Indonesian Chinese Businesses : Case Study of Oei Tiong Ham Concern Widjaja Hartono INTERNATIONAL BUSINESS MANAGEMENT UNIVERSITAS CIPUTRA - SURABAYA email@example.com ABSTRACT Indonesia is the largest economy in Southeast Asia and a member of the G-20 major economies. With more than 230 million inhabitants, it is the 5th most populous country in the world and is among the most culturally rich countries. Indonesia has more than 300 ethnic with some 250 distinct languages and dialects throughout the nation. For the last ten years, Chinese or Mandarin language has been commonly used and has become advantage for businessmen doing business with China. As economic development and modern education spread throughout the country, the ethnic and regional differences are being diluted. Chinese descent constituting only 3.5 per cent of the population but they own approximately 74.5 per cent of national assets. Much of the country's privately owned commerce and wealth is Chinese-Indonesian-controlled, which has contributed to considerable resentment, and even anti-Chinese violence. This is a long time and vulnerable issue which last for decades. Oei Tiong Ham was a Chinese businessman. He was the son of Oei Tjie Sien, the founder of the Kian Gwan Kong Si (a multinational trading company). Later it became Oei Tiong Ham Concern (OTHC) which was the largest conglomerate in the South East Asia. He became one of the wealthiest and most powerful men in his time period. In 1961, during President Sukarno rule, his business was naturalized and confiscated by the government of Indonesia (Old Regime). The purpose of this research is to analyze the Indonesian Chinese Role and the Indonesia Chinese Businesses in the past, present and future challenges in learning with Oei Tiong Ham Concern Case Study. Keywords: Oei Tiong Ham Concern, Indonesian Chinese Businesses, Indonesian Chinese Role INTRODUCTION Chinese Indonesians, also called the Indonesian Chinese, are an overseas Chinese group whose ancestors emigrated from China to Indonesia. When speaking of ‘Chinese’, it refers to Indonesians who define themselves as ‘orang Tionghoa’ and are seen by others as ‘Chinese’. Ethnic Chinese have been living in Indonesia for generations, if not centuries. It is often impossible to find differences between them and the Indonesians regarded as indigenous, the so-called pribumi. Most of the Chinese Indonesians have Indonesian names, use the Indonesian language, are Indonesian citizens, and have never been outside Indonesia. However, until 1998 they constituted the ‘nonpribumi’, the counterpart of the pribumi-majority. This ‘non-asli’ (‘not original’) attribute not only legally marked the Chinese as outsiders of the nation, but constituted the dominant social reality in Indonesia. In many ways, be it in the institutional enactment of discriminatory laws and unfair practices or publicly in riots, the exclusion of the Chinese took place. RESEARCH METHODOLOGY This research uses descriptive method and was done by collecting data from papers, journals, modules, and internet databases. RESULTS AND DISCUSSION Pic.1: Kian Gwan Maatschappij Resource: www.semarang.nl Oei Tiong Ham Concern (OTHC) The OTHC originally started with the trading firm of Kian Gwan, established in 1863 by Oei Tje Sein, Oei Tiong Ham's father. In 1890, Oei Tiong Ham took over the firm Kian Gwan which diversified and grew into one of the largest firms in Southeast Asia. At the time Tiong Ham took over the firm, Kian Gwan’s main activity was trade, especially trade in rubber, kapok, gambir, tapioca and coffee. In addition, it was involved with pawnshops, postal services, logging and the highly lucrative opium trade. Unlike many of his Chinese contemporaries, Oei Tiong Ham relied heavily on written contracts in conducting his business. This did not make him popular in Chinese circles but it provided him with a legal basis to acquire the collateral for the loans he extended. Among his main debtors were often owners of sugar factories in East Java and when these factories were unable to repay the loans, due to the long-lasting effects of the sugar crisis of the 1880s he used his rights as a creditor. In this way he acquired five sugar factories. Sugar now became the backbone of the company and would remain so for the next several decades. In the period between the 1890s and the 1920s, OHTC grew and diversified rapidly. It started branches in London and Singapore, created a bank, a steamship business and had a large wholesale business. Of all the ethnic Chinese business conglomerates in pre-war Asia, the Oei Tiong Ham concern was by far the largest. Besides making use of written agreements and a modern accounting system, Oei Tiong Ham also diverted from yet another Chinese business practice of the time. Instead of relying solely on family members in running his wide ranging business enterprises, he deliberately chooses capable outsiders, such as Dutch directors, managers, and engineers to manage his companies. Nevertheless, the top managerial positions were held by members of the Oei family. After Oei's death on 1924, OTHC continued to grow. However on 10 July 1961, the Pengadilan Ekonomi (the court for economic crimes) in Indonesia issued a confiscation order on OTHC in Indonesia. The company and its owners were charged with economic crimes against the country. OTHC was then nationalized and renamed on 1964 to PT Radjawali Nusantara. However, the overseas subsidiaries remained with the Oei family. The Indonesian Chinese History For around 250 years the majority of what is now Indonesia was ruled by one of the biggest, most long lasting and least socially responsible of the colonial trading companies. Such companies were in their own way prototypes of the modern TNC. The legacy left by the colonial regime and the Dutch East India Company in Indonesia was a complex mélange of patronage, monopolies (the so-called conglomerates) and the commensurate concentration of wealth and power. Tan (2008) reports that, as a result of that early history, capitalism is inextricably linked with colonialism and imperialism in the Indonesian consciousness. By the time the