The end of the conglomerates?
stead, it was widely expected that they had to adapt to western norms of corporate govern- ance, transparency, and professionalism to exist in a liberal economy. Similarly, Gunadi
Sindhuwinata, President Director of Indomobil, contended that
since the environment has become liberal and you are a part of the international society, the way of doing business has to be tuned up and trimmed accordingly. We now have to let professional
people run the business. Gunadi Sinhuwinata, interview 22 September 2004
The conglomerates that survived the crisis had to realise, according to Farid Haryanto Lippo advisor, interview 21 June 2004, that growth was only possible through the market.
Sofjan Wanandi interview 1 July 2003 was not alone in his prediction that the conglom- erates of the New Order would disappear sooner or later if they stuck to their old patterns of
collusion. Sampoerna’s Angky Camaro acceded:
Now everything is open, licences are available for everyone. The conglomerates have to com- pete in the free market. That leads to a change. […] Who has the mentality of the New Order
cannot survive. Angky Camaro, interview 17 September 2004
If they were right – and in 1998 there were not many indicators that contradicted them – big business in Indonesia indeed had to transform itself fundamentally to be able to carry on in
deregulated markets without the help of protectionism and KKN. But were the conglomerates able to survive in those new, even alien conditions?
4.4 The end of the conglomerates?
The political environment in Indonesia changed immensely after the crisis. From predatory, centralised authoritarianism, the country moved towards deregulation, decentralisation, and
democracy. Economic liberalism, safeguarded by various watchdogs, was expected to replace the collusive appropriation of the markets by the oligarchy. Regional autonomy was also sup-
posed to shift more power to the districts and away from Jakarta. Moreover, political parties and civil society groups seemed to thrive in new ways that were not possible under the old
dictatorship. All these reforms – at least in intention – were potentially harmful to a continu- ing existence of the conglomerates, as they ‘swept away the financial and political arrange-
ments that held this system together’ Robison Hadiz 2002: 39. Thus, it was widely ex- pected that the unravelling of the old regime was equivalent to an end of Chinese big busi-
ness, as many observers assumed that the conglomerates were not suited to survive in an open, transparent political and economic setting e.g. Sjahrir 2004. Capital was believed to
be economically and politically in a deep, severe crisis. Therefore, political risk consultant Kevin O’Rourke concluded that
the conglomerates are longing to have the New Order back, because for them the succeeding re- gime is neither efficient nor reliable. They are forced to pay off too many persons, while being
constantly harassed by critics, media, and politicians. Kevin O’Rourke, interview 6 September 2004
As the President Director of Indomobil, Gunadi Sindhuwinata, confirmed:
Under the New Order the directions were clear: I give you opportunities, you develop that, in re- turn you get some amount of money. […] Suddenly you are confronted with all this profession-
alism, with all the ways to do business by, first thing, non-corruption, second, non-nepotism, and third, non-collusion. Under the New Order it was very easy, and people felt also at that time
that it was safe and secure because of the strong hand of the regime. Gunadi Sindhuwinata, interview 22 September 2004
He certainly missed the convenience and security of the former regime. However, there was nothing to be done. The New Order was irrevocably gone for good, and with it the political
environment without which the conglomerates were left unprotected. This chapter has shown in detail how democratisation, decentralisation, and deregulation brought about many changes
that initially were totally unfavourable for big business.
However, much of this turned out to be just a temporary setback. Only a few years later, Anthony Salim interview 13 April 2005, boss of Southeast Asia’s formerly biggest business
group, praised the new business environment and called it ‘encouraging and much more bene- fiting than harmful’. The crisis, obviously, did not at all terminate the conglomerates. It was
an enormous shock that hurt them significantly and destroyed some of them, but it did not obliterate them. On the contrary, most were able to reorganise and adapt, but not necessarily
through business practices that were any more transparent than during the New Order. It is thus necessary to take a closer look on the sort of markets that were to be established.
As will be discussed in the following chapters, the reforms were eventually and paradoxi- cally even advantageous for the capitalists. They removed the barriers designated for ‘Chi-
nese’ big business and enabled capital in general to emancipate itself from the dominance of the politico-bureaucrats, whose intertwined system of political hegemony disintegrated. To
those observers who expected real structural change and the dissolution of the economic and political foundations of entrenched oligarchic interests, the outcomes of the crisis were disap-
pointing. However, behind the surface of the lingering status quo, a major shift in the balance of power between the political and economic elites is taking place, which would allow capital
to gain an upper hand over the political sphere. Chapter 5 will show how the capitalists re- sisted, diverted, or took instrumental control over the reformasi process and thus laid the
foundation for a plutocratic post-Soeharto Indonesia regime on the basis of enduring power structures.
5 CAPITAL’S REACTION:
THE SURVIVAL OF THE CONGLOMERATES
The reforms that were meant to change Indonesia seemed to be the end of the road for the conglomerates. The crisis threatened their economic empires and unravelled the political ar-
rangements that had underpinned them. It was widely assumed by observers such as Mackie 1999: 189 that Soeharto’s cronies would not be able to carry on in an environment lacking
the formerly crucial authoritarian, centralised, and protectionist features of the New Order. However, the fact is that most of them obviously survived the end of the old regime. The ob-
jective of this chapter is to explore how they managed to do so and what implications their re- silience had for the actual state of Indonesia.
I suggest that the main reason for the conglomerates’ survival was the indispensability and importance of Chinese capital for a recovery of the Indonesian economy. The tycoons could
thus prevent their impending collapse and ensure that the whole reformasi process took place under the premise of structural continuities that did not endanger their existence. As I will
show, the reforms were too incoherent and superficial to completely destroy the power bases of the New Order forces and to subordinate them to a substantive reform agenda. The elites,
their interests, and institutions that constituted the old system did not completely vanish into thin air. On the contrary, as long as the more fundamental power structures of a predatory
form of capitalism remained intact, the New Order oligarchy had time and opportunity to re- store its collusive politico–business networks and to silently reinvent itself in a post-
authoritarian environment, in which the majority of the conglomerates quickly re-emerged from the brink of oblivion.
Before I point out in Chapter 6 how the capitalists utilised the possibilities of the new re- gime to emerge as an autonomous bourgeoisie, I will focus on their reaction to Indonesia’s
democratisation, decentralisation, and deregulation. I argue that reformasi weakened the state considerably, but failed to impede the conglomerates sufficiently, although, in such a situa-
tion, they had to operate in the context of a much more decentralised and diffused system of power. Businesses eventually got back on track, as I will demonstrate through the discussion
of two case studies, Lippo and Salim, which – as two of the largest conglomerates – can be regarded as generally representative to illustrate the economic recovery of the big groups.
This chapter will show how the state gradually lost the means of control over capital and de- liberate upon the conglomerates’ future status, revealing how they achieved a favourable posi-
tion, which they employed to engage in the reorganisation of power in post-Soeharto Indone- sia.