Chinese Investors Face Scrutiny As Indonesia Vies in Asian Economy

POWERFUL ethnic Chinese tycoons are increasingly on the firing line as Indonesians wonder about their country's economic and political future.

During President Suharto's 27-year rule, Chinese conglomerates have used connections to key officials, preferential access to government credit and contracts, and links to the international Chinese business network to build lucrative monopolies and wield financial muscle disproportionate to their numbers.

Many Indonesians overlook the positive economic stimulus of Chinese entrepreneurs in the absence of strong, indigenous businesses. They blame Chinese for bleeding the country, but ignore that their political alliances enrich many government and military officials.

``The Chinese aren't the only ones who benefit. They act as a front for many Indonesian government officials,'' says Muslim leader Abdurrahman Wahid, who has urged local firms to be more aggressive. ``The big tycoons are very clever. They have already sent their money abroad and the officials' money too.''

The issue is becoming more charged as Indonesia faces stiff competition in the regional race for foreign capital.

Indonesian Chinese who invest in the Chinese market face closer scrutiny at home amid declining foreign investment in Indonesia. In 1993, total foreign investment commitments fell 21 percent from the previous year, according to the Investment Coordinating Board. Conservative estimates that place Indonesian investment in China at more than $800 million stir charges of capital flight.

The high profile of Chinese tycoons raises the specter of a resurgent China and heightens debate among overseas Chinese over assimilation in Indonesia. Middle class and poor Chinese say they would bear the brunt of any backlash against the high-living industrialists.

``In some places the feeling of being Chinese is coming back. Some people want to group together as overseas Chinese again,'' says Harry Tjan, a promoter of assimilation. ``This can be a counterproductive and disintegrating process. It is a great potential worry.''

In a move to defuse tension and build up small enterprise in 1990, the government called on Chinese businessmen to sell up to 25 percent of their companies' shares to employees and cooperatives. But few have responded because ``a lot of them don't feel this is their social responsibility,'' says Sofjian Wanandi, a prominent Chinese industrialist.

Although many tycoons are first generation Chinese in Indonesia, businessmen and Western analysts predict they will survive the post-Suharto political transition.

``The transition of power is a major problem in Indonesia as it is in China,'' says S. Gordon Redding, a professor at the University of Hong Kong. ``But the Chinese have locked in the future because all the generals and potential successors to Suharto have already been bought.''

At the same time, the ethnic Chinese magnates hedge their bets by maintaining their Chinese identity and cultivating ties to other Chinese throughout Southeast Asia and China. To create a buffer against charges that they are draining investment from Indonesia, many are investing in China through subsidiaries registered in Hong Kong.

As a sign of modernization, a younger generation of Chinese armed with US MBAs is moving to the helm of many companies and reshaping them along the lines of Western multinationals, some Chinese and Western analysts claim. But other business observers question whether they can move beyond the secretive dealings of the Chinese world.

``Most of them grew up in quite a hostile environment and amid high levels of uncertainty,'' Mr. Redding says. ``When you are built for uncertainty, it is difficult to operate in a Western environment.... It's not true that large Chinese organizations are attempting to globalize. If they try to operate in a Western context, they only get their fingers burned.''