BusinessWeek: February 17, 1997

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 International -- Asian Business: INDONESIA

SUHARTO'S PRIVATE WHEELER-DEALER (int'l edition)
Mohamad Hasan moves to secure the first family's future

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SUHARTO'S PRIVATE WHEELER-DEALER (int'l edition)

TABLE: Hasan's Path to Power


The son of a Chinese immigrant tobacco trader, Mohamad "Bob" Hasan seemed destined to spend his life as a lowly chauffeur in central Java. But when he became acquainted with a young army colonel named Suharto in the 1950s, he found his ticket to wealth and power. The colonel would become President in a 1965 coup and rule Indonesia for the next three decades. And he would take Hasan into his inner circle of privileged cronies, giving him access to a multibillion-dollar empire and a monopoly over logging Indonesia's vast hardwood forests. Today, Hasan is so close to Suharto that the nation gauges the President's health by how many holes of golf the two men play every week.

Recent events have shown that Hasan is playing a more prominent role than ever as Suharto's investment banker, money manager, and business intermediary. In January alone, Hasan steered the President's main investment company, Nusamba, into two major deals: a stake in one of the largest gold deposits on earth and a share of another major mining venture, Freeport Indonesia. The moves have prompted speculation that Hasan is working to guarantee the financial security of the nation's first family after the 75-year-old President dies and the clan's grip on the country weakens. "Suharto is worried about the kids' future, and whatever he controls now is ultimately going to be owned by his kids," says a foreign business executive in Jakarta. Along the way, of course, Hasan, 66, will probably enrich himself even further.

Hasan's clout comes from his position as CEO and 10% owner of Nusamba, the investment vehicle for Suharto's three charitable trusts. Its assets are valued conservatively at $5 billion. Through Nusamba, Hasan effectively controls 140 companies, including banks, trading houses, and a domestic airline, all on behalf of President Suharto. Suharto owns 80% of Nusamba, and his eldest son, Sigit Harjoyudanto, has 10%. Hasan's assets have become so inextricably linked with those of the first family that, as one Jakarta banker says, "you can never tell who owns what unless they tell you, and they usually won't."

TROUBLED WATERS. Hasan's connection to the family has grown in importance since Suharto's wife died in April. In the wake of her death, the six children have been fighting each other for control of key Indonesian assets. That's not smart: After Suharto's death, such squabbling can only dangerously weaken the clan just when rivals will be maneuvering for power.

Hasan--probably at Suharto's request--has been smoothing things over. Suharto sons Hutomo Mandala Putra, or Tommy, and Bambang Trihatmodjo, for example, have been squabbling over control of a national program to make cars. So last October, Nusamba acquired a 10% stake in successful auto maker and distributor Astra International.

Now, industry insiders think Hasan will use Astra as a way to force cooperation between Tommy and Bambang. The brothers are now expected to manufacture a national car under Astra, rather than through their own companies. Earlier, Astra had stayed away from the national car program.

Similarly, one of the January deals seems designed to end a family feud and enrich the Suhartos at the same time. Two of Suharto's children, Siti Hardiyanti Rukmana, known as Tutut, and Sigit, had backed competing claims by two Canadian companies--Bre-X Minerals and Barrick Gold--to manage the development of the vast Busang gold deposit.

Then Nusamba bought a controlling stake in Askatindo Karya Minerals, an Indonesian mining company that already owns 10% of Busang. With their father's interests now so deeply involved, analysts say, the children have had to call a truce. Suharto is expected to decide soon what role Bre-X and Barrick, as well as a third company, Placer Dome, will play in the project.

LUSH PROFITS. Hasan's latest deal, in late January, shows Suharto's willingness to take on long-term investments that he plans to pass on to his children. Nusamba acquired a controlling stake in an Indonesian company that owns a 9.4% stake in the $3 billion mine and mill of Freeport McMoRan Copper & Gold, in Irian Jaya. The mine has been plagued by sporadic tribal warfare, murders by secessionist guerrillas, and riots. But the profits are lush enough to outweigh the risks.

For a peacemaker and fixer, Hasan is not well-loved. Even his friends don't rush to defend the way he has built up his empire. Korean importers, for example, have threatened to boycott Indonesian plywood unless he loosens his grip on prices. CNN, the BBC, and other international television networks have dropped commercials for Indonesian plywood that credited Hasan's cartel with protecting tropical rain forests after finding that the spots had been filmed in zoos. The Freeport deal was also controversial. Analysts speculate that political pressure was applied to Indonesian businessman Aburizal Bakrie, who has fallen afoul of Suharto, to sell his Freeport stake to Nusamba. Aides to Hasan said he was unavailable for comment. Freeport executives also refused to comment.

Despite his reputation, no one doubts Hasan's ingenuity. "Hasan is a major businessman in his own right, whether he acts on behalf of Suharto or not. Nusamba is clearly not his own company, but so what?" asserts a senior executive of an Indonesian bank. The deals look sturdy enough to guarantee financial security for the family--and perhaps even Hasan as well. As the Suharto family prepares for an uncertain future, Bob Hasan is the man to watch.

By Michael Shari in Jakarta

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TABLE

Hasan's Path to Power

1981: Becomes CEO and 10% owner of Nusamba, the investment vehicle of three charitable foundations chaired by President Suharto.



1984: Forms Apkindo, a state-sanctioned cartel that takes a cut of all plywood exports.



1996: Takes control of Astra International, Indonesia's leading auto assembler and distributor.



1997: Acquires 10% of Askatindo Karya Minerals, a mining company with a stake in a huge Borneo gold deposit. Also acquires nearly 10% of Freeport Indonesia, which controls major gold and copper deposits.



DATA: BUSINESS WEEK

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