Investors seek new partners as Soeharto backlash grows

JAKARTA (JP): The growing attack on the business interests of the Soeharto clan and their cronies will force foreign investors to abandon partnerships which link them to the beleaguered family, but obvious replacements have yet to emerge from the country's political uncertainty, analysts said.

Economists Hartojo Wignjowijoto and Faisal Basri told The Jakarta Post that many foreign investors who had previously taken advantage of connections to Soeharto's family and cronies, were now ready to turn their back on their former allies and cut relations in a bid to secure their business interests.

But Hartojo said the investors were confused as to who was now suitable partner material because of the political uncertainty.

"Some investors have asked me if they have to court the cronies of (President) B.J. Habibie or (Coordinating Minister for Economy, Finance and Industry) Ginandjar Kartasasmita," Hartojo said.

"I told them not to rely on political connections until the situation settles down. The most suitable thing to do is to adopt a wait-and-see position, focus on core business interests and limit expansion," Hartojo said.

Demands have grown for the new government to review projects connected to Soeharto's family and cronies because of suspicions that political power and other unsavory business practices were used to win the cream of the country's developments projects.

A group of lawyers have also set up an independent committee to investigate the wealth of Soeharto, his family and their cronies.

State oil and gas company Pertamina is registering all its contractors and suppliers who have connections to Soeharto and his cronies following the government announcement of a review of all contracts awarded to them.

State port management company PT Pelabuhan Indonesia II canceled four port service contracts with PT Humpuss Terminal Petikemas, owned by Soeharto's youngest son Hutomo Mandala Putra, who is also known as Tommy, last week.

The company also bought out the 48 percent stake in Koja cargo port in North Jakarta which was owned by Tommy.

The National Police is reviewing a contract with Soeharto's eldest daughter Siti Hardijanti Rukmana, alias Tutut, to process drivers' license applications, after announcing that her dealings were riddled with corruption and nepotism.

Several provincial governors, including East Java Governor Basofi Sudirman, announced early last week that all projects owned by Soeharto's family and cronies under their respective jurisdictions would be reviewed.

Hartojo and Faisal said foreign investors would simply rid themselves of Soeharto's family and cronies by buying out their stakes in joint ventures. Their stakes are mostly small, they said.

Hypocrite

Hartojo said foreign investors were hypocritical in view of their inclination to rely on political connections.

"They criticize us about crony capitalism, but in reality they enjoy the comfort of it," he said.

Hartojo said foreign investors mostly made partnerships with Soeharto's family and friends to smooth the process of obtaining government contracts and to secure their business interests in the country.

Soeharto's children and cronies own stakes in foreign joint ventures operating in almost all profitable business sectors in the country, and particularly in the oil, power and telecommunications sectors.

Soeharto's family and cronies were usually awarded a free stake in the joint ventures, Hartojo said.

Faisal noted however that foreign investors were basically "true businessmen" who did not rely on political connections to mop-up competition.

But, he said, uncertainties in the country's legal system during the Soeharto era, demonstrated by the frequent changes to business regulations, forced them to make links to the center of political power to avoid the risks this presented.

"I think if we had a better legal system with more transparency foreign investors would prefer to set up wholly- owned companies because they would be easier to manage," Faisal said.

"They would only form partnerships with local businessmen when their business was oriented to the local market," Faisal added. (jsk)