The authors’ answer as to where the fortune of Suharto’s son came from applies for other countries, too.

Putra Suharto, known with the name Tommy, is son of former president of Indonesia. I do not know if he is still alive and fine; may God give him a long life. Tommy had a personal fortune which was estimated at $800 million by the mid 1980s and a fabulous playboy life, according to the book Economic Gangsters by R. Fisman and E. Miguel.

On the eyes of the man on the street, Suharto family made their fortune by demanding a share of companies wanting to do business with the government. According to President Suharto, Tommy was definitely a successful businessman, an entrepreneur. Let me repeat that his personal wealth worth was $800 million. What an entrepreneur, right? Fisman and Miguel are developmental economists and in their book, they ask as calmly as scientists: “how many of Tommy’s millions came from his skills as an investor and manager and how much from an indulgent father’s handouts?” At first glance, there is no proper answer to this question. For some of us, the answer is unclear even then. The authors, however, give a convincing answer, taking departure from the share prices of Tommy’s companies. Here it goes:

The stories that Suharto’s medical condition is turning bad spread around starting with 1990s. On July 4, 1996, the government announced that Suharto went to Germany for health controls, which was interpreted as he had a heath attack. Shares in Bimantara Citra, the big media group owned by Tommy, dropped by 10 percent overnight between July 4 and 5. You might argue that movements of share prices of a company might change under the stock composite index. This time, my response will not be the usual “Yes you are right.” Between the beginning of 1996 and July 4, 1996, the Jakarta Index and the share prices of Tommy’s company moved harmoniously. Interestingly, the harmony disappeared immediately after the rumors about Suharto’s health condition. There is more on this. The drop in Bimantara Citra’s shares started a few days before July 4^th: the drop recorded until July 4^th was 5 percent. Authors argue that the main reason was that shareholders who were informed of Suharto’s travel to Germany tried to sell off their shares in advance.

I guess the reason for the sell-offs and the drop in share prices right before and after the rumors about Suharto’s medical downturn is obvious: The economic “worth” of Tommy would evaporate as soon as Suharto was left out of politics. Taking departure from this, authors answered “calmly” that Tommy’s millions came from his father’s handouts.

During Tuesday’s commentary, I talked about the conference on “corruption and economic development” in Cairo. During the conference, Serdar Sayan of TOBB University of Economics and Technology also presented a paper. Inspired by the story of Suharto’s son, he carried out a similar research on Saddam family. No surprises: The same picture appears when the shares of the companies which are owned or managed by the members of this distinguished family are investigated. Such research makes one understand why Cairo, which could have become an astonishing city, actually is in a miserable condition.

And a note to the self: I realized that Tuesday’s commentary gave the impression that I have read Akerlof’s book Identity Economics, which I did not. I apologize for insisting on this mistake.

This commentary was published in Radikal daily on 29.03.2012