[Kabar-indonesia] Tempo: Lapindo Sinks, Bakrie Sails On [+Op-Ed]

[JoyoNews at aol.com]

4 Tempo Magazine Reports: 

- Lapindo Sinks, Bakrie Sails On 
  [incl sidebar: Ups and Downs]

- Opinion: Sidoarjo Needs Quick 
  Decisions 

- Chronicles of a Three-Generation 
  Dynasty 

- Interview: Anindya N. Bakrie: 
  Never run away from problems 

Tempo Magazine
No. 05/VII
Oct 03-09, 2006 

Economy & Business 

Lapindo Sinks, Bakrie Sails On 

Lapindo is officially separated from Energi Mega Persada. 
It won't be easy for Bakrie to regain lost trust. 

IN terms of age, Lyte Limited is still a baby. Born nine months ago in 
Jersey, 
UK, the company already has to bear a monstrous burden. On the shoulders of 
the company with a mere capital of 10,000 pounds sterling, or around Rp175 
million, are hanging the responsibilities for losses caused by the mud "volcano" 
in Sidoarjo, East Java. 

This is because two weeks ago Lyte purchased two subsidiaries of PT Energi 
Mega Persada Tbk., namely PT Kalila Energi Ltd. and PT Pan Asia Energi Ltd. 
These two companies owned Lapindo Brantas Inc., the oil and gas drilling operator 
in the land of disaster. Kalila owned 84.2 percent of Lapindo's shares; Pan 
Asia owned the remaining 15.8 percent. 

The purchase price was extremely cheap: a mere US$2 (Rp18,000), or the price 
of two packets of cigarettes. Since the mud disaster at the end of last May, 
the company could be said to have gone bankrupt overnight. Its capital was 
devoured by the losses caused. As of June 2006, Kalila's capital was minus US$22.8 
million; Pan Asia's, minus US$208,000. 

Although located in West Europe, Lyte is not foreign-owned. Like Energi Mega, 
Lyte is none other than a part of the Bakrie Group business empire. The 
difference is, Lyte is fully controlled by the Group, Energi Mega was not. Bakrie 
Group owned only 60 percent of the shares, with the public owning the remaining 
40 percent. 

After the transaction process has been completed, "Lyte will change its name 
into Bakrie Oil & Gas," said Herwin Hidayat, Energi Mega's Corporate 
Secretary, to Tempo last week. The name-change seems deliberate so that people will no 
longer doubt the Group's "commitment" to bear the burdens caused by the 
disaster. "The important thing is the company should not be bankrupted," said a 
mining businessman. Because if that happens, Bakrie's responsibilities will 
automatically be nil. 

To the Bakrie Group, separating Lapindo from Energi Mega is an important part 
of its efforts to rebuild its ambitions to construct a giant energy company, 
which had temporarily been shattered by the Sidoarjo calamity. Since last year 
Energi Mega was being groomed to be beside PT Bumi Resources, one of Bakrie 
Group's holding companies in the mining field. 

However, Sidoarjo put a stop to Bakrie Group's big plans. As Lapindo's owner, 
Energi Mega's shares on the stock exchange were also destroyed. Prices 
originally around Rp900 per share are now in the Rp500s. Since it was a listed 
company, losses are suffered not by Bakrie but also the public shareholders. 

That is why investors' trust in Bakrie Group's other shares also vanished. To 
get themselves out of the situation there was no other choice: Lapindo had to 
be separated from Energi Mega. It was the only way to save Energi Mega from 
sinking with Lapindo. 

Besides Lapindo, last August Bakrie was also faced with an unpleasant 
experience. Plans to sell two coal mining companies it owned, PT Kaltim Prima Coal 
and PT Arutmin Indonesia, to the Borneo Lumbung Energi (Renaissance Capital) 
consortium had to be cancelled. Consequently, Bakrie automatically wouldn't be 
able to lay its hands immediately on the Rp29 trillion from the sale proceeds. 

Bakrie actually needs to come up with Rp1.5 trillion to overcome the Sidoarjo 
mud, which had forced 10,000 people to be evacuated and 400 hectares of land 
plus houses, factories and schools to be submerged. Bakrie Group has also 
presented a series of plans to make their big dreams come true. 

