Why Indonesia wants expats to speak Indonesian or stay away

In a move that appears aimed at the numbers of Chinese mainlanders flooding into Indonesia’s industrial sector but that will likely sideswipe foreign and local investors, the government is poised to mandate that all expatriate work permit holders be forced to learn Indonesian as a foreign language.

The early drafts of the new rules – which have not been formally introduced – state that foreigners must be proficient in Indonesian before work permits will be issued. Later drafts seem to indicate some flexibility, but companies are worried that even vital senior executives, who rotate through head offices on 3 to 4 year tours, could be at risk.

Korean, Japanese, American and European business chambers have all been buzzing over this latest manifestation of economic nationalism. It is unclear if the country’s Manpower Ministry will relent, although one recent version of the new rules indicates that there may be a grace period to allow expats already in the country to brush up their Bahasa Indonesia before facing a formal test.  Foreign business associations have been given no input into the new rules but a handful of local business leaders have been consulted.

Given rapid economic growth and a problematic educational system, local companies are often as reliant on expats as foreign firms. Retail supply chains, logistic operations, engineering departments and other out-of-sight aspects of local conglomerates are often run by foreign experts.

Fear of the Chinese

The chief villains being cited by officials are illegal Chinese workers. In the wake of the Asian Financial Crisis in 1997 and 1998, most foreign investors fled Indonesia except for Chinese companies, many of which won infrastructure tenders on a wave of cheap financing. As commodity prices subsequently took off, more Chinese companies entered, taking a strong interest in the country’s growing economy and natural resources.

This has discomfited some Indonesians, many of whom have never been comfortable with the prosperous Chinese-Indonesian minority in the first place, since they tend to command the country’s economic heights.  Tens of thousands of ethnic Chinese were slaughtered in the anti-communist purges that followed a failed 1965 coup. Those events brought to power the strongman Suharto, who used ethnic Chinese economic strength to build the economy while banning the Chinese language and forcing most Chinese to take Islamic names. Later, ethnic Chinese Indonesians felt the brunt of the violence that swept the country when Suharto fell after 32 years at the top.

The new proposed manpower regulations and other measures that are seen to target expatriates are largely aimed at growing numbers of mainland Chinese workers, many of whom are believed to be in the country illegally. Existing laws would bar these workers but enforcement is spotty and bribes to look the other way are common.

ASEAN worries

The measures being proposed are also considered to be aimed at the late 2015 onset of the ASEAN Economic Community (AEC), which envisions an integrated ASEAN economy including the free flow of skilled workers and capital throughout the 10-country region.   According to a joint study by the International Labour Organization (ILO) and Asian Development Bank (ADB) in 2014, the AEC could generate some 14 million jobs by 2025, and improve the livelihood of the 600 million people in ASEAN.

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