Dutch arrived in the early 17th century, major Chinese settlements were already in existence along the northern coast of Java. Most were traders and merchants, but they also practiced agriculture in some inland areas. The Dutch contracted many of them as skilled artisans in the construction of Batavia on the northwestern coast of Java. The new harbor was selected as the new headquarters of the Dutch East India Company (Vereenigde Oost-Indische Compagnie, VOC) in 1609 by Jan Pieterszoon Coen. It soon grew into a major hub for trade with China and India. Batavia became home to the largest Chinese community in the archipelago and remains so today, though the city has been renamed as Jakarta. Chinese settlement in the archipelago was not limited to Java. In western Borneo the Chinese established their first major mining settlement in 1760 and ousted Dutch settlers and the local Malay princes, including establishing their own republic. By 1819 they came into conflict with the new Dutch government and were seen as "incompatible" with its objectives. On the other hand, the local government considered the Chinese population indispensable for the development of the region. Most of those who settled in the archipelago had already severed their ties with the mainland and welcomed favorable treatment and protection under the Dutch. Some became "revenue farmers", middlemen within the corporate structure of the VOC, tasked with collecting export–import duties, managing land sales, and managing the harvest of natural resources. Chinese Indonesians; Roles and Treatments The position of the ethnic Chinese in Indonesian society has for decades been ambivalent. Resentment against the Chinese for their business success and dominance has led to frequent outbursts of anti Chinese sentiment and riots both after independence as well as during colonial times. Conversely, the Chinese have also received considerable appreciation for their introduction of business techniques. Moreover, during the Dutch and Japanese occupations of Indonesia, it was the ethnic Chinese who contributed most heavily to the independence movement of the nation. Indonesian law affecting Chinese-Indonesians were conducted through a series of laws, directives, or constitutions enacted by the Government of Indonesia that affected the lives of Chinese Indonesians or Chinese nationals living in Indonesia since the nation's independence. The laws were considered discriminatory by some, who view them as laws made against Chinese Indonesians. Most of these laws are revoked following Reformation era under President Abdurrahman Wahid (Gus Dur). Right after the Indonesian Independence on 1945, the Indonesian people were overwhelmed by the euphoria of "freedom" and took over a lot of foreign companies: this action was referred to as "Anti-Dutch sentiment". Among others, were a Dutch companies and Chinese Indonesian companies like OTHC. After a while, the Government of Indonesia realized that unskilled and inexperienced Indonesians were unable to run the company. They also did not have enough capital, and it was almost impossible to compete with foreign investment and the Chinese capital (before independence, the ethnic Chinese had more chances to do business from colonialist ruler). These companies suffer losses after the seizure. As a solution, the Government of Indonesia signed an agreement during Dutch-Indonesian Round Table Conference in Den Haag, Netherlands, which stated that the government of Indonesia would return all seized foreign investment assets to its previous owner. In return, to strengthen up the weak Indonesians (pribumi), the Government of Indonesia had the right to issue a law or directive to protect the national interest and those who were "economically feeble". In the beginning of 1950 the Government of Indonesia (GoI) issued "benteng" (fortress), stating that only indigenous Indonesians (pribumi) were allowed to have licenses to import certain items classified as "fortress" items. During its implementation, this rule gave birth to the term "Ali Baba", meaning that underground trade activities with the combine cooperation between Chinese businessmen and Indonesians who have access in the bureaucracy were going on. Presidential Regulation 10 of 1959 (Peraturan Presiden Nomor 10 tahun 1959) was a law directive issued by Indonesian government and signed by Minister of Trade. The law prohibited foreign nationals from doing retail business outside urban areas (including rural areas) and required them to transfer their businesses to Indonesian nationals by 1 January 1960 or relocate to urban areas. This directive was approved by former President Sukarno. The rule triggered a huge exodus of Chinese Indonesians back to China. Although the regulation merely mentioned that only "foreign citizens" were required to do the relocation and closure of business, the law affected many Chinese nationals and Chinese Indonesians. At that time, almost all retail stores in Indonesia were owned by Chinese or Chinese-Indonesians from grocery stores, hardware stores and even restaurants. The law was meant to strengthen the national economy in Indonesia, yet this law resulted in a tense diplomatic relation between Republic of Indonesia and the People's Republic of China (PRC). New Order Regime During this regime, capital has been concentrated in the hands of President Soeharto, his family and selected clients and cronies. Suharto was a strong advocate for Chinese assimilation rather than integration. As part of 1967's 'Basic Policy for the Solution of the Chinese Problem' and other measures, only one Chinese-language newspaper was allowed to continue, all Chinese religious expressions had to be confined to their homes, Chinese-language schools were phased out, Chinese script in public places was banned, and Chinese were encouraged to take on Indonesian-sounding names. Large business in Indonesia is marked by the presence of what have been labeled conglomerates, it is a well-connected groups of businesses linked to Indonesian political elites. The other is large State Owned Enterprises (SOEs), which are bureaucratic corporations protected