Besides ambitions to become one of the giant energy companies in 
Asia-Pacific, Bakrie also aspires to realize the Rasuna Epicentrum development project on 
44.7 hectares of land in the Kuningan area of South Jakarta. The Bakrie 
business empire is planned to be centralized here. 

Furthermore, according to Anindya Bakrie, the oldest son of Coordinating 
Minister for People's Welfare, Aburizal Bakrie, all Bakrie Group business lines 
will be directed towards competition with world-class companies. Some of them 
are PT Bakrie Brothers in the infrastructure sector, PT Bakrie Telecom in 
telecommunications, PT Bakrie Sumatra Plantation in plantation, and PT Bakrie 
Swasakti Utama in property. "Going forward, we'd like Bakrie to be known as a family 
business, but a world-class company such as Toyota or Mitsubishi in Japan," 
said Anindya. 

The question is, will it be possible to make such a beautiful dream come 
true, now? Or, would the Bakrie business empire once again be limping along, just 
like it did when it was hit by the economic crisis in 1997, which caused it to 
be mired in gigantic debt of US$1.1 billion? As to the latter, a 
businessperson at the top level doubts it. Bakrie's riches are multiplying. 

Look at Forbes Asia magazine, September 18 edition. It states that the Bakrie 
family occupies sixth place on the list of the richest people in Indonesia 
with a wealth of US$1.2 billion or around Rp10.8 trillion. Two years ago, 
however, it was only around US$735 million. Anindya also states that Bakrie Group's 
share market capitalization value has doubled compared to pre-1997 crisis, 
from only US$1.5 billion to around US$3 billion. 

Nevertheless, it doesn't mean that all of Bakrie Group's big dreams can now 
materialize. Because, as stated by executive head of the national Team to 
Overcome the Lapindo Mud, Basuki Hadimuljono, at least Rp1.5 trillion is needed to 
relocate the residents and to build the infrastructure to handle the mud 
disaster. 

This cost will automatically make a big hole in Bakrie Group's wallet, 
because Lapindo will certainly not be able to bear it. "Lapindo is bankrupt," said a 
Tempo source. The company only had Rp200 billion. More than that, the Bakrie 
family as majority Lapindo shareholder must bear its burden through Lyte 
Limited. 

On these various problems, Aburizal Bakrie is reluctant to make any comments. 
He reasons that ever since he became minister he has relinquished his hold on 
all corporate matters. "Please ask Bakrie Group management," he told Tempo at 
the State Palace last week. 

A more explicit answer came from Anindya. One of the heirs to the Bakrie 
business empire throne admits that the Lapindo mud case is a difficult trial for 
the Bakrie family. Nevertheless, he is optimistic that the financial impacts 
can be overcome. Although it will necessitate huge funds, it will not drag the 
other Bakrie business units down. "Other companies can't be asked for 
responsibility over Lapindo," said the CEO of Bakrie Telecom. 

If that is the case, the Bakrie Group's business ship may very well be able 
to sail on for quite a distance. However, keep in mind that lost investors' 
trust can't be regained easily. And, without that, it won't be easy for the 
Bakrie Group to obtain loans as in the past, something that the Group certainly 
needs desperately to make its dreams come true. -- Heri Susanto, Bagja Hidayat 

sidebar: Bakrie's Ups and Downs 

1942 

CV Bakrie Brothers General Merchant and Commission Agent is established 
in Telukbetung, Lampung. 

1943 

Expanding to Jakarta, changes its name to Jasumi Shokai. 

1957 

Purchases CV Kawat. 

1959 

Bakrie Brothers pioneers steel pipe manufacturing in Indonesia. 

1971 

Bakrie Brothers becomes limited holding company (PT). 

1986 

Acquires Uniroyal Sumatera Plantation. Changes to Bakrie Sumatera Plantation, 
and enters the stock exchange in 1990. 

1989 

Expands to the telecommunications sector. 

1993 

ANTV airs. 

