Cover Story / June 2018

Today’s Tycoons: Becoming Good Citizens

A slowdown in consumption has impacted the wealth of some tycoons but continuing improvement in Indonesia’s business climate will help the main players boost Indonesia’s capacity to compete at the international level. They too are changing as their businesses mature.

By Albert W Nonto

Over the past few decades, wealth has become ever more concentrated in the hands of fewer Indonesians. Billionaires like Djarum Group magnates Robert and Michael Hartono and their family, with sprawling business interests in cigarettes, banking, the plantation industry, telcos and investment; consumer goods moguls like Anthoni Salim; and property tycoons like Mochtar Riady’s family play a crucial role in Indonesia’s economy.

The wealth of the tycoons sparks related questions. Is the concentration of wealth in the hands of a select group a good or bad thing for the country? The issue of inequity arises. But some argue that inequity also creates growth, contributing tax that can then be distributed to finance public projects.

Others argue that inequity is a drag on growth, stating that it prevents the poor from acquiring the collateral necessary to take out loans to start businesses or get the education and training necessary to underpin a dynamic economy. Others say inequity leads to political instability. Meanwhile strong political connectivity gives the elite great influence over public policy.

A study by Sutirtha Bagchi of Villanova University and Jan Svejnar of Columbia University published in the Journal of Comparative Economics in 2015 helps explains this debate. It found that it’s not the level of inequity that matters for growth so much as the reason that inequity occurred in the first place.

Specifically, the study finds that when billionaires get their wealth because of political connections, that wealth inequity tends to drag on the broader economy. But when billionaires get their wealth through the market — through business activities that are not related to government — it does not.

The researchers found that Russia, Argentina, Colombia, Malaysia, India, Australia, Indonesia, Thailand, South Korea and Italy had relatively politically connected wealth. Hong Kong, the Netherlands, Singapore, Sweden, Switzerland and the UK all had zero politically connected billionaires.

The debate can be considered from many sides and the reader must form his or her own opinion. In the Indonesian context, it can be argued that the rich make a positive contribution to the economy in many ways. They pay taxes, create employment and, in a broader sense, contribute to Indonesia’s competitiveness.

If it were not for successful entrepreneurs, Indonesia’s economy would be far weaker than it is today. Without their appetite for risk, chances are we would have been left behind a long time ago. The growth of gross domestic product (GDP) demonstrates how entrepreneurial talent has contributed to growth. In 2016, national GDP rose to $932 billion, up from $860 billion a year earlier, with average growth of 5-6% in the past ten years.

Statistics Indonesia (BPS) reports that the manufacturing sector contributed about 17% to Indonesia’s GDP, equal to $158 billion, in 2016, followed by agriculture, forestry and fisheries with about 14%, construction 11% and mining and minerals at about 7.3%. At the same time, the total wealth of Indonesia’s 150 richest individuals is about $160 billion, equal to the contribution of the manufacturing sector to national GDP and greater than Indonesia’s 2018 national budget (APBN) of Rp1.84 trillion ($136 billion).


And, despite complaints that manufacturing isn’t contributing enough to growth, the figures tell a different story. Industry Minister Airlangga Hartarto notes that in 2017 Rp224 trillion of national taxation came from industrial sectors including manufacturing, an increase of 16% compared to the year before. The achievement surpassed tax from the trade sector (Rp134 trillion), banking and finance (Rp104 trillion), construction (Rp35 trillion), information and communication (Rp32 trillion) and other sectors (Rp156 trillion).

Scanning through GlobeAsia’s rich list, there are magnates engaged in manufacturing producing resource-based products such as crude palm oil (CPO), food and other consumer products, as with Anthoni Salim’s Indofood Group. Then there is the giant textile business that took Sri Prakash Lohia from Purwakarta in West Java to London.

The excise paid by cigarette producers topped well over Rp60 trillion in 2017. Sofyan Wanandi’s Gemala Group exports half of its products to the international market. Textile maker Sritex Group supplies dozens of countries with military uniforms.

TP Rachmat is an active player in manufacturing business and exports to international markets. Mining also contributes significantly to national GDP, conducted by billionaires such as Edwin Soeryadjaya and Garibaldi ‘Boy’ Thohir at the Adaro Group and Aburizal Bakrie at Bumi Resources.

The country’s billionaires also create millions of jobs. Sinar Mas Group for example employs more than 1 million across its various business lines of property, energy, plantations, pulp and paper, financial services and telco.

Salim Group’s Indofood employs at least 70,000 people and many more if the workforce at its subsidiaries is included. Budi Hartono and family group Djarum also provides a regular wage packet for some 350,000 employees, with 70,ooo at his cigarette factories, 250,000 at Bank BCA and another 100,000 at plantation, property and other operations.

