MM September 1997

SEPTEMBER 1997 · VOLUME 18 · NUMBER 9

T H E N E W M U L T I N A T I O N A L S

Dictators United
The Suharto-SLORC
Business Connection

by George Aditjondro

NO GOVERNMENT MORE STRONGLY SUPPORTED Burma's admission into the Association of Southeast Asian Nations (ASEAN) than Indonesian President Suharto's regime. Suharto had a double interest in advocating for inclusion of Burma in the ASEAN regional bloc. First, the admission of another and more brutal military regime into ASEAN helps take the spotlight off of the Suharto regime for harshly repressing East Timorese, West Papuan, Dayak, Acehnese and other peoples -- as well as for crushing virtually all Indonesian democratic dissent for 30 years. Apart from this political motive, the Suharto regime acted out of economic interests which are less well known but no less decisive. In the last seven years, a complex web of Suharto-linked businesses have made substantial trade and investment inroads into Burma. The early entry of Burma into ASEAN will provide the Suharto-linked businesses with more time to prepare for the ASEAN Free Trade Area (AFTA) in the year 2003, and will facilitate ongoing Indonesian investments in Burma.

SUHARTO'S FORESTRY COLONIALISM

AT THE FOREFRONT of the new "South-South colonialism" are Southern companies that are heavily investing in the forestry sector of other Third World countries and exploiting those countries' forests at unsustainable rates. Among the leading new colonists in Southeast Asia are President Suharto's clan and cronies.
Capitalizing on its strong ties to other countries in the region -- buffeted by the growing importance of the Association of South East Asian Nations (ASEAN) -- and the political connections forged globally as a result of Suharto's chairing the Non-Aligned Movement (NAM), the Suharto-linked companies have rampaged the region in recent years, treating Southeast Asia as their "forestry playground."

KNOTTY BUSINESS
The web of Suharto family forest interests in Southeast Asia is extraordinarily tangled. Here is a brief overview:
The first Indonesian investor in Burma's forestry sector is PT Rante Mario, one of the numerous companies under the aegis of the Humpuss Group, which is controlled by President Suharto's youngest son, Hutomo Mandalaputra, also known as Tommy Suharto.
Through a joint venture with the Burmese state company Myanmar Timber Enterprise (MTI), PT Rante Mario is planning to invest $75 million in wood processing facilities that will first produce logs and lumber, and later plywood.
In the spirit of capitalist competition and the notorious Suharto sibling rivalry, Tommy's sister, Siti Hediyati Haryadi, also known as Titiek Prabowo, has acquired a 1.4 million hectare timber concession in Cambodia -- the largest in the country. Her joint venture partner there is a Sino-Indonesian businessman, Jopie Widjaja, who shares several other joint ventures with the Suharto children back home in Indonesia.
While Tommy and Titiek operate directly in the global forestry sector, two of their siblings operate more indirectly in this field. Bambang Trihatmojo, who controls his own business empire, the Bimantara Group, is a major shareholder in the Barito Pacific Group conglomerate, owning a 25 percent share in the group's bank. Suharto daughter Siti Hardiyanti Rukmana, or Tutut, who controls another business empire, the Citra Lamtorogung Persada Group, has a stake in PT Tanjung Enim Lestari Pulp & Paper (TEL), a South Sumatra partnership of the Barito Pacific Group and Marubeni and Nippon Paper. The $1 billion venture plans to clear half a million hectares of forest, and replace the forest with a eucalyptus plantation for pulp production. If the plan goes through, hundreds of indigenous people would be ejected from from their traditional land. The TEL plan stalled as a Barito Pacific scheme to raise more than $400 million fell apart, but TEL now appears to have knitted together a financing package from various international sources. On June 23, TEL's environmental impact assessment report was conditionally approved over the protests of environmentalists. Barito Pacific also maintains at least three other overseas forestry operations: Rindaya Wood Processing in Malaysia, Lombda Pty. Ltd. in Papua New Guinea and Nantong Plywood Industry in Shanghai, China.
The Suharto children also own shares in other top Indonesian conglomerates, such as the Sinar Mas Group and the Raja Garuda Mas (RGM) Group, which are heavily involved in the plantation economy of the ASEAN region. Sinar Mas operates a food processing joint venture with VegOil Philippines. RGM has established a joint venture with a Malaysian-Philippine plantation company, NDC-Guthrie Plantation, which is involved in palm oil plantations and oil palm milling in Malaysia. In March 1996, RGM began constructing a $1.3 billion joint-venture pulp and paper mill with Ekran Berhad in Bintulu, in Sarawak, Malaysia.
RGM owns 55 percent of the Bintulu venture, which will initially produce 750,000 tons of pulp annually and later produce 300,000 tons of uncoated paper per year. Ekran Berhad is the main contractor for the controversial Bakun dam, and the timber companies have been planning to use timber harvested from the dam area, though the status of the dam project is now uncertain.
RGM and Sinar Mas are both seeking to become global players in pulp and paper. RGM has listed on the Singapore and New York stock markets under the name of Asia Pacific Resources International Holdings Ltd. (APRIL). As it states in one of its media advertisements, the Raja Garuda Mas Group is now one of the leading industrial groups in the Asia-Pacific region, with assets in excess of $4.5 billion and a skilled workforce of over 56,000 people. Sinar Mas has also listed its paper and pulp division on the Singapore and New York stock markets, under the name of Asia Paper & Pulp Co. (APP). With their paper and pulp mills in Indonesia, Singapore, Malaysia, Hong Kong, China, India and the Philippines, these two Indonesian giants have undermined Australian paper producers' hegemony in the region.

