THEWALL STREET JOURNAL. Wednesday, January 15, 2014 | 11

OPINION

As Indonesia’s presidentialelection in July approaches, manyof the country’s most keen politi-cal observers have identified Ja-karta’s new governor, JokoWidodo—affectionately called“Jokowi”—as the leading con-tender. Some have even declaredhim to be virtually unstoppable inhis march to the presidency. Theymay be in for a shock.

There’s no question that Mr.Widodo is popular and competent.A former teak furniture entrepre-neur with a degree in forestry, hejoined Megawati Sukarnoputri’sopposition Indonesian DemocraticParty of Struggle (PDI-P) in 2005,and won election as mayor of theCentral Java city of Surakarta. Hethen was hand-picked by Ms.Megawati to challenge an en-trenched incumbent Jakarta Gov-ernor and surged to victory in2012.

In both posts, Mr. Widodo hasearned a reputation as an honest,pragmatic and hands-on politicianwith deep appeal especiallyamong those tired of Indonesia’slargely recycled set of senior poli-

ticians. National surveys show himwith as much as 45% of voter sup-port, compared with just 12% forthe next most popular potentialcandidate.

Polls also show PDI-P leaderMs. Megawati’s popularity hasfallen down into the single digits.Having served as president from2000-04, she lost elections in2004 and 2009 to current Presi-dent Yudhoyono. This year seemslike the perfect time for Mr.Widodo to ride the core supportof the still-strong PDI-P to victory.

Yet Mr. Widodo is largely un-proven as a national politician.Running even a sprawling metrop-olis like Jakarta is no match forthe complexity of managing thearmed forces and police, or over-coming an obstreperous legisla-ture representing the vast andculturally diverse provinces of theIndonesian archipelago.

An even more fundamental is-sue stands in Mr. Widodo’s way:While most pundits assumed thatMs. Megawati would step asidebefore this summer’s election, thedaughter of Indonesia’s foundingpresident runs the PDI-P like afamily enterprise and is unlikelyto abandon her deeply held viewthat Indonesia’s leadership is hercalling. Over the holidays, first-hand accounts emerged of a meet-ing between Ms. Megawati andMr. Widodo in which she told thegovernor that she would run forpresident and asked that he jointhe ticket as vice president.

Ms. Megawati is apparently

hoping that Mr. Widodo’s popular-ity will catapult her into the presi-dency. This arrangement won’tclip Mr. Widodo’s political wings,she argued, because it would en-able him to be the PDI-P presiden-tial candidate in 2019, at whichpoint he could serve two consecu-tive five-year terms.

For his part, Mr. Widodo hasprecious few options beyondshowing public fealty to his partyleader while hoping that someoneelse can talk Megawati out of run-ning again. His carefully craftedimage of a loyal protege and hiscareful observance of Javanesecustoms mean any move awayfrom PDI-P would be seen as anact of extraordinary disloyalty. Ifnone of the PDI-P senior partymembers is able to gently dis-suade Ms. Megawati, the likelyoutcome is a painful and unneces-

sary loss for the PDI-P.Ms. Megawati’s gambit would

benefit Prabowo Subianto, a for-mer general and now-divorcedson-in-law of the late PresidentSuharto. Although running a dis-tant second in opinion polls, Mr.Prabowo is a favorite among vot-ers seeking a strong and decisivecharacter. They argue that he hasthe chops to hold back Islamicfundamentalists and return asense of decisiveness and strengthto Indonesia’s presidency after adecade of equivocations andpower-sharing.

After initially showing openfrustration over the sudden popu-larity of Mr. Widodo, Mr. Prabowohas regained his balance and be-gun quietly amassing significantsupport in the powerful ChineseIndonesian business community.Contrary to the fears of those who

paint him as a possible Indonesianversion of Venezuela’s Chavez, heis no populist. His grandfatherfounded Bank Negara Indonesia,one of Indonesia’s largest banks,and his father was a respectedeconomist and minister in the Su-harto cabinet. His brother andcampaign financier Hashim Djojo-hadikusumo has significant busi-ness interests in the U.S., Canadaand Britain.

