The end of cronyism in Indonesia?

The following article in The Age has an interesting perspective about SBY’s “enhanced” second term in office and its implications for cronism, long the bane of Indonesians. Can this be true?

Indonesia’s crony clean-out

Eric Ellis

July 15, 2009

MIGHT it just be that after President Susilo Bambang Yudhoyono’s sweeping re-election, the era of Indonesia’s grasping cronies is coming to an end?

These free-wheeling cronies have been a lawless cancer on the Indonesian economy for too long; the reason why so much of Indonesia doesn’t work properly — why its roads are pot-holed, why badly built bridges, buildings and dams collapse, why its technological backbone is dysfunctional, why consumers are abused, why its justice system is corrupt, why the oxygen-sustaining Borneo rainforests are logged to within an inch of their lives.

Cronies are to Indonesia what politically connected oligarchs are to Russia, except they’ve been around longer. Their fathers were to some extent commercial pioneers in the newly independent Indonesia, and there was then a role for them, because the new nation needed to be built, and built fast.

Their contracts and businesses were largely based on proximity to the military and the ruling family, which, save for the last decade of “reformasi”, has been largely the same thing, be it the Soehartos or the Soekarnos before them. Foreign investors quickly figured it out — joint-venture partners were chosen because they were well connected with the palace, not because they were great operators.

Too much was never enough for the cronies, who became some of Asia’s richest men, displaying almost obscene wealth in a country as poor as Indonesia. They should have been banished after the 1997-98 “Asian Contagion” crisis when the Indonesian economy collapsed and Soeharto was ousted. Some did — the Salim/Liem food-to-banking empire for one is a shadow of its former self — but the system was sufficiently politically malleable that many survived, and even prospered.

Continue reading “The end of cronyism in Indonesia?”

Closing Dinner

It’s always great to have good conclusions and last Thursday us – the bankers, lawyers and the Maverick team of Shilla, Adwi and me – were treated to a sumptious closing dinner for the closing of the Makro sale by SHV to Korea’s Lotte Group.

Pak Kuswanto Gunaidi and Pak Gopi Agrawal from makro were gracious hosts and not only did they feed us well, they also gave us an excellent momento of the deal that is novel, Indonesian and unique – a minature Makro handcart laden with minature good that you’d get at Makro.


The gift is actually made by an outfit in Bandung called Crayon Minatures Indon Product and Unspun thinks that they would make great corporate gifts, instead of the usual cap, pen, notepad, name card holder, T-shirt, USB drive, cheap computer bag and other trivia that corporations give away so that you can quikly pass it on to your pembantu. These minatures are classy and make great coversation starters if placed in the room. The Crayon guys also make minuatures of waroengs and other lements that make up the tableu of Indonesian street life. All very well done and excellently detailed.  Excellent choice Pak Kus!

A detailed photo of the minature. Both photos are from Rene Adhibrata.

Who’s doing well in these hard times?

Unspun had to drag himself out of bed but made it to the Amcham Services Committee meeting on Tuesday. It’s Unspun‘s favorite committee meeting because it gives you a great snapshot of how the services-related industry is doing in Indonesia, which is itself a reflection of the Indonesian economy itself.

It is also made up of professionals from the service industries, including security, hotels, movers, international schools, tax consultants, food importers, government consultants and even some NGOs.How the meeting works is that they go round the table asking each participant to update the group on how their sector is faring.

The result for this month’s meeting is fairly expected from the economic turmoil sweeping the world. Down, down down for most sectors. About the only ones who reported doing extremely well are the tax consultants and the private equity consultants.

The tax consultants are doing well because there is a last minute rush to file claims under the Sunset Policy, where the government will forgive you you tax reporting trespasses if you come clean and declare your assets before Dec 31. As one tax consultant explained it, he still has many of clients exercising wishful thinking that somehow they could get away with it if they do not declare their assets. This is very far from the truth as all institutions including banks, insurance companies and those in charge of property will have to provide date to the tax Department regularly from next year. If you don’t come clean now then the Tax Man would come for you one fine day. You can’t run, you can’t hide. So they are all busy filing claims for people and they are hiring as fast as they can fine someone with a pulse and can count past five.

The other people doing very well are the private equity guys. Continue reading “Who’s doing well in these hard times?”

When the going gets tough, the tough become recessionistas?

With financial doom and gloom with every newspaper on our doorstep it could pay to think how to adapt businesses to the news circumstances because no mater in what situation there will always be winners and losers.

