| BUSINESSWEEK ONLINE : JUNE 7, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- ASIAN COVER STORY
Riady: 'Lippo Is Not Like the Stereotype' (int'l edition) Indonesian tycoon James T. Riady has led his Lippo Group through anti-Chinese pogroms, a witchhunt for Suharto cronies, and a severe economic crisis. Now he's poised for a fresh start in the new Indonesia that he hopes a national election will bring on June 7. Riady is the deputy chairman and CEO of the Jakarta-based conglomerate, whose holdings are spread thinly in four major areas of banking, real estate, retailing, and health care. He discussed his survival strategy at his Aryaduta Hyatt hotel in Jakarta with Singapore Bureau Manager Michael Shari: Q: What does the election mean to you? A: With the election, a new political system and the new order of politics would start to be formed. The old political system is not completely gone, but the new system is not formed. So this election is very important. Q: What's your game plan? A: It's very important to project a proper and correct image to the public that Lippo is not like the stereotype that is now being formed, that all the Chinese business groups are bad, will not survive, are all fleeing the country, and are not committed to Indonesia, are not reinvesting in Indonesia, are not contributing to the recovery of our economy. But much work needs to be done to get the message across. Q: How will you get that message across? A: By being as transparent as you can in Your businesses, helping the country to promote itself abroad, helping to get foreign investment back, showing the community that you are not taking money out, taking the lead in bank recapitalization, taking the lead in good corporate governance, take efforts to bring in outside independent directors. So I have taken personally a bigger role than before. Q: Is your role appreciated? A: I believe we've been able to have a positive influence, and we've been able to show that Indonesia is not all negative, that there are positive dimensions to Indonesia that are not known. The government is being made more accountable, and therefore extreme waste is not as prevalent as before. Because of political competition, holders of public office are now having to think about performance and responsibility. We will end up having a healthy banking system, a stronger focus as a country, a much more productive and meaningful agricultural sector. Q: How important is agriculture? A: Indonesia should be the food bowl of Asia. All of a sudden, people want to work hard and to live in the rural areas. The rural economy is doing pretty well, actually. And I think that will be a stabilizing support factor. Q: Some ethnic Chinese business leaders say they're under pressure to make campaign donations to the ruling Golkar Party. A: I get the sense that there has not been a lot of fund-raising targeted at the business community, for the simple reason that the economic crisis has paralyzed and crippled a lot of business groups. And I think there is also a general reluctance by the business community to give when they can ill afford to, when they can just barely meet the daily need of payrolls and paying suppliers. However, having said that, there's also an increased level of awareness in the business community of politics. We see a number of political parties that have as their official leaders people from the business community. Q: Have many of your ethnic Chinese employees left Indonesia? A: Some of them have left and gone abroad. Especially on the information technology side. We probably have about almost 250 director-level executives. We might have lost about 5%. We probably have 2,000 middle managers, and we might have lost 5% of them. And that is a worry, the brain flight. Not over the last two years, but over the next three years, for economic reasons. Because, as they find jobs in Australia, Singapore, or America, where they can get a good education for their children and health-care coverage, they'll go. I don't think it's socio-political. Q: May I ask why you've chosen to stay? A: I love Indonesia. It was where I was born, where I grew up. I have my family here. I have a lot of friends, and I believe in the future prospects of Indonesia. And I do believe the Indonesian people are among the nicest people in the world, genuinely so. That doesn't mean there are no exceptions, but by and large I think Indonesia is a wonderful country. Q: You're not afraid for your life? A: No. I don't think peace and security is what's most important in life. It's more spiritual. That's more important. Q: What's your business strategy? A: In this crisis, the primary focus would be to complete the bank recapitalization [of Lippo Bank, to the tune of $600 million]. The bank continues to pass all survival tests of transparency and has done well. So we look at the banking sector as an area with a lot of excitement and challenge. Q: Do you think other Indonesian bankers are jealous? A: Some have said that Lippo Bank gained preferential treatment to be recapitalized. But so many banks were given the opportunity. We took it seriously and put our money where our mouth was. Some also have said the Lippo Bank's recapitalization has been not totally transparent, but it has been absolutely transparent. Lippo Bank called a shareholders meeting in December, putting very clearly in the agenda that the purpose was to approve the recapitalization plan of the government and issue new shares. The process went through scrutiny and review by a committee that consists of BAnk Indonesia, the Indonesian Bank Restructuring Agency, The Ministry of Finance, the Asian Development Bank, the World Bank, the International Monetary Fund, and McKinsey & Co. Q: How will you manage your conglomerate's debt? A: Our group debt is at a very low level -- the total debt in Lippo Group is only $150 million spread over almost 40 companies. With our companies also having cash, the net debt is probably much less than that. Most of the debt is in two or three companies that are related to real estate. So the second part of our program is to ensure that whatever debt remains in our companies is professionally and responsibly managed and to encourage asset conversion, equity conversion, and, certainly, rescheduling. Now the third part of our program Is to identify businesses where our competitive strengths have strengthened and would be areas of major focus in the next two years. Q: What areas have you identified? A: The four areas of banking, life insurance, retailing, and health care. We have a dominant share of the life insurance market, a 25% market share, with other players each having less than 2%. And our [department store chain] Matahari is the pioneer of modern retailing in Indonesia and is the leader, with more than double [the market share of] the next competitors, Hero and Ramayana. Health care is a sector that we would like to see develop faster. Q: Is there more to your program? A: The fourth part of our program is to make sure that each and every company has a sort of game plan to tighten their belt and increase their competitiveness, and ensure their own survival. We are consolidating, which includes downsizing our headcount due to mostly natural attrition, people retiring, quitting their jobs. Q: When do you expect to see profit growth? A: I think 1998 will [prove to] be the most difficult year; 1999 will be a cleaning up and consolidation period. We should see a slight negative. In 2000, we should go back to positive [growth]. Q: So this year, you're losing money? A: Yes. And most people would have lost money in 1998 because of [currency] devaluation, economic contraction, and high interest rates. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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 RELATED ITEMS Indonesia's Elections: A New Beginning? (int'l edition) ASIAN COVER IMAGE: Indonesia's Elections: A New Beginning? CHART: The Economy Is Bottoming Out... GRAPHIC: Partial Democracy How James Riady Makes Himself Indispensable (int'l edition) ONLINE ORIGINAL: Riady: ``Lippo Is Not Like the Stereotype'' (int'l edition) INTERACT E-Mail to Business Week Online | |||
