Investing in Indonesia

Historians agree that a major motive for Mao Zedong to unleash the Cultural Revolution in 1966 was that he wanted to get rid of a few rivals in the Chinese Communist Party.

And he had good reason for remaining unchallenged. As we know from the biography written by his private physician, Mao enjoyed a never ceasing supply of provincial Chinese girls, which he often just bedded once.

Therefore, about one fifth of the World's population had to endure hardship for about a decade because it fitted one man's private agenda.

Now, what about the private agendas about business men and high-ranking corporate decision makers when they are contemplating a variety of countries. As Mao let one fifth of the world population dance to his tune, many executives often give the business activities of their companies a tilt that suits them privately.

Most people probably would be surprised to what length corporate managers go to have love affairs aside from their legal marriage. I wouldn't. I am convinced that even wars have been started to give husbands a good reason to be away from home (where the opportunities for love affairs are much better).

After World War II, one of Japan's secrets for success was that Japanese companies discretely set up mistresses for their Western buyers. This made sure that their Western buyers wanted to be in Japan as much as possible. To justify (towards their wives) their repeated trips to Japan, nothing made more sense than to do more business in Japan.

To lure foreign investment into a country, the first measure should always be to attract foreigners by providing conditions that make foreign investors (and their staff) wanting to stay in a country.

If in a Western corporation, you have employees who are eager to be posted in a specific country, that country has an important advantage over other countries.

So, which countries are the most attractive ones to be posted at?

China probably has the most votes in its favor. The country is safe, cheap, and expats have an easy time looking for local girlfriends and even one-night stands.

Of course, China has many of the conventional advantages, too. Foreigners can invest in China with a minimum of bureaucratic red tape, local labor is easily employed, motivated, and cheap.

But that is available in Indonesia, too.

The only real difference is how welcoming or not welcoming a country is. And that comparison heavily speaks for China.

Yes, the Indonesian president time and again emphasizes that Indonesia is welcoming foreign investment. And because some high-profile Western business leaders may have told him that the problem with Indonesia has been corruption.

But that is only the "official" version of why the Western business world doesn't invest more in Indonesia. But Western businesses don't mind corruption per se (lots of it in China, too). They only mind corruption if the local corruption culture is tilted against them (ample of proof: many more foreigners were in favor of investing in Indonesia during the Suharto years, even there was much worse corruption than today).

Anyway you turn it, it boils down to how welcoming a country is towards foreigners. And because Indonesia has changed so much in this respect, foreigners, and foreign investors shay away from Indonesia.

Look what you've got, and didn't have 10 years ago:

A silent, but nevertheless a marked Islamization of the state.

Because it's a cheap publicity stint, local politicians out-compete each other in demanding the implementation of Islamic virtues. Everybody likes to complain that the police isn't doing enough fighting social ills (penyakit masyarakat).

And the police, throughout the country, is responding by filling the jails.

But genuine criminals are hard to come by. Because genuine criminals are aware that they must not be caught, they take great efforts to operate in secret.

So the police turns towards those who aren't aware that they are "criminals" because they do something they have always done. Small-scale gambling, watching porn movies, using recreational drugs, having a beer or two, having sex with a girlfriend.

All of this is, of course, prohibited in Indonesia. The point is, if you look hard enough through Indonesian legal provisions, than you will, here and there, find something that can be used legally against many fun behaviors in Indonesia. The Indonesians even have a word for it: "cari pasal". If you look hard enough for a "paragraph" you will find one that fits the case you are trying to make.

Now, what makes this new attitude particularly disturbing for foreign investors is that for police chiefs big and small (and they are under immense pressure to meet their quota on people to arrest), catching a single foreigner is at least as much success as catching 20 locals.

So, whenever local policemen do find cause to arrest a foreigner, the local police chief, and the next one up the chain of command, and that one's superior, too, will all try to get the most out of it.

This means: immediate full media attention.

It also means: the police will try to blow up the case until it is totally out of proportion.

Take, for example, the case of William Payne, a young Australian who was found by the police with about half a gram of ecstasy. The case was immediately presented as the busting of an international drug syndicate.

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Indonesians throughout the archipelago have become aware of the police's new attitude to arrest "social ills" criminals. Thus it now happens regularly that parents report the boyfriend of their daughter to the police after consensual sex, even when the girlfriend / daughter is well in her 20s.

Yes, you can find paragraphs that outlaw consensual sex between non-married adults.

And Indonesia actually is on the move to strengthen related legislation. In the new penal code, a new paragraph will likely be included that reads:

This website is about investing in Indonesia. But I have repeatedly referred to China. Why? Because for the past few years, and most probably for a good number of years to come, China is like a giant sponge, soaking up much of the world's foreign investment.

If the Chinese government does everything right (and the indications are, they do), then China will indeed be, as the country's name in Chinese indicates, the center of the world, even more so than currently the US.

From a purely economic point of view, China is top for work force. This is a nation of extremely industrious, work-motivated people. It's not the people's character to just get things done. These people also constantly strive, without being asked for it, to get things done as quickly and as efficiently as possible.

This alone, even when all other aspects are equal, will always speak in favor of China.

I do not mean that international businesses will necessarily always decide in favor of Chinese busyness. India, for example, can claim to have potentially more loyal employees, willing to spend a lifetime in the same firm.

But in times of global globalization, those who want to compete with the Chinese sponge better know on what basis they want to compete.

The single most important card other nations can play is personal attachment. If an investor, or his advisors have a great personal fondness for a particular country, than he will continue to focus on that country, in spite of very attractive offers from China.

Indonesia isn't playing that card. The opposite is true. Since the downfall of Suharto, they have been doing a lot to diminish the attractiveness of Indonesia to foreigners. An anti-Western atmosphere has been brewing for a number of years, and successive Indonesian governments have done very, very little indeed to move against this silent shift.

This can easily be traced back a number of years. Take for examples the raids of Islamic radicals on hotels with Western occupants.

It has happened time and again that Islamic radicals have entered hotels with primarily Western occupants, bursting into rooms and checking on their marital status, dragging them out of their beds in the middle of the night.

Islamic radicals have a free ticket for such and similar actions. The Indonesian government is afraid of them, as they fear for the Islamic vote.