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Economy

Indonesian tycoons place bold bets as Widodo's economy inspires confidence

Armed with higher net worth, billionaires are making bolder investments

From left: CT Corp. Founder and Chairman Chairul Tanjung, Salim Group Chairman and CEO Anthoni Salim and Lippo Group Chairman Mochtar Riady

JAKARTA "The Future is Here Today." This slogan is splashed across billboards all over Jakarta, advertising a massive satellite city project on the outskirts of the capital. Open a newspaper or turn on the TV, and you are bound to encounter the same five words.

On weekends, buyers are dazzled with tours of the new 500-hectare township, called Meikarta. Orange golf carts zip them around a sprawling park and construction sites where cranes tower overhead.

Lippo Group, an Indonesian conglomerate owned by the Riady family, launched the project in May and plans to develop at least 250,000 residential units, along with schools, malls, hospitals and more. It is ambitious even for a group known for aggressive marketing campaigns.

It is also a sign of the times.

Indonesia's most powerful companies and tycoons are lining up big domestic bets under President Joko Widodo -- a clear sign that doing business has become easier.

These bets also signal that business heavyweights are confident in Indonesia's political stability. Ethnic-Chinese tycoons tend to stay out of the public eye and avoid politically sensitive investments, especially after the 1997-98 Asian financial crisis, when their cozy ties with former President Suharto elicited public outrage. But recently, companies linked to billionaire Anthoni Salim, whose father was known as Suharto's closest business partner, bought large stakes in an infrastructure developer and water treatment companies in Jakarta.

The markets have rewarded the tycoons handsomely. The country's top 10 richest people -- nine of whom are ethnic Chinese -- have a combined net worth of about $80 billion, up nearly 50% from three years ago thanks to rising asset and commodity prices, according to Forbes.

Foreign companies' reactions to Widodo's reform drive, meanwhile, have been mixed, partly because economic growth has not accelerated as hoped. On Dec. 22, Salim-controlled food company Indofood Sukses Makmur announced it is buying out Japanese beverage producer Asahi Group Holdings' stake in local joint ventures for nonalcoholic drinks.

The pair launched the partnership only five years ago with much fanfare, vowing to cater to Indonesia's growing middle class. Yet the business struggled with lackluster demand.

Widodo has cut foreign ownership limits in industries such as tourism and e-commerce, potentially posing challenges for domestic consumer businesses. But the government has been less friendly to overseas players in sectors like mining, where it has tightened controls on foreign ownership of raw natural resources.

A string of international companies, including Newmont Mining of the U.S. and South Korea's Samtan, have sold off assets to local tycoons. Widodo showed no sign of budging in an interview with the Nikkei Asian Review on Dec. 22, saying: "We don't want to sell natural resources. We want to sell trust."

HAVES AND HAVE-NOTS Beneath the surface lies the potential for social friction that could give Widodo's adversaries ammunition.

While Indonesia's tycoons are racking up gains, 82% of the country's adults have less than $10,000 in assets, according to the Credit Suisse Research Institute. That is higher than the global average of 70%.

As presidential and regional elections near, inequality could give the public its next issue to rally around, after the large demonstrations against former Jakarta Gov. Basuki Tjahaja Purnama over accusations that the ethnic-Chinese Christian had insulted the Quran.

Anies Baswedan, who beat Purnama in the gubernatorial election in April, appears to be capitalizing on an apparent return of anti-Chinese sentiment. "In the past, all of us natives had been oppressed and defeated," he said in a much-criticized inaugural speech in October. "Now that we're free, it's time to be the host of our own home."

Such rhetoric, if it snowballs, could make life decidedly less comfortable for the conglomerates.

Nikkei staff writer Erwida Maulia in Jakarta contributed to this story.

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