Capital Loss

The fate of Indonesia rests largely on the shoulders of people like Liem Sioe Liong and Hendra Lie. Liem is an elderly, publicity-shy billionaire whose vast empire includes the country’s largest cement and steel plants. Lie is an outspoken 30-year-old garment factory owner.

They are very different people with one thing in common: their Chinese ancestry.

In recent weeks that bond has brought despair to both men, who were amongthe thousands driven from Indonesia by angry rioters venting their frustration over the nation’s mounting economic problems by torching and looting property owned by ethnic Chinese.

Whether they return from Singapore, Hong Kong and elsewhere--with the billions of dollars they have reportedly moved overseas in recent months--is a critical question for Indonesia, confronting its worst economic crisis in three decades.

“This represents a massive yanking of capital and talent that Indonesia desperately needs at the moment,” said Don Emmerson, an Indonesia expert at the University of Wisconsin.

Already, the ethnic Chinese--who make up just 3% of Indonesia’s population while controlling an estimated 70% of its private wealth--are desperately needed to get food back on the shelves, stores reopened and factories running.

The new government led by former Vice President B.J. Habibie needs the support of the Chinese-owned conglomerates to boost international investor confidence. But winning them over will not be easy, given the centuries of mistrust between the indigenous pribumi and the ethnic Chinese immigrants.

“This is a problem that will not be solved overnight,” warns J.K. Han, executive director of the Maspion Group, an ethnic Chinese-owned conglomerate based in Surabaya, Indonesia’s second-largest city.

Anti-Chinese violence is an old story. Before Indonesia’s independence in 1945, the Chinese were viewed as lackeys of the Dutch colonialists. They later were persecuted as communist sympathizers. Unable to get jobs in government or the military, the Chinese went into business, where their success and visibility made them easy targets of resentment.

To promote assimilation, and ostensibly to protect the ethnic Chinese, the Indonesian government prohibited the use of Chinese characters on signs and owning books in Chinese. Most Chinese adopted Indonesian names and many, after several generations in this country, don’t speak Mandarin or Cantonese.

Last week, the anti-Chinese sentiment erupted once again when the Indonesian government sharply boosted prices. Thousands of poor Indonesians headed for the Chinese neighborhoods seeking vengeance.

For two long days, terrified Chinese shop owners and residents huddled behind locked doors or fled for their lives while mobs torched cars, smashed windows and doors and looted stores and homes of everything that could be used or sold.

Rioters attacked swanky Chinese-owned shopping malls filled with designer clothing and high-end electronics as well as poor and working-class neighborhoods. Most of those businesses remained shuttered and boarded up Friday while their terrified owners tallied up the damages.

“If I had any money, I would immigrate to the U.S.,” said Kiki, the 40-year-old owner of two appliance stores that were looted and burned Thursday evening. “It is not secure in Indonesia for the Chinese.”

Indonesia’s wealthiest Chinese tycoons went underground. Liem Sioe Liong, the former Chinese peasant who heads Indonesia’s largest private company, the Salim Group, had a house go up in flames. He is rumored to be in Singapore or the United States.

Liem and other wealthy ethnic Chinese business leaders maintained close ties to former President Suharto, and benefited handsomely from lucrative monopolies and other financial benefits he sent their way. In exchange, Suharto and his extended family members profited as well.

Murray Weidenbaum, author of the book “The Bamboo Network: How Expatriate Chinese Entrepreneurs Are Creating a New Superpower in Asia,” speculated that those businessmen with strong connections to the former president may choose to live elsewhere now that they have lost their patron and protector.

“The wealthy ones have lots of places where they have wealth and family to welcome them,” said Weidenbaum.

Even if they do return, many are unlikely to bring back their families or their personal wealth until the political climate stabilizes, according to a top official of a large ethnic Chinese conglomerate. The disappearance of that investment pool will further aggravate the country’s liquidity crunch.

“They are parking money in Singapore and Hong Kong,” said one ethnic Chinese executive. “In Indonesia, the losers are the government bank.”

The biggest threat to Indonesia’s long-term recovery, however, is the potential loss of the middle-class Chinese, many of whom saw decades of hard work and dreams of prosperity shattered in last week’s riots.

They are the ones holed up in Singapore, staying with friends or relatives and filling the city’s luxury hotels. Those unable to afford the bribes necessary to secure a ticket out of the country went to Bali, the Indonesian island whose largely Hindu population is more hospitable to the Chinese.

In interviews in Singapore, these shellshocked economic refugees expressed betrayal and fear. Most were still too fearful to have their names published, but they talked openly about the terror-filled days leading up to their escape on chartered jets.

One young ethnic Chinese manager said he decided to leave Indonesia after his brother’s home in Jakarta was looted and burned. When the vandals drove off in trucks filled with furniture, electronics goods and kitchen supplies, it was like a “giant vacuum cleaner had sucked everything out of the house, including their underwear.”

A civil engineer who lost his house in the Jakarta suburbs is already making plans to move his family to New Zealand. A 30-year-old management consultant said he will return to Australia where he attended college.

After five sleepless nights trapped at his factory outside Jakarta, Hendra Lie, the young part-owner of the Lieka Group apparel company, finally decided to leave for Singapore with his brother’s family.

Half a dozen of his firm’s 75 retail outlets burned down. His bank abruptly closed and he couldn’t pay his employees. Customers around the world called anxiously, asking if they would get their apparel orders on time.

Just before leaving for the airport, Lie called a meeting with his 20 Indonesian office staff workers and explained that he had to leave for an indefinite period. Four or five of them burst into tears.

“I don’t know whether I want to go back,” he said. “My commitment to that country is not what it used to be. . . . Losing your business is OK. Losing your house is OK. But losing your morale, losing the trust of the people, this cannot be mended in one or two years.”

* PROTEST ENDS: Troops cleared protesters from parliament grounds in Jakarta. A14

* DON’T BLAME ISLAM: Indonesia’s was a popular, not a religious, uprising. A15