Kanindo takeover draws criticism and scepticism

Kanindo takeover draws criticism and scepticism

By Hidayat Jati

JAKARTA (JP): The takeover of the troubled Kanindotex group of textile companies by a well-connected consortium drew criticism and skepticism from various analysts yesterday.

"The triumph of PT Apac Century Corporation in taking over a controlling stake of Kanindotex and its management under a scheme offering a subsidized interest rate proves that crony capitalism is alive and well in the Indonesian economy," Didik J. Rachbini, an economist associated with the National Development Planning Board, told The Jakarta Post by phone yesterday.

Didik was commenting on the final agreement regarding the takeover of Kanindotex, signed on Tuesday night after months of delay. The deal was a clear victory for Apac Century, which is headed by President Soeharto's second son Bambang Trihatmodjo.

Bambang is the chairman of the Bimantara Group as well as treasurer of Golkar, the ruling political group.

Apac Century secured 90 percent of Kanindotex's shares as well as its management, completely ejecting the Indonesian Batik Cooperatives Federation (GKBI) from Kanidotex's management in spite of a four-year contract awarded by the Finance Ministry last year.

Kanindotex, which owns three mills in Central Java which employ more than 10,000 workers, had defaulted on Rp 1.3 trillion (US$585 million) in loans from state-owned Bank Bumi Daya (BBD) and Bank Pembangunan Indonesia (Bapindo).

The consortium also won an extraordinarily low 11 percent annual interest rate from Kanindotex's creditors -- the current market rate is about 20 percent per annum -- under which to repay the bulk of the textile group's loans within eight years.

The 11 percent rate represented a compromise, since Bambang originally asked for a two percent annual rate for the first four years and four percent for the remaining period.

Inefficient

"What we are seeing in this case is that the possession of an inefficient project has shifted from one politically-related party to another," Didik said.

Kanindotex was previously owned by businessman Robby Tjahjadi, a known Golkar supporter.

Echoing the conclusion of last year's parliamentary investigation, Didik said yesterday that Robby had marked up Kanindotex's real worth to get a bigger loan.

Despite such claims, Robby has never been charged by the authorities.

"So our only hope is that Bambang's consortium will be able to honor Kanindotex's debts, which were granted to Robby by neglecting normal banking procedures in the first place," he said.

Rizal Ramli, a economist based with the Econit think-tank, warned that the government, or Kanindotex's creditors, would not be able to supervise the financial development of the textile group since neither BBD nor Bapindo had managed to secure a controlling interest in Kanindotex.

Bambang's consortium had precluded any possible scrutiny or intervention by outside parties, he said.

Benny Sutrisno, an Apac Century executive who is now the president of Kanindotex, confirmed on Tuesday that the final takeover agreement had dropped a government's suggestion which might have facilitated a management takeover by BBD and Bapindo in the event that the consortium failed to honor its debts during the first nine months.

Benny said that the suggestion was originally made by Minister of Finance Mar'ie Muhammad.

"How can we be sure that Bambang's consortium will honor its obligations and how can we check that Robby Tjahjadi is not behind them?," Rizal asked yesterday in an interview with the Post.

Rizal revealed his suspicions to the press in February that Bambang and his partners in Apac Century were acting only as Robby's proxies in his efforts to regain control of Kanindotex.

Robby was not available for comment yesterday.

Although the final takeover agreement states that Robby agrees to surrender all of his shares, management and obligations at Kanindo to the consortium, none of Bambang's team members has openly challenged Rizal's suspicion.

Benny Sutrisno, for his part, has repeatedly stated that the consortium will succeed since both he himself and his partners are experienced textile businessmen.

In the meantime, economist Didik Rachbini concluded that the Kanindotex takeover represented a victory for parties who wish to maintain a tight relationship between business and politics in Indonesia, at the expense of efficiency and fairness.

"This is another defeat for our reform-minded officials," he said.