as his venture’s brand-new and debt-financed plant neared completion—with a capacity greater than the then Indonesian demand and perhaps some inflation of the costs—Suharto’s daughter Tutut set up a rival plant on Batam Island with secondhand machinery from the United States.

  After a year of default, Bakrie managed to square off with 300 creditors in a debt-forgiveness deal. As we have seen, he pursued a dual career in the reformasi era, deftly gathering up plum coal resources in Kalimantan as demand from China and India boomed and becoming minister for social welfare in Yudhoyono’s first term. In October 2008 Bakrie & Brothers was back in the same precarious position, thanks to the global financial crisis and the drop in coal and other commodity prices and a high level of debt. Investors rushed out of his three listed vehicles, causing the Jakarta Stock Exchange to shut down for a month. The finance minister, Sri Mulyani Indrawati, was giving Bakrie’s companies no extra time to pay their large tax backlog.

  In East Java, hot volcanic mud had erupted in May 2006 alongside a gas exploration well bored by Bakrie’s majority-owned company Lapindo Brantas at Sidoarjo, just south of Surabaya. The mud cut the main toll road and railway south from Surabaya, and at one point ruptured the main natural gas pipeline into the city, causing an explosion and a flood of hot mud that killed fourteen people and caused blackouts and industrial shutdowns. The mud “volcano” flowed and flowed, eventually displacing 20,000 villagers and by 2013 nearly filling a ten-meter-high containment dam. American contractors brought in to stem the blowout complained of resistance by Lapindo to solutions that might have diverted and capped the flow, on the grounds of expense. After a while, the well was so enlarged that capping it became impossible.

  Within two years, the Bakries achieved a triple act of escapology. Lapindo was sold off to a shell company in a tax haven. More expensive loans were secured to keep creditors at bay. In September 2009 Beijing’s sovereign wealth fund, the China Investment Corp, announced a $1.9 billion loan for Bumi Resources, the Bakrie coal-mining flagship. The same year, police declared they could find no criminal liability on Lapindo’s part. The company argued that the large earthquake south of Yogyakarta before the mud eruption had fractured the geology under Sidoarjo and caused the disaster; its own well drilling alongside was incidental. Though the weight of geological expertise concluded it was drilling without the protection of casing pipe that was to blame, a parliamentary commission chaired by a member of Bakrie’s own Golkar party declared the mudflow a natural disaster, getting the company largely off the hook. In the parliament, Golkar was out of government after Yudhoyono’s reelection; it joined the claque attacking Sri Mulyani, the finance minister, over the bailout of a badly run private bank in 2008 to avoid a domino effect during the 2008 global financial crisis. In 2010 Yudhoyono eased her out to a senior position at the World Bank in Washington.

  Bakrie has never been short of new investors ready to be dazzled by his local knowledge and connections and by the promise of Indonesia’s natural resources. In 2010 he teamed up with Nathaniel Rothschild, a scion of the old European banking house. Rothschild floated an investment company in London, raised $1 billion, and then engineered a reverse takeover with two Bakrie-linked companies in a share and equity swap that resulted in the London-listed investment company, renamed Bumi PLC, owning 29 percent of Bumi Resources and 85 percent of another large thermal coal producer, Berau. The deal created a compa
ny valued at $3 billion, while the Bakrie group’s $3.8-billion debt load was temporarily relieved. While Rothschild became cochairman due to his 15 percent equity, he allowed Bakrie to nominate the chief executive and chief financial officer.

  Just over a year later, Rothschild was raising the alarm about large sums that were disappearing from the books of Bumi Resources and Berau. One of the Bakrie-linked vehicles used in creating Bumi PLC, an investment fund called Recapital, had just previously borrowed $231 million from Bumi Resources and was not repaying it. In late 2013 Recapital’s chief was buying a share of the Italian football club Inter Milan. Around the same time, Berau placed $75 million in a trust known as the Chateau Asean Fund 1. Two years later it was declared unrecoverable. Another $115 million went missing from a share-market float of a Bumi Resources subsidiary called Bumi Resources Minerals, while a $363-million stake in two Yemeni oilfields, possibly nonexistent, was written down to zero. Further questions hovered over the sale of two coal infrastructure companies in 2012, despite them having been announced as sold to other buyers two years earlier, and over a sale of 30 percent of Bumi Resources to a subsidiary of India’s Tata Power for $1. Every month, $2 million was being taken out of Berau as a fee, which was put at the personal disposal of the Bakries.

  The Bakries began their exit, taking with them as much of their money as possible. In early 2012 Samir Tan, of Borneo Lumbung Energy and Metal, bought half of the Bakrie stake in Bumi PLC, 23 percent, for $1 billion and gained control over the other half. This put him in control of the company. The leakage continued. The board later admitted that during Tan’s tenure as chairman in 2012, a further $152 million was spent “with no clear business purpose” from subsidiary Berau. In early 2013 Rothschild was openly alleging “malfeasance” on a grand scale, accusing the Bakries and allied parties of having “looted” Bumi Resources and Berau. Trading in shares of Bumi PLC was suspended.