E42 UNCLASSIFIED CONFIDENTIAL PAGE 01 ACTION EAP-01 JAKART 04098 01 OF 10 PTQ0801 030724Z RELEASED IN PART Bl 1 4 D B6 AIT-03 ACDA-08 ACDE-OO AGRE-OO AID-OO ClAE-OO SMEC-OO CTlv IE-OO DINT-OO DODE-OO EUR-01 EXIM-01 E-OO DS-OO EB-OO IO-OO H-01 IM-01 TEDE-OO INR-OO ADS-OO MMP-OO NSAE-OO NSCE-OO OIC-02 PM-OO PRS-OO P-OO OPIC-01 PA-OO DSCC-OO USIE-OO PMB-OO STR-OO T-OO G-OO NFAT-OO SAS-OO 033W ------------------5AE56B 030724Z 38 R 030708Z AUG 98 FM AMEMBASSY JAKARTA TO SECSTATE WASHDC 2879 INFO AMCONSUL HONG KONG ASSOCIATION OF SOUTHEAST ASIAN NATIONS DEPTTREAS WASHDC USDOC WASHDC AMEMBASSY SEOUL AMEMBASSY TOKYO AMEMBASSY CANBERRA AMCONSUL SYDNEY AMEMBASSY BONN AIT TAIPEI 0917 USMISSION GENEVA USCINCPAC HONOLULU HI AMCONSUL SURABAYA INFO LOG-OO CEA-01 SRPP-OO FRB-OO L-01 OMB-01 SSO-OO DRL-04 CON F IDE N T I A L SECTION 01 OF 10 JAKARTA 004098 CONFIDENTIAL PAGE 02 JAKART 04098 01 OF 10 030724Z BANDAR SERI BEGAWAN PLEASE PASS EAP A S ROTH HONG KONG FOR TREASURY ATTACHE QUINN DEPARTlv IENT FOR EAP PIMBS EB OMA INR IL STATE PASS FEDERAL RESERVE FOR LANDRY COMMERCE FOR 4430 MAC MlKALIS AND 6904 TD OEPC IEPD DEPARTMENT PASS FOR EXIMBANK FOR IMAM PASS USDA FOR FAS UNITED STATES DEPARTMENT OF STATE REVIEW AUTHORITY CHARLES E LAHIGUERA CLASSIFICATION CONFIDENTIAL REASON 1 4 D DECLASSIFY AFTER 2 AUG 2023 DATE CASE ID 30 JUN 2006 200502473 UNCLASSIFIED ACQ-01 DOEE-OO FBIE-OO ITC-01 OIG-04 SP-OO PRM-01 UNCLASSIFIED AID W FOR ANE MANILA ALSO FOR USADB USCINCPAC FOR FPA AMB SALMON E O 12958 DECL 08 02 08 TAGS PGOV ECON EIND PINR KPRP PHUM PINS PREL ID SUBJECT A CLOSER LOOK AT THE INDONESIAN CHINESE 1 U CLASSIFIED BY POLCOUNS ED MCWILLIAMS REASON 1 5 D 2 C SUMMARY TDY POLOFF CONDUCTED 22 INTERVIEWS IN JAKARTA'S SINO-INDONESIAN COMMUNITY TO GAUGE CURRENT SENTIMENT TOWARDS INDONE IA'S POLITICAL AND ECONOMIC SITUATION SINO-INDONESIANS CANVASSED INCLUDED ACADEMICS PROFESSIONALS SMALL AND MEDIUM SCALE BUSINESSPEOPLE AND CONGLOMERATE OWNERS THIS CABLE A FOLLOW UP TO CONFIDENTIAL JAKART 04098 01 OF 10 030724Z PAGE 03 JAKARTA 4031 ENDEAVORS TO CORRECT SOME OF THE MOST COMMONLY HELD MISPERCEPTIONS OF THE CHINESE SINO-INDONESIANS IN INDONESIA FIRST AND FOREMOST BY SHOWING THAT THERE IS NOT ONE MONOLITHIC COMMUNITY WHICH IS REACTING TO INDONESIA'S CURRENT CRISIS IN A FORMULAIC WAY THE FIRST SECTION EXAMINES IMPORTANT BUT LITTLE UNDERSTOOD STATISTICS ABOUT THE SOCIO-ECONOMICCOMPOSITION OF THE CHINESE COMMUNITY IN INDONESIA THE SECOND ADDRESSES THE CRITICAL ISSUE OF CAPITAL FLOWS IDENTIFYING THREE DISTINCT PERIODS OF OUTFLOW DRIVEN BY DIFFERENT POLITICAL AND ECONOMIC DYNAMICS CONTRARY TO POPULAR PERCEPTION CAPITAL OUTFLOWS BEGAN IN EARNEST IN THE MID-1990'S AND THE AMOUNT OF FLIGHT CAPITAL AVAILABLE FOR REPATRIATION MAY BE LESS THAN OBSERVERS BELIEVE 3 C THE THIRD SECTION EXPLAINS WHY THE CHINESE SEE THIS CRISIS AS PROFOUNDLY DIFFERENT THAN PREVIOUS ANTI-CHINESE UNREST PRESENTING A PICTURE OF PERVASIVE PESSIMISM WHICH SPANS DIFFERENT GROUPS WITHIN THE COMMUNITY THE FOURTH SECTION EXAMINES DIFFERENT RESPONSES TO THE CRISIS SHOWING HOW AGE CLASS EDUCATIONAL BACKGROUND AND CULTURAL ORIENTATION ALL INFORM THE CHOICES BEING MADE BY DIFFERENT KINDS OF CHINESE CERTAIN GROUPS ARE LEAVING OR TRYING TO LEAVE WHILE OTHERS ARE FIGHTING FOR THEIR RIGHTS AND ATTACKING THE CORRUPT PRACTICES OF THE CRONY CHINESE MANY BUSINESSPEOPLE ARE WAITING TO SEE HOW EVENTS UNFOLD WHILE THE VAST MAJORITY OF CHINESE HAVE NO CHOICE BUT TO STAY PUT AND START OVER 4 C THE INDONESIAN CHINESE ARE A HETEROGENEOUS COMMUNITY AND BEING ANTI-CONGLOMERATE DOES NOT MEAN BEING ANTI-CHINESE THE MINIMUM REQUIREMENTS FOR A RETURN OF CONFIDENCE AND CAPITAL TO INDONESIA ARE POLITICAL AND MACROECONOMIC STABILITY A CREDIBLE UNCLASSIFIED UNCLASSIFIED GUARANTEE FOR PHYSICAL SECURITY INVESTIGATION OF THE MAY RIOTS AND RAPES AND ACCOUNTABILITY FOR THOSE FOUND GUILTY IN THE SHORT CONFIDENTIAL PAGE 04 JAKART 04098 01 OF 10 030724Z TERM THEN THE PICTURE IS BLEAK FOR HESE CRITERIA WILL NOT BE EASILY OR IMMEDIATELY MET MOREOVER SHOULD ATTACKS ON CHINESE RESUME THE CHINESE HAVE BEEN ARMING THEMSELVES AND ARE PREPARED TO FIGHT IN THE MEDIUM TO LONG TERM HOWEVE IF ELECTIONS AND CREDIBLE GOVERNMENT FOSTER A MORE STABLE POLITICAL AND ECONOMIC ENVIRONMENT THERE IS REASON FOR SOBER OPTIMISM ON THE ECONOMIC SIDE WHILE CAPITAL IS INDEED MOBILE AND CHINESE LIKE CERTAIN KINDS OF OTHER INVESTORS CAN KEEP THEIR MONEY ABROAD VIRTUALLY ALL CHINESE BUSINESSMEN ACKNOWLEDGE THAT A STABLE INDONESIA WOULD PRESENT ENORMOUS INVESTMENT OPPORTUNITIES ON THE POLITICAL SIDE o PERANAKAN CHINESE INDONESIANIZED CHINESE ARE PRO-ACTIVELY ENGAGED IN REFORMASI AND ARE PROMOTING THE KIND OF DISCOURSE NECESSARY TO FIND LONG-TERM SOLUTIONS TO INDONESIA'S LONGSTANDING CHINESE PROBLEM END SUMMARY SINO-INDONESIANS MISPERCEPTIONS AND STEREOTYPES 5 U MANY OF THE MISPERCEPTIONS AND STEREOTYPES ABOUT THE CHINESE AKA SINO-INDONESIANS IN INDONESIA STEM FROM THE LACK OF ACCURATE DATA THE LAST CENSUS THAT EMPLOYED RACE AS A DISTINGUISHING VARIABLE WAS TAKEN BY THE DUTCH IN 1930 