Legitimate Businessman: Liem Sioe Liong

Liem Sioe Liong aka Sudono Salim, as you know, has passed away on June 10, 2012 yesterday, at the age of 95 years (or 96 years less one month). Although he’s gone, Uncle Liem, as he was usually called, will always be remembered as the founder of one of the largest business groups in the history of Republic of Indonesia, the Salim Group. As a tycoon, there are so much lessons to be learned from the figure. A friend of mine once said, "Everyone knows how Uncle Liem had working extremely hard in building his business empire. He is a perfect example for anyone who wants to succeed in pioneering a great business from absolutely zero.”

Uncle Liem (to be simple, let’s make it ‘Liem’ only) was born in the District of Fuqing, Fujian Province, China, in 1916. At that time China was in a continuous conflict and war with the Japanese, so that little Liem and his family had never live in peace as farmers. This encouraged Liem’ older brother, Liem Sioe Hie, to seek overseas for a better life, and the destination was to the south, to a town named Kudus. In 1938, at the age of 22 years, Liem then followed his brother. The sailboat carrying him successfully landed in Surabaya, East Java, and four days later Liem’ brother found him and then took him to the town of Kudus, Central Java.

In Kudus, Liem worked in a cracker factory. Unlike other workers who only work routine, Liem noticed that in the town, there are many cigarette manufacturers, and the industry was always requiring tobacco and cloves in large amount every year. Liem captured the opportunity, and he immediately tried to trading the tobacco and cloves, possibly with a capital from his father-in-law, which was a prominent merchant (Liem married to his wife, Liliani, at the age of 24 years). And his luck was in cloves. In the early 1940's, at the age of 25 years, Liem had become one of the largest cloves traders in Kudus.

But Liem’s great business was only lasted for a moment. In 1942, the Japanese landed in Indonesia, and stopped almost all economic activities, including Liem’s cloves trading business. After completely doing nothing for about three years, finally in 1945, the Japanese leftIndonesia, and Liem started to business again. At the time, Liem saw a greater opportunity rather than back to cloves trading, which was the business of providing logistics, medicine, and weapons for the soldiers of the revolution war, who defended the new Republic ofIndonesia from the Dutch efforts to back to colonize the country. After searched for a connection, Liem had finally met someone who was a father of Fatmawati, the wife of Bung Karno, the first President of the Republic. Liem then began his business of military logistics. In the army, Liem became acquainted with several high-profile officers of TNI (Tentara Nasional Indonesia/Indonesian Armed Forces), particularly Major General Kemal Idris, and Lieutenant Colonel Suharto.

In 1950, Liem moved to Jakarta along with his friend and partner, Suharto. In these years, Liem were still doing the business of providing logistics for the military, especially the Angkatan Darat (army). In the early 1950's as well, Liem established a soap factory to meet the needs of the army. In the mid-50s, Liem saw an opportunity in the banking business. As a result in 1957, Liem with his employee, Mochtar Riady, founded Central Bank Asia, which in 1960 changed its name to Bank Central Asia (BCA). Then, Liem also saw that the Indonesian people are very dependent on rice as staple food. His vision said that the people of Indonesia would require alternative food sources, which leads to the establishment of flour trading companies, PT Bogasari, in 1968.

In the same year when Bogasari established, ie 1968, Liem was introduced by Suharto to a fellow businessman from Fujian, Djuhar Sutanto. At that time, Suharto had become the President of Indonesia. The two men were match, so a year later, Liem and Djuhar established CV Waringin Kentjana, a company engaged in the business of export and import of commodities, including wheat (raw flour). Through Waringin Kentjana, Liem then obtained permission to import wheat from outside the country to be processed into flour by Bogasari in Indonesia. Bogasari then changed from a trading company into a manufacturer of flour, and successfully established its first flour mill in 1972, located in Tanjung Priok, Jakarta.

In Waringin Kentjana, Liem, who occupied the position of chairman, found a talented young man who was previously an employee of Djuhar’s business partner, Lim Chin Song, named Ibrahim Risjad. Risjad then appointed as finance director of the company. Later, a Suharto’s cousin named Sudwikatmono, also joined the company as licensing director for export and import. The quartet of Liem-Djuhar-Risjad-Sudwi later became the forerunner of the Salim Group. After successfully built a flour mill for Bogasari, in 1974, the group founded a cement company, PT Indocement. In the 70's, outsied BCA, Bogasari, and Indocement, Salim Group also founded many other companies with smaller sizes, which is engaged in various fields. Outside developing their own businesses, the Salim Group also helped a brilliant and young civil engineer, Ciputra, to establish PT Metropolitan Kentjana, a property company.

