In my research and investing I stress three things: people, structure and value. I look for companies that are controlled and managed by quality people, have corporate structures that align minority and majority shareholder interests and trade at valuations that are below fair value if not outright cheap.
This article is about people. Richard Borsuk and Nancy Chng’s Liem Sioe Liong’s Salim Group: The Business Pillar of Suharto’s Indonesia, is a detailed review of Indonesia’s business environment, economy and politics during Suharto’s 30-year rule. The book is people-centric and a virtual who’s-who in Indonesia.
The first sentence of Chapter One, is as good a summary as it can be, “One hankered after power, the other after money, and when they paired up they made a potent team that kept them on top in Indonesian politics and business respectively for three decades”.
For those who don’t know, Liem Sioe Liong, also known by his Indonesian name Sudono Salim, founded and built the Salim Group into the largest business group in pre-Asian Financial Crisis Indonesia. In my 1991 report on Indonesian business groups I calculated that the group’s turnover to have accounted for a massive 5% of Indonesia’s GDP (publication list is here).
Put another way, companies associated with Liem had turnover equivalent to 1/20th of the world’s fourth largest country’s GDP. Only has Rinat Akhmetov’s SCM group accounted for an equally large concentration of economic control in a reasonably sized country (details here).
I particularly enjoyed the book’s detailed work on Liem’s early years. He was born very poor in rural Fujian province. So poor that his two older sisters were given away. At 21 he arrived Indonesia with only the clothes on his back, his money having been stolen en route, and spent 3 days in a holding cell until his brother-in-law came to take him to his new home in Kudos, Central Java. He immediately went to work as a small trader peddling goods on his bicycle in the Javanese countryside. He learned early to take risks, invest and to not “think small”. He did well and within a few years he saved the equivalent of five new cars. He lost all his savings when the notes issued during Japanese Occupation became worthless after the war. He rebuilt his business and spent the next four years running provisions for Central Java-based Indonesian Republican soldiers during Indonesia's struggle for independence. It was during this time that Suharto and Liem first met. The two would meet again in Jakarta and spend more time together after Suharto came to power in 1966.
As explained in the book, all the top generals during Suharto’s leadership partnered with at least one smart ethnic Chinese businessman. The businessmen provided funds and in return the generals provided protection and privileges. Liem was Suharto’s cukong, as they are known (cukong definition here).
The relationship was successful with both becoming the most powerful and richest Indonesians of their generation. Salim worked with his own partners and various combinations of the Suharto family, friends and Yayasans (“foundations”) to build some of the largest businesses in Indonesia and South East Asia. This includes Indonesia’s biggest cement manufacturer (Indocement), bank (BCA), food group (Indofood) and a myriad of other businesses. Suharto was one of the world's' longest sitting presidents ruling Indonesia for 31-years. The relationship is the typical cukong/politician with Liem providing capital and business acumen and Suharto protection and privilege.
The book interestingly notes that Liem and Suharto were not that different. Both came from humble backgrounds. Both believed in mysticism and fate, and trusted their instinct when making decisions. Both had fond memories of their poor, but simple childhoods. They were very typical of their birthplaces. Suharto was a typical Javanese (reserved, polite, indirect), and Liem a typical Fujianese (lives and breathes business).
There is a lot more in the book than Liem Sioe Liong, the Salim group, Suharto and their relationship. The book includes details of all the major news stories and key people that made up Suharto’s Indonesia. The Berkeley Mafia, Ex-President Habibie’s expensive attempts to leap frog development, Tommy Suharto’s ‘national car’ and his attempt to monopolize clove trading, Bulog, Ibnu Sutowo’s Pertamina, Suharto’s downfall and the 1998 Jakarta Riots.
The book also contains solid backgrounds of virtually all prominent groups. The Soeryadjaya’s Astra International, the Riady’s Lippo, Bob Hasan’s Apkindo, Ciputra’s real estate group, Eka Tjipta Widjaja’s Sinar Mas group, Sukanto Tanoto’s Raja Garuda Mas, Prajogo Pangestu, and all the Suharto family’s business groups – Bimantara, Humpass, etc.
The last third of the book is about the Salim group leading into and through the financial crisis and Suharto’s downfall. It’s fascinating to read how Anthony Salim, son of the founder and current group head, retained key assets in a chaotic environment when the Salim group was viewed as corporate enemy number one. The group was stripped of its largest asset, Bank Central Asia, within a week of Suharto’s resignation.
The book was written by the husband-wife journalism dream team of Richard Borsuk and Nancy Chng. They are the Jay-Z and Beyonce of South-East Asian journalism (or Stanley Turrentine and Shirley Scott for jazz aficionados).
All books should be this good. Wonderfully detailed, well-organized, and heavy on the facts. As per the authors’ other works this book is incredibly well-researched with extensive notes, index and bibliography.
I’m biased. Richard Borsuk’s superbly-researched, detailed and wonderfully long articles in the Asian Wall Street Journal helped my own research on Indonesian business groups in the early 1990s. In fact he edited an early version of one of my reports and provided additional insight. While I'm not as aware of Nancy Chng’s work, she is a co-founder of Select Books, the best source globally for information on South East Asian politics and economics. (link here)
It is also notable that both Liem Sioe Liong and his son Anthony Salim spent time with the authors. The senior Liem rarely gave interviews and was often criticized by the Indonesian and foreign press as a result. Hats off to both for opening-up.
If there is any criticism it’s that there are several instances of repetition. But this may be a good thing as each chapter and section can stand on its own. This repetition provides good context for each chapter.
In summary, this book should be on every Asian investor’s books shelf. It will appeal to anybody doing business or having an interest in Indonesia and South-East Asia. Scholars of overseas Chinese history will find this a tremendous resource, as will scholars of economic and financial history.
If this book is not on the syllabus for a class on emerging markets, economic development, Indonesia or South-East Asia, students should think twice about taking that class. If your SE Asian portfolio manager doesn't have this book on his desk, then you need to find someone better.
The best place to buy Liem Sioe Liong's Salim Group: The Business Pillar of Suharto's Indonesia, by Richard Borsuk and Nancy Chng, is through Select Books. Link is here.
|Liem Sioe Liong and his wife with Bill Clinton in the US in the early 1980s. Source: Salim Archives (copied from Liem Sioe Liong's Salim Group: The Business Pillar of Suharto's Indonesia)|
|Xi Jinping and Liem in 1991, a year after diplomatic ties were established between Indonesia and China. Source: Salim Archives (copied from Liem Sioe Liong's Salim Group: The Business Pillar of Suharto's Indonesia)|
|Liem and Xi Jinping in 2009 when XJP was China's Vice-President. Source: Salim Archives (copied from Liem Sioe Liong's Salim Group: The Business Pillar of Suharto's Indonesia)|