The Bakrie Group
Suara No. 1/09, August 2009
by Marianne Klute
Translated into English by biofuelwatch, September 2009
The Bakrie case offers an interesting insight into the intertwining of politics and business in Indonesia, a lesson to be learned about business practices in Indonesia, based on the exploitation of Indonesia’s valuable resources for the benefit of individuals and the lack of will to build a consolidated and responsible economy, and, last not least, provides data on the involvement of international capital in environmental destruction and human rights abuses.
The Bakrie Group is one of Indonesia’s oldest companies. It was founded in 1942 by Achmad Bakrie and may be considered the most controversial and likewise the most successful company with an originally Indonesian background, amidst mostly Chinese dominated Indonesian business groups.
Aburizal Bakrie, son of founding father Achmad, led the Bakrie Group to its current position. Grown up inside the inner political power circle of the Suharto regime, Aburizal Bakrie made clever use of the commodities most important for economic growth of developing countries: Mineral resources (coal), agro-industry (palm oil and rubber), housing and investment (property), energy (gas and oil), and communication (mobile phones). He lead the group until 2004, when he had become Minister of Business and Industry and left the position as chief executive to other members of the family. One year later, after a cabinet reshuffle in 2005, Bakrie was appointed coordinating minister of social welfare.
Bakrie Sumatera Plantations is only one arm of the Bakrie & Brothers empire, which is mainly owned by the family of Indonesia’s Minister of Social Welfare. In addition to BSP, the holding Bakrie & Brothers is a major stakeholder of PT Bumi Resources (coal), PT Bakrieland Development (property); PT Energi Mega Persada (energy), and PT Bakrie Telecom (mobile phone operator).
In 1997, during the Asian financial crisis, Bakrie & Brothers seemed close to collapsing. The group was unable to pay its $ 1.2 billion – mostly foreign – debt. Aburizal Bakrie, at that time head of Kadin (Indonesia’s Chamber of Commerce), went through a tough restructuring process. Bakrie’s creditors, including Deutsche Bank, Dresdner Bank and Westdeutsche Landesbank Girozentrale – finally approved a debt restructuring process in 2000. An exchange of debt for equity deal transformed the creditors into owners through a „master special purpose vehicle“ through which the creditors owned 80% of Bakrie´s most important assets in Bakrie: Sumatera Plantations, Bakrie Electronics Company, Bakrie Kasei Corp, Arutmin Indonesia (coal), and Iridium LLC.
With regard to palm oil, former creditors owned a 52.4 % stake in PT Bakrie Sumatera Plantations. It is not transparent how Bakrie has been able to buy back all assets in a very short time, and has now risen to such height, „ascending into the sky“, as Bisnis Indonesia writes. Thus, international banks still have a deep interest in his ambitious exploration plans and will have difficulties to apply to their social, environmental and corporate responsibilities. (http://www.thejakartapost.com/news/2000/11/29/bakrie-creditors-approve-108- billion-debt-deal.html and http://web.bisnis.com/artikel/2id1659.html)
Bakrie & Brothers were severely hit by the Asian crisis. After converting some of the debt into equity in 2001, Bakrie recovered to new heights. The same seems to be true for other obstacles. The eruption of the mud flow in East Java on 29th May 2006, which has inundated 12 villages and displaced more than tens of thousands of inhabitants, (see below about the Lapindo mud volcano) obviously did not harm the Bakrie empire. On the contrary, Aburizal Bakrie emerged a year later as Indonesia’s richest man on the Forbes list.
Bakrie’s 2007 position as Number One of Indonesia’s richest is due to their aggressive expansion into coal business. Soon after the restructuring process, Indonesia experienced an emotional campaign against foreign industries, with called for nationalizing the country’s resources. While foreign firms faced heavy pressure to get out of the natural resources sector, Bakrie was the winner; their coal unit Bumi Resources was able to buy 80% of PT Arutmin Indonesia in 2001, and in 2003, Bumi Resources bought PT Kaltim Prima Coal from BP and Rio Tinto. Since then, coal is Bakrie’s golden goose, and Bakrie’s Bumi Resources are Indonesia’s biggest coal producer.
Since 2008, Bumi Resources has held the majority of shares in the Australian mining company Herald Resources, and this year, in January 2009, they bought three Indonesian coal mining companies at five times the market value, with European and US money, as part of a new debt restructuring and business consolidation process, amidst a global capital crisis which has hit so many national economies. Meanwhile, the Sei Kopas and Sidoardjo cases remain unresolved, and the people have lost everything, while a senior politician may reach the sky again.
