III. Baseline Results: 1994/1995Page 1| 2 | 3The report now turns to the other three of Indonesia's top five private timber concession holders, the Djajanti, Alas Kusuma, and Kayu Lapis Indonesia groups. Unlike their more political counterparts, the Djajanti, Alas Kusuma, and Kayu Lapis Indonesia (KLI) groups appear not be involved in a broad range of non-timber business and financial activities with the former first family. Methodological problems emerge, of course, in attempting to "prove" the absence of non-timber financial ties to the former first family. But until such time as evidence of this comes to light, it is sufficient to point to the lack of it. Another fact that sets Djajanti, Alas Kusuma, and Kayu Lapis Indonesia apart from their more political counterparts is that concessions licensed to the three groups have a lower levels of representation of former first family members as board members or shareholders (Table 3.4). The number of timber concessions controlled by both Djajanti and Alas Kusuma with former first family board members or shareholders is less than the number controlled by either Barito Pacific or the Bob Hasan groups. Kayu Lapis Indonesia appears to have none at all. Thus, while it is not accurate to say that Djajanti, Alas Kusuma and KLI are apolitical, they are, as a whole, far less political than either the Barito Pacific or Bob Hasan groups. Table 3.4 Timber concessions licensed to Djajanti and Alas Kusuma groups with former first family board members or shareholder representation
*Djajanti Djaja II was another of the concessions revoked by the Department of Forestry on 8 July 1999 (Jakarta Post 1999n). Djajanti does have a substantial number of board members or shareholders who, although not from the Suharto family, are nevertheless politically significant. Djajanti has given shares in HPHs to former Minister of Agriculture Cosmas Batubara, and Minister of Foreign Affairs Ali Alatas. In short, Djajanti may be thought of as a politically diversified company, occupying a middle ground between the overtly political Barito Pacific and Bob Hasan groups, and the less political Alas Kusuma and KLI groups. Indonesia's remaining top twenty private timber concession licensees (numbers 7 through 20) are mid-sized (with HPH holdings of 1 to 2 million hectares). The following table lists the owners, and where relevant, the salient features of the companies, including whether they have significant political connections. Table 3.5 Indonesia's mid-sized timber concession holders: names of owners; salient characteristics
As is the case with Indonesia's largest timber companies, the mid-sized companies are roughly evenly divided between those that are less political and those that are more political. The seven less political, mid-size timber companies are Surya Dumai, Tanjung Raya, Hutrindo, Daya Sakti, Bumi Raya Utama, Sumalindo Lestari Jaya, and Kayu Mas. These companies are owned by Indonesian Chinese businessmen and women. Of the seven mid-size political companies, two are companies linked to individuals who were political heavyweights in the old government but fell from favor, while five are still favorites with the former first family. Of the two formerly-political companies, one is Satya Djaya Raya (SDR), which developed into a major timber conglomerate under the patronage of General Ali Murtopo, the former head of the now-defunct intelligence organization Kopkamtib (Samego 1992: 225). SDR's concession holdings have fallen precipitously over the past decade, a delayed response to the now-deceased Murtopo's falling out of favor with the former President as a result of the former supporting the 1974 Malari riots. The other mid-size timber concessionaire linked to individuals who fell from grace in the former government is Pakarti Yoga, the holding company of the Gemala group, the conglomerate owned by the Wanandi brothers, Sofyan and Jusuf (CISI 1991: 265-269). While Sofyan takes care of the family business, Jusuf handles the political side of things, and has for many years led the Center for Strategic and International Studies (CSIS), probably still Indonesia's most visible and high-powered think tank. CSIS was at one time quite close to the former regime, but has fallen increasingly out of favor in recent years. The political fortunes of the Wanandi brothers reached a nadir when Sofyan was scapegoated initially for alleged political, and now business, crimes. The five remaining political companies retain more active ties to the former first family. The first is Korindo, which shares control in three of its eight HPHs with Nusamba (PDBI: 164). The second and third companies, Mutiara timber, and the Salim group, sit at the nexus of two of Indonesia's largest rent constellations: forestry and food products. Piet Yap is not only an owner of Mutiara timber company, but is also a senior food executive within the Salim group (CISI: 484-487), where at one time he held the distinction of being the world's single largest buyer of wheat. The wheat was then turned into flour on which, until relatively recently, the Salim group held an Indonesia-wide monopoly (Robison 1986: 232-233). In addition to being Indonesia's largest corporation, the Salim group was Indonesia's 16th largest timber concessionaire in 1995. The owner of the Salim group, Liem Sioe Liong, is one of the former President's oldest friends, and there are considerable linkages between the timber holdings of the two families. Yayasan Harapan Kita, a foundation chaired by Suharto and his