SINCE INDEPENDENCE INDONESIA HAS INS ISTED THAT RACE ETHNICITY NOT BE USED AS DISTINGUISHING CRITERIA HENCE THE ABSENCE OF CONCRETE DATA CONFIDENTIAL END OF DOCUMENT CONFIDENTIAL PAGE 01 ACTION EAP-01 INFO JAKART 04098 02 OF 10 PTQ2837 031857Z LOG-OO CEA-01 SRPP-OO FRB-OO L-01 OMB-01 SSO-OO DRL-04 ACDA-08 ACDE-OO AGRE-OO AID-OO AIT-03 ClAE-OO SMEC-OO CTME-OO DINT-OO DODE-OO DS-OO EB-OO EUR-01 EXIM-01 E-OO H-01 IM-01 TEDE-OO INR-OO IO-OO ADS-OO MMP-OO NSAE-OO NSCE-OO OIC-02 OPIC-01 PA-OO PM-OO PRS-OO P-OO STR-OO T-OO USIE-OO PMB-OO DSCC-OO G-OO NFAT-OO SAS-OO 033W ------------------5B2707 031857Z 49 R 030708Z AUG 98 FM AlvJEMBASSY JAKARTA UNCLASSIFIED ACQ-01 DOEE-OO FBIE-OO ITC-Ol OIG-04 SP-OO PRM-01 UNCLASSIFIED TO SECSTATE WASHDC 2880 INFO AMCONSUL HONG KONG -ASSOCIATION OF SOUTHEAST ASIAN NATIONS DEPTTREAS WASHOC USDOC WASHDC AMEMBASSY SEOUL AMEMBASSY TOKYO AMEMBASSY CANBERRA AMCONSUL SYDNEY AMEMBASSY BONN AIT TAIPEI 0918 USMISSION GENEVA USCINCPAC HONOLULU HI AMCONSUL SURABAYA CON F IDE N T I A L SECTION 02 OF 10 JAKARTA 004098 CONFIDENTIAL PAGE 02 JAKART 04098 02 OF 10 031857Z BANDAR SERI BEGAWAN PLEASE PASS EAP A S ROTH HONG KONG FOR TREASURY ATTACHE QUINN DEPARTMENT FOR EAP PIMBS EB OMA INR IL STATE PASS FEDERAL RESERVE FOR LANDRY COMMERCE FOR 4430 MAC MlKALIS AND 6904 TD OEPC IEPD DEPARTMENT PASS FOR EXIMBANK FOR IMAM PASS USDA FOR FAS AID N FOR ANE MANILA ALSO FOR USADB USCINCPAC FOR FPA AMB SALMON E O 12958 DECL 08 02 08 TAGS PGOV ECON EIND PINR KPRP PHUM PINS PREL ID SUBJECT A CLOSER LOOK AT THE INDONESIAN CHINESE ABOUT THE SIgE DEMOGRAPHIC BREAKDOWN AND INCOME DISTRIBUTION AMONG CHINESE INDONESIANS IT IS INTERESTING TO NOTE THAT THE GOVERNMENT DOES HAVE THIS DATA SINCE IDENTITY CARDS FOR CHINESE HAVE UNTIL RECENTLY BEEN DI'FFERENT FROM THOSE OF NATIVE INDONESIANS STILL THIS INFORMATION HAS NEVER BEEN RELEASED AS A RESULT ECONOMISTS USE THE FIGURES FROM THE 1930 CENSUS IN UNCLASSIFIED UNCLASSIFIED CONJUNCTION WITH THE OVERALL GROWTH RATE OF THE POPULATION AND' CONFIDENTIAL PAGE 03 JAKART 04098 02 OF 10 031857Z IMMIGRATION STATISTICS TO EXTRAPOLATE A FIGURE OF ROUGHLY SIX MILLION CHINESE OR SOMEWHERE BETWEEN 3-4 PERCENT OF THE TOTAL POPULATION THESE CHINESE ARE OVERWHELMINGLY CONCENTRATED IN URBAN CENTERS NOTABLY JAKARTA' MEDAN SURABAYA SEMARANG AND PONTIANAK BUT CAN BE FOUND THROUGHOUT THE COUNTRYSIDE AS WELL 6 U OF THE SIX MILLION OR SO CHINESE ONLY 200 FAMILIES BELONG TO THE TYCOON CLASS FACTORING A WIFE CHILDREN GRANDCHILDREN SURVIVING PARENTS AND OTHER EXTENDED FAMILY MEMBERS ECONOMISTS ESTIMATE AT MOST 10 000 INDIVIDUALS OR ABOUT 2 PERCENT OF THE TOTAL COMMUNITY BELONG TO THIS GROUP A MILLION OR SO CHINESE ARE THOUGHT TO BE MIDDLE UPPER-MIDDLE AND LOWER-UPPER CLASS RANGING FROM SMALL AND MEDIUM SCALE BUSINESSMEN TO SMALL AND MEDIUM-SIZED CONGLOMERATE OWNERS CONTRARY TO POPULAR PERCEPTIONS THEN A SUBSTANTIAL MAJORITY OF THE CHINESE IN INDONESIA ARE LOWER MIDDLE TO LOWER CLASS SHOP OWNERS AND TRADERS SOME CHINESE IN FACT ARE QUITE POOR BY ANY STANDARD LIVING BENEATH THE POVERTY LINE AND WORKING AS PEASANTS AND FOOD SELLERS IN PLACES LIKE WEST KALIMANTAN AND THE NORTH COAST OF JAVA A POIGNANT REMINDER OF THIS FORGOTTEN CLASS OF CHINESE HIT THE INDONESIAN PAPERS ON JULY 20 WHEN IT WAS REPORTED THAT A POOR CHINESE FARMER IN SINGKAWANG WEST KALIMANTAN POISONED HIMSELF AND HIS FOUR CHILDREN BECAUSE HE COULD NOT COPE WITH THE ECONOMIC CRISIS 7 U ONE OF THE KEYS TO UNDERSTANDING CHINESE IS THE IIPERANAKAN-TOTOKII DISTINCTION THE SO-CALLED PERANAKAN CHINESE HAVE LIVED IN INDONESIA FOR MANY GENERATIONS AND CONSIDER THEMSELVES WHOLLY INDONESIAN THIS GROUP IS GENERALLY WELL EDUCATED WITH THE OLDER GENERATIONS TRAINED BY THE DUTCH AND THE YOUl GER ONES IN INDONESIAN AND WESTERN SCHOOLS THE MAJORITY OF PERANAKAN ARE PROFESSIONALS THOUGH SOME MEDIUM TO LARGE SIZED CONFIDENTIAL PAGE 04 JAKART 04098 02 OF 10 031857Z BUSINESSMEN AND A FEW TYCOONS THE SURYAJAYAS THE WANANDIS THE HARTONOS THE SAMPOERNAS BELONG TO THIS GROUP 8 U THE MORE RECENT IMMIGRANT GROUP ARE CALLED TOTOK CHINESE TOTOKS ARE GENERALLY FIRST SECOND OR THIRD GENERATION IN INDONESIA SPEAK MANDARIN AND OR A CHINESE DIALECT IN THE HOME AND HAVE RELATIVES OR FAMILY TIES IN CHINA SINGAPORE OR HONG KONG THEY WERE TRAINED IN CHINESE SCHOOLS BEFORE SOEHARTO SHUT THEM DOWN IN 1967 WHILE THEIR CHILDREN OR AT LEAST THE CHILDREN OF THOSE WITH MONEY ARE SENT ABROAD TO RECEIVE A CHINESE EDUCATION EIGHTY TO NIN TY PERCENT OF THE CHINESE TYCOONS ARE TOTOK CHINESE AS ARE THE VAST MAJORITY OF SMALL SHOP OWNERS AND TRADERS THROUGHOUT JAVA UNCLASSIFIED UNCLASSIFIED 9 U WHILE THESE DISTINCTIONS ARE NO LONGER AS CLEAR CUT AS THEY WERE SEVERAL DECADES AGO MORE AND MORE TOTOK CHILDREN FOR EXAMPLE ARE EDUCATED ENTIRELY IN THE STATES SPEAK LIMITED MANDARIN AND THUS ARE NEITHER TOTOK NOR PERANAKAN IN THEIR PERCEPTION OF THEMSELVES THE PERANAKAN TOTOK DISTINCTION STILL HELPS TO EXPLAIN SIGNIFICANT DIFFERENCES IN THE SINO-INDONESIAN RESPONSE TO INDONESIA'S CURRENT POLITICAL AND ECONOMIC CRISIS 10 C WHILE THE CHINESE