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Indonesia's rags-to-riches Salim family rebuilds
2002-06-09
JAKARTA - Indonesia's Salim family -- whose patriarch built a fortune in a classic rags-to-riches saga -- is reviving its business empire, battered by the Asian financial crisis of the late 1990s, by paring it back.Salim's Hong Kong-listed unit First Pacific Co is trying to sell stakes in Philippine Long Distance Telephone Co and Bonifacio Land Corp, a unit of property company Metro Pacific Corp, in a deal that suggests the family's intention to focus on more stable consumer goods businesses. After paying off some of its debts, some of the proceeds of a successful sale could be used for expansion. Some analysts say First Pacific is likely to put the money into its food-making unit PT Indofood Sukses Makmur -- the world's largest instant noodle maker -- and also eye new forays into the booming Chinese market. USEFUL MEETING Liem Sioe Liong, founder of the Salim group, arrived in Indonesia almost penniless from China more than six decades ago. He started building his empire as a petty trader of products ranging from peanuts to bicycle parts. His enterprises grew bigger as he sold supplies to the nationalist forces who successfully fought Dutch rule after World War Two. Along the way he adopted the Indonesian name of Soedono Salim. In the 1950s Liem met a young officer who handled an army unit's supplies and finances. The officer's name was Suharto, and he would later rule Indonesia as an autocratic president for 32 years. Liem's friendship with Suharto helped him as he ultimately forged a conglomerate spanning dozens of industries around the globe, often in partnership with Suharto's children. But since Suharto was pressured from power four years ago, the Salim group has had to face Indonesia's devastating downturn without its key political ally. In the savage May 1998 riots that preceded Suharto's fall, a mob broke into Liem's Jakarta mansion and set his portrait ablaze. He left Indonesia and the group was taken over by his second son Anthony Salim, described by author, business consultant and Indonesian specialist Adam Schwarz as a "shrewd, tough and intrepid" businessman. In the weeks following Suharto's resignation, a run on the deposits of the group's former banking arm Bank Central Asia -- the country's largest retail bank -- brought it to the brink of collapse until the government stepped in to take it over. GAVE UP STAKES To pay back billions of dollars pumped in by the central bank to keep BCA afloat, the Salim group has had to give up stakes in more than 100 companies to the Indonesian Bank Restructuring Agency (IBRA). The agency said the companies were transfered to cover the group's total debts of around 53 trillion rupiah ($5.96 billion). While the Salim group has gone further than any other Indonesian conglomerate in trying to meet its IBRA debts, critics say the family should surrender still more assets after their market value shrank to about half their book value. There has also been speculation the group has tried to buy back the assets at bargain prices acting through nominees, although that would violate prohibitions on purchasing any of its former holdings until all its debts are fully settled. Selling companies at bargain prices back to former owners who originally buried them in debt would also be a blow to efforts to revamp Indonesia's battered corporate sector and convince investors and international aid agencies genuine reform is underway in the country. One way or another, analysts expect the group to continue to be a major player in Indonesian business. "It is only natural for the Salim family to buy back its assets. The family knows exactly how much those assets are worth, better than anybody else," said analyst Willianto Ie, analyst from Kim Eng Securities. Reuters
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