INDEPENDENT OBSERVER
IO – If one were to believe former president Susilo Bambang Yudhoyono, the Jokowi administration’s recent decision to simplify the process of recruiting foreign workers is disastrous. He said it would lead to an ‘invasion’ of foreign workers and even possibly cause social unrest.
According to Jokowi and his minister of manpower, the decision will not necessarily result in an invasion, just more foreign direct investment. Which, if we think about it, is a nice story: with more inflows of investment capital, the economy will grow and there will be more employment opportunities for Indonesians.
But is this really a story with a happy ending?
On the one hand, Jokowi is correct in saying the new regulations will not result, as SBY puts it, in an invasion. Official limits on the numbers of foreign workers that can be employed by corporations will remain in place. And, restrictions on the types of foreign workers will also be intact, which means mostly highly skilled white-collar expatriates, not blue-collar workers, will be allowed to obtain their work permits.
On the other hand, Jokowi is incorrect if he thinks waving this regulatory wand is sufficient to entice more foreign investors. It will certainly help, but other issues weigh more heavily in corporate boardrooms. The president’s economics cabinet should focus more on the factors that matter the most: industry-specific regulatory regimes, corporate tax rates, domestic costs-of-doing business, macroeconomic conditions and political stability.
To be generous, SBY should not be faulted for attacking Jokowi on this new policy. After all, he is saying what most politicians would say and have been saying when it comes to hot-button issues that align with nationalist sentiments. It is, after all, campaign season, and rhetoric counts more than the facts.
Meanwhile, Jokowi needs to conduct a reality check. As president, he should not fall prey to wishful thinking while the Indonesian economy is performing at a subpar level and foreign investors continue to swing towards other emerging markets such as Vietnam.
But there is another side to this story, one that is conveniently forgotten by the mainstream media and which, if left unchecked, could actually result in SBY’s worst-case scenario of a foreign invasion and social unrest come true.
As we cover in our feature story of this edition of the Indonesian Observer, one of the fastest-growing sources of investment in Indonesia over the past few years is China. This is not a worrisome trend—Indonesia should remain agnostic about sources of direct capital inflows.
But what is particularly troubling is Chinese companies setting labor preconditions for their Indonesian projects. As elsewhere in the world, in Africa, South Asia and other parts of our Southeast Asia region, Chinese companies typically demand of their host countries that they be allowed to export their workers to be employed at project sites. We have already heard credible and documented stories of Chinese companies in Indonesia doing precisely that, many times bringing their workers into Indonesia on regular tourist visas.
One example of such practices is Virtue Dragon Nickel Industry, a Chinese joint venture nickel producer located in Konawe, Central Sulwesi with reportedly more than half of its workforce being Chinese nationals and receiving salaries six times higher than their domestic counterparts.
Of course, the Jokowi administration dismisses these stories as fake news. Our question is, why should the government ignore so many reports of Chinese nationals working illegally in Indonesia, often as blue-collar-laborers, especially when the downside risk of resentment and social unrest is so high?
For those of our readers who find these stories as incredulous, the case of Chinese companies working in the port city of Gwadar, Pakistan is particularly instructive. Gwadar is being touted as the ‘Gateway City’ for a US$62 billion project known as the China Pakistan Economic Corridor that includes developments for a deepwater port, gas pipelines and highways stretching from Gwadar and Karachi with its northern reaches, the western Chinese province of Xinjiang and eventually Central Asia, as well.
Enter the China Pak Hills Investment Corporation, or CPIC, which has already announced plans to invest US$500 million in a mega-housing development named China Pak Hills in Gwadar. According to numerous news reports, there are plans to house around half a million Chinese professionals in the China Pak Hills by the year 2023, which roughly represents nearly six times more Chinese than the indigenous Baloch peoples living in Gwadar.
None of this has gone unnoticed with the Baloch, and although Islamabad is refuting reports that the Gwadar Port Authority has certified the China Pak Hills project, CPIC officials have confirmed they have received the blessings of the Pakistani government.
Meanwhile, Baloch militants have already laid attacks on Chinese workers in the area. More will surely come in the future. It is a cautionary tale that the Jokowi administration should, at the very least, take to heart.