PLAYING THE ETHNIC CARD
A final Suharto family vehicle is MUSA (Mitra Usaha Sejati Abadi), which is owned by Yayasan Kemusuk Somenggalan, a family foundation of Suharto's relatives in his childhood village. This group has developed its forestry interests by taking over or merging with other Indonesian business conglomerates' timber companies. Among the groups that have merged some of their timber concessions with MUSA are the Porodisa Group, owned by the Sumendap family from North Sulawesi, Indonesia, and the Meratus Kalimantan Timber Group, which was owned by the Sutrisno family. Irawan Imoek, son of Imoek Sutrisno (Lauw Kong Yen), now works for the MUSA group in Surinam.
MUSA has targeted Surinam -- which has a large ethnic Javanese population and a corrupt ethnic-Javanese political class -- as an entry point into South American forests. Despite protests from the indigenous Afro-Maroon people, it managed in 1993 to obtain logging rights for 150,000 hectares in the Apura district in West Surinam, without the approval of Surinam's parliament.
A key to MUSA's expansion has been its ability to play the "South-South cooperation" card. In the name of cooperation between fellow members of the Non-Aligned Movement (NAM), which is currently headed by Suharto, there has been a regular shuttle between Jakarta and Paramaribo that has sealed MUSA's contracts. MUSA's investment approval was obtained after visits to Indonesia by Surinam's Minister for Social Affairs, Willy Soemita, who is of Javanese origin. A subsequent 1994 visit of Surinam's then-president, Ronald Venetiaan, to Indonesia, established a 20-year cooperation agreement between Indonesia and Surinam in the field of forestry. Finally, Suharto himself made a trip to Surinam in October 1995.
MUSA is now looking to expand from Surinam to Guyana, with plans to open its timber operations in Brazil's Amazon forests as well [see "Asian Invasion"].

SOLIDARITY OF THE ELITES
After successfully fighting Dutch and Japanese colonialism in the Indonesian archipelago, the political and economic elite which grew out of this independence struggle have now become a new colonialist regime on a global scale.
The Suharto family-related forestry companies initially accumulated their capital from Indonesian timber concessions which were handed out in the first New Order decade to reward business people, military officers and civilian politicians who had wholeheartedly supported Suharto's disguised military coup d'etat in 1966. In the name of ASEAN solidarity, these Suharto-linked companies have expanded into the region through various joint ventures with companies linked to the ruling elites of the ASEAN countries, which now include Burma and Laos, and of ASEAN member-in-waiting Cambodia.
Now, with the rising political profile of Suharto as chairperson of the Non-Aligned Movement (NAM), these Suharto-linked companies have begun their foray into the Latin American as well as Central African forests. Indeed, this new colonialism in part underlies Suharto's belligerent opposition to "Western interference" in ASEAN and Third World politics generally.
As a general matter, these companies have wracked up an abysmal environmental record, and have shown utter disregard for the indigenous people's interests in preserving the forests and their culture. That this behavior completely contradicts the ideals of ASEAN and NAM -- which were established to uplift the welfare of the majority of Southeast Asian and Third World peoples, not simply to enrich their ruling elites -- is one of the sad ironies of the brutal Suharto regime. -- G.A.