In the US some people are going for recesson chic. Can you imagine this playing out in Indonesia?

With Bakrie’s companies going southward and the Sidoarjo issue still boiling away an earthy look would be appropriate to replace those Zegnas:

Angry young men and women could adopt the FPI range of streetwear:

Activist types could also look elegant and make their point:

The extremely practical who think their misdeeds may be exposed by the extra vigilance against corruption in hard times may want to adopt the prison look.

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Consider the $1,235 patent-leather satchel with golden hardware designed by Anya Hindmarch.

Mary Hall, a marketing manager at I.B.M. in Redondo Beach, Calif., heard its siren call. Then she went to Target to purchase a similarly shiny purse, made out of polyvinyl chloride, by the same designer. Price: $49.99.

“In the current economy, I thought I would reform,” Ms. Hall said.

Welcome to “recession chic” and its personification, the “recessionista,” the new name for the style maven on a budget.

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May we, may we not, own BII

This has been one strange transaction. First there was the nail biting process of waiting for Indonesia’s central bank, Bank Indonesia, to approve the acquisition amid uncertainty of whether it violates the bank’s Sing Presence Policy.

Then, once approval was granted Malaysia’s central bank shot down the deal, agreeing with critics that the price paid for the bank to the Temasek Group was too high.

Now the parties have reached a settlement with Temasek giving a discount. What a way to negotiate! Unspun wonders if central banks from now can be incorporated as part of the negotiations strategy for acquisitions.

Malaysian holding companies Khazanah and PNB now own the Lippo Bank and Bank Niaga, and now BII. The Lippo and Niaga are apparently to be merged.

The fun now begins for the Malaysians to compete in Indonesia’s wild, wild West marketplace. It will not be an easy ride and they need to pay attention to how they tend to their image and how they respond to attacks that will inevitably occur. In short they need to take their Public relations efforts seriously, unlike in Malaysia where they deal with an emasculated Pres.

(And in case any skeptical readers out there think that Unspun is trawling for business with this posting, think again: Unspun has an exclusive contract with the largest foreign bank here that precludes him from taking on other banks)

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Maybank completes BII deal after discount

The Jakarta Post � | �Thu, 10/02/2008 3:26 AM� | �Business

The Malayan Banking Bhd (Maybank) has completed the transaction over majority ownership in Bank Internasional Indonesia (BII) after agreeing to a discount offer from the Sorak consortium.
Maybank acquired 55.6 percent shares in BII on Tuesday for US$ 1.24 billion after consortium members, Singapore’s Temasek Holdings and South Korea’s Kookmin Bank, bowed down to the demand of Malaysia’s central bank of lowering the selling price.
In a statement sent to the Malaysia’s stock exchange on Wednesday, Maybak said that the consortium offered a discount worth $220.5 million, making the price per share significantly lower to Rp 433 (4.6 US cents) per share from Rp 510 that was agreed earlier.
Maybank president and CEO Abdul Wahid Omar said in the statement: “It has been an intensive process to bring this transaction to a close but we are happy that we have all now come to agreement.
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New investment moves?

Unspun occassionally gets let out of the office and ysterday he went to the buka puasa reception of a prominent law firm. Unspun caused a stir among the polite company. Suffering from a minor surgery for ingrown toenail problems Unspun had no choice but to wear Crocs with his Armani suit (bought from a firesale in Singapore and probably an imitation). Eyebrows were raised, some sneered but others were contemplating whether they were behind the curve on the latest businesswear. Then the lawyers shared some information and it was fascinating.

Apparently the BKPM is planning to introduce some changes to investment regulations. Three of these changes are:

1. Companies that have failed to update their articles of association would not be denied justice. The Ministry of Justie and Human Rights will apparently not entertain the grouses and applicatons of a company until they update their articles of association according to new guidelines.

2. Publicy-listed companies in the Negative List will in future not be able to have foreign investors as majority share holders. The example given was that a public listed telecommunications company would not be able to have foreign entities owning more than 40% of the stocks.

3. Companies that convert to PMA status must also convert their subsidiaries to PMA status. Apparently presently it is OK to leave a PMA ompany’s subsidiaries as PTs. But in future thi won’t be allowed.

What does all of this mean? Unspun will leave it to the business pundits and analysts to interpret and decipher. In the meantime Unspun is getting a high on all those painkillers the surgeon has given him for the offensive toe.

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