former wife, sold four mills, and the timber concessions attached to those mills, to the Salim group in 1986 (PDBI: 169). Two of those timber concessions – Dutarendra Muliasejahtera and Melapi Timber, are still identified as belonging to the Harapan Kita Utama group (PPHH 1998), although for the purposes of our report we include them under the Salim group. The Suharto family owns 20-25 percent of the Salim group's timber operations through their Hanurata timber company (CISI: 372-374), whose primary shareholders are Yayasan Harapan Kita and Yayasan Trikora, two foundations chaired by Suharto and his deceased wife (CISI 311-313). The primary shareholders in the fourth group are two foundations, the Army's Yayasan Kartika Eka Paksi and the Armed Forces' Yayasan Maju Kerta (Yamaker). The primary shareholders in the fifth company, Hanurata, are the two foundations mentioned above, Harapan Kita Utama and Trikora. While there is much loose talk in Indonesia about various timber groups belonging to the Suharto family, Hanurata is the one timber group for which this is unambiguously the case. Those who possess timber concessions - and at least one downstream plywood mill through which to channel exports of that timber - were in a position to collect substantial economic rent, roughly US$25 for each cubic meter of plywood exported prior to the onset of the monetary crisis (Table 1.2). Therefore, access to timber concessions has always been highly-sought-after, and required in many cases the direct intervention of the former President in exchange for money, shares, business partnerships, or at a minimum political support. Roughly half of the large and medium-size timber concession holding companies in Indonesia were politically-linked in one or more of these ways, as discussed in this section. In the case of companies such as Barito Pacific, the Bob Hasan group, Korindo, the Salim group, and Hanurata, some or all of the rent captured through exporting logs initially, and subsequently through exporting plywood, went directly to the former first family. This money was either used by the first family for political expenditures or to pursue other financial objectives. In a slightly different category were politically diversified companies such as Djajanti, Satya Djaja Raya, Pakarti Yoga, and those belonging to the Armed Forces, which furnished funds to individuals or institutions who in turn provided political support to the President. In a different category again were the less political companies, including large companies such as Alas Kusuma and KLI, and mid-sized companies such as Surya Dumai, Tanjung Raya, Daya Sakti, Bumi Raya Utama, Sumalindo Lestari Jaya and Kayu Mas. Why were less-political companies like these allowed to exist at all, given the importance evidently placed by the former President on using the timber industry to generate funds for his political and financial objectives? One possibility is that while the former leader may have viewed the timber industry primarily as a generator of funds for himself, he probably also recognized that the timber industry was a pillar of the national economy which would be unable to stand were it subjected entirely to his predation. An argument can be made that provided they do not lose their timber concessions, the less-political companies are likelier to stay in business, given that they are, for the most part, more financially-sound, and less-indebted than their more political counterparts. A second possibility is that Indonesia's less political timber companies – while they appear not to have provided a great deal of informal revenues for the former first family – may still have done so for the major agency charged with overseeing the nation's timber resources. Field research conducted in conjunction with this and other studies shows that the Department of Forestry does not appear to discriminate between well-politically-connected companies and less-well-politically-connected companies when it comes to extracting informal payments from timber concessions, especially at the provincial level.
In 1995, Indonesia had a total of 385 HPH-linked plymills and sawmills with a total licensed capacity of 41 million cubic meters of roundwood. Between them, the Barito Pacific, Kayu Lapis Indonesia, Alas Kusuma, Djajanti, and Bob Hasan groups controlled more than a quarter of the nation's licensed HPH-linked milling capacity. It should come as no surprise that HPH-linked plymills and sawmills were dominated by the same companies that controlled access to the nation's timber concessions. Controlling timber concessions in Indonesia is necessary, but not sufficient, to collect timber rents. Since 1992, exporting plywood has been virtually the only way for timber companies to collect timber rents, as the export of rough sawn timber was effectively banned early in that year, and the export of raw logs banned in 1985. If these mills were running at full capacity, and assuming that the entire output of the country's HPHs were being diverted toward them (two assumptions which will later be relaxed in this report), these mills operated with a non-HPH-sourced roundwood deficit of 23 million cubic meters per year. Not a single one of the top half of the nation's mill-owning groups managed to run a surplus in 1995. Their deficit was compensated for by roundwood from either legal (but unsustainable) land clearing, or illegal (and also unsustainable) logging. Page 1| 2 | 3
September 7, 1999
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