[Kabar-indonesia] 2: Tempo Cover Story: Grooming the Next Generation [+Arifin; Op-Ed]

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2: Tempo Magazine Cover Story (4 reports): 

- Opinion: Indonesia's Super-Rich 

- Oil Blessings for Arifin 

- Interview/Arifin Panigoro: 
  There is no heir 

- Grooming the Next Generation 

Tempo Magazine
No. 04/VII
Sept 26-Oct 02, 2006 

Opinion 

Indonesia's Super-Rich 

DURING the New Order era, when Forbes magazine published its annual list of 
the world's richest people, and among them would be a number of Indonesians, 
they would end up being the subject of a lot of talk. The information 
presented 
by the New York-based magazine founded in 1917, should be nothing less than 
credible. And therein lies the irony: that a country whose majority population 
is classified as poor, would have world-class, super-rich people living among 
them. 

Yet no significant criticism emerged following the publication of the 
super-rich list at the time. The media, after all, was totally under government 
control. People could only whisper, make snide remarks or joke about how such 
wealth could only come from corruption, or collusion with those in power, or as 
gifts from the presidential palace. 

It might very well be that the existence of the super-rich conglomerates was 
part of Suharto and the New Order's strategy. Several select entrepreneurs 
were showered with excessive facilities so that they could become strong 
businesses. These giants were subsequently expected to play a major role in developing 
the nation's economy to achieve growth targets. But what about equitable 
distribution? After the chosen businesspeople prospered, they were expected to 
become the benefactors of small- and medium-sized businesses and cooperatives. 

We know that this strategy of the New Order failed. The hoped-for engine of 
the economy, strong and dependable, never materialized. Instead, what emerged 
were spoilt conglomerates, sucking milk from the government. They were hollow 
parasites lacking in the competitiveness needed to do business outside their 
country. The collusion they fostered with the authorities resulted in a 
high-cost economy while nepotism pushed officials' children into big businesses. The 
social gaps that emerged became an incurable disease. 

When the economic crisis hit in 1997, these tycoons crumpled like a house of 
cards. Not only where they unable to pull people out of the crisis, they 
themselves, with their super-debts, became a burden to the nation. The State 
Budget, mandated to finance projects for the poor, had to be slashed by Rp40 
trillion every year to salvage the banking industry, hit hard by the tycoons' 
non-performing loans. The end of these cutbacks is not yet in sight, even though the 
New Order collapsed eight years ago. 

Unfortunately, the people's and the nation's sacrifice do not seem to have 
altered much the Indonesian business map. The list of the 40 richest people in 
Indonesia released by Forbes Asia, two weeks ago, confirmed this. The 
super-rich who made the list are still the old players, although some of them may have 
diminished assets. 

A few of them have no debts, such as the clove cigarette king, the owner of 
Gudang Garam or Djarum. However, there are others who still owe the state huge 
debts. One of them is Sukanto Tanoto, who occupies the top spot in Forbes 
Asia's list this year, and who still owes state banks more than Rp5 trillion. It 
doesn't seem right that Tanoto places his business abroad over any effort at 
settling his debts domestically. Presumably, Forbes factored in his huge debts 
when they calculated Tanoto's wealth. If not, the list should be amended 
significantly. 

The issue of debts is not the only reason to question the magazine's list. 
The fact that not one single member of the Suharto family is in it needs some 
explaining. It is hard to believe that a businessman like Soedarpo Sastrosatomo 
or media mogul Jakob Oetama, who recently lost nearly half of his TV7 shares, 
is listed as richer than Suharto's children, who control several television 
stations, toll roads, and many other businesses. 

Still, there is good news. New stars are emerging. Eddy William Katuari, the 
next generation of the Wings business group who is worth US$1 billion and who 
is not in the habit of asking the government for special favors, is ranked the 
seventh richest man. The group that started out producing soap now exports 
its products to 93 countries. 

Trihatma Haliman is continuing the Agung Podomoro Group's property business, 
pioneered by his father, Anton Haliman, in 1969. This businessman has a unique 
principle: grow on its own capital, without bank loans. 

There is also Arifin Panigoro, an oil businessman who rose above the crisis 
and settled his debts. Medco, with several new oil fields, provided Arifin with 
a wealth of US$815 million. 

These companies have grown without creating problems for the government and 
the people. Instead, they have provided many job opportunities. It is important 
to note that these businessmen, except for Arifin, who was an active member 
of the Indonesian Democratic Party of Struggle, are examples of businessmen who 
separated themselves from politics-something that could drag them into 
collusion with the authorities in power. 

We need more such businesspeople. Independent businesspeople who will be the 
pride of the people, and not objects of their curses. 
 
------------------------------------

Tempo Magazine
No. 04/VII
Sept 26-Oct 02, 2006 

Cover Story 

Oil Blessings for Arifin 

ANOTHER name also emerged in Forbes Asia's list. Arifin Panigoro, owner of 
Medco Energi. The wealth of oil tycoon Arifin Panigoro also jumped to ninth 
place, one place higher than Liem Sioe Liong. But the cause was different. Arifin 
reaped his profits from the spiking crude oil prices in the international 
market over the past two years. 

