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November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

AsiaweekTimeAsia NowAsiaweek story

FEBRUARY 18, 2000 VOL. 26 NO. 6

The Revenge of Cronyism
Hard to find good guys in the Astra debacle

Rini Suwandi argued forcefully at a special meeting of Astra International shareholders Feb. 8 that she should be allowed to keep her job as the chief executive. But after shareholders of the automaking conglomerate voted, she was out. Suwandi cried as she said she would accept the overwhelming verdict against her. It seemed that a soap-opera saga pitting two forces that once heralded a new era of honesty and professionalism in Indonesian business was finally over. Last week, however, neither side emerged untainted.

The fight for Asia's place in a shrinking world
Interview: George Yeo
Getting on with globalization
Interview: Supachai Panitchpakdi
Making technology palatable

Winners and Losers
Riders of the Global Tidal Wave

Asia's Worldly Past
Everything old is new again

China's Rarest Man
The mainland's first entrepreneur to list his company outside China may be a harbinger of things to come

The Revenge of Cronyism
Hard to find good guys in the Astra debacle

A Swift Kick in the Internet
Another blow for community vs. commerce

One of the two, Suwandi, was a breath of fresh air when she arrived on the scene in 1998 to battle both foreign creditors baying for loan repayments and Astra employees who decried efforts to rationalize a bloated workforce. The other main player is the Indonesian Bank Restructuring Agency, the government department tasked with recapitalizing banks and selling billions worth of assets seized as collateral for failed loans. IBRA wanted badly to sell its 45% stake in Astra as a way of delivering money to the strapped Indonesian government.

IBRA thought Suwandi was blocking its efforts to sell, which is why the agency wanted her out. The agency says she actively thwarted efforts by a U.S.-based partnership involving Newbridge Capital and Gilbert Global Equity to conduct due diligence prior to a purchase. The buyers pulled out after, they claimed, Suwandi denied them access to key records. Critics charged that Suwandi was trying to keep the potential buyers from digging and uncovering evidence of illegalities at the company - committed by whom it is hard to know.

The former Astra CEO claims she was simply trying to prevent the company from being sold to foreign interests at a fire-sale price. The truth is hard to determine based on available information. Both sides have legitimate public explanations for their actions. But both also have connections to other interested parties that call their stated motives into question. In the end, a thorough audit of the company is probably the only way Suwandi could be cleared. And the proof of IBRA's sincerity lies in its ability to successfully unload $60 billion in assets it has seized, which will take many months.

In the short run, Suwandi is the clear loser. She is being replaced by the man she herself was hired to succeed less than two years ago, Theodore "Teddy" Rachmat. He is said to be a much more old-school, aloof business leader than the hands-on Suwandi.

Suwandi's nemesis in the conflict has been Edwin Suryadjaya, son of Astra's founder, William Suryadjaya. Edwin acted as an adviser to Newbridge and Gilbert, and was slated to take over as CEO if the U.S. companies gained control and got rid of Suwandi. There has been bad blood between Suwandi and the Suryadjaya family dating back to 1992. Suwandi, then finance director of Astra, refused to allow company funds to be used for a bailout of another Suryadjaya son, Edward, whose Bank Summa was on the verge of collapse. In fact, the bank did collapse and brought down the family's management of Astra as well. The Astra founding father had refused to kowtow to President Suharto, who reportedly used the opportunity of the family's financial troubles to take away control of Astra and put crony Bob Hasan in charge. Hasan is a long-time friend of Suwandi and hired her in 1998 to be Astra's CEO. Suwandi's ouster, therefore, should also be considered in the context of her enemies, including Edwin Suryadjaya.

To make matters more complicated still, the Suryadjayas count among their allies Indonesian president Abdurrahman Wahid. Wahid is the one who appointed IBRA's current chairman Cacuk Sudarijanto - who is probably of two minds over the entire matter. Before he entered government, the current IBRA chief was allied with a movement to put more of Indonesia's economy in the hands of indigenous pribumi, mostly Muslim Indonesians as opposed to ethnic-Chinese, mainly Christian Indonesians. Suwandi belongs to the former category and Edwin Suryadjaya to the latter. But IBRA's Sudarijanto nevertheless chose to cast IBRA's shareholding power against the sitting CEO.

The immediate task for IBRA is to move ahead with the sale of Astra. The agency had wanted to complete the sale by March 31, when the government needs money for its budget. Whether it can actually meet that deadline now seems of declining importance compared with the need to do something - anything - that shows it is on top of things. "We have to move this program forward to stop foreigners from laughing at us," said Sudarijanto, the IBRA chief, last week. In 1999, the only deal IBRA made was selling a piece of Bank Bali to Standard Chartered. That fell through when bank employees rebelled against the removal of Rudy Ramli as chief executive. Standard Chartered bowed out. Suwandi, whose toughness with employees earned her the unflattering nickname si galak, meaning "the one who snarls," won't be rescued by such loyalty. In Indonesia, it seems, business is still about the friends you keep.

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