Indonesia: The Plight Of The Ethnic Chinese

Many have fled the violence, and others are looking for a way out. How badly will the economy be hit if they don't return?

Veronica Suryati Tanujaya, 35, used to be a shop owner. As one of hundreds of thousands of general store merchants, she helped form a cornerstone of the Indonesian economy that has kept the archipelago running on credit since the 17th century. Her family, emigrants from China, founded the store in a small subdistrict of West Java three generations ago. She knew all the local farmers and how much credit to give each one for kerosene, rice, and cooking oil until harvest time.

In February, in the midst of the most turbulent months of Indonesian history since 1965, the farmers started rioting and burned down all the 17 stores owned by ethnic Chinese in the area, including Tanujaya's. She escaped with her husband, throwing her 9-year-old son out the back window into a stream 8 meters below and plunging after him. They survived but lost everything. Now a refugee in Jakarta, she runs a food stall selling fried rice and chicken satay. "We're very afraid to stay," Tanujaya says, lamenting the lack of sufficient money to allow her to emigrate. "If we had the chance, we would leave Indonesia."

From Indonesian Chinese tycoon Liem Sioe Liong, who had his house burned by rioters, to simple merchants like Tanujaya, Indonesia's Chinese have been marked by the violence and persecution that characterized the end of the Suharto era. Their experience triggered the flight of 100,000 ethnic Chinese from the country. While many have come back, all of Indonesia's Chinese community are asking what comes next. If the ethnic Chinese are convinced that Indonesia's leaders can guarantee them safety and justice, they could aid the country's recovery by bringing their capital back from abroad and applying their talents to reconstruction. But if they feel threatened by renewed violence, many more could flee.

The impact of a mass exodus of ethnic Chinese could be devastating. Ethnic Chinese run Indonesia's largest conglomerates. They form the backbone of the professional class. They run thousands of small factories that make everything from shoes to auto parts. They own the shops that double as credit agencies for farmers and laborers. Almost every tiny town has a general store run by an ethnic Chinese family as the center of local economic life.

Already, the flight of ethnic Chinese capital has contributed to the collapse of the economy. While not all of it is ethnic Chinese, some $100 billion is believed to have left Indonesia since the turmoil began, with perhaps $60 billion remaining in Singapore. Thousands of professionals have fled to Singapore, Malaysia, Thailand, New Zealand, and the U.S. While Indonesia's seven million ethnic Chinese make up just 3.5% of the population, as much as two-thirds of the country's total economy passes through their hands in the form of products, goods, capital, and services. The destruction of 3,000 Chinese-run general stores on the island of Java alone has created such scarcity that prices are skyrocketing and stomachs grumbling.

The resentment toward ethnic Chinese has strong roots. It stems in part from cultural and religious differences--most Indonesians are Muslims, while most Chinese are Christians or Buddhists. And it derives from the dominant role the Chinese have played in the economy for centuries. Fostered partly by the favorable policies of past governments, including Suharto's, an enormous wealth gap has grown between the ethnic Chinese and native Indonesians, or pribumi. When economic times are good, prosperity smooths the divisions. But periodically, violence erupts, such as in 1965 when thousands of ethnic Chinese were killed in the aftermath of a failed Communist coup. Times are anything but good now, and the Chinese fear another explosion.

Sporadic harassment of ethnic Chinese--including attacks, rapes, and verbal threats--is continuing in Indonesia. Many ethnic Chinese feel the government is doing precious little to stop it. They point to alleged government or military involvement in escalating the attacks on ethnic Chinese, from spontaneous food riots to the organized arson, looting, and gang rapes that occurred in mid-May.

On May 14, trucks loaded with muscular men raced to shopping centers and housing projects owned by ethnic Chinese. The men doused the shops and houses with gasoline and set off devastating fires. At least 182 women were raped or sexually tortured, some of them repeatedly, by men with crewcuts whom the victims believe to be soldiers. At least 20 women are confirmed to have died as a result.

Since then, some Chinese families in Jakarta have had their front doors marked with red or black paint in the middle of the night--color codes they are told stand for "loot and burn" and "rape and kill." Sandyawan Sumardi, a Jesuit priest who confirmed the rape cases in a report to the Indonesian National Commission on Human Rights, found a hand grenade in front of his office. Ita Fatia Nadia, a female social worker who helped the priest interview rape victims, got a phone call from an unidentified man who recited her daily routine and the name of her children's school before hanging up. The secretary of a Jakarta CEO had an experience common to other ethnic Chinese women: After a taxi ride home in late June, the driver told her: "I was paid money to rape you, but I won't this time. Don't take any more taxis."

GORY FAKES? In addition, nine ghastly photos of naked women being tortured by men in camouflage uniforms are circulating on the Internet. Their bodies were carved with the words, "Don't be stupid." Diplomats and human rights workers say the pictures may be fakes, but they illustrate the fear and tension that reign. Sukang Prasetio, 31, head of the legal department of a Jakarta company, was undecided about whether to leave until he saw the gory pictures. A few days later, Prasetio, father of a 6-month-old girl, quit his job and prepared to leave for New Zealand. He will consider coming back "only after the election next year, and only if we see a good government, not like the one now in power."

With such sentiments common in the Indonesian-Chinese community, major Indonesian companies complain that their management ranks are thinning out. Peter Gontha, CEO of media conglomerate Datacom, was gratified to see two of his directors who had fled to Singapore in May return. But then he found they were only organizing a final exit for their families. Sofjan Wanandi, chairman of the Gemala Group, has lost five directors and has 25 applications on his desk from Chinese Indonesians who want to work for Gemala's overseas units, including a trailer plant in the U.S. state of Arkansas.