1998 

Bakrie Brothers' debts soar to US$1.08 billion (Rp9.7 trillion). 

2001 

October 

Bumi Resourses acquires Arutmin for US$185 million from BPH Hilton. 

November 

Debt restructuring agreement is signed. Shares belonging to the Bakrie family 
are only 2.92 percent. 

2003 

Bumi Resources buys Kaltim Prima Coal (KPC) at US$500 million from Rio Tinto 
and Beyond Petroleum Plc. 

2005 

ANTV collaborates with STAR TV. 

2006 

March 

Bumi relinquishes Arutmin and KPC to Renaissance Capital through PT Borneo 
Lumbung Energi, US$3.2 billion (Rp29 trillion). 

May 

Mud in Brantas Block gushes out. 

June 

Energi Mega Persada and Bumi Resources plan to merge. 

August 

Sale of Arutmin and KPC to Renaissance Capital goes awry. 

September 

Energi Mega Persada relinquishes Kalila Energy Ltd. and Pan Asia Enterprise 
Ltd. to Lyte. 

Hit by a Storm-Again 

THE economic crisis, around eight years ago, temporarily demolished the 
Bakrie family businesses' structures. However, who would have thought that the 
business started by Achmad Bakrie in 1942 was able to rise up. A series of dreams 
are once again presented. 

However, hardly have they been realized, problems emerge: ranging from the 
Lapindo mud flood, the failure of the sale of Kaltim Prima Coal and Arutmin by 
PT Bumi Resources, and the delays in the merger between Bumi and PT Energi Mega 
Persada. The growing business tree is once again hit by a storm. 

-- Yandhrie Arvian 
 
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Tempo Magazine
No. 05/VII
Oct 03-09, 2006 

Opinion 

Sidoarjo Needs Quick Decisions 

The more mud flows out of the Sidoarjo ground, the clearer it seems that a 
cabinet meeting is not the fastest place for decision-making. 

JUST because President Susilo Bambang Yudhoyono decided in a cabinet meeting 
last week to dump the hot Sidoarjo mud into the sea, does not mean the 
situation on the ground has returned to normal. It should be clear by now that the 
120-day massive mudflow out of the Lapindo Brantas drilling site, needs more 
intensive handling. The volume of mud gushing out, which stood at 50,000 cubic 
meters per day, has now reached 130,000 cubic meters daily. Every morning local 
residents wake up to the realization that the mud has spread to cover an 
additional area the size of two soccer fields. 

This is the problem facing the national team set up to tackle the mudflow at 
Sidoarjo by President Yudhoyono on September 11. The team needs to think of 
the fastest way to dump the mud into the sea because the pumps used for the 
first time last week are only capable of pumping 1,000-1,500 cubic meters of mud 
per day. But 130 times that volume is gushing out every day. 

The team, therefore, needs authority to make decisions fast. The critical 
situation on the ground means that it is no longer possible to delay decisions or 
make lengthy studies. The team is facing a situation which requires 
day-to-day, even hour-by-hour decisions. The risk is too great for the Sidoarjo mud 
problem to rely on a cabinet meeting. 

The greatest risk involves the local residents who must be evacuated. A new 
location, compensation and all the details of moving the people will have to be 
thought of very carefully. Negotiations will be difficult. Forcing people to 
move, using the violent tactics of the New Order, will only lead to needless 
chaos. Reportedly, the offer of transmigrating out of Java has met with a cool 
reception. This is understandable, given that people around Sidoarjo have been 
living with discomfort and uncertainty for three whole months. 

Another, no less urgent problem, is the restoration of the Surabaya-Gempol 
freeway that has been inundated with mud. If the road remains covered in mud as 
it was at the end of last week, a vital transport link in East Java will be 
severed. Then there is the salvaging of the Surabaya-Banyuwangi railroad, a 
section of which passed the inundated area. 

More importantly is the future of Sidoarjo. Considerable thought needs to be 
given to what will happen to the area covered by mud, which we found will be 
unusable in the long run. This task is too onerous for the national team to be 
tackling by itself. 