ON AVERAGE ARE CONSIDERABLY MORE PROSPEROUS THAN THEIR PRIBUMI COUNTRYMEN THE WIDELY USED STATISTIC OF 70-80 PERCENT OF INDONESIAN WEALTH BEING IN THE HANDS OF SINOCONFIDENTIAL END OF DOCUMENT CONFIDENTIAL PAGE 01 ACTION EAP 'Ol INFO JAKART 04098 03 OF 10 PTQ0803 030724Z LOG-OO CEA-01 SRPP-OO FRB-OO L-01 OMB-01 SSO-OO DRL-04 ACDA-08 ACDE-OO AGRE-OO AID-OO AIT-03 CIAE-OO SMEC-OO CTME-OO DINT-OO DODE-OO DS-OO EB-OO EUR-01 EXIM-01 E-OO H-01 IM-01 TEDE-OO INR-OO IO-OO ADS-OO MMP-OO NSAE-OO NSCE-OO OIC-02 OPIC-01 PA-OO PM-OO PRS-OO P-OO T-OO STR-OO USIE-OO PMB-OO DSCC-OO G-OO NFAT-OO SAS-OO 033W ------------------5AE577 030724Z 38 R 030708Z AUG 98 FM Al fEMBASSY JAKARTA TO SECSTATE WASHDC 2881 INFO AMCONSUL HONG KONG ASSOCIATION OF SOUTHEAST ASIAN NATIONS DEPTTREAS WASHDC USDOC WASHDC AMEM13ASSY SEOUL AMEMBASSY TOKYO AMEMBASSY CANBERRA AMCOlilSUL SYDNEY AMEM13ASSY BONN AIT TAIPEI 0919 USMISSION GENEVA USCINCPAC HONOLULU HI AMCONSUL SURABAYA CON F IDE N T I A L SECTION 03 OF 10 JAKARTA 004098 UNCLASSIFIED ACQ-01 DOEE-OO FBIE-OO ITC-01 OIG-04 SP-OO PRM-01 UNCLASSIFIED CONFIDENTIAL PAGE 02 JAKART 04098 03 OF 10 030724Z BANDAR SERI BEGAWAN PLEASE PASS EAP A S ROTH HONG KONG FOR TREASURY ATTACHE QUINN DEPARTMENT FOR EAP PIMBS EB OMA INR IL STATE PASS FEDERAL RESERVE FOR LANDRY COMMERCE FOR 4430 MAC MlKALIS AND 6904 TD OEPC IEPD DEPARTMENT PASS FOR EXIMBANK FOR IMAM PASS USDA FOR FAS AID W FOR ANE MANILA ALSO FOR USADB USCINCPAC FOR FPA AMB SALMON E O 12958 DECL 08 02 08 TAGS PGOV ECON EIND PINR KPRP PHUM PINS PREL ID SUBJECT A CLOSER LOOK AT THE INDONESIAN CHINESE INDONESIANS SHOULD BE USED WITH EXTREME CAUTION EVERYONE IS JUST QUOTING EACH OTHER AND THIS FIGURE IS ACTUALLY ABSOLUTE NONSENSE SAID WELL-RESPECTED ECONOMIST KWIK KlAN GIE THE 70-80 PERCENT FIGURE IS BASED ON THE PERCENTAGE OF PUBLICLY LISTED SHARES CONTROLLED BY CHINESE GROUPS THIS IS AS SEVERAL THOUGHTFUL ECONOMISTS FORCEFULLY ARGUE AN ENTIRELY SUPERFICIAL AND UNREPRESENTATIVE PORTION OF THE NATIONAL ECONOMY TO BEGIN WITH CONFIDENTIAL PAGE 03 JAKART 04098 03 OF 10 030724Z ONLY 225 OR SO COMPANIES ARE PUBLICLY LISTED AND IN SOME CASES ONLY ONE COMPANY OF A CONGLOMERATE HAS GONE PUBLIC MOREOVER THE FIRST FAMILY THE MILITARY AND OTHER INDONESIAN CRONIES ARE DEEPLY EMBEDDED IN THESE GROUPS AND NO ONE REALLY KNOWS WHO ACTUALLY CONTROLS WHAT THIS IS AS TRUE FOR PUBLIC COMPANIES AS WELL AS NON-PUBLIC ONES SECOND THERE IS A SUBSTANTIAL CLASS OF PRIBUMI CRONY BUSINESSMEN AS WELL AS A VAST NUMBER OF BUREAUCRATS AND SENIOR MILITARY OFFICERS WHO HAVE ACCUMULATED ENORMOUS WEALTH DUE TO THEIR PROXIMITY TO THE STATE THIRD AND MOST IMPORTANT THERE ARE MAJOR SECTORS OF THE ECONOMY IN WHICH CHINESE HARDLY PARTICIPATE AT ALL INCLUDING AGRICULTURE ALTHOUGH THE CHINESE ARE REPRESEN D IN AGRIBUSINESS MINING OIL AND GAS EXPLORATION NATURAL RESOURCE PROCESSING GOVERNMENT SERVICES AND THE STATE UNCLASSIFIED UNCLASSIFIED SECTOR 11 C SAID ANI ANYONE WHO SERI OU S - L - Y - UN D E R T O O K - T O I NVE - S T I G - A - T E -- T H - I S -- I S S UE -- W o O ' 'U L -'D FIND THAT CHINESE DO NOT CONTROL MORE THAN 40 PERCENT OF THE INDONESIAN ECONOMY SUCH A STUDY HOWEVER WOULD NOT FIT THE IMAGE OF CHINESE CONSCIOUSLY PORTRAYED BY THE GOVERNMEN T OFFICIALS POLITICIANS AND PRIBUMI CRONY BUSINESSMEN HAVE LONG USED STATISTICS LIKE THE 70 PERCENT CONTROL OF INDONESIAN WEALTH TO FOCUS POPULAR RESENTMENT ON -- AND EXCUSE OUTBREAKS OF VIOLENCE AGAINST -- THE CHINESE COMMUNITY MAKING SENSE OF CAPITAL FLOWS 12 C WE KNOW FROM THE RUNS ON INDONESIAN BANKS THE HIGH DEMAND FOR DOLLARS WHICH FED THE DRAMATIC DEPRECIATION OF THE RUPIAH ANECDOTAL REPORTING OF THE BALLOONING OF ASSETS IN CONFIDENTIAL PAGE 04 JAKART 04098 03 OF 10 030724Z SINGAPOREAN BANKS TOWARDS THE END OF 1997 AND ACCOUNTS BY INDIVIDUALS WHO HAVE TRANSFERRED FUNDS ABROAD OVER THE COURSE OF THE PAST YEAR THAT A SUBSTANTIAL AMOUNT OF CAPITAL FLED INDONESIA AFTER THE ONSET OF FINANCIAL CRISIS LATE LAST SUMMER ACCOUNTS OF HOW LARGE THESE FLOWS HAVE BEEN HOWEVER VARY WIDELY RANGING FROM A FEW BILLION TO 200 BILLION DOLLARS JAKARTA 4031 WITH NO SYSTEMATIC WAY TO TRACE THESE FUNDS AS A RESULT OF OPEN CAPITAL ACCOUNTS THIS FIGURE WILL REMAIN CONTENTIOUS 13 C ONE THING THAT IS BECOMING CLEAR HOWEVER IS THAT THERE WERE THREE DISTINCT PERIODS OF CAPITAL OUTFLOWS EACH DRIVEN BY DIFFERENT POLITICAL D ECONOMIC DYNAMICS 14 C THE FIRST FLOW BEGAN LONG BEFORE THE FINANCIAL CRISIS HIT ASIA AS SOME OF THE BIGGER CHINESE CONGLOMERATES BEGAN DIVERSIFYING IN THE 1990'S WITH THE LIBERALIZATION OF THE JAKARTA STOCK EXCHANGE UNDER MARZUKI USMAN NOW MINISTER OF TOURISM IN 1989 MANY CONGLOMERATES RAISED SUBSTANTIAL AMOUNTS OF CASH THROUGH INITIAL PUBLIC OFFERINGS IPOS A NUMBER OF THE BIG GROUPS INCLUDING LIPPO GAJAH TUNGGAL GAJAH GARUDA MAS SALIM AND SINAR MAS THEN RESTRUCTURED THEIR HOLDING COMPANIES IN THE MID-1990'S AND INVESTED HEAVILY ABROAD LARGELY IN ASIA 15 C ACCORDING TO SEVERAL TYCOON CLASS BUSINESSPEOPLE THESE CONFIDENTIAL END OF DOCUMENT UNCLASSIFIED Bl UNCLASSIFIED CONFIDENTIAL PAGE 01 