The Fall of the Salim Business Empire After Three Decades of Success

Jakarta, CNBC Indonesia - Sudono Salim, also known as Liem Sioe Liong, is a legendary figure in the world of Indonesian business, with a long and storied entrepreneurial journey. The founder of the Salim Group was known for his close personal relationship with President Soeharto, a connection that began even when the president was a colonel.

In the early years of Indonesia’s independence, Salim built his reputation as an importer of cloves and a provider of logistics for the military. His extensive business network attracted the attention of Colonel Soeharto, which eventually led to a strategic partnership after being introduced by Soeharto’s cousin, Sulardi, during the Indonesian National Revolution between 1945 and 1949.

“After Soeharto gained power in Indonesia in the mid-1960s and became president, he was supported by a group of crony businessmen, the largest and most powerful of whom was Liem Sioe Liong,” wrote Richard Borsuk and Nancy Chng in Liem Sioe Liong and Salim Group (2016), quoted on Sunday (December 3, 2023).

The two were involved in a mutually beneficial relationship for three decades. Soeharto protected Liem and ensured that his businesses ran smoothly. Liem, through the Salim Group business empire, channeled funds to Soeharto, his family, and other cronies.

As a result, both parties prospered. Salim successfully established himself as one of the richest people in Indonesia. Soeharto also succeeded in holding power in the country. However, their success suddenly collapsed in just a few days in May 1998.

Salim successfully built three business empires in three sectors, including banking (Bank Central Asia, BCA), construction (Indocement), and food (Bogasari and Indofood). However, all of this gradually crumbled during the 1998 crisis. BCA was the worst affected.

Historian M.C Ricklefs in Modern Indonesian History (2009) said that during the crisis, customers withdrew funds en masse. Hundreds of people were willing to queue for hours to drain all their savings. This condition made BCA, which was no longer trusted by the public, threatened with bankruptcy. This series of crises reached its peak in May 1998.

Salim’s close relationship with Soeharto turned out to be a disaster for him at that time. The emergence of anti-Soeharto sentiment following the widespread economic crisis and political turmoil was a severe blow to Salim. People who knew of their close relationship made Salim a target.

This happened after protests turned into racial riots on May 13, 1998.

That day, Jakarta and its surroundings were hit by riots, looting, and arson of homes, shops, and many vehicles (Kompas, May 14, 1998).

This action was carried out by a provoked mob. They targeted buildings and vehicles belonging to Chinese people, even targeting Chinese people themselves.

Jemma Purdey in Anti-Chinese Violence in Indonesia 1996-1999 (2013) explained that the emergence of racial sentiment against Chinese people was due to the stereotype that they were rich and close to President Soeharto, and that they deserved to be hated. And the central figure associated with that description was Sudono Salim.

“The companies of the cronies and Soeharto’s family were the main targets of the arson and looting. Bank Central Asia, owned by Liem Sioe Liong, was the main object of the attack,” wrote Ricklefs.

Richard Borsuk and Nancy Chng in Liem Sioe Liong and Salim Group (2016) said that even though he was the target of the mob, Sudono Salim, his wife, and some of his children were in the United States to accompany Salim, who was about to undergo eye surgery. In Jakarta, only Anthony Salim was working at Wisma Indocement, Jl. Sudirman.

Anthony was so afraid to go home to his father’s house in the Roxy area. This is because the mob also targeted Chinese residential areas. It was feared that if Salim stayed at home, he could be killed.

That prediction then came true. On the morning of May 14, Anthony received news that his father’s house was visited by a group of young men with menacing faces, armed with jerry cans of fuel, and tools. They wanted to enter Liem’s luxurious house.

Anthony did nothing. He immediately ordered the security guard to allow the mob to enter and damage his house, rather than confront them and cause bloodshed.

“In an instant, all the cars in the garage were burned, as well as the entire house. They burned the furniture, removed the paintings, and ransacked the rooms. They even wrote inappropriate words on the house,” Anthony told Richard Borsuk and Nancy Chng.

After a few minutes, black smoke quickly billowed from Salim’s residence. In the streets, Salim’s photos were thrown with stones and burned by the angry mob (Kompas, May 15, 1998).

Seeing the very bad situation in Jakarta, Anthony immediately thought about leaving his office. He was afraid that his office would suffer the same fate as his house. He then went to Halim Airport to fly to Singapore on a private jet. From there, Anthony monitored the development of his business after the difficult times.

After the riots subsided and Soeharto finally stepped down, BCA suffered the worst losses. There were 122 branches damaged, consisting of 17 offices burned down, 26 branches damaged and looted, and 75 branches damaged but not looted. Then, there were 150 ATMs that were damaged and the cash was taken, resulting in losses of Rp 3 billion.

In addition to BCA, Indofood was also attacked. Its factory in Solo was looted and burned, resulting in losses of Rp 42 billion. Its distribution center in Tangerang was also destroyed by the mob. Only Indocement managed to survive.

However, the biggest blow occurred in the banking sector. A week after Soeharto stepped down on May 21, 1998, BCA was taken over by the government because its financial condition was deteriorating.

The government, through the Indonesian Bank Restructuring Agency (BPPN), officially designated BCA as a BTO (Bank Take Over).