The rise and rise of Edwin Soeryadjaya
Yanto Soegiarto | November 03, 2011

Veteran Indonesian businessman Edwin Soeryadjaya has struck gold with palm oil plantations, coal mining, toll roads, consumer goods and telecommunications. Now, the 62-year-old is looking for new investment opportunities.

Edwin Soeryadjaya should be satisfied with his life’s achievements. While he’s by no means dissatisfied, he still keeps his eyes open. Recently, he moved into airlines and acquired a motorcycle distribution company.

For a man who only seriously started working  at 46, he has not done too badly. He has riden the commodities boom and made a fortune by identifying the right investments.

His next big bet he says will be in consumer products, with a particular focus on food and beverages. With domestic consumption contributing 60% of the country’s gross domestic product growth, that may not be a bad decision.

Over the next few years, Saratoga Capital, the private equity  firm founded by Edwin and Sandiaga Uno, will allocate 30% of its investments in consumer goods.

“A businessman always looks for new opportunities whether in difficult or good times,” he told GlobeAsia. “We must always adopt positive thinking and do our best at all times.”

The 2010 Ernst & Young (EY) Entrepreneur of the Year, who  owns majority stakes in huge companies such as coal miner Adaro Energy and telco Tower Bersama Infrastruktur, said stable economic and political conditions meant prosperous  times for equity investors.

“We just sealed a deal in equity ownership of a motorcycle distribution company in East Java,” he says, adding there was a certain wistful pleasure about the acquisition. “It was previously owned by my father, the late William Soeryadjaya.”

Saratoga has also concluded a partnership with Singapore’s Tiger Airways in the acquisition of Mandala Airlines. He believes there is an inescapable logic about that deal: as the economy grows, the demand for air transportation will increase, he argues.

“Both Saratoga and Tiger Airways see there is room to grow in this industry. Saratoga holds a majority stake in Mandala now and we expect the airline will fly again next year. We are still waiting for the flight certification process to be finalized and other technicalities to be completed.

“Although competition is tough in this sector, our deal will be positive for the public because they get another airline alternative and fares become more affordable.”

Mandala president director Diono Nurjadin adds that the joint venture will adopt Tiger Airways’ business model, offering low fares in the five-hour flight time category to domestic and international destinations.
“We hope we get the support of the government so that Mandala will be able to fly again soon,” he adds.

Saratoga co-founder Sandiaga Uno notes that Saratoga Capital acquired 51% of Mandala and has budgeted $250 million to jump-start the new venture.

Coal, fish, palm oil and more

Edwin’s other business interests include PT Adaro Energy Tbk. Established in 2004, it is now the second largest producer of thermal coal in Indonesia. Adaro’s production capacity is currently 45 million tons and is expected to reach 80 million tons by 2013.

He owns Bonecom, which operates one of the largest fish processing companies in Indonesia with 10,000 tons of cold storage in Jakarta. It is one of six companies in Indonesia with licenses to export fish products to the US, Canada, the European Union, Japan, Korea, Russia and China.

Edwin’s palm oil plantation company is Global Kalimantan Makmur (GKM). It has a 41,000-hectare concession in Sanggau, West Kalimantan and potential area for development of approximately 27,000 hectares.

GKM has so far planted 13,000 hectares, with fresh fruit bunch production starting in 2010. Its crude palm oil processing mill was scheduled to open in mid-2011.

Fiber optics specialist iForte is another Edwin endeavor. The fast-growing infrastructure company has a micro-BTS license in the Jakarta-Bogor-Depok-Tangerang-Bekasi (Jabodetabek) area.

Also in telecoms, Saratoga has successfully built Tower Bersama Group from a small company with seven telecommunication sites into Indonesia’s second largest independent tower operator with 2,700 sites servicing 4,000 cellular signals. Tower Bersama Group’s customers include Telkom, Telkomsel, Indosat and XL.

Swings and roundabouts

Edwin has suffered setbacks on the road to business success. In 1993 his family lost control of their business, PT Astra International, which even then was valued at billions of dollars. It was another decade before Edwin began to re-emerge to make a name for himself in Indonesia and abroad.

Currently Edwin sits in sixth place on GlobeAsia’s 2011 rich list with an estimated net worth of $1.25 billion. He was inducted into the EY World Entrepreneur of the Year 2011 Hall of Fame in June alongside 50 other leading business minds.

EY Indonesia chief executive Giuseppe Nicolosi says Edwin is motivating the nation’s next generation of entrepreneurs. “Saratoga Capital is one of the large business groups honored and associated with integrity, transparency and profit,” he says.

“Through Edwin’s innovation, leadership and entrepreneurial spirit, Saratoga successfully diversified its portfolio to include mining, shipping, energy resources and agriculture.”

During tough economic times, Edwin believes a businessman needs to be backed up by world-class partners and governments that maintain their role as mature regulators and create opportunities for the best and brightest to shine.

“If everybody is doing well, then the country is doing well too,” he says.

To avoid the worst of the global economic downturn now hitting Europe and the US, Edwin says the Indonesian government should boost spending. “With that the government can build infrastructure,” he says. “But the government and the private sector must look for new ways to increase economic growth as well.

“At this point, the crisis overseas will have a slight impact on Indonesia. If our economic growth target is 6.5% then we will end up achieving around 6.2%.”

