Point of VIEW.
A purely analytical perception...
Prosperity, historically definable
in national or regional terms, has taken on a more global definition.
Not too many years ago, it was enough to be “relatively”
prosperous; your prosperity was measured against that of your neighbors,
and as long as the guy next door didn’t have a better car or a bigger
house, you might have felt comfortable.
Prosperity can be fleeting, though, if its foundations are not set
in stone. In order to
maintain their station, people must analyze the frailties of their own
system and correct its weaknesses, or it will fail and they will fall
behind their neighbors.
Yet, it isn’t always failure that
breeds unrest. A bizarre
example of how prosperity caused riots, death, burning and looting is
illustrated by recent events in Indonesia, the world’s largest Muslim
State and the fourth most populated country on earth, with 210 million
people, 13,700 islands, 350 dialects and hundreds of ethnic groups.
President Suharto, who was in office for 32 years, brought 7%
annual economic growth to Indonesia, controlled inflation, dropping it
from 600% when he assumed office to 6.5% several years ago when he was
asked to leave office. He
also increased per capita income from $70 to $1,300. ()
He set a global model for family
planning and insisted on his constituents getting a full education.
For these and other innovations, he became the darling of both the
World Bank and the International Monetary Fund, both of which assisted him
in opening Indonesia to foreign investment at the urging of his cadre of
American educated economic advisors. Most of his advisory team went to school or taught at
Berkley, and became known as the Berkley Mafia.
Suharto was literally brought up by a dukin, a spiritual leader who is one-half faith healer and one-half
fortuneteller. In Indonesia,
this is not such a bad thing, and it is rumored that he still consults
these folks on a regular basis to augment his wahyu.
However, this may have been his problem. ()
While in office he made great
strides at eliminating poverty in Indonesia and was able to unite an
extremely diverse ethnic population into a cohesive force. Indonesia, under Suharto, had become a global example
of how free markets can create jobs as well as infrastructure:
“Indonesia has made remarkably steady and huge progress,” says Ben
Fisher of the World Bank and formerly a member of Suharto’s cheering
section. Retrospectively, Fisher was wrong as rain.
Moreover, there was a lot more to
Suharto than met the eye. He was a tough enemy as exemplified by the fact
that after he took office in 1965, a coup was attempted against him by a
number of his adversaries including the Indonesian Communist Party. In
order to properly punish them for their indiscretions against him, Suharto
had them locked up in the starkest of prison conditions for the next 24
years Interspersed with a bread and water diet along with occasionally
some random tortured. When he
determined that he had gotten all the satisfaction he could out of these
helpless souls, he had them executed at the end of Ramadan.
However, in case Suharto ever tires of the endless torture, he can
always drag a few more of these hapless souls out of his prison and
execute a few more. However,
they are now elderly people and he may not get the same satisfaction that
he did when they were younger.
Nevertheless, torture aside,
Suharto gave the term “crony capitalism” new meaning. With the exception of Fidel Castro, he had administrated a
government longer than any other leader in the world today.
His popularly elected parliament has never rejected government
proposed legislation, and equally amazing, until 1997 the parliament never
proposed any legislation of its own.
Yet, the people were prosperous by
almost any standard, and unemployment until recently has been at a
minimum. The government had
provided their people with an infrastructure that includes all of the
social amenities. The
populous had become educated, but ultimately came to the startling
conclusion that their ability to succeed had been limited by the cliquish
power structure comprised of the Indonesian military and indigenous ethnic
Chinese. People began to
suspect that there was a conspiracy against them, and started to question
whether elections were really open enough.
The cry also rose to a crescendo from the people that, although
they were reasonably prosperous, their government was not representative.
The Chinese population of Indonesia is only 8 million - four percent of the more than 200 million population of this island country, yet this minority is estimated to control as much as 70 percent of the nation’s wealth. The Chinese, even those who are native born Indonesians, are exempt from military service and are not allowed to be active in the government, which results in resentment among the Muslim majority. Whenever something seems to go wrong in the country, the Chinese are automatically picked out as having had something to do with it, and more often than not, become a target for rioting crowds. Once the rioting starts, history has shown that things go from bad to worse. When the Chinese called for police help and rioters were arrested, the callers were imprisoned. In one case, the jail term was “three and a half years for expressing hatred against Islam.” The Chinese are not in a good spot, but the money is good, and until recently, that was a tremendous inducement for them to put up with being a hated minority in the population.
