How To Build An Empire In Jakarta
In 1978, Hashim Djojohadikusumo returned to his native Indonesia with a degree from California's Pomona College and a one-year traineeship at a Paris investment bank. He thought it would be easy to set up a small trading business, being the son of a retired Cabinet minister and grandson of the founder of the country's largest state bank. But he soon found his plans blocked every step of the way. "It turned out to be the son of a general in the Indonesian army who didn't like my father for whatever reason," recalls Hashim. "Yes, I inherited my father's and grandfather's contacts and connections, but I also inherited their enemies." Hashim learned what every investor in Indonesia learns sooner or later: You need the right connections.
Two decades later, Hashim, 42, has prospered. He is one of Indonesia's most powerful men. In a rare series of interviews with BUSINESS WEEK, Hashim laid bare his connections with the government of President Suharto and how he came to build his business empire, offering insight into Indonesia's highly secretive world of decision-making.
Hashim's success has flowed from both business savvy and top-drawer contacts. His brother, Major General Prabowo Subianto, is one of the fastest-rising officers in the Indonesian army and considered a future presidential contender. Prabowo is married to Siti Hedijati Hariyadi, or Titiek, one of Suharto's daughters. She also is Hashim's business partner. With multinational partners such as Southern California Edison, General Electric, and Merrill Lynch, the assets of Hashim's Tirtamas Majutama company are worth at least $2.6 billion.
But with the clock ticking on Suharto after 31 years in power, Hashim and dozens of other businesspeople who are tight with the ruling family are plotting their survival. These are dicey times for an entire breed of players who have become billionaires by opening doors for foreign investors, sometimes in exchange for a fee or a slice of the action. The children of Suharto have amassed huge fortunes--estimates range from $4 billion to $15 billion--plying their contacts to the regime to attract business deals.
SLAUGHTER. But Suharto, 75, is thought to be in ill health and to have lost interest in his job since his wife of 49 years died in April. A general election is approaching next May, and the quashing of popular opposition leader Megawati Sukarnoputri, the daughter of ousted President Sukarno, could backfire.
Hashim is no stranger to upheaval. His family was chased out of Indonesia in 1957, after his father, Soemitro, a former Finance Minister under Sukarno, led an armed insurrection against Communists in the government. Hashim's family lived in exile for a decade in five countries on forged passports until after Suharto toppled Sukarno in 1965. Hundreds of thousands of Communists and accused sympathizers were slaughtered in the aftermath. Hashim believes many of the outlawed Indonesian Communist Party's 3 million members survived, and he keeps a .38 Colt revolver in his desk in case one should make an attempt on his life. "The logical step is, if the President resigns or steps down or retires, are you going to leave the country? I say no, I'm going to stay here," says Hashim.
Hashim's plans for his businesses do not suggest that he fears the end is near. Rather than moving assets offshore, he's expanding his cement plant on a sure bet that demand will rise along with Jakarta's skyline. He also is moving rapidly into petrochemicals, producing plastics used in fast-selling consumer goods, from mop buckets to patio furniture. In September, he signed a deal to build a $170 million plant to produce chemicals used in making plastics.
GOING PRIVATE. Hashim is known as a dealmaker who has the power to open entire sectors of industry previously closed to private investment. He succeeded in negotiating the privatization of the Indonesian power sector. With Hashim as its local partner, Southern California Edison's Mission Energy got the Indonesian government to allow construction of the $2.5 billion Paiton power plant in East Java. Again, with Hashim as partner, Merrill Lynch & Co. led the privatization of two state-owned telephone companies, raising $2.6 billion on international stock exchanges.
Those deals established Hashim as one of the most sought-after local partners for multinationals who want a presence in Indonesia. And he looks the part, rarely allowing himself to be seen in anything but a dark business suit, sober tie, and gold cufflinks. "He has the ability to develop the political access he has," says Christianto Wibisono, director of the Indonesian Business Data Center, a Jakarta-based consultancy.
Unlike many Suharto cronies, Hashim abstains from the common Indonesian business practice of demanding free equity in joint ventures in return for lobbying. He might not pay cash for his equity, but at least he borrows it from foreign shareholders at commercial rates. In exchange for supplying coal to the Paiton power plant from his Adaro coal mine, Hashim was offered 5% equity in the plant, free of charge. But he held out for 15%, about $47 million, and offered to pay it back from dividends over 15 years at commercial interest rates, says Graeme L. Robertson, chairman of Swabara Group and Hashim's partner in the coal business. Hashim's credo: "You just can't wait for blessings to come from heaven. You've got to work for it."
