Indonesia's inquiry into cronyism may hit British firms

INDONESIA'S President, BJ Habibie, is considering the formation of a independent commission on corruption which will investigate business links between the family of the deposed dictator, Mr Suharto, and foreign investors, including a number of British companies.

The new body would look for evidence that foreign investors benefited from nepotistic favours granted by the former president. Contracts found to have been awarded unfairly would be withdrawn and retendered, although both the government and opposition rule out the possibility of legal action against foreign firms.

The special commission is part of a growing reaction against the Suharto family, some of whom became immensely rich during the former president's 32-year rule from the acquisition of lucrative business contracts and monopolies. Yesterday, in what looked like an attempt to pre-empt any investigation, Mr Suharto's son Bambang Trihatmodjo, and his son-in-law, Indra Rukmana, resigned from the board of Bimantara Citra, one of Indonesia's largest companies.

Last week, a joint venture between Thames Water and Mr Suharto's oldest son, Sigit, was suspended for review after allegations were made by the Jakarta city authorities that the contract was awarded without a competitive tender, on the orders of the former president. The public works ministry is also set to cancel a contract awarded to the construction firm Trafalgar House and a Suharto daughter to build a toll road in west Java.

The idea of the commission on corruption was recently discussed by Mr Habibie and Amien Rais, Indonesia's most powerful opposition leader and a potential future president of the world's fourth largest country.

"What we will do is review whether the deals were approved without fair and open public tender," said Djoko Susilo, an official of Mr Rais's Muslim organisation, Muhammadiyah. "If they were, then we'll have to cancel them and retender. But we don't contemplate legal action against foreign companies who profited from corruption with Mr Suharto."

The news will bring partial relief to British firms in Indonesia, many of whom are in business with members of the disgraced family. Last year, the United Kingdom was the biggest foreign investor in Indonesia: apart from Thames and Trafalgar House, PowerGen, Rio Tinto, BP, Rolls Royce, Taylor Woodrow, the Bank of Scotland and United Biscuits all have Suharto connections. Next week, the minister of investment, Hamzah Haz, will announce the review of nine projects agreed by Mr Suharto during his last months in power, which will almost certainly be suspended.

Mr Rais is also pressing for an investigation into the Suharto family fortunes. Yesterday, the former president's half-brother Probosutedjo, a banker and businessman, was quoted as saying that the family had no objection to an investigation.