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It was supposed to have been a union of two legendary business dynasties, one from the West, the other from the East, to create an international coal-mining titan that is now the biggest in the world.

But deep cracks are beginning to show in the debt-ridden Bumi Resources, with Nathaniel Philip Rothschild, the wealthy 40-year-old British banker who forged a deal a year ago with Indonesia's powerful Bakrie brothers, coming out to criticize the way the firm was run, saying the debt-ridden company needed "radical cleaning up."

In a letter addressed to Ari Hudaya, chief executive of Jakarta-listed Bumi Resources and the parent company Bumi, which was published in the Financial Times last month, Rothschild said he was dissatisfied with the rate of progress to roll out the 'best practices of corporate governance' at the company.

He has called for an "overhaul" of the way the Bakries, one of Indonesia's most powerful but controversial family business groups, operate the company.

Rothschild also said Hudaya's dual role as CEO of both Bumi Resources and Bumi required "closer evaluation and scrutiny", and listed a string of loans which he identified as the main reason for the company's over-leverage. He also called on the 'non-coal' transactions to be made transparent to investors.

Reports had said that Bumi Resources made early repayment of US$600 million (S$784 million) of its debt to China Investment Corp last week, a move criticized by Rothschild because Bumi still has scores of debts to affiliated parties.

At the end of last month, the Bakries sold half of their stake in Bumi, without informing Rothschild prior to the sale.

This was after friends of Rothschild had earlier expressed interest in buying the stake.

In response to queries, a spokesman for Bumi said Rothschild has conveyed his concerns in a private capacity.

"We respect his view but reject it outright," said Bumi Resources director Dileep Srivastava. "We disagree outright with his comment as it is unsubstantiated by facts." He said everything regarding Bumi Resources" financials has been transparently disclosed to the public.

"And all of them have been approved not only by our shareholders but, as a board member of Bumi Plc, Rothschild himself has acknowledged and approved these financials too."

Bumi Resources says it has been rewarded for good corporate governance practice. "So we must emphatically reject outright this opinion if he implies anything other than that Bumi Resources is clean and transparent," said Dileep.

Rothschild's move to partner with the Bakries late last year raised eyebrows. The Briton comes from a country where the level of standards on corporate governance is high, while Bumi has had serious issues with transparency.

The family patriarch, Aburizal Bakrie, is chairman of Indonesia's largest political party Golkar and was the main financial backer of President Susilo Bambang Yudhoyono during his 2004 election campaign for his first term in office. Aburizal himself is listed as a candidate for the next presidential election. However, the family has faced tax evasion allegations which have never been proven.

The head of research of a foreign brokerage said foreign investors should avoid too powerful business groups in Indonesia as they are often "too big and risky to challenge" when it comes to how they do business. He added that political connections still played a big part in business dealings in the country.

There is a "damned if you do, damned if you don't" perception in Indonesian mining, said David Quinlivan, executive chairman of Britain-based Churchill Mining, which is embroiled in a coal mining license dispute in Indonesia. "As a foreign investor in Indonesian mining, you can't get anything done without a powerful local partner, and once you get a powerful local partner, they turn that power against you."

Reprinted courtesy of Straits Times Indonesia. To subscribe to Straits Times Indonesia and/or the Jakarta Globe call 021 2553 5055.