The typical character of Indonesian capitalism

JAKARTA (JP): You have two cows.

You pledge the profits from the milk they will produce and from the milk their offspring will produce for the next 50 years as the sole collateral for a US$100 million loan from the bank owned by the industrial group you own.

You then turn around and make an offer for the controlling stake of a state-owned oil production company with over $4 billion worth of hard assets. You win the tender because it was run by the bank which is lending you the money. Your brother-in- law is also the director general of the government ministry in charge of the government's privatization program.

You deposit a promissory note drawn on your new Grand Cayman corporation which is backed by your affiliated bank's loan commitment and guaranteed by a state-owned bank as evidence of payment of the shares. You take over control of the company, provide golden parachutes of $10 million to all former government directors and list the company on the Jakarta Stock Exchange through a $500 billion initial public offering (IPO). The proceeds from the IPO are transferred to the Grand Cayman company, which then "pays off" the promissory note that was never actually utilized.

You then strip off the assets of your new company by selling them to your Hong Kong shell companies at fire-sale prices, leaving the company technically insolvent before you have even taken the cash from your bank to pay for the shares.

You then have the company borrow the money your bank promised to lend you, which is now collateralized with the fixed assets you've already sold off, and pay a stream of nonexistent service contracts to another family of offshore entities you own, so that you can send an additional $100 million in hard currency abroad, where you are soon to follow.

One of your Hong Kong entities then sues the Grand Cayman conglomerate in the local bankruptcy court over a debt of about $2.00 over the statutory minimum required to file a claim. An additional 15 percent of the claim amount is donated to the yayasan (foundation) managed by the judge's wife. The bankruptcy wipes out any remaining value of the oil production company, freezes out all minority shareholders and absolves you of any personal obligation for the debt. Your bank is forced to write off the original loan balance, which is then transferred to the Indonesian Bank Restructuring Agency (IBRA). IBRA ends up paying the state bank under the blanket government guarantee scheme, while your bank is recapitalized with a new government bond that provides more interest income than the loan ever did.

You relax on your yacht off the Australian Gold Coast with your new Russian girlfriend.

The cows?

There never were any damn cows!

This story was adapted from a similar story about Russia.