Ethnic Chinese professionals from around the region hesitate to go back. Singaporean investment banker Tan Yong Seng turned down an offer to return to Indonesia as a chief financial officer. He is afraid for his wife and two kids. "You're talking about risking your life," says Tan, 42, who left Deutsche Morgan Grenfell Inc. when it closed its office in Jakarta and has no intention of going back. "I decided not to take the risk."

Many young, well-educated ethnic Chinese women are determined to leave Jakarta. They earned degrees abroad and were recruited by brokerages eight years ago to help get the Jakarta stock market off the ground. Now, they want out. One research analyst who didn't want to be identified has asked for a transfer to the Singapore office of her British brokerage. Soon to follow will be her sister, who is employed by a U.S. bank in Jakarta and will take a transfer. A stock analyst whose company recently closed down is shunning Jakarta job offers. On the night of May 15, rioters pelted her window with rocks and set fire to cars on the street below. "I was inside, by myself, crying, sleeping with my sneakers on, a wallet, my handphone, and a golf club by my bed," she recalls.

The brain drain is also reaching into the intelligentsia. Well-known ethnic Chinese political scientist Christianto Wibisono fled to Portland, Ore., with his daughter and 4-month-old granddaughter. On May 15, men dressed as private security guards herded his daughter along with hundreds of other residents of a luxury housing complex in northern Jakarta onto a golf course. The residents watched helplessly as a mob burned down their houses and gang-raped some of the women. It was "a marriage of convenience between latent racist masses and agents provocateurs," says Wibisono. While his daughter was not harmed, four neighbors were so brutally raped that they were treated at the psychiatric wards of Singaporean hospitals.

Other ethnic Chinese are winding down their businesses and planning their escape. Teddy Tan, an audio-video wholesaler, watched his main outlet in Jakarta burn down on May 14 while he stood howling, red-eyed, at the crowds. He doesn't plan to replenish his stock. "I'll just sell what I have and buy dollars," he says. When he can afford it, he'll get his daughter out of the country. She is now staying with her grandparents in Kalimantan, on Borneo. Tan may relocate to China's Fujian province, where he has several uncles.

Indonesia's ethnic Chinese are investing and buying property in other countries in return for permanent residency. Thailand's Board of Investment has received two Indonesian applications so far for investments worth a total of $88 million, more than enough to qualify for permanent residency for several families if, in accordance with Thai investment rules, they buy a condominium. One Jakarta real estate executive moved to Santa Monica, Calif., where he took a 50% stake in an Italian bakery for $100,000 and is enrolling his daughter in school and buying a house. In Penang, Malaysia, a real estate agent says Indonesian Chinese entrepreneurs and traders are causing a miniboom in the apartment market. The businesspeople, mostly from the Sumatran city of Medan, are putting their families in Penang but commuting to Indonesia until the situation is more secure.

Those who have stayed behind are sending abroad every penny they can. Katherine Susanto, 16, who is one of 180 new ethnic Chinese students enrolled at the Indonesian school in Singapore, says her father, an optician at one of the few Jakarta shopping malls that was not burned down, changes every rupiah he earns into dollars to cover the $1,000 per month in school fees and living expenses that it costs to keep her and her mother there. "Jakarta is still not a safe place for women," says her mother, Kumalawati.

SHOOTING LESSONS. While the government of President B.J. Habibie has made some steps to induce ethnic Chinese to return, few in the community feel they go far enough. "They need to restore confidence in order to get the contribution of a very specific group in rebuilding the nation," says Singaporean banker Tan. "How do you convince a guy with a burned-down house, `Come back, we need you?"'

Habibie has ordered an investigation of the rapes, and the military is investigating commandos formerly under the orders of Lieutenant General Prabowo Subianto, Suharto's son-in-law, for their alleged role in a covert kidnapping operation that targeted opposition figures. But Habibie clearly doesn't want the ethnic Chinese to play as prominent a role in the economy as before. "I think it would be sad if our economy or our future were dependent on one ethnic or racial group," Habibie said in an interview.

Instead, Habibie is rebuilding the distribution system using pribumi, companies and forcing out Chinese ones. Already, the government has taken away contracts from hundreds of ethnic Chinese distributors of state-subsidized foods, even though they had remained in the country. The State Logistics Agency, which distributes rice and cooking oil, instead gave millions of dollars' worth of contracts to pribumi. The tension is such that sources say Salim Group subsidiary Indofood, which reported losses of $80 million in the first quarter, wants to sell its operations. The company would not comment. Founder Liem Sioe Liong and his son Anthony Salim have moved permanently to Singapore and transferred most of their assets there.

President Habibie told BUSINESS WEEK that he favors an antitrust law aimed at creating a level playing field. The idea is to build a more efficient economy and reduce cronyism. But since ethnic Chinese control 43 of Indonesia's top 50 listed conglomerates, many of them would be targeted for breakup to give pribumi a share of the business.

Some in the government are discussing even harsher treatment. On the fringe there is Mohammad Sadli, a former Suharto Cabinet minister who is now an independent economist. He has a system for nationalizing ethnic Chinese-owned assets and giving them to pribumi entrepreneurs, a plan that does not have official government support.

It will take years if not generations to repair the damage from the anti-Chinese riots. In the meantime, ethnic Chinese are buying firearms in Jakarta shops and on the black market. Some neighborhoods are pooling their money to buy protection. "A guy I know

is taking shooting lessons," says Marlina Ng, a 26-year-old financial analyst from Jakarta who fled to New York. "Maybe if we armed ourselves, they'd be scared to do it again." To many Indonesian Chinese, if they can't depend on the government for protection, the only options are to defend themselves--or flee.

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