Asked how Indonesia should deal with the influx of foreign imports, the University of Southern California graduate advises a proliferation of efficiently-made, high-quality local products.
“If the quality of our products is good, it doesn’t matter how many imported goods enter Indonesia, our products will still sell,” he says.

Edwin was fortunate that the 2008 financial crisis did not affect him much. As foreign capital fled emerging markets, many Indonesian equity firms suffered. Saratoga Capital, which managed over $1 billion in funds at the time, was able to attract fresh cash flow.

“This was because our limited partners, such as the International Finance Corporation, the Commonwealth Development Corporation and PT Astra International were strong,” he says. “We received $150 million in fresh funds to invest.”

Last September, five banks loaned Saratoga subsidiary PT Tri Wahana Universal $92 million to construct an oil processing plant. PT Bank Negara Indonesia (BNI) is providing $20 million, while Hongkong and Shanghai Banking Corporation (HSBC), Bank of China, United Overseas Bank and Bank of Tokyo-Mitsubishi are chipping in the rest.

“We are the joint mandated arranger in disbursing credit to Saratoga’s subsidiary, PT Tri Wahana,” BNI corporate director Krishna Suparto told Bisnis Indonesia.

The syndicated loan is one of BNI’s projects for the second half of this year. The bank is eyeing other syndicated loans for corporations too, mainly in the infrastructure sector. Toll roads and power plants have been singled out as prospective targets for credit expansion, as have commodities and agriculture.

Saratoga took more than 77% of shares in Tri Wahana, a private oil refiner, from Harita Group in June. Its new plant will process 6,000 barrels of crude oil per day to produce fuel and derivatives. The oil will be sourced from the Banyu Urip field in the Cepu Block, located on the border of Central and East Java.

Saratoga also controls PT Bank Pundi through Recapital Advisors.

Edwin unabashedly vows to keep investing in new ventures. “I work for the investors, if I don’t manage their funds, there is no work for me,” he says.

Edwin admits his success is not a solo effort, but due to wise partnerships with other prominent businessmen who think the same way he does. Adaro Energy’s TP Rachmat, Benny Subianto, Boy Garibaldi Thohir and Sandiaga Uno make up his core group.

“We are stronger together,” he says. “We protect each other’s image. Our approach to policy is the same and always in the interest of stakeholders: first the clients or the consumers, second the country, third the employees and fourth the shareholders. As long as we are consistent we can advance together.”

Q & A

Man on a mission

Edwin Soeryadjaya spoke to GlobeAsia and sister publications The Jakarta Globe, Investor Daily and Suara Pembaruan, all part of BeritaSatu media holdings, on the sidelines of a recent University of Southern California Alumni Association event in Jakarta.

He covered a wide range of topics. Below, some key excerpts:

What impact do you think the ongoing financial crisis in Europe and the US will have on Indonesia?

I think it will lower Indonesia’s growth target from 6.5% this year to 6.2%, but that is still quite high. It all depends on how the government tackles the situation. It knew there was a problem and should have been like the United States: quick to implement preventative policies so that the uncertainty will not be prolonged.

What should the government do?

The government can’t do much because the crisis is happening overseas. However, it can increase its budget and boost spending to accelerate the economy. If the government doesn’t want what is going on in Europe and the US to happen here, it should provide domestic stimulus.

Has the government done a good job of handling the situation so far?

It’s debatable. The whole thing was a shock. Who thought Europe could experience these terrible financial woes? We hope the government will monitor the situation and be quick to react and take the necessary steps.

Our exports can increase if we have a free trade agreement with Europe. It won’t be easy to put one in place though. What do you think? Do we need to lobby the European Chamber of Commerce?

I am not following the developments but I am convinced that if we have the intention, we can make it happen. The problem with us is we are usually reactive instead of being aggressive. People won’t help us voluntarily. If we wait, and they don’t approach us, we have to take the initiative. We should not only lobby the European Chamber but also the countries involved directly.

As a consequence of the ASEAN-China free trade pact, many imported products are entering Indonesia. How do we deal with this?

The only way is to be more efficient. Businessmen should not always expect the government to help. You can’t be like Fiat in Italy. Fiat cars used to dominate Europe, you’d see them everywhere. Each time Fiat had a problem, the Italian government would step in and help. Yet it still can’t compete with other automobile brands. You simply can’t restrict other goods that are more efficient. It’s all about price and quality. If we have that, we still can sell.

What should businessmen do? It seems our products can’t compete.

Businessmen should be like elite athletes. If they want to win they must study their competitor’s abilities. In my case, I can always win because I am the eldest son in the family. Real competition is not like that. I gave you the example of Fiat. Both the government and the businessmen were wrong to adopt such a stance.

Do you think the government is giving an unfair advantage to foreigners investing in Indonesia?

No, the government has its limitations. We should be sensitive and quickly grab the opportunity to work together with foreigners and learn from them. Take the Chinese. They copy practically everything. Before they had partners, it was the businessmen who took the initiative. We should do the same. Give the foreign investors opportunities and use their know-how. They have the R&D, which is sometimes unaffordable. I happen to know about R&D in motor vehicles because of my background in Astra. I learned from our mistakes.

What industry is Saratoga eyeing next?

Businesses that are competitive. Foods. We have a majority stake in Bonecom. We also partnered with Tiger Airways in Mandala. Potential industries, such as motorcycle distribution, and others, which I can’t tell you yet. But for sure the easy and feasible ones. I don’t want to poison people.

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