We suggest, once again, that an authority be established, with full powers 
led by a ministerial-level official. This body must have the authority to 
instruct all parties to assist in tackling the mud, from handling the mudflow to the 
consequent social problems and the management of Sidoarjo town. 

With wide-ranging powers, such an authority would be able to address the 
issues more quickly, the people would be saved and the future of Sidoarjo would be 
clearer. The team, which has already been established, could have its 
authority increased. What is important, the steps to tackle the mud at Sidoarjo 
should no longer have to wait for the results of a cabinet meeting and a decision 
from the President. 
 
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Tempo Magazine
No. 05/VII
Oct 03-09, 2006 

Economy & Business 

Chronicles of a Three-Generation Dynasty 

Achmad Bakrie's grandchildren are emerging in the business world. 
One was involved in a case in the US. 

THE big tree started with one name: Achmad Bakrie. The 7-year-old child was a 
small farmer's boy who went round Kalianda, South Lampung, every day, selling 
bread carried on a winnow on the head. The year was 1923. 

>From selling the bread-under a sharing system-Bakrie braved himself to be a 
vegetables agent. In dawn's early hours, he was already waiting for farmers who 
were going to sell their harvests. He started this since he entered the 
Holandsch Inlandsche School (HIS, the equivalent of elementary school) in Menggala. 

Upon graduation from HIS, Bakrie wanted to become a full-time trader. Alas, 
he didn't have enough capital. He started taking on various jobs, including 
becoming a commissioner (a middle tradesman) for coffee and pepper at Molekse 
Handel Maatschappij, a Dutch company in Telukbetung. 

Using savings from his salaries, Bakrie moved to Jakarta. He studied 
accounting and English at the Handelsinstituut Schoevers, in 1938-1940. During 
holidays, he returned to Lampung and worked at NV Van Gorkom. Here he became a 
trainee salesman. He covered Lampung, Bengkulu, Palembang, and Jambi. 

In addition, Bakrie worked at Zuid Sumatera Apothek, Telukbetung, as a 
salesman. His salary was 37.5 guilders per month-a large amount for that era. 
However, the Japanese came to invade Indonesia. 

Sensing something was afoot, Bakrie took all the drugs from where he worked. 
Good anticipation. The Japanese later banned European-made drugs to enter 
Indonesia. Drug prices subsequently soared. What happened next was predictable: 
Bakrie's pockets became increasingly filled. 

Feeling there was enough capital, Bakrie with Abuyamin, his older brother, 
established CV Bakrie & Brothers General Merchant and Commission Agent, in 
Telukbetung, in 1942. They sold coffee, pepper, cloves, betel leaves, papaya and 
tapioca. They delivered those to Palembang by train. Although the train left at 
3am, Bakrie would arrive at the station two hours earlier. 

It was unsurprising that later in 1952, Bakrie soared as an export-import 
merchant. This business expanded after he bought a wire factory (1957) and 
Uniroyal rubber plantation in Kisaran, North Sumatra (1986). He also founded a steel 
pipe and casting metal factory. 

But actually, in his autobiography (Achmad Bakrie, A Portrait of Hard Work, 
Honesty, and Success), Bakrie's dreams when he came to Jakarta were simple. "To 
have my own office," he said. "And with phones ringing left and right like in 
American movies." The dream came true with the completion of Wisma Bakrie in 
the Kuningan area, Jakarta, in 1984. 

His success made many people admire him. The late Alamsyah Ratuperwiranegara, 
former Coordinating Minister for People's Welfare in Suharto's era, for 
example, knew very well what Bakrie did as a teenager. "I saw him go back and forth 
in Tanjungkarang," wrote Alamsyah in Bakrie's biography. "He was selling 
Parker pencils." 

Bakrie's diligence as a businessman was also remarked upon by the late Hasjim 
Ning. "If no one was there to clean coffee or cloves, he would do it 
himself," wrote Hasjim. 

The company that was pioneered by Achmad Bakrie was later continued by his 
three sons. Aburizal Bakrie, the oldest son intimately called Ical, became CEO 
of Bakrie Brothers. Nirwan Dermawan Bakrie and Indra Usmansyah Bakrie became 
Deputy President Directors. 