SUHARTO'S FORESTRY COLONIALISM
AT THE FOREFRONT of the new "South-South colonialism" are Southern companies that are heavily investing in the forestry sector of other Third World countries and exploiting those countries' forests at unsustainable rates. Among the leading new colonists in Southeast Asia are President Suharto's clan and cronies. Capitalizing on its strong ties to other countries in the region -- buffeted by the growing importance of the Association of South East Asian Nations (ASEAN) -- and the political connections forged globally as a result of Suharto's chairing the Non-Aligned Movement (NAM), the Suharto-linked companies have rampaged the region in recent years, treating Southeast Asia as their "forestry playground." KNOTTY BUSINESS The web of Suharto family forest interests in Southeast Asia is extraordinarily tangled. Here is a brief overview: The first Indonesian investor in Burma's forestry sector is PT Rante Mario, one of the numerous companies under the aegis of the Humpuss Group, which is controlled by President Suharto's youngest son, Hutomo Mandalaputra, also known as Tommy Suharto. Through a joint venture with the Burmese state company Myanmar Timber Enterprise (MTI), PT Rante Mario is planning to invest $75 million in wood processing facilities that will first produce logs and lumber, and later plywood. In the spirit of capitalist competition and the notorious Suharto sibling rivalry, Tommy's sister, Siti Hediyati Haryadi, also known as Titiek Prabowo, has acquired a 1.4 million hectare timber concession in Cambodia -- the largest in the country. Her joint venture partner there is a Sino-Indonesian businessman, Jopie Widjaja, who shares several other joint ventures with the Suharto children back home in Indonesia. While Tommy and Titiek operate directly in the global forestry sector, two of their siblings operate more indirectly in this field. Bambang Trihatmojo, who controls his own business empire, the Bimantara Group, is a major shareholder in the Barito Pacific Group conglomerate, owning a 25 percent share in the group's bank. Suharto daughter Siti Hardiyanti Rukmana, or Tutut, who controls another business empire, the Citra Lamtorogung Persada Group, has a stake in PT Tanjung Enim Lestari Pulp & Paper (TEL), a South Sumatra partnership of the Barito Pacific Group and Marubeni and Nippon Paper. The $1 billion venture plans to clear half a million hectares of forest, and replace the forest with a eucalyptus plantation for pulp production. If the plan goes through, hundreds of indigenous people would be ejected from from their traditional land. The TEL plan stalled as a Barito Pacific scheme to raise more than $400 million fell apart, but TEL now appears to have knitted together a financing package from various international sources. On June 23, TEL's environmental impact assessment report was conditionally approved over the protests of environmentalists. Barito Pacific also maintains at least three other overseas forestry operations: Rindaya Wood Processing in Malaysia, Lombda Pty. Ltd. in Papua New Guinea and Nantong Plywood Industry in Shanghai, China. The Suharto children also own shares in other top Indonesian conglomerates, such as the Sinar Mas Group and the Raja Garuda Mas (RGM) Group, which are heavily involved in the plantation economy of the ASEAN region. Sinar Mas operates a food processing joint venture with VegOil Philippines. RGM has established a joint venture with a Malaysian-Philippine plantation company, NDC-Guthrie Plantation, which is involved in palm oil plantations and oil palm milling in Malaysia. In March 1996, RGM began constructing a $1.3 billion joint-venture pulp and paper mill with Ekran Berhad in Bintulu, in Sarawak, Malaysia. RGM owns 55 percent of the Bintulu venture, which will initially produce 750,000 tons of pulp annually and later produce 300,000 tons of uncoated paper per year. Ekran Berhad is the main contractor for the controversial Bakun dam, and the timber companies have been planning to use timber harvested from the dam area, though the status of the dam project is now uncertain. RGM and Sinar Mas are both seeking to become global players in pulp and paper. RGM has listed on the Singapore and New York stock markets under