ACTION EAP-01 INFO LOG-OO CEA-01 SRPP-OO FRB-OO L-01 OMS-01 SSO-OO DRL-04 JAKART 04098 04 OF 10 PTQ0804 030724Z AID-OO AIT-03 DINT-OO DODE-OO EXIM-01 E-OO INR-OO IO-OO NSCE-OO OIC-02 PRS-OO P-OO PMS-OO DSCC-OO 033W ----------- ------5AE57C 030724Z 38 ACDA-08 ClAE-OO DS-OO H-01 ADS-OO OPIC-01 STR-OO G-OO ACDE-OO SMEC-OO EB-OO IM-01 MMP-OO PA-OO T-OO NFAT-OO AGRE-OO CTME-OO EUR-01 TEDE-OO NSAE-OO PM-OO USIE-OO SAS-OO R 030708Z AUG 98 FM AMEMBASSY JAKARTA TO SECSTATE WASHDC 2882 INFO AMCONSUL HONG KONG ASSOCIATION OF SOPTHEAST ASIAN NATIONS DEPTTREAS WASHDC USDOC WASHDC AMEMBASSY SEOUL AMEMBASSY TOKYO AMEMBASSY CANBERRA AMCONSUL SYDNEY AMEMBASSY BONN AIT TAIPEI 0920 USMISSION GENEVA USCINCPAC HONOLULU HI AMCONSUL SURABAYA CON F IDE N T I A L SECTION 04 OF 10 JAKARTA 004098 CONFIDENTIAL PAGE 02 JAKART 04098 04 OF 10 030724Z BANDAR SERI BEGAWAN PLEASE PASS EAP A S ROTH HONG KONG FOR TREASURY ATTACHE QUINN DEPARTMENT FOR EAP PIMBS EB OMA INR IL STATE PASS FEDERAL RESERVE FOR LANDRY COMMERCE FOR 4430 MAC MlKALIS AND 6904 TD OEPC IEPD DEPARTMENT PASS FOR EXIMBANK FOR IMAM PASS USDA FOR FAS UNCLASSIFIED ACQ-01 DOEE-OO FBIE-OO ITC-01 OIG-04 SP-OO PRM-01 AID tif FOR ANE UNCLASSIFIED MANILA ALSO FOR USADB USCINCPAC FOR FPA AMB SALMON E O 12958 DECL 08 02 08 TAGS PGOV ECON EIND PINR KPRP PHUM PINS PREL ID SUBJECT A CLOSER LOOK AT THE INDONESIAN CHINESE GROUPS DIVERSIFIED FOR BOTH POLITICAL AND ECONOMIC REASONS AFTER SOEHARTO WAS ELECTED TO HIS SIXTH TERM AND A LESS TECHNOCRATIC MORE ISLAM-FRIENDLY CABINET WAS INSTALLED IN 1993 MANY OF THESE CONGLOMERATES BEGAN TO THINK SERIOUSLY ABOUT THEIR LONG-TERM PROSPECTS IN A POST-SOEHARTO INDONESIA WE DID NOT WANT ALL OUR EGGS IN SOEHARTO' S BASKET ONE TYCOON NOTED WITH THE GION BOOMING THEIR COMPANIES BIG ENOUGH TO GO ABROAD AND STOCK MARKETS CONFIDENTIAL PAGE 03 JAKART 04098 04 OF 10 030724Z HAVING PROVIDED A VEHICLE TO GENERATE CASH THESE FAMILIES RESTRUCTURED THEIR HOLDINGS CASHED OUT OF INDONESIA AND INVESTED THIS MONEY ABROAD THOUGH SOME GROUPS EXPANDED INTO EUROPE AND NORTH AMERICA THE MAJORITY OF THESE INVESTMENTS WERE IN SINGAPORE HONG KONG CHINA AND AUSTRALIA THUS SIGNIFICANT AMOUNTS OF MONEY WERE LEAVING INDONESIA FROM THE MID-1990S ON THOUGH TO DATE NO SYSTEMATIC RESEARCH HAS BEEN DONE TO SHOW HOW MUCH 16 C THE SECOND FLOW STARTED WITH THE ONSET OF REGIONAL MONETARY INSTABILITY IN MID-JULY 1997 ONE TYCOON CLAIMED THAT WE MUST UNDERSTAND THE FIRST PROCESS OF CAPITAL OUTFLOW IN ORDER TO UNDERSTAND THE SECOND FLOW IN POST-FINANCIAL CRISIS INDONESIA HE ARGUES THAT THE MONEY INVESTED IN ASIA BY MANY OF THE BIG GROUPS IN THE MID-1990S WAS LEVERAGED TWO TO THREE TIMES OVER THROUGH FOREIGN BANKS EAGER TO LEND WHEN THE CRISIS HIT AND INVESTMENTS WENT SOUR THESE GROUPS WERE FORCED TO SUCK CASH FROM THEIR VIABLE COMPANIES IN INDONESIA TO PAY DEBT AND KEEP REGIONAL INVESTMENTS AFLOAT HIS POINT WAS THAT MUCH OF THE MONEY THAT FLED INDONESIA IN THE SECOND HALF OF 1997 IS NOT SITTING IN BANK ACCOUNTS OFFSHORE BUT IS RATHER G9NE 17 C THIS INTERPRETATION PROVIDES INTERESTING INSIGHT INTO THE QUESTION OF WHERE MONEY WENT AND WHY IN THE FALL OF 1997 THOUGH FURTHER RESEARCH IS REQUIRED TO DEMONSTRATE HOW MUCH OF THE TOTAL POST-CRISIS FLOW THIS MONEY ACCOUNTED FOR NOT ALL GROUPS DIVERSIFIED UNSUCCESSFULLY IN ASIA SOME GROUPS HAVE DONE VERY WELL WITH INVESTMENTS IN THE U S CANADA AND EUROPE MOREOVER EVEN IF AS THIS SOURCE ASSERTS MUCH OF THE CORPORATE CAPITAL THAT LEFT FOLLOWING THE ONSET OF REGIONAL ECONOMIC INSTABILITY WAS USED TO UNCLASSIFIED UNCLASSIFIED PAY DEBT AND DEAL WITH TROUBLED OFFSHORE INVESTMENTS THIS DOES NOT CONFIDENTIAL PAGE 04 JAKART 04098 04 OF 10 030724Z ACCOUNT FOR THE SIGNIFICANT AMOUNTS OF PRIVATE CAPITAL BELIEVED TO HAVE LEFT INDONESIA IN LATE 1997 AND EARLY 1'9 98 SEVERAL BANKERS IN SINGAPORE POINT TO DECEMBER 1997 AS THE HIGH POINT OF THESE FLOWS WHEN WORRIES OVER SOEHARTO I S HEALTH FUELED FEARS OF IMPENDING DOMESTIC INSTABILITY AND FURTHER EROSION OF INTERNATIONAL CONFIDENCE THIS MONEY CAME FROM A WIDE SPECTRUM OF INDONESIAN SOCIETY INCLUDING PROFESSIONALS MEDIUM AND LARGE CHINESE AND INDONESIAN BUSINESSMEN AS WELL AS STATE ACTORS CONCERNED TO PROTECT DIRTY MONEY 18 C A THIRD FLOW BEGAN IN THE WAKE OF THE MAY RIOTS SEVERAL SMALL AND MEDIUM SCALE ENTREPRENEURS CLAIMED THEY SENT MONEY OUT ONLY AFTER THE UPHEAVAL OF MAY 13-14 BEFORE MAY THESE CHINESE SAID THEY WERE CONTENT TO PLACE MONEY IN INDONESIAN BANKS DUE TO EXTRAORDINARILY HIGH INTEREST RATES AFTER THE RIOTS AND' NEWS OF THE RAPES HOWEVER THESE PEOPLE GOT SCARED AND SENT WHATEVER THEY COULD ABROAD SEVERAL SAID THEY BELIEVED THE RUPIAH WOULD CRASH TO 20 000 OR MORE ANALYSTS BELIEVE THAT THE POST MAY FLOW HAS BEEN QUITE SMALL AS RATES WERE ALREADY AROUND lS 000 AND MOST OF THE BIG MONEY HAD ALREADY MOVED OUT THE FOUR PEOPLE INTERVIEWED IN THIS CATEGORY ACKNOWLEDGED SENDING SMALL AMOUNTS OF BETWEEN $lS20 000 US DOLLARS TO SINGAPORE IN THE THIRD WEEK OF MAY THEY INDICATED THAT FRIENDS AND FAMILY HAD DONE THE SAME CONFIDENTIAL END OF DOCUMENT CONFIDENTIAL