Saturday, May 16, 2015

The changing landscape of who owns what in Indonesia

The financial and political crises of 1998 brought about significant changes in Indonesia’s corporate landscape. The proportion of Indonesian firms with political connections remains relatively high but is declining, as modes of political engagement are becoming increasingly varied.

A comparison of the largest 200 firms listed on the Indonesian Stock Exchange in 1996 and 2008 shows that although family ownership of the largest publicly listed Indonesian companies remained high in 2008, the identities of the owners changed significantly. Between 1996 and 2008, 50 family-owned firms dropped out of the top 200 and were replaced by 13 newly listed and 51 previously listed family-owned firms.

In 1996, over 68 per cent of listed firms (whose ultimate owners could be identified) were owned by an individual or family. By 2008 the proportion had fallen to 57 per cent. The Indonesian state held a dominant share of 10 per cent of firms in the sample in 1996 and 14 per cent in 2008. Foreign state-owned firms accounted for nearly 8 per cent of the sample in 2008. There was thus no decline in the state-owned sector, instead the value of state-owned firms (both listed and unlisted) increased substantially.

As of 2008, the 10 most prominent business groups — those which had the greatest number of firms in the sample — were: Bhakti, with six listed firms; Astra, Bakrie and Sinar Mas, each with five; Panin, with four; and the Surya family, Djarum, Ciputra, Salim and Lippo Group, each with two.

The dominant family owner by this measure was a relative newcomer, Hary Tanoesoedibjo — the owner of the Bhakti (now MNC) group of companies — who took over and developed Bimantara group assets formerly owned by one of Suharto’s sons. In the next tier, Astra was a leading group in the pre-crisis period. But by 2008 it was owned by the Hong Kong-based Jardine group. The Jardine group assumed ownership of Astra companies from some of Suharto cronies, who had themselves acquired the group from the Soeryadjaya family just before the crisis.

In the same tier, the prominence of the Bakrie group shows the significant rise in the fortunes of Aburizal Bakrie, the former cabinet minister and recently ousted Golkar party chair, since the 1990s.

Other families that were in the top 10 in 1996 retained this status in 2008, but they were without the banking assets that previously anchored their groups. The Salim family lost Bank Central Asia, the Widjaja family lost Bank Internasional Indonesia and the Riady family lost Lippo Bank. The same is true for formerly prominent tycoon Sjamsul Nursalim’s, who lost the Gajah Tunggal group’s major bank, BDNI.

Many of Indonesia’s largest tycoons have either delisted their companies since 1996 or retained them as privately held companies. Sukanto Tanoto, the owner of the pre-crisis Raja Garuda Mas conglomerate, delisted his major asset from the New York Stock Exchange in 2003. This asset, now known as the RGE group, is privately held and is incorporated outside of Indonesia. Also taking his wealth largely private was Peter Sondakh, Indonesia’s eighth wealthiest person, who sold his interests in the partly state-owned cement-maker Semen Gresik in 2008 and cigarette manufacturer Bentoel in 2009.

Other owners with their assets largely held privately include the 2014 Gerindra presidential candidate (and the former son-in-law of Suharto) Prabowo and his brother Hashim Djojohadikusumo, who jointly own PT Kertas Nusantara. Hashim Djojohadikusumo’s other companies, including Comexindo, are also privately held. The Arsari group of companies, which is owned by his children, are also all private.

Similarly, another New Order-era tycoon, Edwin Soeryajaya has kept his largest asset (Adaro) private. His other major company, Saratoga, was listed only in 2013. Vice President Jusuf Kalla’s group of companies are all privately held. Indonesia’s fifth richest person, Martua Sitorus is a controlling owner of Singapore-listed Wilmar International, but Wilmar’s Indonesian-listed assets are relatively minor.

So what political roles do Indonesia’s wealthiest corporate owners have? The proportion of firms with political links remains relatively high, but it has dropped — from 52 per cent of the largest listed family-owned firms in 1996 to 47 per cent in 2008. The new pattern of corporate ownership suggests increasingly varied political patrons and modes of political engagement.

The political roles of business players such as Aburizal Bakrie, Jusuf Kalla, Surya Paloh, Chairul Tanjung, Hary Tanoesoedibjo and the siblings Prabowo and Hashim Djojohadikusumo have attracted attention. But Indonesia’s largest business owners do not characteristically take on public political positions. And many have discontinued the practice of placing state-sector power-holders on their boards of directors. Most maintain their political links by funding electoral campaigns, informal patronage ties and the need of all politicians to engage with the country’s largest economic actors.

Overall, the picture of who owns what since the financial crisis and democratisation reveals some important changes: the state has increased its position as an owner of corporate assets, there has been considerable churning in the identities of the owners of Indonesia’s largest listed companies, and the modes of political engagement by business owners are more varied.

Richard Carney is a fellow at the ANU College of Asia and the Pacific, the Australian National University.

Natasha Hamiliton-Hart is Professor of Asian Business in the Department Management and International Business at the University of Auckland.

This article is based on the authors’ ‘What Do Changes in Corporate Ownership in Indonesia Tell Us?’, published in the April 2015 issue of the Bulletin of Indonesian Economic Studies.


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