the name of Asia Pacific Resources International Holdings Ltd. (APRIL). As it states in one of its media advertisements, the Raja Garuda Mas Group is now one of the leading industrial groups in the Asia-Pacific region, with assets in excess of $4.5 billion and a skilled workforce of over 56,000 people. Sinar Mas has also listed its paper and pulp division on the Singapore and New York stock markets, under the name of Asia Paper & Pulp Co. (APP). With their paper and pulp mills in Indonesia, Singapore, Malaysia, Hong Kong, China, India and the Philippines, these two Indonesian giants have undermined Australian paper producers' hegemony in the region. PLAYING THE ETHNIC CARD A final Suharto family vehicle is MUSA (Mitra Usaha Sejati Abadi), which is owned by Yayasan Kemusuk Somenggalan, a family foundation of Suharto's relatives in his childhood village. This group has developed its forestry interests by taking over or merging with other Indonesian business conglomerates' timber companies. Among the groups that have merged some of their timber concessions with MUSA are the Porodisa Group, owned by the Sumendap family from North Sulawesi, Indonesia, and the Meratus Kalimantan Timber Group, which was owned by the Sutrisno family. Irawan Imoek, son of Imoek Sutrisno (Lauw Kong Yen), now works for the MUSA group in Surinam. MUSA has targeted Surinam -- which has a large ethnic Javanese population and a corrupt ethnic-Javanese political class -- as an entry point into South American forests. Despite protests from the indigenous Afro-Maroon people, it managed in 1993 to obtain logging rights for 150,000 hectares in the Apura district in West Surinam, without the approval of Surinam's parliament. A key to MUSA's expansion has been its ability to play the "South-South cooperation" card. In the name of cooperation between fellow members of the Non-Aligned Movement (NAM), which is currently headed by Suharto, there has been a regular shuttle between Jakarta and Paramaribo that has sealed MUSA's contracts. MUSA's investment approval was obtained after visits to Indonesia by Surinam's Minister for Social Affairs, Willy Soemita, who is of Javanese origin. A subsequent 1994 visit of Surinam's then-president, Ronald Venetiaan, to Indonesia, established a 20-year cooperation agreement between Indonesia and Surinam in the field of forestry. Finally, Suharto himself made a trip to Surinam in October 1995. MUSA is now looking to expand from Surinam to Guyana, with plans to open its timber operations in Brazil's Amazon forests as well [see "Asian Invasion"]. SOLIDARITY OF THE ELITES After successfully fighting Dutch and Japanese colonialism in the Indonesian archipelago, the political and economic elite which grew out of this independence struggle have now become a new colonialist regime on a global scale. The Suharto family-related forestry companies initially accumulated their capital from Indonesian timber concessions which were handed out in the first New Order decade to reward business people, military officers and civilian politicians who had wholeheartedly supported Suharto's disguised military coup d'etat in 1966. In the name of ASEAN solidarity, these Suharto-linked companies have expanded into the region through various joint ventures with companies linked to the ruling elites of the ASEAN countries, which now include Burma and Laos, and of ASEAN member-in-waiting Cambodia. Now, with the rising political profile of Suharto as chairperson of the Non-Aligned Movement (NAM), these Suharto-linked companies have begun their foray into the Latin American as well as Central African forests. Indeed, this new colonialism in part underlies Suharto's belligerent opposition to "Western interference" in ASEAN and Third World politics generally. As a general matter, these companies have wracked up an abysmal environmental record, and have shown utter disregard for the indigenous people's interests in preserving the forests and their culture. That this behavior completely contradicts the ideals of ASEAN and NAM -- which were established to uplift the welfare of the majority of Southeast Asian and Third World peoples, not simply to enrich their ruling elites -- is one of the sad ironies of the brutal Suharto regime. -- G.A.