PAGE 01 ACTION EAP-01 JAKART INFO ACDA-08 LOG-OO CEA-01 SRPP-OO FRB-OO L-01 OMB-01 SSO-OO DRL-04 04098 OS OF 10 PTQ0869 0307S0Z ACDE-OO AGRE-OO AID-OO AIT-03 ' SMEC-OO CTME-OO DINT-OO DODE-OO DS-OO EB-OO EUR-01 EXIM-01 E-OO H-01 IM-01 TEDE-OO INR-OO IO-OO ADS-OO MMP-OO NSAE-OO NSCE-OO OIC-02 OPIC-01 PA-OO PM-OO PRS-OO P-OO STR-OO T-OO USIE-OO PMB-OO DSCC-OO G-OO NFAT-OO SAS-OO 033W ------------------SAE74F 0307S0Z 38 R 030708Z AUG 98 FM ALI1EMBASSY JAKARTA TO SECSTATE WASHDC 2883 INFO AMCONSUL HONG KONG CI1 E-OO UNCLASSIFIED ACQ-01 DOEE-OO FBIE-OO ITC-01 OIG-04 SP-OO PRM-01 UNCLASSIFIED ASSOCIATION OF SOUTHEAST ASIAN NATIONS DEPTTREAS WASHOC USDOC WASHDC AMEMBASSY SEOUL AMEMBASSY TOKYO AMEMBASSY CANBERRA AMCONSUL SYDNEY AMEMBASSY BONN AIT TAIPEI 0921 USMISSION GENEVA USCINCPAC HONOLULU HI AMCONSUL SURABAYA CON F IDE N T I A L SECTION 05 OF 10 JAKARTA 004098 CONFIDENTIAL PAGE 02 JAKART 04098 05 OF 10 030750Z BANDAR SERI BEGAWAN PLEASE PASS EAP A S ROTH HONG KONG FOR TREASURY ATTACHE QUINN DEPARTMENT FOR EAP PIMBS EB OMA INR IL STATE PASS FEDERAL RESERVE FOR LANDRY COMMERCE FOR 4430 MAC MIKALIS AND 6904 TD OEPC IEPD DEPA- TMENT PASS FOR EXIMBANK FOR IMAM PASS USDA FOR FAS AID W FOR ANE MANILA ALSO FOR USADB USCINCPAC FOR FPA AMB SALMON E O 12958 DECL 08 02 08 TAGS PGOV ECON EIND PINR KPRP PHUM PINS PREL ID SUBJECT A CLOSER LOOK AT THE INDONESIAN CHINESE 19 C WHILE NOT ALL CONTACTS ACKNOWLEDGED SENDING MONEY ABROAD THOSE INTERVIEWED STATED ACROSS THE BOARD THAT PROFITS AND OR SPARE CASH ARE BEING PLACED INTO BANKS RATHER THAN 'PRODUCTIVELY RE INVESTED DATA ON THE CURRENT ACCOUNT BALANCE MOREOVER INDICATE THAT EXPORTERS BENEFITTING FROM THE RUPIAH'S DRAMATIC DEVALUATION ARE NOT REPATRIATING PROFITS TO INDONESIA SEVERAL EXPORTERS CONFIDED THAT THEIR PURCHASERS ARE DEPOSITING PAYMENT FOR CONFIDENTIAL UNCLASSIFIED UNCLASSIFIED JAKART 04098 05 OF 10 PAGE 03 GOODS DIRECTLY IN SINGAPOREAN BANKS 030750Z THIS CRISIS IS DIFFERENT 20 C INDONESIAN CHINESE ARE NOT UNACCUSTOMED TO RIOTS AND UPRISINGS SINCE DUTCH TIMES ANTI-CHINESE PROPAGANDA AND ACTIVITIES HAVE BEEN A REGULAR FEATURE OF THE INDONESIAN LANDSCAPE IN THE PAST FIFTY YEARS MAJOR ANTI-CHINESE UNREST FLARED UP IN 1959-60 1963 1965-66 1970 1980 AND THROUGHOUT THE MID-1990'S WITH FEW EXCEPTIONS HOWEVER JAKARTAN CHINESE FEEL THAT THIS CRISIS IS DIFFERENT THAN THOSE THAT HAVE COME BEFORE 21 C FIRST THE EXTENT TO WHICH THE RIOTS APPEAR TO HAVE BEEN ORGANIZED AND THE UNPRECEDENTED BRUTALITY OF THE VIOLENCE ESPECIALLY THE GANG RAPES HAVE TRAUMATIZED THE COMMUNITY TO A MUCH GREATER DEGREE MANY CONTACTS CITED ACCESS TO WESTERN MEDIA AND MODERN COMMUNICATIONS AS PLAYING A ROLE IN THIS WEALTHY CHINESE LIVING IN AREAS UNAFFECTED BY THE VIOLENCE WATCHED EVENTS UNFOLD ON CNN STUDENTS AND COMPUTER-LITERATE PROFESSIONALS TRACKED BREAKING DEVELOPMENTS ON THE INTERNET FRIENDS AND FAMILY ALERTED ONE ANOTHER THROUGH CELLULAR PHONES AS TO WHICH AREAS WERE ON FIRE AND WHERE NOT TO GO ONE SMALL BUSINESSMAN FROM CHINATOWN SAID THAT AS HE TRIED TO MAKE HIS WAY HOME ON MAY 13 HE CALLED HIS DAUGHTERS FROM HIS CELL PHONE ONLY TO HEAR THEM SCREAMING AS MOBS WERE BANGING ON THEIR FRONT DOOR THE RESULT WAS THAT AS OPPOSED TO PREVIOUS OUTBREAKS OF ANTI-CHINESE VIOLENCE WHERE MANY CHINESE WERE AWARE OF WHAT HAPPENED ONLY AFTER THE FACT IN MAY THE COMMUNITY AT LARGE EXPERIENCED THE TRAUMA IN REAL TIME 22 C SECOND THE GOVERNMENT'S TARDINESS IN CONDEMNING THE CONFIDENTIAL JAKART 04098 05 OF 10 030750Z PAGE 04 RIOTS ACKNOWLEDGING THE RAPE PROBLEM AND LAUNCHING AN INVESTIGATION INTO THE EVENTS OF MAY HAS REINFORCED CHINESE OUTRAGE RECENT STATEMENTS BY MEMBERS OF PARLIAMENT QUESTIONING THE VERACITY OF THE RAPE ALLEGATIONS ARE FURTHER EXACERBATING TENSIONS AS A RESULT WHEREAS FOLLOWING PREVIOUS RIOTS ONLY A FEW INTELLECTUALS PUBLICLY VOICED CONCERN OVER ETHNIC DISCRIMINATION THIS TIME LARGE NUMBERS OF PERANAKAN PROFESSIONALS ARE RAISING THE ISSUE TO THE TOP OF THE NATIONAL POLITICAL AGENDA THE INDONESIAN PRESS IS FILLED WITH ARTICLES AND EDITORIALS EXPLORING THE ROOTS AND CONSEQUENCES OF INDONESIA'S RACE PROBLEM SEMINARS AND CONFERENCES ARE BEING ORGANIZED TO RAISE AWARENESS AND PROBE SOLUTIONS AND POLITICAL PARTIES ARE BEING FORMED TO DEMAND EQUAL TREATMENT AND PROTECTION FOR THE CHINESE MINORITY UNCLASSIFIED UNCLASSIFIED 23 C THIS IS IN PART BECAUSE THE TRAUMA LEVEL IS HIGHER AND IN PART BECAUSE INTERNATIONAL ATTENTION TO THE EVENTS OF MAY AND THE FLURRY OF REPORTING IN THE WESTERN PRESS HAVE GALVANIZED CERTAIN SECTORS OF THE CHINESE COMMUNITY TO TAKE A STRONGER STAND THIS DISCOURSE ABOUT RACE MOST BE SEEN WITHIN THE CONTEXT OF REFORMASI WHERE ALL KINDS OF GRIEVANCES AGAINST THE STATE ARE BEING AIRED OPENLY FOR THE FIRST TIME IN DECADES 24 C FINALLY THE DEGREE OF PESSIMISM ABOUT THE FUTURE FOR CHINESE INDONESIANS IS GREATER BECAUSE THE CURRENT POLITICAL AND CONFIDENTIAL END OF DOCUMENT CONFIDENTIAL PAGE 01 ACTION EAP-01 JAKART 04098 06 OF 10 PTQ0871 030750Z ACDA-08 ACDE-OO AGRE-OO AID-OO AIT-03 ACQ-01 ClAE-OO SMEC-OO CTME-OO DINT-OO