In spite of leading the better
life, people didn’t like the fact that Suharto ruled like a monarch,
rather than an elected president. He
acquired what he wanted, when he wanted it and from whom he wanted it.
This got a little onerous after a while, and some his constituents
determined that they had enough. Take
the case of the Cimacan Golf Club, which was erected on land purchased
from the farmers who lived in around the property.
In 1989, the land was deeded to P. T. Bandugn Asri Mulya, one of
Suharto’s close associates, for the princely sum of two cents per square
meter, or a whopping $634.
Now, we are talking about land that
had supported scores of families for the previous 30 years.
Well, the farmers got their revenge by taking over the golf club by
force and then planting the despised cassava plant on the greens, spelling
out sayings like “reform” or “We are taking what is ours” in
cassava. Members became
incensed over the attitude the natives were showing and demanded police
action to restore the facility to its pre-cassava brilliance.
The police, who were also residents of the neighborhood, were well
aware of the Government’s land grab and told the club’s members to
take a hike.
Suharto’s wife, Madame Tien, who
died a short time ago in what some say was a shootout between two of her
sons, was a strong believer in the adage that charity begins at home.
She made sure that her husband cut the children in on all of the
richest deals negotiated in the country.
In her own quiet way, she was extremely aggressive, to the degree
that she became known as Madam Tien Percent.
In spite of her greed, she did it with panache, so that when the
pie was divided up, it was done in unobtrusively.
When she died, her brood thought
that they could do even better than mom had done, and they immediately
upped the ante in their negotiations (shakedown) with those craving to do
business in Indonesia. Their
aggressiveness tainted with large doses of innate greed, made the family
look like two-bit politicians or a sideshow at a circus.
This was not what the Indonesians thought their President ought to
be showing to the world, and they became extremely discontented.
The nation had come to believe that Suharto’s wahyu had gone into free fall since his wife's death and that as a
leader, he just may have made himself replaceable.
The theory of free markets is based
on the fact that those who are best equipped
to compete should have substantial input into shaping a country's economic
destiny. Not surprisingly, in
Indonesia, this cadre’ turned out to be primarily comprised of
confidants of the President. The
top of the pyramid in Indonesia, as in almost all other countries, has
room for very few.
Among the anointed were Suharto’s
three sons, but more particularly, his second son, Bambang Trihatmodjo.
Daddy gave the boy’s company, Bimantara, a license that granted
it a full partnership with PT Indosat, the state-owned international
telephone carrier. Equipped
with that ownership, Bimantara requested bids for 25% of their stake in
the enterprise. When Deutsche
Telekom paid Bimantara $600 million, the lad became so overwhelmed with
joy at his business acumen that tears came to his eyes. Suharto himself exalted in his son's business acumen.
We find it refreshing that Bambang
could get so excited over a paltry couple of hundred million, when he is
in fact, partners with Hyatt Hotels in everything they own in the country,
which is substantial to say the least.
You could start to realize what a great deal the lad made when the
people finally had enough of the Suharto family’s crony capitalism and
graft and began burning everything insight.
A full revolt against the government had broken out, and yet the
first place the army went to protect was the Grand Hyatt Hotel in downtown
Jakarta, where they formed a barrier between the raging mob and the hotel.
The lad also has an important interest in Hughes’ operations; he
gets a piece of everything they collect on their exclusive satellite
However, daddy Suharto really loved
his little girl. Suharto
bequeathed to his daughter, Siti Hardianti Rukmana, Chairperson of the
ruling Golkar party, was all of the toll roads in the country.
Siti has extracted substantial fees from motorists for using her
roads. She was also first in
line for the contract to build a 59-mile long bridge, slated to be the
world’s longest, linking the island of Sumatra and Malaysia.
