The Dynamics of the Chinese Business Practice and the Local Elites Behavior: The Legacy of Pseudo-Capitalism in Indonesia’s Local Development

Abstract

The evolution of the Chinese business activities in several Southeast Asian
(SEA) countries such as Indonesia, The Philippines, Thailand, and Malaysia
is rather difficult to separate from the influence of the state policies and the
behavior of political elites. In Indonesia, the relationship of the Chinese
businessmen, particularly in big business activities with Suharto regime,
known as ‘Orde Baru’ (New Order), shows a model of patron-client behavior
and crony capitalism networks. The accommodation, protection, and access
provided by the regime has led to the economic capitalization of the Chinese
business in Indonesia. In fact, the relationship between Chinese business and
New Order’s regime is mutually beneficial and very tight. After the fall of the
New Order regime in 1998, the political system in Indonesia became more
open and decentralized (locally known as ‘Otonomi Daerah’ or Regional
Autonomy). This shows the important role of the local government in
making decision particularly in terms of economy sector and infrastructure
development’s project. The paper aims at three folds: first is to discuss the
pattern of the Chinese ethnic business activities in post-New Order regime
and its impact to the local development. Second, to discuss to what extent
the Chinese business practice particularly in real-estate or property sector
influenced by the local elites behavior. Third is to discuss whether the
patron-client relationship and crony capitalism behavior in the local context
between Chinese businessmen with local elite occurred as in the Suharto’s
era or not. The findings show that the pattern of the Chinese business in
post-Suharto’s Indonesia in several business sectors (medium and mediumlarge
businesses) sometimes still rely on the use of networks with local elites.
The local government faced a ‘complex dilemma’ in term of development
projects, where basically requires substantial capital from big companies, then they often violated the laws to accelerate the development projects. The
patron-client networks and crony capitalism vaguely occurred among the
Chinese businessmen and local elite. However, the level of their closeness is
not too visible as in the Suharto’s era. In other circumstances, the Chinese
businessmen also become superior actors, while the local elites only become
inferior actor, because the companies actually seemed to be able to control
the government decision indirectly.