Fri, 18 May 2001

The value of expatriate experts

By Idris Kyrway

JAKARTA (JP): The article by Donna Woodward on expatriates in this newspaper last Saturday contains some questionable statements -- but her article has the advantage of bringing the subject out of the closet.

Indonesian legislation dealing with the presence of foreigners is not thought through, sometimes ridiculous, in certain cases highly unfair, and often detrimental to the country's very own interests.

When foreign investors choose Indonesia to set up a company -- eagerly welcomed by the government -- they should have the right to protection and to fully develop their investment. Their main purpose is to exploit an available business opportunity. Charity comes after success, as in the case of Ted Turner, Bill Gates, and George Soros.

On the surface the legislation gives sufficient protection. The investors can appoint foreigners as directors or commissioners to lead the company. Directors can get a five-year stay and a work permit, renewable and without having to leave the country. Yet, until not so long ago even commissioners, except in the biggest projects, could not get such a facility.

On the other hand, Indonesia's lawlessness is exemplified by the fact that even this "favor" is not always guaranteed. Illustrative is the case of the Manulife insurance firm, with one of their managers put in prison while it was clear from the start that it was mainly the Indonesian partners who should have been grilled.

The aim of an investor is to develop a business and to earn money. Providing jobs, raising standards of living and education, environmental concerns, and so on, are all praiseworthy objectives, but secondary nevertheless. That's where expat personnel come into the picture.

If local and overseas investors were convinced that Indonesians had the same capacities, skills, work ethics, yet could be employed at a lesser cost than expats with similar qualifications, only cross-cultural differences would stop them from doing so.

If fears of underperforming Indonesians, even when they seem qualified on paper, prevail, then the profit-minded investor will look for overseas candidates he feels more confident with, because of a similar background and of shared concepts of performance, loyalty, integrity and sense of responsibility. "Overseas" does not necessarily mean "Western". It might be Hong- Kongers, Singaporeans, Filipinos, or Thais.

There is an enormous dearth of really qualified Indonesians, and even those who possess the technical qualifications or the required experience don't necessarily have the required work ethics.

A diploma, even from a reputable overseas university, is not automatically a guarantee of quality, of achievement, of work ethics of the highest standards. Academic staff at overseas universities tend to be more lenient towards guest students from developing countries. And we know all too well that the quality of universities here in Indonesia differs as night from day. Moreover, diplomas can be bought, also from overseas institutions.

Of course, local talent in Indonesia is present to the same degree as anywhere else in the world. Yet, this does not mean that the intrinsically talented people here get the same chances as elsewhere to prove their worth. The only single example of one street child I know of who managed to break through the lack- of-education-and-funds barrier is the exception that confirms the sorry rule. This former street boy is now a top manager in a company marketing high-end fashion products, fluent in English, with a remarkably high standard of work morality. But his good fortune has mainly been the result of a chance meeting with an expatriate journalist who took him under his wing some 12 years ago.

The main flaw in Woodward's reasoning is that her arguments don't leave enough room for market instincts and market logic to prevail. And market freedom is what is required here. If Indonesians who studied overseas can't find a job back home, it means that they have concluded that their best chances for self- deployment are elsewhere.

If foreign companies are prepared to pay exorbitant bills for expats, it means that they feel more assured with higher paid but more reliable specialists than with local personnel. Even when this evaluation is at times mistaken, they have a right to such a misperception. It is after all their money that is at risk, not the government's.

Market forces should be allowed to fully play their role as guardians of natural selection and survival of the fittest, also among the business species.

If a foreign investment (PMA) is 100 percent foreign-owned there should be no obligation at all to employ Indonesians. This statement is no different from the conclusion which the government arrived at in the mid 1990s when it dropped the obligation for most PMA ventures to take Indonesian partners on board.

The rules of Indonesian shareholdership as well as the divestment regulation have probably hampered investment more than they have stimulated Indonesian participation in the country's economic development, which was supposedly the intention.

Most of the regulations still in force were drawn up under the New Order. They were conceived and written by a few individuals -- not after deep, honest and tough deliberations, but to have something on paper that would "please" the power-brokers and something the foreigners could live with, albeit grudgingly.

All these conditions of Indonesian shares, training of locals, foreign employment piecemeal, divestment, were lip service, harmful to true Indonesian interests, introduced to placate a largely illiterate populace and to meet widespread prejudices, even reinforcing the latter: foreign investors as blood-suckers, profiteers, etc.

The executioners of these "policies" -- the Investment Coordinating Board (BKPM), manpower ministry, immigration office etc. -- were all well aware of this hypocrisy. These officials showed a much more realistic interpretation of these rules, also, of course, because such flexibility served their own interests of tips and "cigarette money" (uang rokok).

In other words, and contrary to what Woodward states: The BKPM was not wrong to do almost nothing in this regard. After all, each expat position pays a US$100 a month just for being here, funds supposedly to be spent on the training of locals. That makes $1,200 or a bit under Rp 15 million a year plus taxes. This raises another question: Where does all this money disappear to?

The conditions for the employment of "technical advisors" is a good illustration of the ridiculous balancing between placating native prejudices and the need to accommodate foreign investment.

On paper again, everything is there: a manpower plan, education and work experience requirements for the expats, a training plan for Indonesian staff, etc. It's on paper. And that's enough.

That the rules are not serious, were never intended to be applied as such, is clear from the way that there has never been a follow-up by the departments that issued them. To the population at large the officials and politicians can maintain that they have done their job, to the foreigners that "all that is necessary to keep everybody happy".

Meanwhile, everybody seems to forget that training is a specialization in itself, and that most experts are not necessarily born educators.

Is it the role of foreigners to train counterparts to lead Indonesia's companies and to teach them correct work ethics?

Not so long ago there was even talk of importing judges from the Netherlands -- the former colonial power! -- to replace local incumbents in the judicial system. And this idea emanated from the government itself!

Moral education is something that goes back to role models in a person's youngest years, the quality of the educational system and the prevailing social environment which someone breathes day- in, day-out. An Indonesian at the age of 20 or 25 or 30 won't change his work ethics anymore because he has been working for one or two years as a counterpart of a foreigner.

At best, he might adjust his heading a bit, but he won't be able anymore to make a U-turn. And when it comes to the technical skills part of his job, for most specialities to arrive at a "master" level does not require one or two years, but 10 or 20. Those who wrote these regulations just forgot to put a zero behind the figures.

Contrary to Woodward's opinion that Indonesia should put "teeth" into its requirements for foreigners to train locals it seems more imperative to let market forces decide.

Indonesia should invite foreign investors -- and there is a majority of honest expat businesspeople really concerned about Indonesia's future to make this feasible -- to find out which compromises are the best for our country, for attracting a maximum of foreign investment, and for the foreign investors themselves.

The writer, a former senior investment advisor to the Coordinating Investment Board, lives in Jakarta and Bali and is now a political observer and business consultant (