Comeback Of An Indonesian Crony Capitalist
Indonesian media tycoon Peter F. Gontha stunned a meeting of Asia-based CEOs last year with a frank admission. "I'm a crony capitalist," he announced with a cagey grin. Indeed, over the past decade, he made a fortune as the right-hand man of one of the sons of former Indonesian President Suharto, Bambang Trihatmodjo. But in May, after riots forced Suharto to resign, the first family's business empire crumbled. Gontha seemed finished.
Against all odds, however, the 50-year-old Gontha is hustling to rebuild his empire. After using his connections to the Suharto family to get rich, he's now severing them to survive. He's cajoling foreign partners to work out his debts and shoring up his remaining assets. Gontha's friends say the tycoon describes his strategy as "getting enough oxygen." The next step, he hopes, is a big comeback, provided his past as a Suharto crony doesn't come back to haunt him. Gontha is being investigated by Indonesian police as part of a corruption probe, but he has not been charged. Gontha declined to comment for this article.
Behind the scenes, Gontha is methodically taking control of two potentially valuable monopolies: petrochemicals and pay TV. Gontha has grabbed control over one of Bambang's best assets, the Chandra Asri petrochemical plant, Indonesia's only producer of ethylene, a raw material used in plastics. And in pay TV, Gontha's Datakom Asia is the only game in town: it has 33,000 more people who want the service than it can manage to connect. So far, just 8,700 are hooked up. Total sales of the two companies are about $250 million.
BIG CHANCE. A self-made man of mixed Dutch, Chinese, and Manadonese origin, the resilient Gontha is part of Indonesia's tiny Christian minority. He worked his way through college in the Netherlands, scrubbing the hulls of oil tankers. After a stint as an assistant steward on a Holland America cruise ship, he rose through the ranks to the executive level at Royal Dutch/Shell Group, then had stints with American Express in Hong Kong and Citibank in Jakarta.
Gontha's big chance came in 1982, when Bambang, an old acquaintance, offered him $300,000 to sign on as an executive in Bimantara Group, his influential media and industrial conglomerate. Gontha then became a celebrity, appearing regularly on Jakarta's TV talk shows, grabbing the limelight at Bimantara ceremonies, and playing jazz piano at his Jamz nightclub in Jakarta. At Bambang's side, he brokered more than $1 billion worth of deals with foreign investors who were charmed by his candor and willingness to disclose financial information.
Then, Gontha and Bambang fell out. In 1997, Gontha used a newspaper he owned to report news unfavorable to Bambang, according to journalists there. After Suharto's ouster, Gontha mounted a campaign to purge Bambang from his businesses. Bambang and his associates have since resigned from executive positions at Chandra Asri, leaving Gontha with unchallenged control. And Gontha has diluted Bambang's formerly 29% stake in the $1.8 billion Chandra Asri plant by issuing new shares and buying them back, as well as by negotiating to have Bambang sell off his stake. Datakom executives say Bambang has also given up management there.
With his control established, Gontha has started restructuring his offshore debt. He scored a victory in January when Marubeni Corp., his partner in Chandra Asri, negotiated a three-year grace period on $485 million in debt from the Export-Import Bank of Japan.
There have been setbacks, though. In December, Datakom's pay-TV network, Indovision, had an explosive breakup with Rupert Murdoch's Hong Kong-based STAR-TV, which cut off nine sports, movie, and other channels to Indovision. Since then, both sides have traded bitter accusations. STAR faults Datakom for using a broken satellite and for insisting that STAR honor a costly contract struck in Indonesia's boom. Datakom says STAR reneged, and is threatening to sue.
But Gontha has a way of finding a silver lining in calamity. His staff has scrambled to cut costs, raise cash, and negotiate directly with Cable News Network, Home Box Office, and others. Indovision now broadcasts 39 channels, and Gontha stands to profit from the franchise. "No one else is going to finance and build another one of these things," says a Singapore-based banker. This crony is showing an ability to outlast his mentor.