Still, many in Indonesia andabroad are deeply concerned. Alle-gations of past human rightsabuse during his years as the gen-eral in charge of Indonesia’s eliteKopassus unit led the U.S. and theU.K. governments to slap bans onMr. Prabowo’s travel, despite hisbrother having homes in bothcountries. Asked last year what hewould do if he were elected presi-dent and still barred from visitingthe U.S., Mr. Prabowo slyly replied“That’s all right. I will send myvice president to Washington. Ican always visit Beijing.”

For now, Mr. Prabowo’s hopesare pinned on the increasing signsthat Ms. Megawati’s political in-stincts (and those of her party)have dulled. Mr. Widodo has sig-nificant if subtle personal politicalskill, but if he fails to overcomeMs. Megawati’s reluctance to re-linquish the party’s nomination,the most likely outcome is aPrabowo presidency.

Mr. Kurtz is the head of Asia-Pa-cific for A.T. Kearney, where Mr.Van Zorge is a senior fellow.

Jakarta Governor Joko Widodo celebrates the new year with constituents.

European

Presspho

toAgency

Handicapping Indonesia’s Presidential PickBY JOHN KURTZ AND JAMES VAN ZORGE

World economic freedom hasreached record levels, according tothe 2014 Index of Economic Free-dom, released Tuesday by the Her-itage Foundation and The WallStreet Journal. But after sevenstraight years of decline, the U.S.has dropped out of the top 10 mosteconomically free countries.

For 20 years, the index hasmeasured a nation’s commitmentto free enterprise on a scale of 0 to100 by evaluating 10 categories,including fiscal soundness, govern-ment size and property rights.These commitments have powerfuleffects: Countries achieving higherlevels of economic freedom consis-tently and measurably outperform

others in economic growth, long-term prosperity and social prog-ress. Botswana, for example, hasmade gains through low tax ratesand political stability.

Those losing freedom, on theother hand, risk economic stagna-tion, high unemployment and dete-riorating social conditions. For in-stance, heavy-handed governmentintervention in Brazil’s economycontinues to limit mobility and fuela sense of injustice.

It’s not hard to see why the U.S.

is losing ground. Even marginal taxrates exceeding 43% cannot fi-nance runaway government spend-ing, which has caused the nationaldebt to skyrocket. The Obama ad-ministration continues to shackleentire sectors of the economy withregulation, including health care,finance and energy. The interven-tion impedes both personal free-dom and national prosperity.

But as the U.S. economy lan-guishes, many countries are leap-ing ahead, thanks to policies thatenhance economic freedom—thesame ones that made the U.S.economy the most powerful in theworld. Governments in 114 coun-tries have taken steps in the pastyear to increase the economic free-dom of their citizens. Forty-threecountries, from every part of theworld, have now reached their

highest economic freedom rankingin the index’s history.

Hong Kong continues to domi-nate the list, followed by Singa-pore, Australia, Switzerland, NewZealand and Canada. These are theonly countries to earn the index’s“economically free” designation.Mauritius earned top honorsamong African countries and Chileexcelled in Latin America. Despitethe turmoil in the Middle East,several Gulf states, led by Bahrain,earned designation as “mostlyfree.”

A realignment is under way inEurope, according to the index’sfindings. Eighteen European na-tions, including Germany, Sweden,Georgia and Poland, have reachednew highs in economic freedom.By contrast, five others—Greece,Italy, France, Cyprus and the

United Kingdom—registered scoreslower than they received when theindex started two decades ago.

The most improved players arein Eastern Europe, including Esto-nia, Lithuania and the Czech Re-public. These countries havegained the most economic freedomover the past two decades. And it’sno surprise: Those who have livedunder communism have no troublerecognizing the benefits of a free-market system. But countries thathave experimented with milderforms of socialism, such as Swe-den, Denmark and Canada, alsohave made impressive moves to-ward greater economic freedom,with gains near 10 points or higheron the index scale. Sweden, for in-stance, is now ranked 20th out of178 countries, up from 34th out of140 countries in 1996.

The U.S. and the U.K, histori-cally champions of free enterprise,have suffered the most pronounceddeclines. Both countries now fall inthe “mostly free” category. Someof the worst performers are inLatin America, particularly Vene-zuela, Argentina, Ecuador and Bo-livia. All are governed by crony-populist regimes pushing policiesthat have made property rightsless secure, spending unsustain-able and inflation evermore threat-ening.

