Investors seek new partners as Soeharto backlash grows

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)