Easing up on expatriates

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.