Soeharto briefed on Barito's $1b deal in Kuala Lumpur

JAKARTA (JP): The Malaysian government has agreed to provide Indonesia's Barito Pacific Group with one million hectares of land in Sabah state for the development of timber estates for pulp.

Minister of Investment Sanyoto Sastrowardojo told reporters yesterday, after meeting President Soeharto, that the pulp industry would be developed to support the timber estates and could employ around 10,000 Indonesian workers.

Chairman of Barito Pacific Prajogo Pangestu and Minister Sanyoto briefed the President, yesterday, on the Barito's US$1 billion share deal in Kuala Lumpur over the weekend.

Prajogo said that Malaysia's Prime Minister Mahathir Mohamad had agreed to allow the employment of Indonesian workers in the timber estate project in Sabah.

Both Prajogo and Sanyoto met Mahathir in Kuala Lumpur last week following the acquisition of a publicly-listed Malaysian firm: the Construction and Supplies House Bhd. (CASH). During this meeting they completed a deal that could be worth up to US$1 billion.

Under the deal, Prajogo and his wife Harlina Tjandinegara Pangestu sold assets to CASH in exchange for shares that gave Prajogo a controlling stake in the Malaysian firm, whose assets were in Malaysia, Papua New Guinea and China.

Prajogo, a leading Indonesian timber tycoon, said yesterday that he had also reported to Soeharto about the acquisition.

He added that the US$1 billion deal he signed in Kuala Lumpur over the weekend was given the go-ahead by President Soeharto.

Prajogo argued that his move was a way of harnessing fresh foreign funds to Indonesia to finance development projects.

"So naturally, the President gave it his blessing," Prajogo said.

Prajogo said the price of the CASH shares on the Kuala Lumpur Stock Exchange had risen from two Malaysian ringgits before the acquisition to 11 ringgits yesterday.

Assuming the price is between 10 ringgits and 15 ringgits, he said, "It means Barito Pacific will likely get the minimum fresh funds of Rp 4.1 trillion and Rp 6.9 trillion ($3.2 billion) at its peak."

CASH was previously controlled by its politically-connected managing director, Joseph Ambrose Lee Yok Min.

According to Prajogo, he will send the first $1 billion from CASH back into Indonesia after one year period to finance other development projects.

However, he declined to comment about how he will finance the pulp industry.

He added that a pulp mill usually needs between some 100,000 and 150,000 hectares of forest to support its operation.

Among the Barito Pacific companies is Prajogo's flagship PT Barito Pacific Timber, listed on the Jakarta and Surabaya Stock Exchanges, which accounts for about 10 percent of the Indonesian bourse's market capitalization.(09/17)