Despite financial crises and re-cessions, the global economy hasexpanded by nearly 70% in 20years, to $54 trillion in 2012 from$32 trillion in 1993. Hundreds ofmillions of people have left grind-

ing poverty behind as their econo-mies have become freer. But it isan appalling, avoidable humantragedy how many of the world’speoples remain unfree—and poor.

The record of increasing eco-nomic freedom elsewhere makes itinexcusable that a country like theU.S. continues to pursue policiesantithetical to its own growth,while wielding its influence toencourage other countries to chartthe same disastrous course. The2014 Index of Economic Freedomdocuments a world-wide race toenhance economic opportunitythrough greater freedom—and thisyear’s index demonstrates that theU.S. needs a drastic change indirection.

Mr. Miller is the director of theCenter for International Tradeand Economics at the HeritageFoundation.

Getty

Images/Flickr

RF

BY TERRY MILLER

America’s Dwindling Economic Freedom

Regulation, taxes and debtknock the U.S. out of theworld’s top 10.

Jakarta’s governor is afavorite in the electionlater this year, butvictory is far from certain.

Paul Beckett, Asia EditorDean Napolitano, Senior Editor

Miguel Gonzalez Jr., Senior News Editor

Hugo Restall, Editorial Page Editor

Wendy DeCruz, Institutional SalesCharlotte Lee, Circulation SalesMark Pope, Advertising SalesAnjali Kapoor, Marketing

Simon Wan, IT

Published since 1889 byDow Jones and Company

© 2014 Dow Jones & Company. All Rights Reserved

18 | Wednesday, January 15, 2014 THEWALL STREET JOURNAL.

CORPORATE NEWS

With Beam Deal, AsiaMoves Again Into U.S.

Wireless-operator Sprint NextelCorp., pork-producer SmithfieldFoods Inc. and now whiskey-makerBeam Inc. are falling into Asianhands.

Such multibillion-dollar pur-chases of U.S. companies by Asiancorporations hadn’t been seen sincebefore the 2008-’09 financial crisis,when drug maker Millennium Phar-maceuticals Inc. was purchased byJapan’s Takeda Pharmaceutical Co.

But the past year’s deals havebeen bigger than ever, and the tar-gets are well-known U.S. brands.And unlike a spate of purchases inthe 1980s, when Japanese electron-ics company Sony Corp. took on

Hollywood by purchasing ColumbiaPictures Entertainment Inc., Asianbuyers have avoided touchy areasand thus, a backlash from Americanconsumers.

“We have not seen such a strongphenomenon of Asian firms buyingU.S. brands before. I believe we willsee more multibillion-dollar out-bound M&As by Asian companiesthis year,” said Lian Lian, a co-headof North Asia mergers and acquisi-tions at J.P. Morgan Chase & Co. Thesluggishness of the global economicrecovery may “encourage Westernfirms to rationalize value expecta-tions” and sell assets, she said.

Japan’s Suntory Holdings Ltd.said Monday it would buy Beam for$13.6 billion—less than a year afterSoftBank Corp. purchased Sprintfor $21.6 billion. The deals are partof a drive by Japanese companies—struggling with an aging populationand slow growth at home—tostrengthen their offerings and boosttheir popularity overseas. In theSoftBank deal, Sprint received cash

to help it compete with bigger rivalsin the U.S., one of the world’s mostlucrative markets for smartphones.

“In some ways, Suntory going forBeam is not a surprise,” said JeremyCunnington, an analyst at Euromon-itor International in London. “Thecompany, along with its fellow Japa-nese companies, has been looking todiversify away from its moribundmarkets. And undoubtedly, Beam’sarray of international brands wouldmake it a truly global spirits player.”The deal will vault Suntory to theworld’s sixth-largest spirits com-pany by volume from 25th, Mr. Cun-nington said.

While Japanese companies havebeen pushing to gain access to over-seas markets, their Chinese counter-parts have been making purchases

to bring brands home.Shuanghui International Hold-

ings Ltd. last year bought Smith-field Foods for $4.7 billion, the larg-est purchase by a Chinese companyof a U.S. one. Shuanghui’s purchasegave it a well-respected brand thatShuanghui can take home to China—the world’s largest pork consumer—as food scandals and increasing ur-banization drive demand for a safe,secure food supply.