Since 2004, oil prices have been rocketing uncontrollably. There are many 
reasons, ranging from domestic crises in oil-producing countries, storms 
everywhere, ever-increasing oil price consumption. For example, the price of light in 
New York, soared from around US$30 to around US$70 per barrel. "Oil price 
increases have tremendous direct impact," Arifin told Tempo. 

In 1998, the oil price dropped to around US$10 per barrel; however, after the 
economic crisis it continued to go up until it broke the US$70 per barrel 
barrier this year. Medco instantly profited from it. The capitalization value of 
Medco shares in the market went up eight times compared to 1998. Furthermore, 
if compared with its value when it was established 26 years ago, today it has 
soared 300-fold. 

However, like other businesspeople, Arifin was caught in debts and nearly ran 
out of ideas. Medco was drowning under a foreign currency debt that went from 
US$250 million to several times thereof. Especially when during the economic 
crisis the oil price also dove. "Medco's debts were huge and couldn't be 
paid," said John S. Karamoy, former President Director of Medco Energi in his book 
The Oil Man. 

However, Medco didn't shirk its responsibility. Sitting down with its 
creditors, they discussed debt restructuring and cost efficiencies in various areas. 
Supported by production increase and further oil price increases, the 
financial condition of this oil company started to recover. Its capital adequacy ratio 
in 1998 was 220 percent, two years later (2000) it shrank to a mere 28 
percent. Arifin can now smile. 

-- MTQ, Heri Susanto 
 
------------------------------------

Tempo Magazine
No. 04/VII
Sept 26-Oct 02, 2006 

Cover Story 

Arifin Panigoro: There is no heir 

THE listing of Arifin Panigoro as one of the top 10 people in Indonesia 
according to Forbes magazine solidifies his reputation as the Nusantara oil king. 
The rising price of oil in the world market has doubled the value of his 
wealth. "I'm just average rich," he joked with Tempo reporters Hermien Y. Kleden, 
Metta Dharmasaputra, Heri Susanto and Budi Setyarso at his home in South Jakarta 
two weeks ago. 

You are listed as the ninth richest man, according to Forbes magazine. 

To be frank, the data is too simplistic. Their calculations were not too 
complicated. The value of my shares were multiplied, that's how they came to a 
number on my wealth. But share values differ, depending on the time they are 
counted. 

Is Forbes' data accurate? 

I think they are a bit exaggerated. I am listed as richer than Om Liem 
(Soedono Salim). He's the richest man around. Om Liem is 91 years old. He's been in 
business much longer, plus for 30 years he was backed by those in power.

What do you think your wealth is worth? 

Well, they're not too far off. It's about 90 percent accurate.

Did you contact Forbes? 

No. They contacted Hilmi (Arifin's brother and CEO of MedcoEnergi-Ed.).

Your wealth has multiplied. Is this due to the rise of oil prices? 

Absolutely. We got it based on revenue sharing.

Which means, if the price of oil had stabilized, you wouldn't be in the list 
of the country's 10 richest men? 

That could be. But if I found a bigger oil well, I could be worth more too.

How much more are you worth because of oil? 

If we assume that production and oil reserves remain constant, with the price 
of oil going from US$25 to US$50, that would double the value (current price 
is US$70 per barrel). The changes in oil prices in the past five years were 
very significant for us. 

Your success shows that pribumi (ethnic Malay) businesspeople can compete. 

Let's not bring up that pri and non-pri issue. Our seamen don't do as well 
compared to those from Myanmar and Thailand. There should be no problem in 
hiring Thai seamen so long as the profits come to Indonesia. That's the way it is 
in the oil business.

How do you see the question of oil reserves in Indonesia? 

Oil reserves are running out. Gas reserves are still OK. We're still finding 
new ones in the East. We are very interested in buying the gas fields at 
Natuna Sea from Exxon, because their contract has expired. We have conveyed this to 
the government. If we are trusted to do so, we will drill over there. 
Reserves are huge, but the costs are high. If Natuna can be developed, besides 
getting the foreign exchange from it, domestic supplies can be guaranteed. PLN (the 
state power company) now needs a lot of gas. 

Have you quit politics? 

I'm lying low for the moment. I want to see how things go.

Have you achieved your ambitions? 

When I was at school, I never imagined I would be like this. I keep on 
looking for what I have not achieved. There is plenty. Natuna, even though people 
say it's expensive, I want to work on it. I even want to go into Iraq. But 
that's unlikely right now.  

Have you prepared an heir? 

No such thing. I pick the top management from among the professionals. I have 
10 younger siblings. Why did I select Hilmi to lead Medco? Because he's a 
professional. In Indonesia, I think he's the best in the oil industry. 
 
