Ethnic Chinese Moved Assets Overseas Before Riots Erupted : Wary in Jakarta
By Philip SegalPublished: SATURDAY, MAY 16, 1998
HONG KONG: With billions in Swiss banks, hotels in California, pulp mills in China and cellular-phone networks in the Philippines, wealthy members of Indonesia's ethnic Chinese community have been hedging their bets for decades. This week, that planning may be paying off.
Even before crowds of rioters ripped through Chinese-owned businesses Thursday and Friday, any Indonesian company with substantial foreign debt was probably insolvent anyway. Now, as mobs burn down Chinese houses and attack ethnic Chinese cars packed with family members, cash and jewelry on the road to the Jakarta airport, some of Indonesia's richest citizens can at least take some comfort that billions of dollars are already safely invested overseas.
"The cynic or leftist would say they were getting their money out," said Eugene Galbraith, head of research at ABN-AMRO Bank in Hong Kong, who spent more than a decade working in Indonesia. "They would probably say, and I would say, they were quite wisely hedging as any rich person would seek to do."
Race riots are nothing new to Indonesia. After the carnage in 1965 against ethnic Chinese during and after the coup that brought President Suharto to power, came riots against the Japanese in 1974. For many years, the Chinese have been the repeated targets of mob rage across Indonesia, in racial flare-ups that mostly failed to gain international attention.
"There's been capital flight for a long time," said a consultant with a major accounting firm in Jakarta. "The money invested here has turned around and left."
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Indexes rise slightly as a terrible month endsU.S. consumers retreat and brace for leaner timesBarclays seeks $11.8 billion injectionBut over the last few weeks, the scale of the capital flight has grown exponentially, he said.
The wisdom of international hedging was not lost on Indonesia's richest ethnic Chinese businessman, Soedono Salim, one of whose houses in Jakarta was set on fire by mobs this week.
A poor immigrant from China who came to Indonesia 60 years ago, he was fortunate enough to meet and becomes friends with a future army general and president, Mr. Suharto. Mr. Salim's real name is Liem Sioe Liong, but like many of Indonesia's Chinese, he adopted an ethnic Indonesian name long ago.
Unlike hundreds of thousands of middle-class Chinese across Indonesia who may own a shop, a house, a car and maybe an apartment abroad, Mr. Salim has been shipping his money offshore for years.
Much of rich Indonesia's money has flowed to the Singapore offices of European private banks and into property investments, according to Mr. Galbraith, although the length of the list of foreign public companies controlled by Indonesia's ethnic Chinese is by any standard impressive.
The Salim group controls First Pacific Co., which is listed on the Hong Kong stock exchange and has investments across Asia.
Indonesia's second-richest ethnic Chinese clan, the Wijayas, is also well provided for outside of Indonesia. Headed by a man whose real name is Oei Ek Tjhong, the family controls the Sinar Mas group of companies in Indonesia, but also owns hotels in California and Texas, as well as the New York-listed Asia Pulp and Paper Co., which has operations in Indonesia and across the region as well.
Credit Suisse First Boston said in March that "even with the economic turmoil of 1997, the company should continue to expand its capacity in Indonesia and China at a 27 percent rate through 2000."
A smaller but still wealthy empire is controlled by the Wanandi family, which has a stake in Arvin Industries Inc., a U.S. auto-parts maker.
Dharmala Group, owned by ethnic Chinese, holds a listed Hong Kong company with interests in Hong Kong, China and the Philippines.
Analysts cautioned against isolating Indonesia's ethnic Chinese as the source of capital flight, with rumors buzzing around the capital of as much as $14 billion amassed by Mr. Suharto alone. As with all such discussions, there is probably no way to measure Indonesian capital flows accurately, given the extent to which corruption has eroded the practice of record keeping in the country.
"I don't think it's only the Chinese that have taken these sorts of measures," said Simon Francis, an analyst at Credit Suisse in Singapore. Ethnic Indonesians, known as Pribumis, have also stashed billions offshore, he said. "There's no way to quantify how much money has flown out."
As for how quickly the billions of dollars that have left Indonesia would find their way back to the country once the unrest subsided, Mr. Francis was pessimistic. "People are going to be much more wary now," he said.
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