Sadly, this project was shelved on a permanent basis when Suharto
gave up the Presidency. Nevertheless, we should not to worry about Siti’s well
being, since she also has a substantial interest in all of Lucent’s and
General Electric’s operations in Indonesia, which brings her enough to
keep her in pin money.
Siti's wealth has been estimated to
be in the billions of dollars, so it is illustrative of her chauvinistic
nature that during the country's recent currency crises she signaled a
strong vote of confidence in the Indonesian currency by offering to buy
all of $50,000 in Rupiahs, while at the same time selling dollars. This public relations farce, which seemed to be intended as a
gesture of good faith, totally backfired, and rebellious college students
asked for her head.
Bambang’s brother, Hutomo
“Tommy” Mandal Putra, works behind five heavily guarded doors, the
last with a combination lock. He
was overjoyed when he won the country’s new National Car Project (named
“Timor”) in partnership with Kia (the South Korean Motor Car Company
now in tatters).
Tommy, possibly because he is always seen amongst armed guards, is
viewed as being a particularly pathetic hands on manager.
In spite of his lack of management ability, Tommy was able to
secure a $690 million lending package from a 16-bank consortium to build
an assembly plant near Jakarta for his ill-conceived National Car Project.
The state-owned banks joined the group without a whimper, but the
12 private lenders who rounded out the coalition preferred the obscurity
of not being mentioned in the same breath as the scheme.
They had to be individually reminded in no uncertain terms by
Tommy’s father, the President, that, “the car was an important
national project,” before they reluctantly committed to it’s funding.
Of course, as other events occurred, this money went down the
One of the reasons for such
reluctance could be the fact that while the most optimistic insiders
projected annual sales of only 40,000 vehicles, the plant will have a
capacity to produce 70,000 cars. Additional
problems for all concerned have been protests by the World Trade
Organization, the United States, the European Union and Japan over all
facets of the government’s handling of the matter.
On the other hand, the Indonesian Finance Ministry ordered that
every government agency add the Timor to their car fleets and
simultaneously exempted the company from duties on Korean parts and from
paying taxes of any kind.
These benefits were estimated at
several thousand dollars a car, and with this kind of advantage, you would
think the project would be successful.
Think of a country with 200 million people and every major car
manufacturer in the world trying to set up facilities in the country to
tap into this market, and lo and behold, the President’s son steps into
the sweetest deal of the century by being so smart. Well not exactly, Bunkie.
Kia motors tanked; down the drain,
as they say, and in a year
and a half, Tommy’s factory has produced only 41,000 Timor cars and sold
26,000, most of them to very friendly government offices.
Then, the IMF came along and made Daddy issue the following order:
“effective immediately, all special tax, customs and credit privileges
for the national car project will be revoked.”
The World Trade Organization has stated that, “the support being
given by Indonesia to its fledgling “national car” was discriminatory
and breached rules outlawing investment measures conditioned on domestic
content.” Now that we can
kiss the Timor a fond goodbye, what is daddy going to say to all of those
bankers whose heads he put a gun to made them cough up 700 big ones.
Maybe Tommy is going to need door-lock number six, but he had
better locate it on Mars. With
deals like this one, we are surprised the entire Suharto family has not
already fled the country.
Tommy, like his other siblings,
probably should have gone into some other line of work, because business
is not always fun. As Tommy
always says, what is life really about?
Tommy was barely shaving when he established the Humpuss Group with
older brother Sigit. The kid
was prepubescent and already making important decisions, like which
actress to date tonight or at which nightclub to spend his unlimited
allowance. In any event, he
prevailed upon Daddy Suharto to give him the monopoly on cloves, which in
Indonesia are mixed with cigarettes and 90% of the population find this is
an unbeatable combination. Sounds
like a winner; well, not yet Bunkie. The first move the kid made when he got the monopoly was to
raise prices. His brothers
and sisters applauded his business acumen and indicated that he was a chip
off the old block.
Even without being an economist,
one can well imagine what happened next.
