King of the kleptocrats

Another attempt to make a dent in Suharto’s stash

THE tenth anniversary this month of the onset of Asia’s financial crisis is a good moment to pay tribute to one of its central figures: Suharto, Indonesia’s president for three decades until 1998. Indonesia’s government has this week filed a civil lawsuit, seeking to recover $441m allegedly misappropriated from government institutions by Mr Suharto and a foundation he set up, and claiming an additional $1.1 billion in damages.

If Transparency International, an anti-corruption watchdog, is to be believed, this is just a drop in an oceanic illicit fortune. In 2004 the group estimated that he and his family had salted away up to $35 billion, nearly 4% of the country’s GDP. This seems literally incredible. Even if it were true, Mr Suharto, who by all accounts lives comfortably enough in Jakarta these days, is certainly not enjoying more than a tiny portion of his wealth.

But even if the family holds a fraction of the alleged wealth, it would be one of the biggest dynastic swindles any country has ever suffered. The family’s business interests covered the entire economy. It sometimes seemed there was no project too grandiose, nor any rent too small to be shunned by a member of the family. Mr Suharto’s late wife, Tien, was, inevitably, known as “Madame Tien per cent”.

Some businessmen say this probably sold her and her children short. As in many developing countries, the quickest and most bountiful way to riches for those close to power was through commissions from foreign firms winning huge contracts, whose prices were then inflated to ensure the firms did not lose money. Since the projects would usually be financed by commercial loans and government-backed export credits, the burden of repaying the bribes would fall on the national debt.

A family manIn this, Indonesia was no different from many other corrupt yet creditworthy countries of the 1970s and 1980s, such as Nigeria, which was also enjoying an oil bonanza. The Suhartos’ great innovation was to create a family monopoly that preserved competition. Three or four powerful international companies would fight tooth-and-nail for a huge contract. Each one would employ a local partner who, in turn, was tied to one of the Suharto children. The family business never lost.

What seems incredible now is the respect this outrageous system was accorded at the time. In 1995 a senior World Bank official conceded that if one of Mr Suharto’s daughters won, say, a toll-road contract, it probably cost 20% more than it should, “but at least the road got built”. Unlike, say, Nigeria, Indonesia had devised what looked like an efficient form of corruption.

Its 25 years of healthy economic growth, relative fiscal discipline, impressive population control and poverty-reduction results made it a poster-boy for the development banks. Even The Economist declared it in mid-1997 well-placed to withstand the regional financial shock.

At least, however, we did not commend Mr Suharto’s dictatorial ways. Yet even they had fans. Lee Kuan Yew of Singapore and Mahathir Mohamad of Malaysia were more vocal spokesmen for “Asian values”—the notion, broadly speaking, that a bit of discipline never did an emerging economy any harm. But Mr Suharto was the great exemplar, turning a teeming, fractious nation into an economic powerhouse.

It turned out, however, to be a house of cards. No country suffered more from the financial crisis. The Indonesian rupiah crashed and the economy contracted. It took until 2004 for GDP to regain its 1997 levels. Mr Suharto was swept from power in the maelstrom. He has never been convicted of any crime, though one of his sons served almost five years in prison for ordering the murder of a judge. Criminal charges against Mr Suharto himself were dropped when he was declared too ill to stand trial in 2000. (Prosecutors have tried again, but have been repeatedly rebuffed by doctors.) Hence the civil case. Only the sunniest of optimists could believe it might end in even token restoration of part of the booty the Suhartos are accused of amassing.

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