Shuanghui’s deal stood in con-trast to a 2005 attempt by oil com-pany Cnooc Ltd. to buy Unocal Corp.for $18.5 billion, which wasthwarted by fears for U.S. nationalsecurity.

Asian companies bought $260billion in U.S. assets in the fiveyears since 2009, above the $206billion purchased in the previousfive years, according to Dealogic.

The SoftBank and Suntory acqui-sitions are bigger than the Asian—primarily Japanese—acquisitions ofU.S. assets made in the late 1990sand early 2000s.

Until the SoftBank deal, the big-gest Asian purchase of a U.S. assetwas Nippon Telegraph & TelephoneCorp.’s $9.8 billion acquisition of a16% stake in AT&T Wireless GroupInc. in 2000. Excluding financialservices, the next-biggest Asian pur-chase of a U.S. company wasTakeda’s $8.1 billion purchase ofMillennium in 2008, trailed by Ja-pan Tobacco Inc.’s $7.8 billion pur-chase in 1999 of the internationaltobacco operations of RJR NabiscoHoldings Corp. The SoftBank dealstill would be the biggest after ad-justing for inflation.

In the 1980s, when Japan Inc.was at its height, companies likeSony undertook ambitious acquisi-tions. Sony’s acquisition of Colum-bia Pictures for $3.4 billion in 1989at the time was the largest foreignpurchase by a Japanese company.

Japanese companies steppedback in the years following thecrash of the 1980s asset bubble,making a smattering of deals, butrarely for big brands in the U.S. TheRJR acquisition was for interna-tional assets, for example, and withMillennium, Takeda acquired a bio-tech company, not a broad pharma-ceutical concern.

But in recent years, Japanesebuyers, bolstered by large cash re-serves, a shrinking domestic econ-omy and a relatively strong yenhave been on a drive overseas.China, meanwhile, has coupled itsgrowing economy with increasingappetite for brands and technology,not just the big resource deals thathave grabbed headlines.

While Suntory’s deal for Beamhas put the spotlight on Asian buy-ing of U.S. brands again, purchasesof minority stakes in U.S. companieshave been relatively common. Thatwas especially true in the wake ofthe 2008-2009 financial crisis, whenAsian buyers invested in strugglingU.S. banks.

For example, Singapore sover-eign-wealth fund GIC Pvt. Ltd. in-vested in Citigroup Inc., and ChinaInvestment Corp. and Japan’s Mit-subishi UFJ Financial Group Inc. in-vested in Morgan Stanley.

BY PRUDENCE HOAND NISHA GOPALAN

Note: Deal values exclude debt *Pending †According to news release Source: Dealogic The Wall Street Journal

Japan’s Buying SpreePowered by strong profits and readily available credit, Japanese companies have been pursuing big-name purchases inrecent years.

Top overseas acquisitions

Top overseas acquisitions in the food-and-beverage sector

Announced

Oct. 15, 2012

Dec. 15, 2006

Jan. 13, 2014*

Nov. 30, 2000

Sept. 22, 2008

Target (stake)

Sprint Nextel (78%)

Gallaher

Beam

AT&T Wireless (16%)

Morgan Stanley (21%)

Country

U.S.

U.K.

U.S.

U.S.

U.S.

Industry

Telecommunications

Consumer products

Food & beverage

Telecommunications

Finance

Acquirer

SoftBank

Japan Tobacco

Suntory Holdings

Nippon Telegraph & Telephone Corp.

Mitsubishi UFJ Financial Group

Target (country)

Beam (U.S.)

Orangina Schweppes (France)

Gavilon Group (U.S.)

National Foods (Australia)

Schincariol Participacoes e Representacoes (Brazil)

Acquirer

Suntory Holdings

Suntory Holdings

Marubeni

Kirin Holdings

Kirin Holdings

Announced

Jan. 13, 2014*

Sept. 22, 2009

May 29, 2012

Nov. 8, 2007

Aug. 2, 2011

Deal value in billions

$21.6

14.7

13.6†

9.8

9.0

Deal value in billions

$13.6†

3.3

2.7

2.6

2.5

Suntory’s Beam OfferPresents Global TestsNew York and San Francisco.

The purchase will also give Sun-tory control over labels with instantglobal brand recognition—a signifi-cant change from now, because itsbest-known products, such as Ya-mazaki whiskey and Premium Malt’sbeer, still aren’t so well known out-side of Japan.

But handling those labels wellrequires international staffs andknow-how that Suntory might nothave yet, said Takayuki Kito, apartner at strategic consulting firmRoland Berger in Tokyo. Currently,for instance, Suntory said it hasonly one non-Japanese director outof 34.

Mr. Kito said Suntory should “al-low Beam’s management to leadglobal business activities.’’

Suntory’s family-controlled, top-down corporate culture could addanother dimension of complexity inits attempt to go global, experts say.It could muddy the decision-makingprocess—a liability in a big organi-zation. But it could also mean deci-sions are made more quickly, andmanagement is more stable.

“The fact that Suntory is still runby the founding family gives it atrustworthy feel,’’ said SMBC FriendResearch Center analyst YoshiakiYamaguchi.

“The latest decision itself is a bigdeal and it is a challenge for us,” re-gardless of whether the company isfamily-owned, said Naoko Tsuda, aSuntory spokeswoman in Tokyo.

The Beam bid will also be a bigtest for Suntory President NobutadaSaji, a grandson of the company’sfounder, and an important personbehind the company’s drive to makeoverseas acquisitions.

Suntory’s founder, a 20-year-oldmerchant named Shinjiro Torii,started the company in 1899 and ob-tained a reputation for an aggres-sive style that encouraged risk-tak-ing, embodied by his expression“yatte minahare.’’

“I explain it as ‘take a risk’ or ‘gofor it,’ ” said Nobuhiro Torii, agreat-grandson of the founder and

Continued from first page who currently runs the beverageunit, during an interview in July.“What it means is to aggressivelytake on new challenges.”

Under the founder, and otherfamily members who succeeded himas president, Suntory managementalso became known for itswillingness to wait a long time forresults. The company took 46 yearsto make a profit on beer and 14years for one of its biotechnologyunits to genetically engineer a bluerose, thought to be a symbol of theimpossible.

Keeping the company in familyhands was so important that it de-railed a potential merger with Japa-nese rival Kirin Holdings Co. in2010, with the two competitors un-able to agree on who would managethe joined company.

Last year, Suntory listed itsbeverage unit to generate moremoney for deals, netting $3.9billion. But the parent company isstill 90%-held by family members, astake that last April made PresidentSaji the second-wealthiest man inJapan, after Fast Retailing Co. CEOTadashi Yanai, with assets valued at$10.7 billion, according to Forbes.

After graduating from Keio Uni-versity in Tokyo in 1968, Mr. Sajiwent to the U.S. to studymanagement at the University ofCalifornia, Los Angeles, then spentthree years working at a unit ofSony Corp. before moving toSuntory in 1974. By 1979, in hisearly 30s, Mr. Saji was runningSuntory’s U.S. subsidiary, where hedecided to grow a moustache, tolook older.

“I had to do business with li-quor-shop owners and companypresidents, but I looked like a childthere,’’ Mr. Saji said during a 2009interview with Japan’s Asahi news-paper.

While he was running that U.S.unit, Mr. Saji pushed through whatat the time was one of the largestpurchases of a foreign company bya Japanese firm, the ¥20 billion ac-quisition of a bottler affiliated withPepsiCo Inc.

Drink Up | A Suntory timeline

1899: Founder Shinjiro Torii opens theTorii Shoten store in Osaka, beginsmaking and selling wine.1923: Company builds Japan's firstmalt-whiskey distillery, outside Kyoto.1963: Changes name to Suntory Ltd.Begins to brew and sell beer.2009: Buys French soft-drink maker

Orangina Schweppes Group.

2013: Lists Suntory Beverage &Food unit, netting $3.9 billion thatit says will be used for futureacquisitions. Buys GlaxoSmithKline’sdrink brands for $2.1 billion.

2014: Buys U.S. liquor companyBeam for $13.6 billion.

Sources: Suntory; Reuters (photo) The Wall Street Journal

Suntory single-cask whiskey on display at its Yamazaki Distillery

Such multibillion-dollar purchases of U.S. companiesby Asian corporations haven’t been seen since priorto the financial crisis of 2008 and 2009.