DODE-OO 'DOEE-OO DS-OO EB-OO EUR-01 EXIM-01 E-OO FBIE-OO H-01 IM-01 TEDE-OO INR-OO ITC-01 IO-OO OIG-04 ADS-OO MMP-OO NSAE-OO NSCE-OO OIC-02 PRS-OO PM-OO P-OO SP-OO OPIC-01 PA-OO STR-OO T-OO USIE-OO PMB-OO DSCC-OO PRM-01 G-OO NFAT-OO SAS-OO 033W ------------------5AE753 030750Z 38 R 030708Z AUG 98 FM AMEMBASSY JAKARTA TO SECSTATE WASHDC 2884 INFO AMCONSUL HONG KONG ASSOCIATION OF SOUTHEAST ASIAN NATIONS DEPTTREAS WASHDC USDOC WASHDC AMEMBASSY SEOUL AMEMBASSY TOKYO AMEMBASSY CANBERRA AMCONSUL SYDNEY AMEl BASSY BONN AIT TAIPEI 0922 USMISSION GENEVA USCINCPAC HONOLULU HI AMCONSUL SURABAYA INFO LOG-OO CEA-01 SRPP-OO FRB-OO L-01 OMB-01 SSO-OO DRL-04 CON F' IDE N T I A L SECTION 06 OF 10 JAKARTA 004098 CONFIDENTIAL UNCLASSIFIED UNCLASSIFIED PAGE 02 JAKART 04098 06 OF 10 030750Z BANDAR SERI BEGAWAN PLEASE PASS EAP A S ROTH HONG KONG FOR TREASURY ATTACHE QUINN DEPARTMENT FOR EAP PIMBS EB OMA INR IL STATE PASS FEDERAL RESERVE FOR LANDRY COMMERCE FOR 4430 MAC MlKALIS AND 6904 TD OEPC IEPD DEPARTMENT PASS FOR EXIMBANK FOR IMAM PASS USDA FOR FAS AID W FOR ANE MANILA ALSO FOR USADB USCINCPAC FOR FPA SALMON E O 12958 DECL 08 02 08 TAGS PGOV ECON EIND PINR KPRP PHOM PINS PREL ID SUBJECT A CLOSER LOOK AT THE INDONESIAN CHINESE ECONOMIC ENVIRONMENT ARE SEEN AS FERTILE BREEDING GROUND FOR CONTINUED ANTI-CHINESE ACTIVITIES CHINESE ACROSS THE BOARD SEE THE VIOLENCE OF MAY AS HAVING BEEN CAUSED BY THREE FACTORS POLITICAL INSTABILITY ECONOMIC DOWNTURN AND A WILLINGNESS ON THE PART OF CERTAIN ACTORS TO SCAPEGOAT THE CHINESE FOR POLITICAL TACTICAL PURPOSES THESE CONDITIONS THE CHINESE FEEL ARE ALL STILL IN PLACE FIRST THE HABIBIE GOVERNMENT IS SEEN AS CONFIDENTIAL PAGE 03 JAKART 04098 06 OF 10 030750Z WEAK AND WITH NO MANDATE AND THE CHINESE QUESTION THE MILITARY'S COHESION AND ABILITY TO MAINTAIN ORDER ALL INTERVIEWEES POINTED TO THE PERSISTENCE OF LOOTING OUTSIDE JAKARTA AND A RISE IN LAWLESSNESS NATIONWIDE JAKARTA 3867 AS EVIDENCE THAT THE GOVERNMENT DOES NOT HAVE THINGS UNDER CONTROL 25 C SECOND WITH SOCIO-ECONOMIC PRESSURES OF UNEMPLOYMENT POVERTY AND HUNGER ON THE RISE THE CHINESE FEAR THAT THIS LAWLESSNESS WILL INCREASE AND THUS SO WILL ATTACKS ON THE CHINESE HABIBIE'S JULY 22 GUARANTEE OF EQUAL PROTECTION FOR THE CHINESE AND THE MILITARY'S TOUGH TALK ABOUT CRACKING DOWN ON LOOTING HAVE YET TO INSPIRE CONFIDENCE AS REPORTS OF LOOTING NOTABLY IN MEDAN AND EAST JAVA PERSIST THIRD THE PRESENCE OF SEVERAL CABINET MEMBERS CONSIDERED BLATANTLY ANTI-CHINESE LEAVES THE CHINESE SUSPICIOUS THAT THEY WILL AGAIN FALL VICTIMS TO POLITICAL EXPEDIENCE MORE UNCLASSIFIED UNCLASSIFIED THAN THREE QUARTERS OF THE CHINESE INTERVIEWED POINTED TO MINISTER OF COOPERATIVES ADI SASONO MINISTER OF FORESTRY AND PLANTATIONS MUSLIMIN NASUTION COORDINATING MINISTER FOR THE ECONOMY GINANDJAR KARTASASMITA AND PRESIDENT HABIBIE HIMSELF AS THE MOST OFFENSIVE IN THE CURRENT GOVERNMENT Bl B6 27 C B6 I I SAID THAT AKBAR TANDJUNG HAD ORCHESTRATED THE GATHERING IN AN EFFORT TO LIMIT THE DAMAGE DONE BY HABIBIE'S REMARKS TO THE WASHINGTON POST B6 TYCOONS IN DIRE FINANCIAL STRAITS WANTED TO KISS UP TO THE GOVERNMENT BEFORE THE NEW BANKRUPTCY LAW I S RELEASED END COMMENT MASS EXODUS OR MASS CONFUSION CONFIDENTIAL END OF DOCUMENT CONFIDENTIAL PTQ0805 UNCLASSIFIED PAGE 01 ACTION EAP-01 INFO JAKART 04098 UNCLASSIFIED 07 OF 10 030724Z LOG-OO CEA-01 SRPP-OO FRB-OO L-01 OMB-01 SSO-OO DRL-04 ACDA-08 ACDE-OO AGRE-OO AID-OO AIT-03 ClAE-OO SMEC-OO CTME-OO DINT-OO DODE-OO DS-OO EB-OO EUR-01 EXIM-01 E-OO H-01 IM-01 TEDE-OO INR-OO IO-OO ADS-OO MMP-OO NSAE-OO NSCE-OO OIC-02 OPIC-01 PA-OO PM-OO PRS-OO P-OO STR-'OO USIE-OO PMB-OO T-OO DSCC-OO G-OO NFAT-OO SAS-OO 033W -------------------5AE582 030725Z 38 R 030708Z AUG 98 FM A'MEMBASSY JAKARTA TO SECSTATE WASHDC 2885 INFO AMCONSUL HONG KONG ASSOCIATION OF SOUTHEAST ASIAN NATIONS DEPTTREAS WASHOC USDOC WASHDC AMEMBASSY SEOUL AMEMBASSY TOKYO AMEMBASSY CANBERRA AMCONSUL SYDNEY AMEMBASSY BONN AIT TAIPEI 0923 USMISSION GENEVA USCINCPAC HONOLULU HI AMCONSUL SURABAYA CON F IDE N T I A L SECTION 07 OF 10 JAKARTA 004098 CONFIDENTIAL PAGE 02 JAKART 04098 07 OF 10 030724Z BANDAR SERI BEGAWAN PLEASE PASS EAP A S ROTH HONG KONG FOR TREASURY ATTACHE QUINN DEPARTMENT FOR EAP PIMBS EB OMA INR IL STATE PASS FEDERAL RESERVE FOR LANDRY COMMERCE FOR 4430 MAC MIKALIS AND 6904 TD OEPC IEPD DEPARTMENT PASS FOR EXIMBANK FOR IMAM PASS USDA FOR FAS AID W FOR ANE UNCLASSIFIED ACQ-01 DOEE-OO FBIE-OO ITC-01 OIG-04 SP-OO PRM-01 UNCLASSIFIED MANILA ALSO FOR USADB USCINCPAC FOR FPA AMB SALMON E O 12958 DECL 08 02 08 TAGS PGOV ECON EIND PINR KPRP PHUM PINS PREL ID SUBJECT A CLOSER LOOK AT THE INDONESIAN CHINESE 28 C WHILE PESSIMISM IS INDEED PERVASIVE THERE HAS NOT BEEN A MASS EXODUS OF CHINESE AS IS POPULARLY REPORTED IN THE PRESS ACCORDING TO THE DEPARTMENT OF IMMIGRATION 120 000 PEOPLE LEFT INDONESIA FROM MID-MAY TO MID-JUNE IT IS ASSUMED THOUGH THERE IS NO ETHNIC BREAKDOWN IN THE DATA THAT THOSE WHO LEFT WERE MOSTLY CONFIDENTIAL JAKART 04098 07 OF 10 030724Z PAGE 03 ETHNIC CHINESE STILL EVEN IF ALL 120 