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February 20, 2013 3:26 pm
One of the dirtiest shareholder battles the City of London has ever seen will come to a head on Thursday. Shareholders in Bumi plc, the troubled, Indonesia-focused coal miner, must vote to back either financier Nat Rothschild or the board over their different plans to sever ties with Indonesia’s powerful Bakrie family.
Mr Rothschild, the scion of the banking dynasty, has allied with Hashim Djojohadikusumo, an Indonesian oil and gas tycoon, to boost his attempt to take control of Bumi’s board after falling out with the Bakries.
But there is more than investor returns at stake. While Mr Djojohadikusumo and Nirwan Bakrie, who heads his family’s business empire, are locked in a corporate duel, their older brothers are fighting it out back in Indonesia for a much bigger prize: the presidency of one of the world’s hottest emerging markets.
Aburizal Bakrie, the 66-year-old family patriarch, has been chosen as the 2014 presidential candidate by Golkar, the party of former dictator General Suharto.
The only other mainstream candidate to announce an interest thus far is Mr Djojohadikusumo’s brother, Prabowo Subianto, a tough-talking, 61-year-old former general who was a Golkar ally of Mr Bakrie before quitting to set up his own party.
Fifteen years after Suharto was ousted after a popular backlash against cronyism and corruption, Indonesia is hailed by world leaders from Barack Obama to David Cameron as a vibrant democracy. Investors are enticed by rapid economic growth driven by a consumer spending boom.
But despite the undoubted deepening of democracy, the enduring clout of figures such as Mr Bakrie and Mr Prabowo shows that Indonesia is still struggling to escape its difficult past.
“We really didn’t go through a process of regime change when Suharto resigned in 1998,” says Wimar Witoelar, a former presidential spokesman and prominent political commentator. “I hope there will be a way to escape a race between two unacceptable rivals. The reason they are visible now is not because they are popular but because they are riding a wave of oligarchy.”
Susilo Bambang Yudhoyono, the president, will step down in 2014 after reaching Indonesia’s two-term limit. He has proved a disappointment to many voters in this sprawling archipelago of 240m people by failing to maintain the momentum of political reform and anti-corruption efforts.
With 17 months until the election, there is a notable dearth of popular candidates. Some attribute the prominence of Mr Bakrie and Mr Prabowo to their wealth.
“Because of the high cost of campaign financing, we’re seeing the emergence of leaders who have access to money,” says Anies Baswedan, an academic who is part of a group of intellectuals that is trying to find alternative presidential candidates. “This is jeopardising the quality of our democracy.”
Although both men claim to offer Indonesia a new, brighter future, their families rose to prominence during the 32-year dictatorship of Suharto.
The Bakries were major beneficiaries of Suharto’s policy of promoting ethnic Indonesian businessmen to dilute the economic domination of ethnic Chinese tycoons. They have expanded their telecoms-to-coal business empire over the past decade, acquiring new assets but bigger debts.
Explore this interactive graphic in which Jonathan Guthrie sets the scene on a complex boardroom battle
Meanwhile, a ruthlessly ambitious Mr Prabowo rose to become a special forces general in Mr Suharto’s military after his father had been the dictator’s first trade minister. He also married one of the strongman’s daughters although they later divorced.
Both men have attracted controversy. Mr Bakrie is widely criticised over the allegation – consistently denied by the family and rejected by an Indonesian court – that one of their oil companies was responsible for a catastrophic mud flow in Sidoarjo, East Java.
Mr Prabowo, who was discharged from the military after the fall of Suharto in 1998, has been persistently accused of human rights abuses. He insists he has always acted in the national interest. Although his brother is his main financial backer, Mr Prabowo also has his own business group, Nusantara, which owns plantations, a paper mill and coal mines.
Mr Bakrie insists that the corporate battle with Mr Rothschild and his new ally has no relationship to his politics. “That’s nothing to do with me. It’s only the news [media] that made the connection between me as the Golkar party and Bumi, including the Financial Times,” he told the FT at a recent presidential rally.
But most observers believe that politics does play a role.
People close to Mr Djojohadikusumo and Mr Prabowo say they take the view that “their enemies’ enemy is their friend”.
If Mr Rothschild’s attempt to shake up the Bumi board on Thursday succeeds, he has pledged to release a report by Macfarlanes, a law firm, into alleged financial irregularities at Bumi which could further damage the Bakrie family’s standing.
Either way, voters thus far seem underwhelmed by their candidacies.
A recent survey of 1,200 voters by the United Data Centre gave Mr Prabowo 17 per cent support and Mr Bakrie just 10 per cent. The leading figure, with 21 per cent, was Joko Widodo, who stormed to victory last year as the governor of Jakarta, vowing to fight corruption and waste and listen to voters’ concerns.
Mr Widodo has so far insisted that his focus is on running Jakarta rather than aiming for the presidency.
“I think neither of these oligarchs will become president,” says Marcus Mietzner, a lecturer in Indonesian politics at the Australian National University. “I think Mr Widodo will be president in 2014. There has been a seismic shift in the polling numbers. He’s a symbol of a better Indonesia and a better way of doing politics, he’s the white knight on the horizon.”
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