International -- Asian Business: INDONESIA
INDONESIA'S HASHIM: PICKING UP THE PIECES (int'l edition)
A top businessman tries to salvage his Indonesian empire
Hashim Djojohadikusumo is an Indonesian tycoon, a man renowned for his business acumen, his lofty connections, and Tirtamas Group, the corporate empire he has assembled. Yet, as his country's economy crumbles in the wake of a currency collapse, Hashim isn't thinking of all that he has accomplished. He's thinking of the $1 billion in debt he holds and the risky moves his companies made just months before the rupiah lost 90% of its value and interest rates shot up to 30%. Now, he wishes he had reined in his ambitions. "I didn't see the seriousness of the crisis," he says. "I was stupid."
Such candor is rare in Jakarta these days. Other businessmen in President Suharto's circle prefer to blame the International Monetary Fund or foreign banks for their woes. They plan to hold on to all their assets until the crisis eases in Indonesia, a moment that could be years away. But Hashim, 43, is trying to manage his way out of the mess. He wants to restructure by selling off pieces of his empire to the highest bidder, opening up new export businesses, and merging some operations. If he succeeds, he may show other Indonesian companies how to work their way out of their difficulties. If he fails, then he will offer a bitter lesson in how crises can undo even executives who face up to their problems.
There's no doubt recent events have undermined Hashim's plans to create a well-managed conglomerate--something Indonesia lacks. His companies include the country's third-biggest cement maker, four of its biggest banks, a major palm oil plantation, a big petrochemical refiner, and a brokerage run by Merrill Lynch & Co. Before the crisis hit, the group's assets surpassed $7 billion and its overall annual revenues exceeded the $800 million level.
SILVER SPOON. Hashim certainly did not build this empire on talent alone. He has plenty of friends in high places: As a son of a former finance minister, he is a bona fide member of the elite. After his family returned from political exile abroad in the 1970s, Hashim went into business, determined to amass a fortune. But he was blocked in every deal by competitors and enemies of his father who sported even better connections than his. Then, his brother Prabowo Subianto married a daughter of President Suharto, and Hashim was soon accorded the respect and fear a businessman needs to flourish in Indonesia. Now, his sister-in-law, Suharto daughter Siti Hediyati Hariyadi, or Titiek, is a top investor in his holding company, and his brother is a fast-rising army general.
Hashim has obviously profited from his connections to smooth the way for his projects and keep rivals at bay. But most business executives in Indonesia still give him pretty good marks for not relying exclusively on cozy deals with the government and on exorbitant fees extracted from outside companies looking for a way into Indonesia. "All of his businesses were commercially viable before the economy crashed. He was not like a child of Suharto's," says a foreign partner.
Hashim's group reached the height of its prosperity last summer. In July, he bought a reputable Indonesian corporate bank, Bank Niaga, for $300 million--to build a corporate bank empire and "to copycat Citibank," he says. He started lining up $950 million in loans to start construction of the Trans-Pacific complex, his second petrochemical plant after the Polytama Propindo plastics plant in West Java. Through his brother's connections with Burma's military government, Hashim also started construction on that country's first foreign-owned cement plant.
Then the crisis hit. Since July, the value of his companies has collapsed. The stock price of his cement company, Semen Cibinong, dropped by 65% from July to March. Its plant is largely idle because of the shutdown of Indonesia's construction industry. Bank Niaga's share price is off 75%, too. Analysts say nonperforming assets at Hashim's four banks are well above 3% of total loans, the estimated level in December. Construction on the Trans-Pacific complex has ground to a halt. And Hashim's palm plantations can no longer bring in hard currency because Suharto has banned exports of the oil, due to domestic scarcity. "The economy is reaching the red-light stage," says Hashim.
Hashim is scrambling now to pull himself out of a hole. He indirectly controls 15% of a power plant, the new $2.5 billion Paiton facility, which is 80% financed with debt. The plant is supposed to start supplying electricity soon to a state utility, but Hashim fears the utility will fail to pay the rate, which was negotiated in better times. Now, Hashim and his partners--Southern California Edison and General Electric of the U.S. and Mitsui of Japan--may reopen negotiations on the rate just to get some sort of revenue.
Hashim also is quickly planning steps that Suharto's children and closest friends are resisting at their own companies. He's merging his four banks into one which will retain the name Bank Niaga so he can lay off 300 redundant clerks and managers. His cement company is planning to export to such markets as Africa. The Tirtamas barter company wants to swap plywood for African cotton and coffee--even though that means competing with the plywood consortium of a close Suharto associate, Mohamad "Bob" Hasan, who was just named minister of industry and trade.
REALISTIC PRICE? Hashim is also putting parts of Tirtamas up for sale. He's scrambling to sell off such assets as his stake in Paiton and an oil well in Kazakstan. And he's negotiating with foreign investors to whittle down his stake in the Transpacific petrochemical plant, selling 5% to Koch Industries of the U.S. Another oil company, which he won't name, may take a piece, too.
Hashim is a long way from raising the cash he needs to keep Tirtamas afloat. "We know we can't get 100 cents on the dollar," concedes Hashim. The problem is that he may be demanding too much money for potentially worthless assets, such as Paiton, says a Jakarta-based executive familiar with Hashim's recent attempt to sell his stake in the power plant. And merging his banks won't make them better banks, just one big bank with big problems. "That just makes it someone else's problem, namely the central bank's," says a Singapore-based economist. Hashim says his move is just the kind of action the IMF is seeking.
To a great degree, Hashim's workout depends on developments beyond his control. By his own admission, his net worth and the value of his companies are "very low" now that the rupiah is bumping along at 10,000 to the dollar. A quick settlement between the IMF and the Suharto regime about proposed reforms could strengthen the currency and boost Hashim's chances of paying off that hard-currency debt. He and his chief financial officer, Al Njoo, are desperately hoping for a credible plan that will get the rupiah rate to 5,000. "It's not a time to take two months to debate a currency board system," says Njoo. "It's a time when within a week you make a decision."
Meanwhile, Hashim is a perpetual motion machine, calling his foreign partners, trying to find new markets for his goods, angling for ways to save his banks. To lower his phone bills, he has even installed hardware at his headquarters that automatically cuts calls after five minutes. It all may not be enough. For him and other tycoons, says Hashim, "the day of reckoning has come."By Michael Shari in JakartaReturn to top