Indonesia’s Tech Nerve Center a Victim of Riots

President B.J. Habibie paid a visit Tuesday to Glodok, the Chinese neighborhood that was shattered and torched by rioters this month, but it was more than an ordinary sympathy call.

The loot-and-burn rampage by protesters who drove former President Suharto from power not only destroyed the confidence of the ethnic Chinese who form the backbone of Indonesia’s economy, but nearly wiped out the nation’s high-technology nerve center.

The virtual destruction of Glodok--home of more than 70% of the nation’s trade in computers, electronics and appliances--couldn’t have come at a worse time.

The destruction of Glodok “will slow down the rebuilding of the economy,” said the president of a small Indonesian bank. “This was the heart of all the country’s electronics goods, all the high-end technology.”

Putting Glodok back together will take money and time. The chief concerns are rebuilding more than 3,000 damaged or destroyed businesses, getting bank credit for cash-strapped merchants and providing assistance to the thousands of people left jobless by the riots.

In Glodok Plaza alone, more than 1,000 businesses were destroyed and 11,000 people were made unemployed by the fire, according to Johannes Gimo, general manager of the huge facility.

“This will destroy our national economy,” he said. “It’s paralyzed.”

Even as Habibie toured Glodok, the fragility of the Indonesian economy was demonstrated again by a minor run on the country’s largest bank, Bank Central Asia, triggered by its ties to the now-discredited family of Suharto.

Meanwhile, Hubert Neiss, the Asia director for the International Monetary Fund, arrived for meetings with Habibie and his new cabinet. The IMF is considering resuming its emergency lending to the troubled nation, which earlier signed an agreement to implement tough reforms in exchange for a $43-billion support package.

In the aftermath of the riots, which took 500 lives and caused upward of $500 million in damage, the new government is under pressure to somehow narrow the gap between the indigenous Indonesian people and the ethnic Chinese. The latter make up just 3% of the population but reportedly control 70% of the nation’s wealth, making them an easy target of resentment during tough economic times.

In a carefully choreographed “public meeting” Tuesday in front of the blackened remains of Glodok Building, a giant shopping mall, Habibie pleaded for calm, denounced racial and religious intolerance and urged affected merchants to “help each other rebuild this again.”

But Habibie’s promises of help were not enough to persuade Hermawi Taslim, one of the center’s largest computer dealers, that Indonesia’s new government is serious about making the country more hospitable for the ethnic Chinese.

Taslim, whose family owns Dragon Computer & Communications, urged Habibie to prove his sincerity to the ethnic Chinese community by helping provide access to bank financing and helping to collect damages from recalcitrant insurers.

“After hearing the speech, I felt moral support, but still I will wait for implementation” of the promises, said Taslim, who added that he lost 728 billion rupiah--$65 million to $70 million at recent exchange rates--worth of computers, peripherals, fax machines and other equipment in the riots.

The destruction of Indonesia’s primary technology wholesale center has been keenly felt in Jakarta, where parts of the city are still mopping up after the riots. Spare parts and other equipment are in short supply. Computer repair centers were destroyed.

And the problems extend far beyond the capital, since Glodok served as the wholesale center for goods distributed throughout Indonesia’s 17,000 islands. That’s more bad news for U.S. high-tech firms, which enjoyed double-digit growth in Southeast Asia prior to last summer’s crash but have since seen sales collapse.

Hendriek Suherman, general manager of Tech-Pacific Indonesia, a leading distributor of imported hardware and software, lost an entire warehouse of goods on “Black Thursday.” Within days, he had faxed all his U.S. suppliers to stop shipments until the dust settled.

Suherman--who handles products from Microsoft, Hewlett-Packard, Intel, 3Com and other firms--is still tallying the riot damage, filling out insurance forms and consolidating his goods at a new site. He doesn’t expect Indonesia’s high-technology distribution and sales network to recover for at least four to six months.

Asked if he fears a repeat of last week’s violence, Suherman paused.

“I’m sure the present president right now is going to take on this kind of issue. The security of the whole nation, not only the Chinese, is at stake.”