The baton was handed over on January 1, 1988, one and a half months before 
Bakrie senior passed away. Roosmania Kusmoljono, his only daughter, was not much 
involved in the business world. 

However, before then, Bakrie's three sons had been in the business for quite 
a long time. Ical, for example, from 1972 was already assistant to Bakrie 
Brothers' board of directors. Two years later he became director. It wasn't until 
1982, that the alumni of Electrical Engineering from the Bandung Institute of 
Technology became Deputy President Director. 

In their hands, the Bakrie Group expanded to telecommunications, 
infrastructure, energy and mining, banking, financial services, and the media. However, 
the brains behind the Group wasn't Ical but Nirwan and Indra. "Nirwan held trade 
strategy, while Indra implemented it," said Ical. 

Ical himself was spokesperson, and he also developed the company's 
organization. "It was Ical also who did the lobbying," a Tempo source whispered. This 
role was exactly right for him because he was involved in many organizations, 
such as Kadin, HIPMI, Persatuan Insinyur Indonesia, and joined Golongan Karya in 
1984. 

It's not surprising that Ical's name was more famous than his younger 
brothers'. "Because on earth there can only be one sun," Ical made an analogy. It was 
such a philosophy that Achmad Bakrie instilled in the family. His younger 
brothers, said Ical, relinquished the role of "the sun" to him. 

Later on, unlike his father who was reluctant to be close to politics, Ical 
participated in the Golkar convention in 2004. Although he failed, he made it 
into the cabinet under Susilo Bambang Yudhoyono-Jusuf Kalla's government. After 
a stint as Coordinating Minister for the Economy for one year, Ical is today 
Coordinating Minister for People's Welfare. 

Since then, the responsibility for running the company became increasingly 
Indra's and especially Nirwan's. "Because they are the most senior," said 
Anindya N. Bakrie, Ical's eldest son. Anin-his nickname-became CEO of ANTV and PT 
Bakrie Telecom in 2002.  

The 32-year-old man has been interested in business since he was little. 
However, on his journey, Anin's career did not proceed smoothly. Eight years ago, 
the MBA holder from Stanford University, was reported by the Securities & 
Exchange Commission (SEC) to the South District Court, New York. He was charged 
with insider trading. 

The story was that on September 5, 1997, Anin asked his friend, Roy Handojo, 
to buy shares at Washington Gas Light Company for himself. From the purchase 
of 25,000 shares valued at US$650,000 (Rp5.8 billion), Anin promised profits to 
Roy. At that time Washington Gas was negotiating with Consolidated Natural 
Gas Company to merge. 

Anin knew of the merger plans because he worked as junior financial analyst 
at Global Power Group, a unit of Salomon Smith Barney Inc., New York. By 
coincidence the company where Anin worked was merger advisor. 

Anin was to change his mind later and decide against buying the shares. Roy 
had to release all the shares and suffered losses in the amount of US$13.8,000. 

This action was discovered by the SEC. Roy was arrested. Anin, however, 
returned to Indonesia and hastily resigned from Salomon. Nevertheless, the South 
District Court, New York, ordered Anin to pay a fine of US$40,000. 

Besides Anin, a third-generation Bakrie who is already in the business is 
Syailendra Surmansyah Bakrie, 26. Indra Bakrie's oldest son has been interested 
in the business world since he was 12. "I want to be a businessman like Papa 
and Atuk (grandfather)," he said at the time. 

Today Syailendra owns 12.29 percent of the shares in Federal International 
(2000) Ltd. The company has ties with Medici Citra Nusa, Lapindo Brantas' 
drilling contractor. Meanwhile, Anindhita Anestya Bakrie, 29, Anin's younger 
brother, is Deputy Director of ANTV Programs and Production. Andika Nuraga, Nirwan's 
oldest son, works at Mitsubishi and intends to continue his studies. The rest? 
"Still at school and working abroad," said Anin. -- Yandhrie Arvian 
 
------------------------------------- 

Tempo Magazine
No. 05/VII
Oct 03-09, 2006 

Economy & Business 

Anindya N. Bakrie: Never run away from problems 

EIGHT years ago, Anindya N. Bakrie went through a bitter experience. The US 
Securities & Exchange Commission took him to court for the crime of insider 
trading. At the time, he was working as a junior analyst for the Global Power 
Group, a subsidiary of Salomon Smith Barney, Inc. in New York. The case involved 
the purchase of Washington Gas Light Company shares, valued at US$650,000. His 
colleague Roy Handojo was arrested. Anin went back to Indonesia to work for 
the Bakrie Group. 