000 WERE SINO-INDONESIANS LEAVING AS A RESULT OF THE CRISIS THIS REPRESENTS ONLY 20F THE ENTIRE CHINESE COMMUNITY NO FIGURES AS TO HOW MANY OF THOSE THAT LEFT HAVE RETURNED HAVE BEEN PUBLISHED THOUGH ANECDOTAL EVIDENCE SUGGESTS THAT A SUBSTANTIAL NUMBER WHO LEFT JAKARTA ARE BACK IN INDONESIA SEVERAL CHURCH GROUPS CANVASSED INDICATED THAT THE VAST MAJORITY OF MEMBERS WHO HAD GONE ABROAD HAVE COME BACK AND INTERVIEWEES STATED THAT WIVES AND KIDS WERE SENT TO SINGAPORE HONG KONG OR AUSTRALIA FOR JUST A FEW WEEKS COMPLICATING THIS PICTURE HOWEVER IS INTER-ISLAND MIGRATION SOME CHINESE TRADERS WHOSE SHOPS WERE LOOTED AND OR BURNED HAVE MOVED FROM JAKARTA SOLO AND SURABAYA TO OTHER MORE TRADITIONALLY TOLERANT PARTS OF INDONESIA LIKE BALI BATAM SINGAPORE'S SISTER ISLAND AND PONTIANAK WEST KALIMANTAN 29 C WHAT THEN ARE THE CHINESE THINKING FOR THE SHORT MEDIUM AND LONG TERM AS REPORTED IN JAKARTA 4031 THE ETHNIC CHINESE ARE NOT A MONOLITHIC GROUP WHICH CAN BE PERSUADED UNDER SPECIFIC CIRCUMSTANCES TO STAY IN INDONESIA AND BRING THEIR MONEY BACK EN MASSE THE INDONESIAN-CHINESE COMMUNITY IS DIVIDED BY AGE CLASS EDUCATIONAL BACKGROUND AND CULTURAL ORIENTATION AND RESPONSES TO THE CRISIS HAVE BEEN HEAVILY INFLUENCED BY EACH OF THESE FACTORS 30 C THE COMMUNITY IN JAKARTA WHICH IS BELIEVED TO ACCOUNT FOR OVER TWO MILLION OF JAKARTA'S TEN MILLION CITIZENS CAN BE ROUGHLY DIVIDED INTO FOUR GROUPS THOSE WHO WANT TO LEAVE CONFIDENTIAL UNCLASSIFIED UNCLASSIFIED PAGE 04 JAKART 04 098 07 OF 10 030724Z 31 C UPPER-MIDDLE AND UPPER-CLASS CHINESE IN THEIR EARLY 20'S TO EARLY 30'S EDUCATED IN THE WEST HAVE BEEN AMONG THE FIRST GROUP TO LEAVE WHILE THOSE CURRENTLY WORKING 'OR STUDYING ABROAD ARE BEING TOLD BY THEIR PARENTS TO STAY PUT THESE CHINESE ARE COSMOPOLITAN BILINGUAL AND HAVE THE SKILLS AND CONNECTIONS TO WORK OVERSEAS STILL PREDICTIONS THAT INDONESIA IS LOSING THE GENERATION OF HIGHLY EDUCATED CHINESE THAT WAS MEANT TO TRANSFORM INDONESIA IN THE 21ST CENTURY MAY BE PREMATURE WHILE THIS GROUP HAS BEEN AMONG THE FIRST TO GO THEY WILL LIKELY RETURN IF TH POLITICAL AND ECONOMIC ENVIRONMENT STABILIZES WE WERE BORN IN INDONESIA WE ARE ATTACHED TO INDONESIA AND AT THE END OF THE DAY WE WILL HAVE GREATER OPPORTUNITIES IN INDONESIA SAID ONE CONTACT I B6 I MOST OF US ARE ONLY LEAVING UNTIL THINGS SETTLE DOWN HERE THE COMPETITION IS TOO EXTREME IN THE STATES WE ARE MUCH BIGGER FISH IN JAKARTA'S POND B6 32 C ANOTHER VERY DIFFERENT GROUP THOSE WHO TOOK THE PHYSICAL BRUNT OF THE VIOLENCE THAT EXPLODED WITH THE RIOTS IN MAY IS TRYING TO LEAVE THE AREAS HARDEST HIT IN MAY SUCH AS KOTA CONFIDENTIAL END OF DOCUMENT CONFIDENTIAL PAGE 01 ACTION EAP-01 JAKART 04098 08 OF 10 PTQ0807 030725Z ACDA-08 ' ACDE-OO AGRE-OO AID-OO AIT-03 CIAB-OO SMEC-OO CTME-OO DINT-OO DODE-OO DS-OO EUR-01 EXIM-01 E-OO EB-OO H-01 TEDE-OO INR-OO 10-00 IM-01 ADS-OO NSAB-OO NSCE-OO OIC-02 MMP-OO OPIC-01 PA-OO PM-OO PRS-OO P-OO USIE-OO ' PMB-OO DSCC-OO STR-OO T-OO G-OO NFAT-OO SAS-OO 033W ------------------5AE587 030725Z 38 R 030708Z AUG 98 FM AMEMBASSY JAKARTA TO SECSTATE WASHDC 2886 INFO AMCONSUL HONG KONG ASSOCIATION OF SOUTHEAST ASIAN NATIONS INFO LOG-OO CEA-01 SRPP-OO FRB-OO L-01 OMB-01 SSO-OO DRL-04 UNCLASSIFIED ACQ-Ol DOEE-OO FBIE-OO ITC-Ol OIG-04 SP-OO PRM-Ol UNCLASSIFIED DEPTTREAS WASHDC USDOC WASHDC AMEMBASSY SEOUL AMEMBASSY TOKYO AMEMBASSY CANBERRA AMCONSUL SYDNEY AMEMBASSY BONN AIT TAIPEI 0924 USMISSION GENEVA USCINCPAC HONOLULU HI AMCONSUL SURABAYA CON F IDE N T I A L SECTION 08 OF 10 JAKARTA 004098 CONFIDENTIAL PAGE 02 JAKART 04098 08 OF 10 030725Z BANDAR SERI BEGAWAN PLEASE PASS EAP A S ROTH HONG KONG FOR TREASURY ATTACHE QUINN DEPARTMENT FOR EAP PIMBS EB OMA INR IL STATE PASS FEDERAL RESERVE FOR LANDRY COMlYlERCE FOR 4430 MAC MlKALIS AND 6904 TD OEPC IEPD' DEPARTMENT PASS FOR EXIMBANK FOR IMAM PASS USDA FOR FAS AID W FOR ANE MANILA ALSO FOR USADB USCINCPAC FOR FPA AMB SALMON E O 12958 DECL 08 02 08 TAGS PGOV ECON EIND PINR KPRP PHUM PINS PREL ID SUBJECT A CLOSER LOOK AT THE INDONESIAN CHINESE GLODOK PLUIT ANGKE AND KLENDER ARE THE REAL CHINA TOWNS OF J TA IN THE NORTH WEST AND EAST OF THE CITY MIDDLE TO LOWERCLASS CHINESE ENTREPRENEURS ARE CONCENTRATED IN THESE AREAS THEIR STORES AND OR HOMES WERE LOOTED AND BURNED AND IN SEVERAL HUNDRED CASES THEIR DAUGHTERS WIVES AND EVEN MOTHERS WERE RAPED MOST UPPER-CLASS CHINESE DO NOT LIVE IN PREDOMINANTLY CHINESE AREAS BUT IN MIXED COMMUNITIES WITH WEALTHY INDONESIANS GOVERNMENT OFFICIALS CONFIDENTIAL UNCLASSIFIED UNCLASSIFIED PAGE 03 JAKART 04098 08 OF 10 030725Z AND FORE IGNERS IN THE CENTER AND SOUTH OF THE CITY WERE LARGELY UNTOUCHED BY THE VIOLENCE THESE AREAS 33 C THESE SMALL AND MEDIUM SCALE CHINESE BUSINESSPEOPLE HAVE BEEN THE MOST TRAUMATIZED BY THE MAY CRISIS AND THEY ARE AFRAID FOR THEIR PHYSICAL SAFETY AND THAT OF THEIR FAMILIES MANY ARE NOT WILLING TO START OVER AND REINVEST PARTICULARLY THOSE WITH YOUNG DAUGHTERS STILL WITH LIMITED SAVINGS AND LIMITED SKILLS THIS CLASS OF CHINESE IS LARGELY UNEDUCATED CHINESE TRADERS AND SMALL BUSINESSMEN CAN NOT