Maligned at Home, Bakrie Group Is the Face of Indonesia Inc. Around the World

Jakarta Globe, February 18, 2011

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At a lecture by a European leader in Singapore several years ago, a Western member of the audience expressed almost devout anguish over China’s economic clout in world affairs given its problems with democracy and human rights at home.

The statesman asked the young man what he did for a living. The man replied that he worked in a company. The statesman asked: “And is your company run on biblical principles?” As laughter rippled through the audience, the statesman looked at the hapless questioner intently and then softened his voice.

He had no doubt that the man ran his family on biblical principles, but business was another matter. Just as the two could be kept separate, it was perfectly legitimate to have concerns over China’s political and social policies, but those concerns did not justify existential alarm over its role in world affairs.

The company formed by the union of Bumi Resources and

Berau Coal Energy is looking to acquire coal mines around

the world and become a global giant, investor Nathaniel

Rothschild, left, said on Friday, Dec 17, 2010.

I was not present at the lecture, but heard this anecdote from a friend. I was reminded about it during the predictable aftermath of the Bakrie Group joining forces with Rothschild in November to consolidate its influence in Indonesia’s coal sector. Here was an Indonesian company that had struck a world-class deal to advance the interests of its country, the world’s largest exporter of thermal coal.

Yet some responses to the deal were hardly joyous. “Coal is so popular that it makes for odd bedfellows,” The Economist declared with wry disdain.

Since company patriarch Aburizal Bakrie “is not universally loved in his homeland,” Nat Rothschild “should prepare for a bumpy mix of politics and business,” it added. Where Rothschild is concerned, that piece of advice is gratuitous, if not presumptuous: The banking dynasty did not become a dynasty without understanding the business of politics.

But it is the Bakrie Group which is the real target of the barb. Many commentators, both in Indonesia and abroad, have developed a professional interest in worrying about its continued ascendancy given the controversies that surround it.

Holding the company up to the highest principles, they wonder righteously whether its prominence might not be dangerous for Indonesia — when the truth is that no company that operates profitably on earth would be willing to have its bottom line judged by such exacting principles.

Admittedly, the Bakrie Group is no stranger to controversy, ranging from tax-evasion charges, which it denies, to its contested responsibility for a disastrous mud volcano in 2006.

However, what gives its detractors their heavy ammunition is that Aburizal is also chairman of Golkar, the ruling party during President Suharto’s regime that is now a member of President Susilo Bambang Yudhoyono’s governing coalition.

Aburizal has been accused of using his political connections to advance his business interests, in a coded reference to the persisting culture of the Suharto years, when the company flourished because of the state patronage with which the Indonesian strongman buttressed his rule.

The critics have a point, but the point is neither here nor there.

The Bakries thrived under the patronage system, but they were not the only corporate entity to do so. No business of any note succeeded in that system or era unless it played by the rules. What is important is that the group continued to flourish after Suharto, overcoming market setbacks in the vastly different environment of the maturing democracy that Indonesia is today.

The Bakrie Group is a national enterprise. From its origins in Sumatra in 1942, when Achmad Bakrie — Aburizal’s father — set up a little trading house that dealt in coffee, rubber and pepper, the group’s trajectory has run parallel to Indonesia’s own evolution from a poor agricultural country to a regional economic power.

The conglomerate today combines its expertise in agriculture with extensive interests in real estate, trade, shipping, banking, insurance, media, manufacturing, construction and mining.

The fact that it is a pribumi — indigenously owned — company symbolizes the reach of native business skills that, having crawled out of colonial rule, have taken the highway to modernization and now globalization.

It is because of this success that the Bakries have become a national enterprise, and not the other way around. Thus, when Indonesia has come to the group’s rescue, it has done no more than what other states have done for their own national enterprises, including in advanced democracies.

American protection for Chevron in the face of the Chinese takeover plan is a case in point. Some national enterprises are simply too big to fail.

That is the business of politics. To pretend otherwise is to live in an imaginary world.

As the group looks ahead, it is becoming a bridge for Indonesia to a globalizing world.

China, which leads the pack in chasing the future, acknowledged the Bakries’ worth when it signed a $1.9 billion loan agreement with Bumi Resources using its sovereign wealth fund, the China Investment Corporation, in October 2009.

In Indonesia, the Bakries represent the cutting edge of business. Products developed and manufactured by Bakrie & Brothers, the holding firm for the group, are an essential component of infrastructure and telecommunications systems in Australia, Brunei, Canada, China, Dubai, England, Egypt, France, Germany, Iran, Italy, Japan, Kuwait, Malaysia, Mexico, the Netherlands, the Philippines, Singapore, the United States, Uzbekistan and Vietnam.

The group is to Indonesia what companies like Tata and Reliance are to India: the interface between a locally grown company that is a national asset, and the globalizing business environment in which nations are obliged to operate.

Such companies think locally but act globally, with calm, confidence and elan. In a rising Asia, they are signposts to the future.

Derwin Pereira heads Pereira International, a Singapore-based consulting firm. He can be reached at derwin.pereira@pereiraintl.com. This article first appeared in the Business Times.

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