With cloves selling at a high price, farmers converted their crops
to cloves to get in on the action, thus creating what amounted to an
economic black hole. Production
increased while prices rose, and then when the economy started rolling
downhill, consumption dropped. Adam
Smith would have been proud of young Tommy.
“But wait, this can’t go on forever,” said Tommy’s
advisors, “what are we going to do with the excess cloves?”
Tommy’s advisors asked. Tommy,
still in control, said let’s burn half the crop and give those farmers a
subsidy. Bravo, said the
siblings and the crop was destroyed.
$370 million later, the IMF has called for end to this uniquely
This may have been the first time
that anyone in known universe has owned the great majority of something
that everyone wanted and didn’t have a clue on how to profit from it.
Well, it didn't really matter as long as Daddy was running the
country. Well, sonny, Daddy
isn't running the country any longer, and Tommy increased his staff of
bodyguards substantially. One wonders what he might worried about.
Just like many of us, Tommy really
loves fast cars, but just like many of us, there aren’t a lot of places
to race them, especially in downtown Jakarta where Tommy lives.
Lucky for Tommy though, he had a spare square mile of property near
downtown on which he could squeeze in a two-mile international-standard
Grand Prix racing track. Having done that in record time and at the minimal cost of,
give or take, $50 million, Tommy now became concerned that there were no
racing cars in the country. Noting
that the fabled Italian, Lamborghini Company was for sale at bargain
basement prices, Tommy hypothesized that this was the ticket that would
assure a full race card.
Once coming up his brilliant
conclusion he plunked down $40 million to buy Lamborghini, a company that
had been losing money since it opened.
The cars manufactured by Lamborghini sell for about $200 thousand
per copy. Now, that’s all
right maybe for Italy, Germany, France or the rest of Europe where the
average wage is over $20,000, but for Indonesia at a little better than
$1,000, people in the know considered this deal a little iffy.
As of this date, we are unaware of any Lamborghinis being sold in
Indonesia nor does Tommy’s track get any use other than by a family of
homing pigeons. Tommy
indicates that this is not the criteria by which the deal should be
judged, rather, it should be judged on how fast the car goes around his
track, and to that we have to say, “right on Tommy!”
Talk about conspicuous consumption,
Indonesia is a country where people on the outlying islands suffer from
malnutrition because they can’t afford the right food, or sometimes, any
food at all, and there is Tommy being shown in all the leading Indonesian
newspapers riding around that silly track in his Lamborghini with no one
to race with because first they don't have the money for the cars
and second they couldn't even afford the gasoline.
Tommy was betting big that Daddy would never leave office.
Tough luck, Tommy.
Tommy also owns the country’s
largest airline, and sadly for him, it is already in default on lease
payments to creditors. Those
lease payments are made in hard currency and have effectively tripled
since the Rupiah’s recent devaluation, and at the same time Tommy
doesn’t have an awful lot cash flow between cloves, the racetrack, Timor
and the airline. Wrong,
Bunkie, because you forgot Tommy owns the Four Seasons in Bali which
charges at least $650 a night and go skyward from there just to spend one
night at the place. On the
other hand, it is a value because each room has its own private swimming
pool. Tommy certainly gets
cash flow from there.
Wrong again, Bunkie, because you
don’t remember the terrible smog created by all those fires that were
started all over Indonesia when the farmers played “Amazon Jungle” in
a race to be first to clear the land.
Well, you can imagine that if those fires were bad enough to kill
off the tourist industry in Malaysia, thousands of miles away, it didn’t
do a lot of good for Bali, which is right next-door.
Tommy had already planned the largest and most costly wedding in
the history of Indonesia before things started to go bad.
Tommy invited 3,500 of his closest friends and rented an entire
theme park for the formalities. When
things went bad, he did what he does best: he stiffed the vendors.
You can readily believe that Tommy
was not overjoyed when the IMF told Daddy that he had to reign in his
troops. Tommy gave possibly
his only press conference and said, “We give our best to the nation, if
we were only thinking of ourselves and our family, we wouldn’t still be
involved in business. But
because we see ourselves as children of the nation, who give added value
to Indonesia, we continue to be involved in business.”