>From then on, Anin's career soared. At the tender age of 32, the oldest son 
of People's Welfare Coordinating Minister Aburizal Bakrie is now the top man at 
ANTV and PT Bakrie Telecom. 

He has become more conservative, business-wise. "Take care of your debts 
first before you can enjoy the profits," said Anin, a graduate of Northwestern and 
Stanford universities in the US, when asked his recipe for success at ANTV. 

Because of his accomplishments, Anin is now being groomed to become the 
Bakrie Group's principal heir. So, since his father can not comment on any issue, 
he seems ready and willing to respond to questions regarding the Bakrie family 
business. He met with Tempo reporters Heri Susanto and Yandhrie Arvian at his 
Wisma Bakrie office in South Jakarta, for an interview, two weeks ago. 

Is the Lapindo mud problem affecting the Bakri businesses? 

Thankfully, no. Yet we are responsible for all that has happened. However, 
the 
other Bakrie companies should not be held responsible for the Lapindo problem.

Is this Lapindo's fault? 

Lapindo is a contractor, not the proprietor of the oil and gas field. The 
contractor is tied to a revenue-sharing agreement with the government. So, if we 
incur losses, should Lapindo be the only one to bear the burden? We want some 
clarification. Otherwise, should Bakrie Telecom build a tower at volcanic 
Mount Merapi and it erupts, it will be responsible [for the catastrophe]. 

Has the Lapindo case had any effect on the Bakrie Group's plan to expand? 

No. Thankfully, we can still go on as usual. Some impact may have been felt 
at how much we can contribute towards the people. The funds are being spent to 
address the Lapindo problem.

What is the difference between the old and the new Bakrie Group? 

In the past, we used to have huge loans. If we wanted big profits, we had to 
look for huge loans. So when there was a loss, we got hit twice as hard: we 
lost out on our assets and shares, plus we had to repay our debts. Today, our 
loans are minimal, in line with our capability to repay them.

Have there been changes in the composition of the company's professional 
staff? 

Yes. About 10 percent of the professional staff at the Bakrie Group are 
expatriates. We used to have only 1 percent. This is what is needed if you want to 
be a world-class player. 

How much is Bakrie worth today? 

In 1997, before the crisis, we were worth US$1.5 billion. That has now 
doubled, and most of it is assets not loans.

As a third-generation Bakrie, how do you see the figure of Achmad (Bakrie 
Group founder) Bakrie? 

I only knew that when I was 14 years of age. So, I never learnt the business 
from him. What I learnt from him were values. This is important because 
business is not just about buying low and selling high. 

What are those values? 

Never run away from problems. If you owe money, you cannot turn away. Never 
be greedy and make the company a world-class one.

Do you still hold on to those values? 

We do. That's why Bakrie is still around after 64 years.

But each generation should have a different character. Achmad Bakrie was a 
genuine trader... 

I think the values remain the same. Their implementation may be adjusted with 
the times. The proceeds, after all, go towards the people. In the past, there 
were no public companies because the stock market had not been developed yet. 
During the second generation, some companies went public. There are more now 
among the third generation [of Bakries]. Today, Pak Nirwan and Pak Indra 
manage the businesses now that Pak Ical (Aburizal) is in politics. 

Is it true you are being groomed to be the heir? 

No one is being groomed for the job. Almost all of the companies are publicly 
listed. Instead of grooming an heir or heiress, it would be best to prepare a 
solid management team able to lead the company to success and produce 
dividends that can be enjoyed by all.

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Joyo Indonesia News Service
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