by the power of government and patronage. Increasingly they operate as limited companies (PT) and possess the same flexibility as private enterprises. In later years, FDI was continuing led and dominated by Japan, a nation that had occupied Indonesia during the Second World War. The strengthening of economic ties with Japan and other Asian economies, such as Taiwan (Republic of China) and the Republic of Korea, has continued until the present. During the 1970s and 1980s Suharto and his government brought in Chinese Indonesian businesses to participate in the economic development programs of the New Order, while keeping them highly vulnerable in order to strengthen the central authority and restrict political freedoms. Patron-client relationships, mainly through the exchange of money for security, became an accepted norm among the ethnic Chinese as they maintained a social contract through which they could claim a sense of belonging in the country. A minority of the economic elite of Indonesian society, who may or may not be ethnic Chinese, secured relationships with Suharto's family members and members of the military for protection, while small business owners relied on local law enforcement officials for protection. Stereotypes of the wealthy minority became accepted as generalized facts, but they failed to acknowledge that these businessmen are small in number compared to the small traders and shop owners. After the May riot 1998 which targeted ethnic Chinese businesses in Jakarta and some big cities, New Order regime was ended. The situation of the ethnic-Chinese Indonesians seems unlikely to improve soon. While to some degree the violent persecutions have abated since the resignation of President Suharto, his successor, President Habibie, has only added to the troubles of the ethnic Chinese. In one of his first acts as president, Habibie joined in the scapegoating of the Chinese community. Instead of attempting to encourage the ethnic-Chinese Indonesian citizens who fled the country to return, President Habibie instructed the government to give their trading licenses to what he called "indigenous Indonesians" (pribumi). On the other hand, Habibie began a campaign to rebuild the confidence of Chinese Indonesians who had fled the country, particularly businessmen. Habibie appealed to Chinese Indonesians seeking refuge throughout many developed countries to return and promised security from various government ministries. Despite Habibie's efforts he was met with skepticism because of remarks he made, which suggested that the message was insincere. Family Business The economic achievement of the Overseas Chinese in Southeast Asia and Indonesia particularly has attracted the attention of many economists, social scientists and management researchers from all parts of the world. One of the key characteristics of the Overseas Chinese business practices is its remarkable high entrepreneurship. This extraordinary high business sense of the Chinese leader is very much shaped by the Chinese cultural values that strongly emphasize the value of familism and the importance of glorifying the family-name. This has explained why most of the Overseas Chinese businesses are family-oriented, like OTHC. In addition, the unique organizational and managerial practices of the Chinese enterprises have also partially contributed towards their economic successes. Chinese cultural values are often seen as important factors in determining and shaping Chinese business organizational and managerial practices. The influence of Chinese cultural values on managerial practices is so significant that it distinguishes Chinese managerial practices from Western practices (Redding, 1982). These distinct Chinese cultural values have created the distinguishing characteristics of the Chinese managerial system (Limlingan, 1986). The unique characteristics in Chinese organizations include a low level of structuring activities, highly-centralized decision making, exhibiting nepotism and family ownership control, as well as demonstrating a paternalistic style of leadership with strong emphasis on group behavior. However, the uniqueness of the Chinese organizational and managerial practices has its limitations, especially when the size of the family business grows from small-medium size to large. In fact, this is the time when the weaknesses of Chinese family business organizational practices start to reveal themselves and even overtake the strengths. Some of the major and common weaknesses are no succession plan, lack of operational systems and controls, lack of ability to develop long-term strategic plans, one-man show authoritative management style and family conflict among the family members (splitting of family business and wealth among brothers). That could be used to partially explain why a Chinese family normally would not last for more than three generations. In order to enable the continuity of the family business, it is of paramount importance for the Chinese leaders to gradually move toward modern management and professionalism in place of the conventional style of management. Pic. 2: Book “Family Business” Nyonya Meneer Resource: www.tower.com Jamu Nyonya Meneer Company - Semarang (Indonesian traditional medicine manufacturer ) is one of sustainable Chinese Indonesian family businesses which last more than a century. CONCLUSION None of Indonesia's ethnic groups are as important relative to their size as the ethnic Chinese. The Chinese are not considered an indigenous group to the nation, although they have been present in varying degrees for centuries. The Chinese are few in number but dominate Indonesia's business sector. REFERENCES Ariel Heryanto, “Ethnic Identities and Erasure: Chinese Indonesians in Public Culture,” in Southeast Asian Identities: Culture and the Politics of Representation in Indonesia, Malaysia, Singapore, and Thailand, ed. Christine Susana Tjhin, Reflections on the Chinese Indonesians, CSIS Working Paper, Jakarta, June 2005. Christian Chua. Chinese Big Business in Indonesia: The State of Capital. 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"Indonesian Chinese Businesses"