Well, there we thought that the only thing Tommy couldn’t do
right was run a business. Instead
of public speaking, Tommy, keep your day job.
The President’s eldest grandson,
Ari Haryo Wilbowo Sigiit Harjojudanto, now 30 years old and overwhelmed by
the largesse awarded his aunts and uncles, embarked on his own mission in
business, “how to succeed without really trying,” by asking grandpa
for a concession that would make him sole supplier of shoes for all
children of school age in Indonesia.
He also told Suharto that in keeping with the family tradition, the
shoes would be sold to these tikes at a substantial markup, which would be
shared with grandpa. Touched
by the lad’s offer and impressed with his entrepreneurial insight and
his previous success in a snakeskin trading business, Suharto saw no
problem with forcing Indonesia to become a one-style shoe country.
Grandpa indicated that it was a capital idea, but cooler heads
prevailed when the currency and stock market collapsed.
Suharto’s progeny was requested to go back to the drawing board
But the boy wasn’t done yet. Known
in the family as being a stickler for detail, he noted that there was a
strange characteristic of Indonesian bird nests: they were relished by the
residents of Hong Kong as a delicacy.
An industrious group of Indonesian entrepreneurs of Chinese origin
started to retrieve the nests, and before you could blink an eye, believe
it or not, it had become a nine-figure business.
Indonesians, who though the place where birds make their homes was
not fit food for a good Muslim, paid little attention to the cottage
Not so first grandson.
Grandpa generously gave first grandson the rights to all of the
nation’s edible nests to encourage the lad.
Ari’s cartel, “Mr. Ari’s Birds Nest Association,” became
the gatekeeper for taxes for exporters of these luxury items, which sold
for as much as $600 per pound. Now,
Ari wasn’t all that aware of why the birds build their saliva nests
where they do, but it is highly technical and requires the just the right
blend of feces, stench, dankness and humidity in areas devoid of light.
Nest cultivators say that a cow’s head buried under the nests
also hastens the “swiftlets” nest building process. We are talking
about a high-tech enterprise here, and where Ari thought that anyone could
step into the slot, it just was not the case. Just one of those tactical errors we can chalk it up to
Almost uniformly, people determined
that Ari’s association was illegal and would not pay the penalties
initiated by the association. Before
too long, "Bird’s Nests" became the prime contraband export of
Indonesia with literally everyone skirting the fees, while simultaneously
waging a legal battle in court questioning the Association’s legal
status. Poor Ari; in a land
where Suharto offspring never even lose a round, first grandson lost the
war. As the overzealous youth is loath to point out, “You should
see those bird-nest farmers, they drive Mercedes-Benzes.” Ever the patriot, Ari added, “We did this for the
government; our studies showed Indonesia was losing 800 billion Rupiah ()
a year in taxes.” You have
got to love a kid like this, always thinking of his country first.
Young Ari's foray into bird droppings ended when no one would pay
any taxes at all and Ari's people decided against running through the
jungle to collect the nests instead the taxes. The desire for eating
bird’s nests, while somewhat bizarre by western standards is not the
only strange epicurean delight that fascinates the Indonesian palate. Bats
too are a delicacy here, they are three inches long, look like small rats
and taste like beef jerky. ()
Undaunted, Ari bounced back in
typical family tradition and soon established cartels controlling beer and
tropical-wood and was even awarded the rights to build an adjunct to
Jakarta’s water supply which would sell the precious commodity at a rate
25% higher than people were currently paying.
This action was not geared to engender a warm and fuzzy feeling
from the general populous for this precocious lad.
Just envision the local laborer working his normal 14-hour shift in
downtown Jakarta, then coming home and getting his water bill, knowing
from whence the increase had come.
Other enterprises that were on the
lad’s drawing board before Grandpa's retirement were modeling and music
academies, all carrying Ari’s proprietary “Sexy” label.
