Sunday, May 12, 2002

Black May 1998: 4th Commemoration (7 of 17)

China Moves May End Croney Capitalist Game (March 27, 2002 12:43 PM)

Laksamana.Net - President Megawati Sukarnoputri has offered new guarantees for Chinese investment in Indonesia, and at the same implicitly sent a message that times have changed to "croney capitalists" linked to Suharto's New Order regime.

In a speech at a business luncheon in Beijing Tuesday (26/3/02), Megawati guaranteed that Chinese investments in Indonesia would not suffer discriminatory treatment.

She added that Chinese business operators were welcome to play a larger role in Indonesia.

Highlighting improved political stability and security as priorities for her government this year, Megawati called for enhanced Sino-Indonesian cooperation on energy development and bilateral trade.

The speech marked a significant switch from Indonesia's long-term love-hate relationship with China and its own ethnic Chinese community.

Right-wing military leaders together with nationalist and Islamic elements long tended to consider the local Chinese community a major threat to the security of the government and national security in general.

Being Chinese was inevitably linked to Chinese state communism, a linkage that became an obsession following the Chinese government's support for the Indonesian Communist Party in the early 1960s.

Discrimination against Indonesia's Chinese was embedded in policy even before this. Influenced by right-wing nationalists including Syafruddin Prawiranegara, Rachmat Muljomiseno and Soemitro Djojohadikusumo, the government in the 1950s, introduced what was called the Benteng (fortress) program.

Minister of Social Welfare Juanda stated at the time that the policy was designed to protect Indonesian importers and allow them to better compete with 'foreign' importers. The discriminatory aspect of the policy was quite clear.

'National importers' meant indigenous importers or import firm whose capital was 70% indigenous. Protection was provided in the form of granting them credit, licenses, and privileges to import certain goods. These privileges were not enjoyed by non-indigenous importers.

The Chinese minority at the time was very critical of the Benteng policy, since at that time Indonesian citizens of Chinese descent still technically held dual nationality, and the Benteng policy also affected them.

The aim of the policy was to encourage indigenous businessmen to regain control of Indonesian economy from 'foreigners', especially Indonesian Chinese businessmen.

In 1954 under Prime minister Ali Sastroamijoyo, the right wing nationalists continued the Benteng policy by transferring ownership of rice mills to indigenous Indonesians.

This discriminatory economic policy received support from Islamic nationalists based on the motto: better to support the indigenous capitalist rather than Chinese capitalist.

Most damaging for Chinese traders was the issuance of Presidential decree No, 10 in 1959, which banned 'alien' retail trade in rural areas and required 'aliens' to transfer their business to indigenous Indonesians by September 30, 1959.

The policy was not only a serous blow for Chinese small-scale traders and retailers, but also affected ordinary people living in the villages, who depended on the Chinese as distributors of primary commodities.

In the end, the policy was distorted and confused because it was poorly implemented and highly vulnerable to abuse.

What was being consolidated was not the role of the indigenous businessmen and traders but a group of license brokers and political fixers.

The discriminatory movement continued during the New Order regime led by Suharto. In 1974, several subsidized lending programs for indigenous businessmen were introduced.

State-owned investment company Danareksa was formed in 1977 to buy shares in large corporations and sell inexpensive investment certificates to the public.

In 1980 the economic nationalists gained increasing influence in moves led by State Secretary Sudharmono and his protigi, Ginandjar Kartasasmita.

Through several Presidential decreee like Presidential Instruction No. 14 of 1979 and Presidential Instruction No. 10 of 1980, the weak economic group (a phrase for indigenous businessmen) were given precedence in the granting of certain government contracts.

For small projects, only the 'weak group' would be allowed to bid. For medium-size projects worth up to $80.000, this group was given a 5% 'cushion' on bids.

For major projects, a new team was set up to decide on project allocation, known as Team 10. This provided extra powers to Sudharmono as State Secretary. Sudharmono later went on to become Then in Golkar chairman in 1983.

Ginandjar Kartasasmita served as vice chairman of Team 10 through which Sudharmono and his allies among the economic nationalists gained great leeway to build up their support base, in strengthening their own economic empires, at the same time giving
Suharto a valuable mechanism for patronage.

Very few of the indigenous businessmen assisted by Team 10 had any real foothold in production, industry or trade.

More importantly, they were not even members of the small-scale business community.

Aburizal Bakrie, for instance, controlled considerable wealth through the activities of his father, a successful commodities trader who had been building a fortune from as far back as the 1930s.

Other to benefit from Team 10 included Fadel Muhammad, Imam Taufik, Jusuf and Achmad Kalla, Fahmi Idris, Siswono Yudohusodo, Suryo Sulistio, Rudy Pesik, Surya Paloh, Kamaludin Bachir, Kusumo Martoredjo, Sudharmono's son-in-law Bambang Rachamdi, Ponco Sutowo, Agus Kartasasmita, Abdul Latief, and Hasyim Djojohadikusumo.

Team 10 became the vehicle for the Suharto clan and its cronies to control government purchases in all ministries and state-owned companies.

Megawati's guarantees to China appears to mark the end of the road for this system.

The China Trip
Indonesia appears to have won major benefits from the President's trip to China. These include:
  • A package of loans worth $400 million
  • A partnership deal between Pertamina and PetroChina
  • Chinese economic and technical aid for Indonesia
  • Cooperation on public-works projects in Indonesia
  • Establishment of a China-Indonesia energy forum

China will establish consulates in Surabaya and Medan, and Indonesia will establish diplomatic missions in Shanghai and Guangzhou.

Megawati also called for the early re-opening in Indonesia of the Bank of China, closed amid the furore of alleged Chinese involvement in the coup attempt of 1965.

The President left Beijing Tuesday for Chengdu, capital of Sichuan province, and Fuzhou, capital of coastal province of Fujian.

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