The collapse of Corporate Indonesia

The global financial crisis has hurt the big Indonesian companies so bad that they are forced to sell their assets to repay debts. One example is the Bakrie group of companies. The largest corporation in Indonesia borrowed heavily during the past two years to finance an expansion drive. As a result, Bakrie stocks are now worth only a fraction of what they used to be. On October 7, 2008, the Indonesian Stock Market suspended trading of six Bakrie companies, which together accounted for about a third of daily trading value in the market. Now Bakrie is very desperate (who wants to buy those cheap and silly papers anyway).The government and the political elite are by any means trying  to bail out Bakrie, including urging state-owned companies to buy Bakrie stocks (for a very specific reason, they have to bail out Aburizal Bakrie). Other investors are cautious and uncertain. Only the foreign investers who might be interested. But at lowest price of course. In the banking sector meanwhile, Central Bank Governor Boediono said that the US financial meltdown will not have significant impact on Indonesian local banks (officialdom is always optimistic as ever). But the facts are different. An Indonesian depositor had difficulty withdrawing million of his own money from a local private bank. The bank simply did not have enough liquidity (most probably some of the money is deposited abroad or invested somewhere). Many others are likely to do so as they want blanket gurantees. A number of Indonesian banks, including Bank BNI, BRI, Bank Mandiri, Bank NISP and Bank Lippo have deposits in the Indonesian Central Bank-owned Bank Indover based in Amsterdam. The bank was hit hard by the credit crunch and had to be closed down. On October 6, 2008, the Indover Bank failed to meet a withdrawal request of 100 million euros. It is not clear whether or not the Indonesian bank deposits can be recovered. Based on existing regulations, the Central Bank can’t bail out Indover Bank by injecting funds. But now, the government is lobbying the lawmakers at DPR to change the legislation on grounds that if not, the shareholders will lose their money and on the part of Indonesia, it will lose its overall credibility. Indonesia’s largest bank, Bank Mandiri wanted an acquisition of Bank Indover but that effort also failed. The collapse of Lehman Brothers is to be blamed for the collapse of Bank Indover’s Credit Default Swaps (CDS). Who else are to blame? The rating agencies such Moody’s, Standard and Poor’s, JP Morgan and so forth. They are the ones who practically fooled every investor on earth. A class action should be launched against them. Also to blame were irresponsible Indonesian policy makers and elite who adopted laissez faire capitalism and the free market as their true ideology without check and balances (their Indonesian values and nationalism must be questioned). What’s happening to the state-owned companies? Sooner or later fall in the hands of the foreigners (why sell the cash cows?) Privatization violates the ‘45 Constitution. BUMNs are supposed to be one of the pillars of the Indonesian economy according the ’45 Constitution. What about the Indonesian property players? A shareholder of the prestigious Senayan City was reportedly offering his stake for sale (he borrowed money to build another high-rise project and can’t pay back). Other property projects are lacking buyers as well (don’t believe in the “sold” signs). What about the large export-driven companies? They are also on the verge of collapse due to drop in commodity prices such as CPO, coal and rubber. There is no more market in the US, Europe or even in China and India. As a result people, and especially the plantation workers will be out of work and can’t feed their families (1 million hectares of crude palm oil plantations are abandoned and harvests are rottening). Who says the global financial meltdown won’t affect the Indonesian economy? We are already feeling the pain. Capitalism has failed as proved by the crisis in the US and Europe. Neither can it work in Indonesia where the gap between the rich and the poor is too wide.