The Indonesian investments illustrate the nature of business development in Indonesia -- where most major domestic companies are controlled by or closely related to the Suharto family or to Suharto's cronies. (The Suharto family alone is estimated to be worth $6.3 billion.) The investments also show how Suharto-linked businesses are going multinational, partially in an attempt to "go legitimate."

The emergence of the new Indonesian multinationals -- like that of other new regionally based multinationals -- pose enormous challenges to citizens' campaigns for democracy and ecological sustainability. For whatever the difficulties of pressuring companies like Unocal or Texaco, they are dwarfed by the challenge of influencing relatively small companies that care little about their reputation and are politically protected by close ties to a military-industrial-bureaucratic elite.

IT'S A FAMILY AFFAIR

Indonesia's extended First Family has led the charge into Burma, establishing a wide range of trading relations this decade. In August 1991, the Indonesian PT Indomiwon Citra Inti (ICI) first exported 70 tons of monosodium glutamate (MSG) to Burma, Vietnam and Hong Kong. The company is a 50-50 joint venture between PT Sambada Widyacita and South Korea's Miwon. PT Sambada Widyacita itself is a joint venture between Bambang Trihatmojo, President Suharto's second son, and Anthony Salim, chief executive officer of the Salim Group, Indonesia's largest business conglomerate. Bambang and two of his siblings -- Siti Hariyanti Rukmana and Sigit Harjojudanto -- and their uncle, Sudwikatmono, are major shareholders in the Salim Group.

Two years later, another Suharto-related company, PT Prima Comexindo Trading (PCT), began bartering Indonesian-made medicines for Burmese products. This company is owned by Hashim Djojohadikusumo, whose older brother, Mayor General Prabowo Subianto, is married to Suharto's second daughter, Siti Hediyati Hariyadi, also known as Titiek Prabowo. Titiek is a major shareholder in several of Hashim's companies. Hashim's Tirtamas Group and Titiek Prabowo's Maharani Group control numerous overlapping companies, including cement factories and a coal mine.

When Hashim began bartering with the ruling junta, the State Law and Order Restoration Council (SLORC), Suharto's youngest son, Hutomo Mandalaputra Suharto, also known as Tommy Suharto, began to export oil drilling explosives to Burma. This was carried out by PT Bina Reksa Perdana, in which Tommy holds a 55 percent stake. These initial MSG, pharmaceutical and explosive exports are peanuts compared to Indonesia's auto exports to Burma, handled by another Suharto-related company, PT Astra International. Astra is directed by Suharto crony Mohammad "Bob" Hasan, on behalf of PT Nusamba. Nusamba, in turn, is 80 percent owned by three charities headed by Suharto himself. Other Suharto-related companies own chunks of Astra, a producer of Toyota cars and the largest automotive producer and assembler in Indonesia. Astra is the importer and sole distributor in Burma of BMWs and Land Rovers -- vehicles of choice for the ruling SLORC generals.

The Indonesian traders come by air as well as land. Tommy Suharto's Sempati Air began direct flights from Jakarta to Rangoon in 1991. Sempati Air is undergoing an interesting privatization and civilianization, metamorphosizing from Indonesian military tool to genuine ASEAN airline. The airline was originally fully owned by an Indonesian Army company. Six years ago, Tommy took over the company by buying a quarter of the shares, and bringing in PT Nusamba as a 35 percent shareholder. Since then, a Sabah, Malaysia-based company, ASEAN Aviation Inc. (AAI), acquired 40 percent of the company, reducing Tommy's share to 15 percent. Now Singapore Airlines is planning to acquire a stake in Sempati as well.

INVESTING IN REPRESSION

All these trading links paved the way for even more lucrative investment plans. The first Suharto-linked company to invest in Burma was PT Rante Mario, one of many companies under Tommy's Humpuss Group. Through a joint venture with a Burmese state company, Myanmar Timber Enterprise (MTI), PT Rante Mario has been converting Burmese forests into logs and lumber. Now the joint venture plans to build a $75 million wood processing and plywood facility.

Suharto brother Bambang has also begun to invest in Burma. His electronic company, PT Elektrindo Nusantara, has built small telephone central units for 256 subscribers in Rangoon as a pilot project for a much bigger deal with the SLORC. This company is 51 percent owned by Bambang, and is one of the main money makers of his Bimantara Group. Bambang's brother-in-law, Indra Rukmana, who is married to Suharto's eldest daughter, Siti Hariyanti Rukmana, also known as Tutut, is a fellow Bimantara shareholder.

Simultaneous with the Elektrindo Nusantara deal, another Bimantara company, PT Japfa Comfeed, developed plans to invest in an animal feed company in Burma.

