Thursday, March 26, 2015

Indonesia's ethnic-Chinese companies create opening for China

JAKARTA -- The ethnic-Chinese-led companies that play an outsize role in Indonesian business are also a force behind the country's economic shift toward China.

     Their fortunes rising on healthy domestic demand, these companies are seeking outlets abroad. For China, they represent an inviting base for political and economic bridge-building with Indonesia.

     Official statistics put the number of ethnic Chinese in Indonesia at 2.8 million in 2010, or 1.2% of the population. But the actual figure ranges from 5 million to 10 million, an association of ethnic Chinese says.

     Moreover, they make up nearly 40 of Indonesia's 50 richest people, as ranked by the U.S. magazine Forbes. Around 40% of the 50 most valuable companies on the Jakarta stock exchange are run by ethnic Chinese. On the business side, Indonesia and China are already compatible.

     The two countries suspended diplomatic relations during the Cold War years of 1967 to 1990. Ethnic-Chinese Indonesian companies turned to Japan, partnering with the likes of automakers Toyota and Suzuki. Some 95% of new vehicles sold in Indonesia bear Japanese brands.

     Mainland Chinese companies have started sidling up to Southeast Asia's biggest economy. Alibaba Group, the e-commerce giant, said last month it is stepping into the Indonesian market in a tie-up with Alfa Group, a big ethnic-Chinese retailer. Internet services heavyweight Tencent has joined forces with Indonesia's biggest media company, which is headed by an ethnic-Chinese entrepreneur.

     China surpassed Japan in bilateral trade with Indonesia in 2013 and is catching up in foreign direct investment. Inflows of Chinese investment roughly tripled last year. Moreover, the Chinese are showing enthusiasm for the rural infrastructure projects that President Joko Widodo's government is seeking. While 90% of Japanese investment goes into the capital region here, 60% of Chinese inflows go the rest of Indonesia. SADACHIKA WATANABE

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