Conrad introduces some of the candidates for next year’s presidential elections in Indonesia. Anyone concerned over the deteriorating climate for foreign investment in Indonesia should rest assured, the people that helped create the phenomenal boom of the 1990s in the island republic are down but not out. I was pleased to see that Siti Hardiyanti Rukmana or “Tutut” is mulling a bid, as I can personally attest that due to her involvement in a number of projects phenomenal amounts of capital flowed into Indonesia that helped build some spectacular infrastructure projects. In turn these deals generated work for exporters all over the world, helped the local island economy by creating jobs and of course they ensured huge bonuses for the lawyers and bankers who put it all together. Reading Conrad’s post I dug out one of my old deal memoranda that I prepared for our head office, describing one of the local companies that owned a stake in the power project my bank was underwriting:

“ … President and Commissioner of the company is Siti Hardiyanti Indra Rukmana, the youngest daughter of the President of Indonesia, Suharto. Her company’s ownership is conform the Indonesian law on foreign investment for local shareholding requirements which is currently 5%. Her company is involved in thermal power station maintenance and private power development”

I wrote that, in 1996. Thermal power station maintenance? I bet you that Tutut was not able to tell a power station from a fish market but, under the laws carefully crafted by her father anyone doing business was required to carry at least a 5% interest for the family. To be clear, they got it for free, no need to make a cash contribution for the equity as was required of the other partners. Multiply this arrangement over telecoms, car plants, gas fields, banks, property developments, beer bottlers and you will begin to get a grasp of the wealth the Suharto family generated. And few foreign investors ever raised material objections; it was the way business was done in Indonesia. And Tutut was obviously not the only one, the brother of Prabowo Subianto (also on the Conrad shortlist and married to another Suharto daughter), was instrumental in putting together one of the largest private power financings in Indonesia in the 1990s, US$2.6 billion, largely funded by US and Japanese investors and banks. For this deal, which took a little longer to arrange, the family upped its rate to a healthy 15%.

I recently dusted off these memories for a gathering of MBA students and to my surprise they could not contain their amazement over these somewhat unusual arrangements, asking me over and over again how western banks and businesses could be comfortable with such excessive corruption. Not only businesses I told them, as many western governments helped to finance these deals indirectly through export credit support, or even direct intervention with Bill Clinton, Warren Christopher and Bob Rubin calling on the Suharto clan to get deals closed. And with good reason. Not only was it a small price to pay for economic growth and making good profits, in retrospect we may have funded - at the expense of a currency crisis - a veritable attempt to help bring prosperity to countries that we now know may drift towards radical Islamism absent any economic prospects. Tutut and Prabowo are probably not our dream candidates to take up the highest office in Jakarta, but we should remind ourselves to remain involved in Indonesia to help steer it away from economic and political chaos. If that means picking up someone’s interest in a gas plant or fast-food outlet, so be it.