IBRA move on Astra

Rini Soewandi, who was voted 2000's best Indonesian chief executive officer (CEO) by Swa business magazine and Asian Market Intelligence last week, was voted out on Tuesday from publicly listed PT Astra International. The departure of 41-year-old Rini ironically came at a time when the company is enjoying a robust recovery from near bankruptcy in 1998 to a net profit of Rp 808 billion (US$107 million) last year.

The controlling shareholder who demanded her firing was IBRA, which Rini co-chaired for a few months in early 1998 and the one who replaced her as CEO of the country's largest carmaker was Theodore "Teddy" Permadi Rachmat, who she succeeded in June 1998.

Hence, the four-month acrimony between Rini and IBRA finally ended in a dramatic twist of events at the Astra extraordinary shareholders meeting on Tuesday, and the impasse to the sale process of IBRA's 45 percent stake in the company was removed.

Though the boldness by which IBRA pushed through the ousting of Rini and finance director Dorys Herlambang "burned" minority shareholders, IBRA chairman Cacuk Sudarijanto should be commended for his right decision to nominate Teddy and his tactfulness to retain the majority of the management team. That way, the move would not damage market sentiment on Astra and, most importantly, would prevent an employee revolt like the previous labor unrest which foiled IBRA's deal with British Standard Chartered Bank for publicly listed Bank Bali late last year.

Though most analysts reckoned that IBRA should act firmly to expedite the sales of its Astra stake and would therefore nominate its "own man" to the helm of Astra, they were previously worried that Cacuk would nominate a political partisan unknown to the market. Now IBRA has a chief executive who not only fully supports its mission -- to expedite its divestment of Astra -- but is also well-regarded in the market.

Teddy, who was Astra CEO for 14 years until 1998, is a cousin and protege of William Soeryadjaya, the founder of Astra in 1957. The latter was forced to sell his company in 1992 to settle the debts of the now defunct Bank Summa, which was owned by his eldest son Edward. Teddy was replaced by Rini when Astra was then controlled by a group of shareholders who were all cronies of former president Soeharto.

By retaining the majority of the board of directors -- all professional managers left behind by William -- Cacuk maintains the fundamental asset that has made Astra one of the best managed companies in the country and highly regarded by foreign creditors and foreign investors.

It is regrettable that Rini's "opposition" to the sale process of IBRA's stake ultimately cost her her job at a highly respected company, which is one of the largest in the country.

But the stake was too great for IBRA to tolerate another delay in its divestment plan after the failure last week of its Astra deal with an American investor group led by Newbridge Capital/Gilbert Global Equity Partners. Not only was that because of its urgent need to raise funds for the state budget by the end of the fiscal year on March 31, but also because the sale process of its Astra stake is a test case for its credibility and capability to woo back foreign investors after its botched deal with Standard Chartered Bank for Bank Bali in December.

The problem is, if IBRA, a government agency, is not able to sell its assets in a blue-chip company like Astra, there would seem to be little hope for the agency to recover even a fraction of the Rp 600 trillion (US$80 billion) worth of equity and bad debt assets the agency took over from closed and nationalized banks.

But IBRA should draw a lesson from the controversy of its Astra deal as there are many other publicly listed companies among the assets under its management which it will have to sell. The turmoil over the past four months would not have occurred had IBRA made good preparations for its deal and conducted the process in a transparent manner, supported by effective communications to the public -- the mass media, securities analysts, House of Representatives and regulatory agencies.

Now that the impasse has been removed, the most important next step is to ensure that the bidding will proceed through a process that the market will see as transparent and fair.