Mochtar Riady’s Lippo Group every year maintains many thousands of jobs at his sprawling businesses throughout the country in the fields of property, retail, investment, healthcare, technology, financial services and many more.

Indonesia in 2017 had a workforce of more than 131 million in different sectors, with more than 50% engaged in agriculture. Another 17 million work in the industrial sector and 5.6 million in the plantation sector, where palm oil still dominates. GlobeAsia estimates that at least 2-3 million people work for Indonesia’s conglomerates.


Indonesia’s business landscape is also colored by the emergence of the tech business. Learning from the US and Japan, newbies in technology are emerging on the rich lists in their respective countries.

There has been a big shift of investment in technology throughout Asian countries in the last decade, partially reducing the dominance of Silicon Valley. Zhou Qunfei’s Lens Technology, Masayosi Son’s Softbank, Jack Ma’s e-commerce giant Alibaba, Xiaomi’s Lei Jun and Liu Qiangdong’s e-commerce operation JD have all established new empires that can compete with the West’s giants.

In Indonesia, Nadiem Makarim and Michaelangelo Moran of Go-Jek, venture capitalist William Tanuwidjaja, Leontinus Alfa Edison of Tokopedia, Derianto Kusuma and Ferry Unardi of Traveloka and Achmad Zaki and Nugroho Herucahyono of Bukalapak are emerging names in the sector.

The new names that began as startups and have now developed weight and emerged as unicorns provide a diversity of services. While Silicon Valley’s supremacy in information technology will create a great challenge for Indonesia to do well in the software business, the doors are wide open in other areas.

Success for Indonesia’s startups has come as marketplaces, e-commerce operators and solution applications. In the past five years a number of startups have become popular with the public due to their inventiveness and smart business strategies.

Can Indonesia’s tech businessmen become new billionaires? The answer can be yes or no. A former technician at Go-Jek says he believes the opportunity for the founders to become billionaires depends on many factors. Most important, investment in startups mostly involves dilution of shares. A, B and C series investment from venture capitalists is normally in exchange for greater share ownership. The source, who requested anonymity, says its believed Nadiem Makarim and his partners now control less than 10% of company shares.




Performance across the range of sectors has been mixed. There has been a slowdown in consumption growth and changes in spending patterns have impacted the share price of companies in the consumer goods sector. Indofood, for example, has seen its share price fall from Rp8,745 on May 8 last year to Rp6,200 a year later, roughly a 25% fall.

The good news for tycoons with significant assets in financial services is that the sector posted profit growth of 30% in 2017. This trend has certainly sent the wealth of magnates such as siblings Robert and Michael Hartono soaring.

Their shares in Bank BCA moved from Rp18,000 ($1.3o) last year to Rp23,000 ($1.90) now. Two other magnates, Eka Tjipta Widjaja and Chairul Tanjung, have seen more modest increases in the share prices of their banking interests.

In the case of Eka Tjipta, pulp and paper has been the outstanding business in the last year, with share prices multiplying. Shares in Sinar Mas Group’s subsidiary Tjiwi Kimia was trading last year at Rp1,360 but now is worth Rp10,500. Another subsidiary, Indah Kiat Pulp and Paper, has moved from Rp14,200 a share at May 15 from only Rp2,300 last year.


After years of tax evasion in the past, many Indonesian businessmen voluntarily joined the national tax amnesty program last year. Some admit that this is like being reborn, allowing them to feel they have become good citizens who adopt more ethical standards and practices and comply with regulations.

Jewelry businessman Stefanus Lo says that while the richest families are keen to adopt best practices in business, they also want to see other parties – government regulators, the Ministry of Finance, the police and others - work professionally and accountably. Most importantly, civil servants also must answer the call to serve their country as well as their personal interests. Decent salaries and compensation will mean there will be no more need for secret negotiation in darkened rooms. And, he adds, bureaucratic reforms also need to be implemented correctly, with clear targets.

It is undeniable that most of Indonesia’s major tycoons succeeded in business partly as a result of establishing good relations with politicians. They also needed a talent for real innovation and strong entrepreneurial skills.

Anthoni Salim inherited the Salim Group empire from his late father Liem Sioe Liong, known for his strong ties with Indonesia’s Army and especially with the late President Suharto. Aburizal Bakrie’s family fortune was developed by his father the late Ahmad Bakrie, and both nurtured the business with strong backup from the New Order regime’s support for indigenous business.

Stefanus Lo points out that all of today’s business empires started from small beginnings. Strong ties to government allowed them to grow faster and bigger. But they also needed talent, and nerve to ride the wild tiger of business fortune to reach their present greatness.