Looming Large

It'

s hard to say no to Taufik Kiemas. That much a senior executive from Indonesia's largest foreign investor, U.S. mining giant Freeport McMoRan, knew when he accompanied President Megawati Sukarnoputri's controversial husband to the company's mine site last September. Freeport officials were aware that Taufik had been asking about a chunk of shares in the company's Indonesian operations previously held by Mohamad ("Bob") Hasan, a confidant of former President Suharto. Indeed, the issue of the shares came up soon after the Freeport executive boarded the presidential C-130 aircraft carrying Taufik and a 40-member entourage. With Hasan serving a lengthy jail sentence for corruption, the executive was told, the 4.7% stake in PT Freeport Indonesia was in limbo. As a committed nationalist, Taufik told the executive, he—and the President—felt it would be best if the stake remained in Indonesian hands. The executive smiled politely, sources close to the company say, then said he would have to get back on this to his bosses in the U.S.

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In the end, Taufik was handed a rare no. Freeport had acted as guarantor for the original loan from Chase Manhattan of $315 million, which enabled Hasan to buy the shares. It had also pledged to lend Hasan's company any shortfall on the interest payments not covered by dividend from the stock, a sum that had climbed to some $69 million by late 2001. Freeport withdrew its guarantee and paid off the $253.4 million remaining on the loan. In return the company got back the troublesome 4.7% stake. Freeport says the decision to repay the loan came after Hasan's company said it could no longer keep up its interest payments and had "nothing to do with any Indonesian official."

The story of how Taufik sought to keep a chunk of Freeport shares under Indonesian ownership—which he himself confirms—is one example of what is today Jakarta's hottest topic: the increasingly dominant role the President's husband is exercising at the most senior levels of government and business. This isn't another case of your regular, pushy presidential spouse playing gatekeeper, but of a consummate networker aggressively meddling in matters with national ramifications. To many Indonesians, the flamboyant 58-year-old Taufik is now simply the most powerful man in the country. "If Megawati is Number One and Vice President Hamzah Haz Number Two," says Alvin Lie, an M.P. for the opposition National Mandate Party, "then Taufik is One-and-a-Half."

Taufik's influence doesn't come solely from his three-decade marriage to the President. Of the pair, he has always been the political animal. He persuaded a reluctant Megawati to enter politics in the first place, and wielded a powerful voice in the councils of her Indonesian Democratic Party of Struggle. But it is typical of the quantum leap his stature and influence have taken since Megawati became President a year ago that, though he is only an ordinary M.P., the President's husband is now "de facto chairman" of the party, says senior M.P. Haryanto Taslam. Controlling the largest party in the country's legislature has given Taufik the opportunity to put those loyal to him in key positions, politicians and analysts say. The perception is that people linked to him—many of them men from his hometown of Palembang in Sumatra—run everything from key committees in parliament to agencies such as the state workers' pension fund to the debt recovery agency. And if his opponents are to be believed, hardly a major policy decision can go through the Cabinet without his approval. The practical benefit of having friends in important government positions was vividly displayed last week in a July 4 ceremony presided over by Taufik in Palembang, where the South Sumatra Governor and the head of the state toll-road company, also a Palembang native and close Taufik ally, signed an agreement for the construction of a $70 million toll road. The 23-kilometer highway, which will link Palembang to a nearby town, will be the first of its kind built outside the country's main island of Java.