The Real Story of Sukanto Tanoto

Sukanto Tanoto and Deutsche Bank

Sukanto Tanoto nowadays called himself An entrepreneur, philantropist, visionary and pioneer of a number of industries in Indonesia

But here’s the real story of his success, full of corruption.

Sukanto Tanoto started his business empire in 1971 with his forestry business and began expanding to other sectors after establishing Raja Garuda Mas Plywood with an investment of IDR 1 billion (USD 142,000) in 1973 (PDBI, 1997). Sukanto gained control over more natural forests in Aceh when he took over PT. Overseas Lumber Indonesia, which had HPH concession rights on 250,000 hectares of forest in 1979. He then expanded into oil palm plantations in 1980 in partnership with the Salim group, as well as other plantations and fisheries projects. At the same time, Sukanto diversified into the pulp industry with PT. Inti Indorayon Utama in 1983 and PT. Riau Andalan Pulp and Paper (RAPP) in 1994. Inti Indorayon Utama’s cost was about USD 402.2 million while RAPP cost USD 2.15 billion. Sukanto took over PT. United City Bank in 1987.

Twenty-five years after his first investment in the forestry sector, his business empire through domestic and foreign investment had expanded into 16 sectors. His conglomerate was valued at IDR 4 trillion (USD 571 million) by the end of 1996.

Sukanto Tanoto took over the United City Bank from its previous owner, James Semaun, and changed its name to Unibank in 1990. In 1997, at the time of the crisis, he turned the bank into a publicly listed company with total assets of IDR 1.9 trillion. At the time of this transaction, he and his partner owned 25 percent of the bank’s shares. Unibank was considered healthy by the Bank Indonesia and IBRA in 1997 and did not enter the recapitalization program. Interestingly, only a year after going public Unibank started showing structural problems and was placed under the Bank Indonesia’s ‘close supervision’ category. The Bank Indonesia requested that Unibank replace its board of directors, increase its capital and temporarily cease certain activities. Despite these requests, Unibank’s health continued to deteriorate. In November 2000, Bank Indonesia put Unibank into its ‘special supervision’ category and finally, at the end of October 2001, closed it down. Some analysts suggested the Bank Indonesia should have closed Unibank down in June 2001. However, since IBRA (representing the Indonesian government) did not have funding to repay Unibank customers’ deposits, the decision was delayed until October 2001

Sukanto Tanoto successfully avoided being held liable for the costs of closing Unibank. By the time the Bank Indonesia finally closed it down, Tanoto was no longer the owner, and none of the shareholders owned more than five percent of its total shares. In August 2001, two months before the closure, Bank Indonesia, Bapepam (the Capital Market Supervisory Agency), and IBRA had allowed Unibank to announce changes in the composition of its shareholders, and to break up its ownership into shares of less than five percent. This allowed shareholders to avoid reporting requirements, which applied to transactions involving shares equal to, or more than five percent of total shares. Some analysts felt this move was engineered to protect Sukanto Tanoto, the controlling shareholder of Unibank, from his obligations.

The Indonesian government could not force Sukanto Tanoto to enter a shareholder debt settlement as they did with Bob Hasan. Tanoto had no liability to the government, despite the fact that IBRA had to repay customer deposits of IDR 3.1 trillion or about USD 442 million. The story did not end there however; as a result of IBRA’s own regulations it was forced to pay up to IDR 70 billion, or about USD 10 million, towards deposits owned by several subsidiaries of Tanoto’s RGM Group. Expansion while not repaying debts Sukanto Tanoto, the owner of the Raja Garuda Mas Group, gained significant financial benefits from the financial crisis. He was able to expand his pulp mills in Riau while not paying his obligation on time. Foreign and local financial institutions allowed the group to increase its mill capacities. Using its holding company, Asia Pacific Resources International Ltd. (APRIL) that controlled Riau Andalan Pulp & Paper (RAPP) and Inti Indorayon Utama, the Raja Garuda Mas Group raised RAPP’s mill capacity from 850,000 tons per year in 1999 to 2,000,000 tons per year in 2001 making it the largest pulp and paper mill in the world (Barr, 2001).

From: http://www.cifor.org/publications/pdf_files/Books/BSetiono0701.pdf

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: