Wednesday, September 08, 2004

TEMPO's Special Report: Chinese Indonesians (4 of 14)

Ethnic Chinese Entrepreneurs

The economic crisis has not drastically reduced the wealth of ethnic Chinese businessmen.

Their bread and butter is now finished." It's the metaphor Sofjan Wanandi has often used for the post-crisis situation of Indonesian conglomerates. Such food is now indeed no longer easily found on the "dining table" of leading entrepreneurs, let alone in abundant supply as in the New Order period.

The economic crisis hitting Indonesia has forced Sofjan's counterparts to diet. The Salim Group, once the number one conglomerate in Indonesia, for instance, can enjoy the profit of Indomobil and Indocement no more. The Sinar Mas Group under Eka Tjipta Widjaya no longer controls Bank Internasional Indonesia (BII).

The Chandra Asri petrochemical giant is not owned by magnate Prajogo Pangestu any more. Conglomerate boss Usman Admadjaja has lost Bank Danamon. Similarly, Sjamsul Nursalim is not the proprietor of Bank Dagang Nasional Indonesia (BDNI) now. But a limited diet obviously is not the same as bankruptcy and deprivation.

Anyway, the conglomerates' menu still offers "delicious and nutritious meals." Salim, for example, remains in control of Indofood, the giant food producer known for its instant noodle products. Sinar Mas retains its many property projects-now handled by Franky Widjaya, Eka Tjipta's son.

Prajogo Pangestu, too, still holds the integrated forest product industry under Barito Pacific. Sofjan also referred to several conglomerate leaders unaffected by the wave of crisis. They mostly own cigarette factories like Gudang Garam, Djarum and Sampoerna.

Sofjan's fellow businessmen of Chinese descent in fact are highly resistant to blows. It's this character that made their predecessors capable of placing this ethnic group in a dominant position in trade for centuries in the country. Yet six years after the crisis, the grip of the major business groups in different fields has slightly slackened.

The map of capital and business has changed. The banking sector is now more controlled by state-owned enterprises (SOEs) and foreign investors. Most of the manufacturing sector, formerly under conglomerates, is taken over by the government. However, "the trade sector remains in the hands of Chinese Indonesian entrepreneurs," said Sofjan.

Though no exact data are available, the ethnic Chinese super-capitalist majority are estimated to dominate 80 percent of national assets. In fact, the Chinese only constitute 2 percent of Indonesia's 220 million people. These figures are naturally still debatable.

Sudhamek, Garuda Food's boss, regarded the data as an "exaggeration." He warned against overlooking the role of small- and medium-scale businesses. "It's these groups that make the Indonesian economy recover," said the entrepreneur, whom Sofjan Wanandi called a rising star among medium-scale businessmen.

The other players no less important in the Indonesian business scene are state-owned banks. With regard to factors triggering the economic crisis, Sofjan, who heads the Gemala Group, blamed the government's financial institutions for sharing a major responsibility. It's because "two-thirds of bad debts involved state owned banks."

Sofjan did not deny the part of ethnic Chinese moguls in setting off the economic crisis due to the unfair business practices they had frequently been engaged in. The other act with a lingering impact up to the present was the flight of capital abroad.

Christianto Wibisono, through Indonesian Business Data Center (PDBI), once put the amount of capital fleeing overseas at the beginning of the economic crisis at US$85 billion. The fund has indeed been returning, but around US$30 billion is estimated to still be abroad today.

As the republic is badly seeking foreign capital injections, our conglomerates are even boosting their investments in other countries. Most of them are building various projects in mainland China, covering property, palm oil refineries, motorcycle assembly plants, paper and instant noodle factories.

Sofjan Wanandi also mentioned a popular property businessman who builds real estate in Vietnam. But he had an argument for his friends' operations. "They're just searching for business opportunities," he said. So, one should not hastily link them with sentiments of regional or ethnic origin.

Economist Chatib Basri also described investments in China as a normal profit-seeking approach of businessmen. Enjoying the average economic growth rate of 9 percent over the last 10 years, China has practically become an important economic engine in the Asia-Pacific region. "A lot of economic opportunities can be found there," he told Danto from TEMPO News Room.

Under such conditions, it's proper for Indonesian investors to flock to the Great Wall land. "Money has no passports, it knows no siblings," said Chatib. "It will go to where profits are big and the climate is certain." Thus, both Sofjan and Chatib held the view that tycoons of Chinese stock need not be seen as adversaries.

They should even be invited to rebuild the Indonesian economy. Moreover, entrepreneurs in Indonesia are very small in number. Sofjan also had another reason. "They control great networks," he said. These particularly cover capital and goods distribution, most needed to invigorate the economy. In order to persuade them, the government should inevitably review the economic policies that have so far made them hesitate to withdraw their money from abroad.

The various policies as business disincentives have actually been often discussed. Some examples are less flexible labor and tax rules, muddled law enforcement and differing unreasonable regional regulations.

The situation of infrastructure is equally tragic. Power supply, for instance, is not sufficiently available. In non-Java regions, electricity is frequently provided on alternate days. In Java many generators have to operate without adequate maintenance. If they finally break down, the disruption caused to industries is imaginable.

Road and transport facilities? They're terrible. Most main highways are in bad repair, while new roads-let alone freeways-are rarely found. Unless improvements are made, said Sofjan, "entrepreneurs working properly will have difficulty in making profit." In fact, their efficiency and labor absorption capacity are far higher than those of unreliable businessmen now being promoted.

Not only large-scale companies need hospitable economic policies. Sofjan Wanandi maintained that the government should create balance by empowering small- and medium-scale businesses. In this way, the resultant economic structure and prosperity will be more equitable to absorb social envy.

The government can adopt many ways to assist small-scale businesses and cooperatives, such as facilitating business licensing. "Licenses for small-scale firms need not be as many [and expensive] as those for large-scale companies," Sofjan indicated.

Another instance is simplifying the process of providing bank loans. If necessary, small-scale businessmen can borrow money with cattle as collateral. Allowing display rooms and market information access can also considerably help their businesses.

Of course, not all burdens should be borne by the government. To create harmony and break the ice, there should be sound communications among businessmen themselves. Sudhamek openly suggested that ethnic Chinese entrepreneurs be ready to change their custom a little.

"They shouldn't just do business," he proposed, "be active also in various social affairs like educational and religious activities." To get rid of racial prejudice, according to Sudhamek, non-discriminatory law enforcement is also much required. "If found guilty," he added, "they must be appropriately punished regardless of their ethnic backgrounds."

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