A Smoke And Mirrors Act From Tutut?

Suharto's daughter steps back from business--sort of

The 500 or so Indonesian tollbooth attendants employed by President Suharto's eldest daughter, Siti Hardiyanti Rukmana--or Tutut--wear uniforms that have no pockets. That way, not a penny goes astray from the $184,000-a-day operation, a network of toll roads on the Indonesian island of Java. This cash cow is just one of her businesses, which range from selling General Dynamics Corp. warplane parts to running a pulp mill with Marubeni Corp. The President's favorite daughter is estimated to be worth anywhere from $400 million to $2 billion.

Now, the aging Suharto has designated Tutut, 48, as his heir apparent. And that poses a problem for Tutut. To become the acceptable future President of Indonesia's 200 million people, she has to get out of the business of doing business--or at least give the appearance of it. Analysts think she is taking the first steps to cut her visible connections to her companies. The result is dealmaking that is typically Indonesian in its complexity but that probably will leave Tutut in a stronger position, politically and financially, than ever.

KEEPING CONTROL. One transaction involves Tutut's publicly listed company, Citra Marga Nusaphala Persada (CMNP), with sales of $94 million and profits of $53 million last year. CMNP controls her toll roads, and Tutut runs it as president. In August, a local raider, Yopie Widjaja, bought 11% of CMNP from a charitable foundation--formerly run by Tutut's late mother--and picked up 4.8% on the market and from companies controlled by Tutut. He's now looking for an additional 5.3%, worth about $25 million, to raise his stake to 21%. Tutut herself owns only 2% or so of CMNP stock, so it would seem that control of CMNP has passed to Widjaja and his company, an operator of buses and ferries called Steady Safe.

But this is no ordinary takeover. It now seems that Tutut is moving in on Widjaja's company, rather than the other way around. Tutut has become chairwoman of Steady Safe, while Widjaja remains president. Two other CMNP executives have moved over to Steady Safe, which had sales of just $64 million last year. It is staggering under $265 million in offshore debt, and it's not at all clear how the company can pay it all back, given the 40% drop in the rupiah's value since last July.

What's going on here? Indonesian stock analysts and business executives figure Tutut will stay on as chairwoman of Steady Safe at least until the end of the year to lend it the support it will need to ride out the currency crisis. Then, they say, she can step down from her positions and claim Steady Safe now controls her company--but still be the power behind the scenes. Meanwhile, Widjaja denies that the deal was "anything fabricated, like a reverse takeover. As long as it's not against the law and we do good things for the people, I see nothing wrong with it." Tutut and CMNP Finance Director Tito Sulistio did not respond to questions sent by fax.

NEXT PARTY CHIEF? The Steady Safe deal is probably the first step in Tutut's rearrangement of her empire. She is still believed to retain direct control over her privately held conglomerate, Citra Lamtoro Gung Persada. Even if she sheds all these business ties, her ability to reach the presidency is not assured. Tutut's father laid the foundations of his regime in 1965 by exterminating the Indonesian Communist Party and giving the military a major role in politics. "She doesn't have the history of crushing the communists and putting the army in power," says an Indonesian economist. "Will Tutut be effective in instructing the army to shoot demonstrators? I don't think so."

Nonetheless, she is rising fast in the ruling Golkar party. She probably will take over as chairwoman at the party's next congress in October, 1998. On the way up, she could become social affairs minister overseeing state charities, says Widjaja. Since the death of her mother, Tien, last year, Tutut has become de facto first lady, accompanying Suharto on a visit to Burma and presiding over public functions with him.

However her political fortunes play out, Tutut is expected to retain access to the funds generated by her tolls. "I'm very comfortable with CMNP," says Miscellia Dotulong, transportation analyst at Peregrine Sewu Securities in Jakarta. "How can you go wrong with all this cash?" That may be Tutut's thinking, too.

Before it's here, it's on the Bloomberg Terminal.