Potential exportiers ripped off

Potential exportiers ripped off

By Inghie Kwik

JAKARTA (JP): The business environment in Indonesia can be
described as a giant jelly that traps wealthy businesspeople but
sucks out any business ethics, integrity, honesty and morality
that they possess.

Once they get in the jelly, life becomes very convenient. But
the problem is, the longer they stay in, the more contaminated
they become. It does not matter whether they are local or foreign
businesspeople, the jelly will overwhelm their senses.

Even blue chip U.S. companies that are supposedly regulated by
the strict code of the Foreign Corrupt Practices Act cannot
overpower the force of the jelly.

"Just list what you consider respectable U.S. firms and look
at their partners," said a friend. "In a place where even the
World Bank is supposedly corrupt, how can you expect anyone else
to be honest."

Of course, the severe economic crisis has crippled many of the
larger business bandits in Indonesia, but it has not stopped the
more deceptive kinds. A real life example is the case of PT
Mediatama Binakreasi, which late last year, in one shot, cheated
12 small and medium-scale furniture manufacturers to such extend
that it left all the manufacturers with significant losses. Some
may have even gone bankrupt by now.

Mediatama, an event organizing firm, invited the manufacturers
to participate in a major furniture exhibition in High Point, the
United States.

At the outset, this offer was extremely attractive. Not only
did Mediatama manage to book exhibition space in High Point --
which is normally very difficult -- but it also managed to obtain
government subsidies from the Ministry of Industry and Trade to
pay half of the rental fees. At the time, most domestically
oriented furniture companies were facing severe difficulties due
to the crisis, and were looking for ways out through exports.

As such, despite the rupiah trading at about 14,000 to the
U.S. dollar then, the 12 manufacturers decided to bite the bullet
and participate by prepaying the US$150 per-square-meter rental
fees to secure their booths, with the government subsidizing half
of the bill. All the manufacturers were participating for the
first time and were naive about the logistical needs and costs of
such an exhibition.

When they first arrived in High Point, the participants had
difficulties finding their designated exhibition hall. They
looked for a building in the center of town, where all the
exhibitions were taking place. To their surprise, they discovered
that all the Indonesian participants were placed on the third
floor of a building located one kilometer away from the center.
This floor belonged to Plywood Tropics USA, a company controlled
by tycoon Mohammad "Bob" Hasan.

Plywood Tropics acted as an agent for Kiani Rattan and had a
permanent exhibition of rattan furniture there. However, last
year they decided to sell the property as indicated by "for sale"
signs placed on all the windows of the floor.

Upon entering the building, a polite but naive representative
from the Ministry of Industry and Trade's National Agency for
Export Development was there to greet the participants. He
immediately apologized because it turned out that the space
allocation was much smaller, by about 30 percent, than what was
paid for. He promised that he would help the participants obtain
reimbursement from Mediatama.

In fact, not only were the booth spaces too small, but all the
participants were placed at the back of the room, behind dense
displays of rattan furniture belonging to Plywood Tropics. It was
obvious that Plywood Tropics was in the processes of selling
inventory in preparation for selling the property. As the company
had freed up some of its space, it decided to rent it out. But
this was done by allocating space in the back, the last to be
visited by customers.

Many of the participating companies were rattan manufacturers.
Placing them in the front would have been a competitive threat to
Kiani.

The participants complained that the space was too small, too
far from the center of town and about the "for sale" signs, which
were obviously a deterrent for potential walk-in customers.

When they asked for a representative from Mediatama, they were
shocked to find out that no one from this company had come on the
trip to manage the event.

The participants also discovered that their display furniture
arrived just one day before the show and many of the pieces had
been damaged. They all, therefore, had to help each other through
the night to put up their displays. But they were forced to cut
back on their products for display.

The next morning, traffic jams and full parking lots gave them
a good feeling, with high hopes for writing out export orders.
Smartly dressed buyers were seen entering exhibition buildings in
hordes. Employees of Plywood Tropics assured the Indonesian
participants that High Point visitors normally had a routine
route, which included a visit to their floor.

However, by closing time on the first day of the exhibition,
it became clear to all the participants that they had been duped
by Mediatama. Apart from a visit by the Indonesian commercial
attache, not a single customer visited any of the 12 Indonesian
manufacturers. The following day saw around 10 visitors, but no
buyers. For the entire 10-day exhibition, the Indonesian
exhibition (including those of Plywood Tropics) received less
than 200 visitors. Every customer that walked into the building
was immediately approached by marketing representatives of
Plywood Tropics and offered the rattan of Kiani. Very few
bothered to look in the back, where the 12 small manufacturers
were anxiously waiting for customers.

There was practically no promotion to draw the attention of
customers. Some participants took the initiative to place signs
at the entrance and to remove the "for sale" signs from the
windows of the building. But these efforts were blocked by the
building management. Out of desperation, many of the participants
embarrassingly stood on street corners and in bus terminals to
distribute brochures of their products. But their efforts were to
no avail. The building was simply too obscure and unattractive
for visitors.

To add insult to injury, midway through the exhibition the
participants also discovered that their rental fees had been
significantly marked up from the market rate. Mediatama charged
$150 per square meter (half of which was paid for by the
government), while market rates for the building were in the
range of $50. With $150 per square meter, one could get space in
the center of town for two shows in 1998.

Apparently, participants who used the travel agency designated
by Mediatama faced even more rip-offs. Hotel rooms were marked up
by more than 100 percent above market rates. Some participants
even had to share a room with two others, despite the verbal
promise that they had reservations for deluxe rooms. Instead,
what they got was extra beds.

In the end, none of the manufacturers managed to close any
meaningful deals. Even worse was that they never had a chance to
see if their goods were competitive on international markets.
Mediatama acted as a space brokerage company in cooperation with
Plywood Tropics (Kiani) and made a profit of over 90 percent on
the back of financially deprived small and medium Indonesian
companies. All the participants asked Mediatama for the
reimbursement of their losses. In reply, they obtained a four-
page letter of justification that six companies were promised
reimbursement of rental fees averaging $570. In the letter,
Mediatama acknowledged that "we too are very disappointed ... we
didn't know that the building was for sale."

One must wonder how many of these shenanigans take place in
the life of commerce in Indonesia on a daily basis, and how many
helpless businesspeople get ripped off by cunning organizations
with powerful backing. Newspapers have reported large cases of
corruption and their linkages with powerful bureaucrats.

It is clear that even against the most blatant and egregious
cases of corruption, victims have no legal recourse, let alone
against the more cunning and sophisticated ones. No wonder
Indonesia has been rated as one of the most corrupt countries for
at least five years in a row by several corruption-fighting
agencies.

The "jelly phenomenon" is valid even today. It is simply not
possible to prosper in business without compromising moral ethics
and business integrity. In the above example, it is clear that it
would be much more profitable to be in the business of duping
others, rather than trying to develop business in international
competitive markets. It will take several generations to correct
this, and a clean government must guide it.

The writer, a furniture businessman, prepared this article on
behalf of 12 furniture manufacturers: PT Anak Menawan Indonesia,
CV Roda Jati, PT Super Poly, PT Indo Jago, PT Andara, PT Erfian
Boga Pratama, PT Tunggullaras, PT Bauma, PT Epconindo Citra
Decora, PT AFC and PT Usada Baebunta Sembada.