Indonesian Magnate Mochtar Riady:
'When Everyone Gets Out, I Go In'
This prominent ethnic Chinese Indonesian tycoon has written the book on the art of mixing business and politics. How exactly has he created his legend?
'When Everyone Gets Out, I Go In'By Hsiao-Wen Wang
From CommonWealth Magazine (vol. 458 )
Mochtar Riady has experienced three wars during his long life: World War II, the Chinese Civil War, and Indonesia's War of Independence. And this magnate's career has experienced three main phases, as Indonesia's best-known banker, as the ethnic Chinese capitalist who gained access to the White House, and now as an Asian real estate tycoon with interests in Seoul and Chengdu.
The 81-year-old businessman typifies an Asian godfather, with his chameleon-like past and innate skill in wheeling and dealing. From his rags-to-riches story, it is easy to understand that if Taiwanese businessmen want to gain a foothold in the Indonesian market, they will have to deal with the complex interlocking relationships between political and business circles common to most emerging countries and be ready for both risks and opportunities.
Whenever this emerging nation has faced widespread economic distress and a multitude of problems, Lippo Group founder Riady has built a huge market by being the earliest to invest heavily.
"I started doing business when I was in my twenties. My business in a sense was born with the Indonesian republic," says a proud 81-year-old Riady, sitting in a spacious office in his Mochtar Riady Center for Nanotechnology and Bioengineering.
After World War II at the age of 18, Riady became the head of an East Java overseas Chinese students' association and enthusiastically organized the students to resist the Dutch colonial authorities. The Dutch arrested Riady and threw him into prison before expelling him from the country. He took the opportunity to return to China and study at Nanjing Central University. One of his classmates there, K.T. Li, eventually became known as the father of technology in Taiwan.
When the Nationalists retreated to Taiwan in 1949 after losing the Chinese Civil War to the communists, the 20-year-old Riady ended up in Hong Kong. He then returned to Jakarta, where he got his first experience as a clerk in a car shop and then worked in the department store founded by his father-in-law while also serving as a shipping agent.
Growing Bank's Total Assets 390-fold
When he first entered Indonesia's banking sector, Riady targeted markets that everybody else frowned upon, soliciting deposits from Indonesia's bicycle industry and Minnan Chinese.
In the early 1970s, Indonesia's government encouraged small banks to merge and restructure. Sensing an opportunity after having worked in the field for over 10 years, Riady raised some capital and acquired a number of banks to form Bank Panin in 1971. The bank also received approval to deal in foreign exchange. Within three years, Riady increased the bank's assets 20-fold, turning it into Indonesia's biggest private financial institution and springing himself to fame.
During that period he also gained a growing number of influential Taiwanese friends, and developed strong relationships with leading entrepreneurs Jeffery Koo (ChinaTrust Group), Y.S. Miao (Lien Hwa/Mitac Group), and Kao Chin-yen (Uni-President Group).
In the mid-1970s, Riady gained the attention of ethnic Chinese tycoon Liem Sioe Liong, also known as Sudono Salim, who at the time controlled 5 percent of Indonesia's GDP. He was hired by Liem to take over as the Bank of Central Asia's president and chairman, and the bank's assets grew 390-fold over a 15-year span. Riady's exploits established him as one of Indonesia's top bankers and turned him into a household name.
By the time he was 53, Riady decided that he no longer wanted to work for anybody else, and he formed the Lippo Group with Liem. The group's Lippo Bank, which had been in business since 1948, safeguarded the core cash flow of the group's diversified interests, from retailing and property development to media.
Business as the Art of War
Although the Asian Financial Crisis of 1997 nearly destroyed Lippo Bank, sending the financial institution's share price to 1 percent of its original value, Riady used his connections to regain ownership of the bank. He then sold it in 2005 at four times its net value to Santubong Investment, wholly owned by Khazanah Nasional Berhad, the investment arm of the Malaysian government.
"He is very good at buying and selling banks," said one Indonesian banker.
"Doing business is like Sun Tzu's Art of War. Before you start, you have to think clearly how to retreat," Riady says. Because he always first figures out how to pull back, Riady dares to enter risky markets.
In 1984, just as an emigration wave was budding in Hong Kong in anticipation of the colony's return to China in 1997, Riady bought the Hong Kong Chinese Bank (renamed China Resources Bank in the late 1990s). Five years later, as foreign investors rushed to pull out their capital from China after the Tiananmen Incident, he acquired the Lippo Centre in Hong Kong. "When everyone gets out, I go in. At that time, it cost HK$4,000 per square foot. Today the same square foot costs 200,000," he said, demonstrating his familiarity with the topic.
When it comes to the two games of money and power, Riady has always made sure he has a seat at the table.
During an earlier economic development stage in Southeast Asia, when connections and political protection were more important than efficiency or global competitiveness, Riady invested in politicians based on business calculations.
In a commercial environment in which the government limited competition, and obtaining permits was the foundation of doing business, businessmen seized any new opportunity the moment it presented itself. Indonesian conglomerates followed a two-pronged secret of success – on the one hand engaging in a level of diversification that Western enterprises could barely fathom, and on the other hand securing powerful relationships and the concessions and monopolies they delivered. What induced jealousy in other Indonesian tycoons the most, however, was Riady's relationship with Bill Clinton, which began before Clinton won the White House.
Peddling White House 'In' to China, Indonesia
When Riady bought a US$16 million stake in Little Rock, Arkansas-based Worthen Bank in 1984, he met then 30-something Arkansas governor Bill Clinton. He was also a client of Hillary Clinton, who was a partner at Rose Law Firm. Riady soon began making political contributions to the Democratic Party and would donate a total of US$700,000 over the years.
In the United States, Riady's donations left him implicated in the 1996 "Chinagate" scandal, in which he and other Asian businessmen were accused of funneling funds from China to the Clintons and the Democratic National Committee. In Indonesia, however, Riady's cozy relationships with public officials enabled him to win many land development concessions from the government. He also developed close ties with the Jiang Zemin government in China.
"Riady's goal was to sell his relationship with Clinton to two governments, Indonesia and China," a former Lippo Group executive told the Washington Post.
Soon after Clinton took office in early 1993, Riady wrote him a four-page letter urging him to grant Most Favored Nation trading status to China and to support the participation of Indonesian president Suharto at that year's G7 meeting.
"Clinton is my old friend," Riady recalls with a laugh in fluent English during an interview otherwise conducted in Chinese.
Behind Mochtar Riady's desk in his office hangs a painting of huge waves crashing into a dark coastal reef, generating a magnificent spray. Some might see it as a metaphor for his career.
"I hope for shocks. It's not interesting when things are calm," he says, squinting at the painting, his expression seemingly looking into the distance, ready to embrace another challenge.
Translated from the Chinese by Luke Sabatier
Born in 1929 in Malang, Indonesia; his ancestral home is Putian in China’s Fujian Province.
Founded Lippo Group: Has annual revenues of US$4 billion. Was once Indonesia’s second biggest conglomerate and now ranks eighth. It has interests in property development, health care (hospitals), retailing and media.
The Lippo Group consists of nearly 20 listed companies in Indonesia, Hong Kong, China and Singapore, with total assets exceeding US$10 billion and around 40,000 employees.