Then where was the position of Indofood, the group’s another large company? Indofood is actually established later. Here’s the story. After gained success with Bogasari, in the early 1980's, Liem began to making value added products of wheat flour, for increasing the profits, or course. After trying to make some kinds of products, finally in 1982, Liem creating an instant noodles product, which then labeled Indomie. Besides Indomie, Salim Group had also manufactures a variety of other foods.

Then in 1990, the Salim Group founded a food company called PT Panganjaya Intikusuma, which in 1994 changed its name to PT Indofood Sukses Makmur. The entire food businesses of the Group, including Indomie, then placed under the new company, including also Bogasari which was acquired in 1996. At that time, Indofood was only playing in the business of wheat flour and foods, and had not yet entered the agribusiness industry as it is now (such palm oil, sugar cane, rubber, etc.).

The heyday of Salim Group's business empire occurred in the early 1990's, where the Group owned three large companies that were the market leader of each industries, ie Bank BCA (largest private bank in Indonesia), Indocement (largest private cement company in Indonesia), and Indofood (largest food company, also one of the largest in Asia).

But the story was turned around in the end of 1990’s. In 1998, the monetary crisis hit Indonesia, President Suharto stepped down, and Salim Group business was instantly destroyed, including losing their two key assets, Bank BCA (to Djarum Group) and Indocement (toHeidelberg). Beyond that, the group had also lost some of other assets, such as Darya Varia Laboratories (DVLA), Indo Tambangraya Megah (ITMG), and Indosiar (IDKM) (but Indosiar has successfully retrieved), and many more. Luckily, the Salim Group managed to keep Indofood. At this moment Uncle Liem decided to retire, and the control over all the Salim Group business handed to his youngest son, Anthoni Salim(Anthoni, not Anthony).

Under the new boss, the Salim Group then focus on developing Indofood. In the last ten years, Indofood has entered into the business of production of cooking oil, margarine, milk, nutritional foods, sugar, soy sauce, and flavoring food. Outside Indofood, the Salim Group also keep doing business as usual, including developing some assets outside Indonesia. Mr. Anthoni himself was listed as one of the wealthiest businessman in Indonesia by Forbes Magazine, with a net worth of US$ 3.6 billion in 2011. But we will not discuss this further, because this is an article about Uncle Liem, not the Salim Group or his son.

On June 10, 2012, fourteen years after living peacefully in retirement, Uncle Liem eventually passed away. For a young man like me, it is always interesting to learn how Uncle Liem could pioneering a wide range of business, and eventually went on to become a tycoon. Well, we will share some of them here.

Success Secrets of Uncle Liem

First, Uncle Liem is adherent of the Chinese business philosophy: Whatever you need, I could provide. When he was working in a cracker factory, Liem’s instinct of trading was immediately formed when he saw many cigarette factories that needed cloves and tobacco. So at that moment, he immediately tried to become a supplier of cloves and tobacco, which was then successful in cloves. Later, when the Indonesian leaders declared a war to the Dutch, Uncle Liem saw that the soldiers would need soap, drugs, and weapons, and immediately he strived to be the supplier for such goods.

The point here is, if you want to start a business, then do not try to manufacture a product and then trying to sell it, but: First of all, you have to find out in advance, what goods are needed by the people around you, then try to provide it.

Second, Uncle Liem believe, truly believe, that he was fortunate. And the fact is, Uncle Liem was always in good luck. Okay, let us try to trace it. When he was at a very young age and still living in China, Liem had managed to escape the army recruitment by the Japanese invaders, and managed to get into the sailboat to Surabaya, and the sailboat was successfully landed in Surabaya. At the time, there were lots of stories that mentioned that many young Chinese are dumped into the sea, or the sailboat ambushed by the Japanese, or managed to land, but not in the destination. Young Liem was very lucky to land safely in Surabaya, which was the destination.

From Surabaya, Liem moved to Kudus. In Kudus, Liem’s luck continues. Liem was marrying a rich man's daughter, who drove him to success in the business of cloves trading (a lot of literature says that Uncle Liem’s venture was growing fast after the marriage). Finally, when he and his friends had a car accident in 1942, Liem was miraculously survived, while his three friends died. Many people say that after that accident, Uncle Liem was aware that he is always shaded by fortune. His belief in the good fortune then later made him aggressive and relentless in doing business.

