Fri, 05 Aug 1994

Easing up on expatriates

President Soeharto's instruction to ease restrictions on the employment of expatriates addresses one of the major problems complained about by both domestic and foreign investors.

The government has tried to expedite the licensing procedures for expatriates through a one-stop administration service at the Investment Coordinating Board (BKPM) in Jakarta and its provincial affiliates since the early 1980s. However, the procedures are still considered arduous and complex, especially because employers are still required to obtain letters of recommendation from relevant ministries.

Another problem is related to the lists of occupations open to expatriates which are drawn up periodically by the various ministries. Most of the time the lists do not reflect the actual supply and demand equation, especially because the manpower market in the country remains disorganized.

It is naturally the right and in fact the duty of every government to restrict the hiring of foreign workers. After all, the promotion of investments is primarily aimed at creating jobs for the local people. The root of the problem, though, is that the extent and growth rate of the demand have been rising so steeply within so short a period of time that the local supply simply cannot meet it in terms of quality and quantity. The problem is often exacerbated by the erroneous perception that the only skilled personnel for middle and high level management positions are university graduates. In fact, those with academic credentials mostly constitute no more than trainable material for such positions.

The demand for middle and high level managers, including supervisors, has risen steeply since the latter half of the 1980s due to the sudden massive inflow of foreign investments as a result of the massive deregulation drive. The export-led growth strategy launched by the government in coincidence with the deregulation measures and the opening of the domestic market wider to foreign competition has further spurred the need for professional managers. Even domestic companies which were previously well protected from import competition are being forced to hire more skilled personnel to remain competitive.

Given the disorganized manpower market, it is difficult to estimate the actual need. The Indonesian Management Association has estimated the need for middle and high level managers at more than 50,000 a year. Another rough guess could be based on the number of domestic and foreign investment ventures realized since 1967 which, according to BKPM, totaled 7,300. Assuming that one venture needs 20 professional managers, the need exceeds 150,000. But the total does not include investment ventures in the financial and hydrocarbon sectors which are licensed by other ministries and numerous other enterprises licensed directly by the various ministries.

So scarce are local professional managers on the higher levels that most foreign businessmen consider well qualified Indonesian managers the most expensive in the world. No wonder many companies have been forced to hire highly competent managers from such countries as India, the Philippines and Singapore who, due to adequate supplies of skilled manpower in their home countries, are willing to accept lower compensation overseas. Other companies risk violating the government restrictions by illegally hiring expatriates, even though many firms would prefer to hire locals for most management posts because paying foreigners generally costs much more.

So we see the President's instruction as a rational stopgap measure to meet the rising demand for skilled personnel until the local supply is adequate.

We should remember that qualifications for middle and high level management positions cannot be fulfilled entirely by university education. Experience, which means the accumulation of achievements and learning from mistakes, counts greatly.

We can speed up the turning out of university graduates by juggling the credit systems, but we will need much more time to develop increasingly professional managers because we cannot accelerate the process of gaining experience.