The third member of Suharto's extended family to invest in Burma is Hashim Djojohadikusumo. Last year, he signed a memorandum of understanding with a Burmese state-company, the Union of Myanmar Economic Holding Limited, to build a one-million-ton-per-year cement factory. The $210 million joint venture is expected to begin full production in 2000. Hashim's Tirtamas Group will own a 70 percent share.

Hashim's cement factory may become a boon for other Suharto-related projects in Burma, especially toll roads. During his recent two-day visit to Burma, President Suharto and the SLORC chairman, General Than Swee, witnessed the signing of a memorandum of understanding between a Burmese state company and an Indonesian "private" company.

The lucky Indonesian company was PT Citra Lamtoro Gung Persada, headed by Suharto's eldest daughter Tutut. Traveling as part of her father's official entourage, Tutut signed the agreement with Union of Myanmar Holding Ltd. Though the terms or even subject of the deal were not disclosed, many speculate it covers toll road construction, Tutut's specialty in Indonesia, Malaysia, the Philippines and China.

Meanwhile, the Salim Group has recently also signed a major infrastructure deal with the SLORC. Together with two Hong Kong-based companies, Wharf Holding and Jardine Matheson Holding, the Salim Group is planning to build a $200 million industrial zone and harbor in Thanlin Kyauk, 18 kilometers southeast of Rangoon. Salim will hold a 40 percent share in the venture.

Suharto himself is tied to investments in Burma, through PT Astra, which is now exploring for oil in Burma. Another Suharto-related company, Meta Epsi Duta from the Medco Group, is also trying to close an oil exploration contract with Burma. The Medco Group was partly owned by Tutut's father-in-law, the late Eddy Kowara.

CORPORATE SECURITY

There are reasons to suspect that the Suharto regime is also supplying the needs of the Tatmadaw, the Burmese armed forces. When General Than Swe visited Jakarta in June 1995, he signed an agreement to buy airplanes produced by the Indonesian aircraft industry, Industri Pesawat Terbang Nusantara (IPTN). These planes may be intended for unpublicized military purposes.

Indonesian companies produce a wide array of weapons and military equipment, much of it licensed from European companies. IPTN is a licensee of Spain's CASA, Germany's MBB and France's Aerospatiale. PT Pindad, the former Army-controlled ammunition factory, produces rockets and rocket launchers under license from Belgian arms factories FN-Herstal and Les Forges De Zeebrugge. PT PAL, the former Navy-controlled shipyard, has contracts with two German shipyards -- Luerssen shipyard in Bremen and HDW shipyard in Kiel -- to produce high-speed ships and subs. These military companies, under the control of Suharto's Research and Technology Minister, Dr. B.J. Habibie, have supplied military regimes in the past, notably in Fiji and Iraq, and they may well be doing so now in Burma.

TRADING IN TERROR

Jakarta's cozy trade relations with Rangoon coincide with the forging of stronger political bonds -- and exchange of repressive tactics -- between the two authoritarian regimes. Learning from the overwhelming electoral victory and moral authority of the daughter of one of Burma's founding fathers (Aung San Suu Kyi, daughter of Aung San), Suharto moved swiftly to prevent any chance for Megawati Sukarnoputri, also the daughter of one of Indonesia's founding fathers, to challenge him in a fair and free election. The SLORC has also learned from the Suharto regime how to use thugs to terrorize political dissidents, as evidenced by threats to Aung San Suu Kyi last November 12 weekend.

Following Suharto's maneuvers to manipulate the Indonesian Muslim majority against non-Muslim minorities and to infiltrate and split religious groups, the SLORC too is playing the religious card. The SLORC has formed, or is at least supporting, a Buddhist Karen organization to fight against the predominantly Christian Karens who seek greater autonomy, and is fomenting divisions between Buddhist monks and Burma's Muslim minority.

Finally, in a blatant attempt to emulate Suharto's Golkar political party, this year SLORC has begun to promote the so-called Union Solidarity and Development Association, which it appears intent on converting into a crypto-political party to which it could hand formal power -- while the military maintains its grip on real power.

# END #

Dictators United The Suharto-SLORC Business Connection

Dictators United
The Suharto-SLORC
Business Connection