They say, if you believe that you are lucky, then you will be lucky. If you believe that you will succeed, you will succeed. Yes, as simple as that. Just believe that you will be successful, and let the time show you the way. Uncle Liem is a real example of people who was successfully applied this motivational tip.

Third, Uncle Liem knew exactly that connection is the main capital in the business, which is even more important than capital of funds. Since pioneering the business of cloves trading, Om Liem was skilled in making friends and relationships with anyone. Yes, anyone!

Today, many people think that the success of the Salim Group business empire was because Uncle Liem’s direct connection and relationship with the President of Indonesia, Soeharto. It may indeed be true. But most of people forgot that Uncle Liem had already making his relationship with Suharto since the early 50's, or long before Suharto became a president! Uncle Liem wasn’t a petty politician who just wants to be friends with rulers. And in fact, since he was pioneering the business of providing logistics for the army, Uncle Liem was not only making friends with Suharto, but also with a lot of leaders in the revolution war era (including Major Kemal Idris who mentioned above).

A friend of mine once said this: "If you want to be success, then do not be a picky man. Befriend with anyone, build relationships with anyone, including the people who are nobody. Do not ever underestimate someone just because he is nobody. You never know if a man would be someone important, someday.'

Fourth, it seems like Uncle Liem had the principle that to be success, you should be able to make other people success. If you could see, almost all of the ‘students’ and business partners of Uncle Liem has successfully become a rich, not only in the Salim Group but also in their own business groups respectively. We have mentioned some names like Mochtar Riady (Lippo Group), Ibrahim Risjad (Group Risjadson), Sudwikatmono (Indika Group), and Ciputra (Ciputra Group). While Djuhar Sutanto, although had not built his own business, but also became very rich with the Salim Group.

In Indonesia, there are lots of tycoons. But there is almost no tycoon who could create other tycoons, except Uncle Liem. Yes, Uncle Liem had never restrained his employees and business partners in building his company, but rather pleased when he saw them get ahead and succeed. The same principle is applied by one of the famous American investment bank, Goldman Sachs. One of the principles of human resource management at Goldman is, the company will provide an opportunity for employees to grow more rapidly, than if they were working at other companies. The principle could be had drove the Salim Group to be a successful conglomerate group in Indonesia, and also drove Goldman Sachs to became the world's largest investment bank, because in fact the logic is simple: If you could make your employees become rich, then as their boss, you definitely would be richer!

Fifth and also the last, Uncle Liem was a conservative businessman. He had never looking for instant success in business, for example by way of massive leverage or financial engineering. He was a merchant, who making a product, and then sells it, that's it. And he was genius in creating a good and acceptable product to consumers. Bank BCA has successfully be a greatest private bank in Indonesia for an excellent quality of service to customers. And who doubts Indomie as a food product that tastes good, easy to cook, and affordable?

The conservative style of business had managed Salim Group to avoid the bankruptcy because of the 1998 monetary crisis. Yep, the only company that was not guaranteed by the Group in obtaining loans for expanding the business was Indofood. Since the beginning, Uncle Liem had knew very well that in the worst turmoil that could happen at any time, his business could turn into the ‘dark’ and all of his assets could confiscated by bank or the state. But Indofood as a consumer goods company should not be part of the assets. That's why despite Indocement and BCA had eventually lost, but Salim Group has successfully kept Indofood.

So the lesson, no matter how confidence you are in building a company, but it would be helped if you keep a precaution for the worst conditions, isn’t it?

Of course, there are many things that could be learned from the late Uncle Liem, but since this article is already too long, you may add yourself.

And by the way, I admit that this article is not related to the Indonesian stock investment at all. This article is dedicated to honor Uncle Liem, for his services in building the country's economy. Despite all the controversy that associated him with the New Order Regime (rezim orde baru), but I think Uncle Liem is one of the main partners of the Father of Development, President Soeharto, in his capacity as an entrepreneur that drives the economy. As a developing country, Indonesia does not have a lot of products that go international. We should be proud with the Indomie, which became one of the few products which are able to go international. Going forward, hopefully there will be more Indonesian businessmen who were able to make innovative products just like Indomie, and became a driver of Indonesian economic growth, amen!

Original article was written at June 13, 2012