Also ready to roll was his chain of Sexy restaurants, his Sexy
beverages and his Sexy clothes, a can’t miss deal because of the name of
the designer involved, none other than Ari Haryo Wilbowo Sigit
Harjojudanto himself. In the
land where most have only one name, the lad has been five times
His beer concession on Bali also
became the exclusive government agent for selling the required revenue
stamps that must accompany the purchase of beer for resale. Ari, ever the business man, marked up the tax stamp to three
times its face value, enraging almost everyone on the Island, including
some of his relatives who owned the hotels where the beverages were sold.
This action required Suharto himself to step into what had became a
family war, and the concession was voided on the spot.
As many in the family later remarked, this was not Ari’s shining
Ari was not to be denied.
Growing on Sumatra and Irian Jaya is a resinous black root called
gaharu that matures in tropical Indonesian forests.
This stuff when sold by the pound goes for almost as much as a good
birds nest. People in the Mideast are almost cult-like in their ravenous
demand for the product as a critical ingredient in incense. Ari saw an opportunity in the gaharu trade because it was
first grown, then shipped to Jakarta to middlemen and after that
transshipped to the Mideast. He
first was able to tie up the marketing rights in Jakarta, which certainly
did not ingratiate him to those people he had just put out of business.
He next had Grandpa assign him the exclusive collecting and
marketing rights for the product in the states of Sumatra and Irian Jaya,
the only places where gaharu is cultivated.
Moreover, his very low bid surprisingly turned out to be the only
one returned when requests were made for tenders.
You can image that the lad is not on anyone’s Christmas list from
these regions, but so far so good, and the kid may just hit a home run on
this one. Couldn’t you just
see this boy as President of the country.
Fortunately, in Indonesia charity
does not end with close blood relatives.
Until the IMF stepped in, Suharto’s cousin and foster brother was
in the midst of building the world’s tallest structure, a 1,841-foot
tower costing almost $600 million, aptly named the Jakarta Tower. The “Tower” would be slightly taller than Toronto’s CN
Tower, but would also be totally lacking in economic viability. Considering that Indonesia’s economy was in chaos, their
currency was in free fall and their markets were in collapse, most of
these projects hardly seem to be the types of things the International
Monetary Fund would like to see their money invested in.
Suharto’s brother-in-law, Ibnu
Hartomom, was in the best business of all.
According to the newspaper Republika,
it seems that he issued “$3 billion worth of promissory notes in
the name of the Indonesian Government.”
Apparently, these were zero coupon notes carrying interest, and
today the notes are worth $4.5 billion.
It seems that at that time, Hartomo was deputy head of the National
Security and Defense Council and in spite of being in the government, he
was not allowed to step on the toes of the Finance Ministry, which already
owned the exclusive right to issue these kinds of securities.
Moreover, as surprising as it may seem, now that these notes are
maturing the lenders want to get paid.
However, there no longer is any money to meet these obligation, and
Attorney-General Andi Muhammad Ghalib announced the only thing he could.
“The notes are illegal,” he said.
 Astonishingly. At this point the rupah was. 10,000 to the dollar, the average wage had reverted to $305 in early January of 1998.
 Devine mandate of the gods.
 New York Times, Monday February 2, 1998.
 In Dutch, which is the derivation of the Indonesian language, Tien means ten.
 Unfortunately for Tommy, on October 23, 1997, Kia Motors was taken over by the Korean Government because they were so hopelessly in debt that it had become obvious that their enormous overdue bills would never be paid as long as the current inept management continued in place. The goal was to put an affordable car on the streets for the middle class, and Tommy was given preferential luxury-tax and duty breaks to import sedans manufacture red by KIA Motors corporation in South Korea. The price was $15,000 each, double what his venture , Kia-Timor Motor, purchases them for and more than 10 times the average per capital income of $1,300.
 Daddy indicated that he would cancel their charters unless they lent the money.
 On April 15, 1998, Kia Motors, once the second largest auto builder in Korea was reluctantly put into receivership by the government.
 About $90 million at current exchange rates.
 Ray’s List of Weird and Disgusting Foods, Carl A. Pforzheimer.
Copyrighted Worldwide ©1997 Chapman Spira & Carson,