In the process, Hashim has made a lot of money. He estimates the combined assets of Tirtamas Majutama's seven largest holdings at $2.6 billion, and his company owns about half of those assets. Hashim's personal wealth is thought to be in the hundreds of millions of dollars.
CHILD TYCOON. Hashim showed his business acumen early on when, at age 12 and living with his exiled family in London, he offered to make his brother's bed for one shilling. Prabowo, who also granted a rare interview conducted in military fatigues and with his combat boots up on the coffee table, recalls: "I used to say he was stingy. But in the end, that's what makes him a good businessman, because he knew how to handle his money even from a very young age."
Hashim stayed abroad 21 years, long after his father returned to Indonesia as Research Minister in Suharto's Cabinet. That gave Hashim time to earn a BA in politics and economics from Pomona College. Frank Tugwell, his academic adviser, had dinner with Hashim in 1991, on a visit to Jakarta, and was shocked to find that Hashim remembered his textbooks by title and author and picked up right where classroom discussions had left off. "It was amazing. I don't think I've ever had a student who has had that kind of alert application of the knowledge," says Tugwell.
After graduating in 1976, Hashim became a mergers-and-acquisitions trainee in Paris at Lazard Freres & Co., which served as financial adviser to the Indonesian government. The training whetted his appetite for business in Indonesia. "I thought I could do a lot of things for the country--and for myself, obviously. I'm not a hypocrite. I like to make money," says Hashim. He waited for his father to retire from Suharto's Cabinet in March, 1978, and then flew home.
In the beginning, Hashim confesses, he had no strategy: "I was opportunistic. I was groping for businesses." His first deal was one of many contracts the government offered pribumis, or indigenous Muslims, to give them a chance against the dominant ethnic Chinese-owned businesses. He sold $80,000 worth of detonator cord to a state-owned explosives company.
Little by little, Hashim began dealing in commodities. He went into palm oil, used for soap and cooking, with Malaysian tycoon Robert Kuok. Then he purchased a cement plant from Britain's Hanson PLC, edging out contender Mitsubishi with a government decision to put the plant under Indonesian ownership, and began diversifying.
Hashim's strategy became one of investing in government-protected industries. The state reserves the cement-hungry Jakarta market for just two cement plants, one of them owned by Hashim. The government also levies 40% tariffs on imports of polypropylene--the plastic that he produces.
ENEMIES. Hashim's colleagues admit that many doors would have been closed if not for Titiek, his sister-in-law, being a "passive shareholder" in his holding company. "Sometimes she helps out on things, like when we have situations, that sort of thing," admits Al Njoo, another of Hashim's partners.
That's a luxury Hashim's less-connected competitors can't afford. Ventures linked to the first family are known to be immune to the range of obstacles that pop up mysteriously in dealing with government officials in a country considered one of the most corrupt in Asia. Without explanation, senior officials are unavailable for meetings, licenses are not issued in time for deals to be signed, or documents required to import equipment don't get processed. "Having access to the powers that be obviously offers advantages," says Hashim.
His foreign business partners believe Hashim will survive in the post-Suharto era. "I can point to dozens of people who were born in all of the right circumstances and fail," says Bob Driscoll, head of Southern California Edison's Asia unit. "Hashim was, however, able to take the networks and connections and be very, very successful in developing a substantial business."
Any post-Suharto government will need to maintain economic growth. Says Wilson Nababan, head of CISI Raya Utama, a private credit agency in Jakarta: "Whoever runs the next government will need strong, indigenous businessmen such as Hashim, who are well-connected and committed."
However, Hashim is less confident about the future of his sister-in-law, whose holdings include a securities brokerage in addition to her minority stake in his holding company. "I think Titiek would inherit her father's enemies," says Hashim. Suharto has plenty: relatives of the Communists executed in 1965, victims of the invasion of East Timor in 1975, and Indonesian businesspeople shunted aside by his children's deals. Whatever happens, Titiek's shares in Tirtamas also automatically belong to her husband, Prabowo, under Indonesian law, notes Hashim.
In the future, it may be Hashim's family that makes headlines. Major General Prabowo distinguished himself in military training at Fort Bragg and Fort Benning and was given command of the Indonesian army's elite Red Berets before taking two rapid-fire promotions from the rank of colonel in less than a year. "He's assuming he'll be commander of the armed forces at some fairly early point," says Harold Crouch of the Australian National University in Canberra. If Prabowo's ascension to power continues with its current speed, his post could be a springboard to the presidency. One day, it's even conceivable Hashim and his ambitious brother could claim the title of Indonesia's first family.