------------------------------------
 
Tempo Magazine
No. 04/VII
Sept 26-Oct 02, 2006 

Cover Story 

Grooming the Next Generation 

The Katuari family is the seventh richest in Indonesia according 
to Forbes Asia, with businesses ranging from toiletries to banking. 

IT all started with a cream soap. Nearly six decades ago, Johannes Ferdinand 
Katuari and his friend, Harjo Sutanto, founded FA Wings in the suburbs of 
Surabaya. The home industry company produced cream soaps. Who would have thought 
that Wings would transform into a conglomerate. It is nvolved not just in 
toiletries but also food (Mie Sedaap), hotels and shopping malls (Grand Indonesia) 
and banks (Bank Ekonomi). 

Its toiletry business is not limited to just cream soaps (Wings) and various 
other soaps such as bathing soaps (Giv) and dish soaps (Mama Lemon). Wings 
production has expanded into shampoo (Emeron), toothpaste (Ciptadent), and 
sanitary napkins (Hers Protect). Recently Wings has entered the fragrance business, 
including perfume. Exports from the toiletries division have reached 93 
countries. 

In other words, Wings is on a par with multinational toiletry producers such 
as Unilever (Dutch), Procter & Gamble (American), and Kao (Japanese). The 
Katuari family's assets are reported at US$1 billion. Last week Forbes magazine 
ranked the family as the seventh richest in Indonesia. However, Eddy William 
Katuari, Ferdinand's fourth child who now leads Wings, claims he doesn't know 
where the data came from. "I was never interviewed by Forbes," he said. 

Wings' achievement can be traced to the way the company expands. Before going 
downstream, Wings conquered the upstream business. Through PT Unggul Indah 
Cahaya, for example, Wings together with the Salim Group became the only 
producers of detergent raw material, alkylbenzene, in Indonesia. With a capacity of 
210,000 metric tons per year, the factory established in 1983 also became the 
largest in Asia Pacific. Uniquely, its customers are Wings' competition, such 
as Unilever and Kao. 

Wings' other strategic move was when it collaborated with Lautan Mas Group 
(Jimmy Masrin and Pranatha Hajadi) and the Djarum Group to buy PT Ecogreen 
Eleochemical, from the Indonesian Bank Restructuring Agency. At a capacity of 
110,000 metric tons per year, the company which previously belonged to the Salim 
Group, also became the sole producer of natural fatty alcohol in Indonesia and 
the fourth largest in the world. Fatty alcohol is the raw material used to 
produce soap, detergent and body care goods. 

Wings' success in keeping the company on an even keel is also due the 
division of roles among the second generation Katuari. Teddy Jeffrey Katuari, Freddy 
Ignatius Katuari, and Eddy William Katuari are at the helm. The company's 
operational affairs are handled by Finney Henry Katuari. A similar role is also 
played by Fifi Sutanto, Harjo Sutanto's daughter. She is the brain behind all of 
Wings' fragrance products. Fifi has been to Paris to study perfumes. 

Marketing consultant Rhenald Kasali believes that one of Wings' 
strengths-including the way it escaped the financial crisis that brought down many other 
big companies-comes from not asking the government for facilites. The Jawa Pos 
Group CEO Dahlan Iskan added, unlike many big businesspeople, William does not 
mind taking care of small problems. "This means that it would not be easy to 
defraud William in business," said Dahlan. 

Today, the Katuari business empire is preparing its third generation of 
heirs. Boen Danny Katuari, Ferdinand's grandson, is a director in Bank Ekonomi 
Raharja. "There's even a grandchild that's being groomed to be a chemical expert," 
said Dahlan. The objective is for him to master the techniques of detergent 
extraction to concoct spice ingredients from plants. 

Interestingly, Grace L. Katuari, a third generation Katuari (William's 
daughter), married Martin B. Hartono, a third generation Djarum heir. It would not 
be surprising to find the two big business groups in Indonesia collaborating, 
such as in building the Pulogadung Trade Center and Grand Indonesia (formerly 
Hotel Indonesia). In fact, one should not be surprised if one day, Wings takes 
off to become number one in Indonesia. -- Yandhrie Arvian, Heri Susanto 

Selected Subsidiaries of Wings 

* Bank Ekonomi 
* PT Unipacs 
Packaging products 
* Property 
Raffles Hills Housing, Cibubur 
* PT Adyabuana Persada 
Ceramics 
* PT Siam Indo Concrete Product 
Fiber Cement 
* PT Kurnia Alam Segar 
Mie Sedaap (20% market share) 
* PT Gawi Makmur Kalimantan 
Oil Palm 
* PT Damir Mitra Sekawan 
Oil Palm 
* PT Pertocentral 
Detergent Raw Material (sodium tripolyphosphate) 
* EcoKapital Securitas 
* PT Wings Surya, PT Sayap Mas Utama, 
  PT Lionindo Jaya 
Toiletries 
 
-End 2 of 2-

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Joyo Indonesia News Service
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