EASILY LEAVE AND LIVE ABROAD SOME OF THESE TOTOK CHINESE HAVE FAMILY ELSEWHERE IN THE REGION AND SO THEY ARE SENDING THEIR CHILDREN OUT FIRST WHILE THEY WAIT TO SEE HOW EVENTS UNFOLD IN INDONESIA ONE MAN DESPERATE TO GET HIS THREE DAUGHTERS OUT SAID THAT HE AND SOME OF HIS FRIENDS WERE CONSIDERING MAILORDER BRIDE SCHEMES THOSE THAT WANT TO FIGHT 34 C PERANAKAN CHINESE PROFESSIONALS WHOSE FAMILIES CAME TO INDONESIA MANY GENERATIONS AGO AND WHO THINK OF THEMSELVES AS WHOLLY INDONESIAN ARE STANDING UP TO DEMAND THEIR RIGHTS AND ASSERT THEIR PLACE IN THE INDONESIAN NATION THESE PERANAKAN ACADEMICS INTELLECTUALS LAWYERS AND DOCTORS HAVE BECOME VERY ACTIVE OVER THE COURSE OF THE PAST TWO MONTHS WRITING NEWSPAPER ARTICLES ORGAlIfIZING SEMINARS AND CONFERENCES AND FORMING A VARIETY OF NGOS TO TACKLE RACIAL DISCRIMINATION AND PRESSURE THE STATE SIGNIFICANTLY TH SE GROUPS ARE ENGAGING A NUMBER OF HIGH-PROFILE PRIBUMI INTELLECTUALS AND ACADEMICS INCLUDING B6 AND OTHERS SUCH ACTIVITY IS ALSO REPORTEDLY TAKING PLACE IN SOLO JOGJAKARTA AND SURABAYA CHINESE CONFIDENTIAL PAGE 04 JAKART 04098 08 OF 10 030725Z POLITICAL PARTIES HAVE EVEN FORMED THOUGH SUPPORT WITHIN THE BROADER CHINESE COMMUNITY FOR EXCLUSIVELY CHINESE PARTIES IS WEAK 35 C ONE COMPONENT OF THIS PERANAKAN POLITICAL AWAKENING HAS BEEN AN OUTPOURING OF ANGER TOWARDS THE CHINESE TYCOONS WHO ARE SEEN AS HAVING ABUSED THEIR PRIVILEGED ACCESS TO STATE LICENSES AND FACILITIES AND ENRICHED THEMSELVES AT THE EXPENSE OF THE SECURITY OF THE CHINESE COMMUNITY THIS HAS BEEN A CONSTANT THEME OF THE RECENT SEMINARS CONFERENCES AND NEWSPAPER ARTICLES ON THE CHINESE ISSUE WHILE RESENTMENT OF THIS CLASS IS PARTICULARLY ACUTE AMONG PERANAKAN CHINESE 80-900F THE TYCOONS ARE TOTOKS AND PERANAKAN PROFESSIONALS ARE LEADING THE PUBLIC CHARGE PERANAKAN AND TOTOK CONTACTS ALIKE CURSED THE CORRUPT CONGLOMERATE FAMILIES AS HAVING RUINED IT FOR THE REST OF THE CHINESE NOT ONLY THEY ARGUE HAD THE VAST MAJORITY OF CHINESE NEVER BENEFITTED ONE RUPIAH FROM STATE UNCLASSIFIED UNCLASSIFIED PATRONAGE BUT THE CHINESE COMMUNITY ALSO WAS LEFT VULNERABLE TO PUBLIC IRE AS A RESULT OF THE HIGHLY VISIBLE WEALTH OF THE CORRUPT TYCOONS WHILE THESE CHINESE ALSO BLAME SOEHARTO FOR THE CORROSIVE CONGLOMERATE-STATE RELATIONSHIP ANGER AT THE TYCOONS RUNS DEEP SAID ONE MAJOR PERANAKAN BUSINESSMAN I WOULDN'T BEAT ALL SAD TO SEE A FEW OF THOSE GUYS HANGED FOR WHAT THEY'VE DONE THEY'RE WHITE COLLAR CRIMINALS EVERY ONE OF THEM AND THEY SHOULD PAY FOR RAPING THE STATE AND RUINING THE REPUTATIONS OF THE REST OF US 36 C PERANAKAN PROFESSIONALS ARE RAISING A NUMBER OF CONCRETE CONFIDENTIAL END OF DOCUMENT CONFIDENTIAL PAGE 01 ACTION EAP-01 JAKART 04098 09 OF 10 PTQ0809 030725Z AIT-03 ACDA-08 ACDE-OO AGRE-OO AID-OO ClAE-OO SMEC-OO CTME-OO DINT-OO DODE-OO EXIM-01 E-OO DS-OO EB-OO EUR-01 H-01 IM-01 TEDE-OO INR-OO 10-00 ADS-OO MMP-OO NSAE-OO NSCE-OO OIC-02 OPIC-01 PA-OO PRS-OO P-OO PM-OO DSCC-OO STR-OO T-OO USIE-OO PMB-OO 033W G-OO NFAT-OO SAS-OO ------------------5AE5B8 030728Z 38 R 030708Z AUG 98 FM AMEMBASSY JAKARTA TO - SECSTATE WASHDC 2887 INFO AMCONSUL HONG KONG 075 ASSOCIATION OF SOUTHEAST -ASIAN NATIOS DEPTTREAS WASHOC USDOC WASHDC AMEMBASSY SEOUL AMEMBASSY TOKYO AMEMBASSY CANBERRA AMCONSUL SYDNEY AMEMBASSY BONN AIT TAIPEI 0925 USMISSION GENEVA INFO LOG-OO CEA-01 SRPP-OO FRB-OO L-01 OMB-01 SSO-OO DRL-04 USCINCPAC HONOLULU HI AMCONSUL SURABAYA CONFIDENTIAL PAGE 02 JAKART 04098 09 OF 10 030725Z CON F IDE N T I A L SECTION 09 OF 10 JAKARTA 004098 UNCLASSIFIED ACQ-01 DOEE-OO FBIE-OO ITC-01 OIG-04 SP-OO PRM-01 l UNCLASSIFIED BANDAR SERI BEGAWAN PLEASE PASSEAP A S ROTH HONG KONG FOR TREASURY ATTACHE QUINN DEPARTMENT FOR EAP PIMBS EB OMA INR IL STATE PASS FEDERAL RESERVE FOR LANDRY COMMERCE FOR 4430 MAC MlKALIS AND 6904 TD OEPC IEPD DEPARTMENT PASS FOR EXIMBANK FOR IMAM PASS USDA FOR FAS AID W FOR ANE MANILA ALSO FOR USADB USCINCPAC FOR FPA AMB SALMON E O 12958 DECL 08 02 08 TAGS PGOV ECON EIND PINR KPRP PHUM PINS PREL ID SUBJECT A CLOSER LOOK AT THE INDONESIAN CHINESE DEMANDS INCLUDING SIMPLIFICATI N OF THE CITIZENSHIP REQUIREMENTS FOR INDONESIANS OF CHINESE DESCENT ABOLITION OF MARKS THAT DISTINGUISH CHINESE FROM PRIBUMIS ON IDENTITY CARDS REPLACEMENT OF THE DEROGATORY TERM CINA WITH THE NEUTRAL TERM TIONGHOA IN REFERENCE TO SINO-INDONESIANS AND ELIMINATION OF INFORMAL BARRIERS TO CHINESE PARTICIPATION IN THE BUREAUCRACY AND THE MILITARY CONFIDENTIAL PAGE 03 JAKART 04098 09 OF 10 030725Z COMMENT THE GOVERNMENT HAS ANNOUNCED ITS INTENTION TO ABOLISH THE IDENTITY CARD MARKINGS NATIONWIDE AND JAKARTA HAS REPORTEDLY ALREADY IMPLEMENTED THE CHANGES AFTER ASSUMING POWER IN 1967 SUHARTO ISSUED A PRESIDENTIAL DECREE CHANGING THE TERM TIONGHOA TO CINA ' WHICH TO INDONESIAN CHINESE IS ROUGHLY ANALOGOUS TO CHINK OR WORSE YET NIGGER END COMMENT SOME GROUPS ARE ALSO CALLING FOR NEW LAWS THAT EXPLICITLY GUARANTEE THE RIGHTS OF THE CHINESE MINORITY 37 C INTERESTINGLY MANY CHINESE ARE ALSO PROPOSING AFFIRMATIVE ACTION PROGRAMS TO HELP POOR PRIBUMIS A SOLID MAJORITY OF CHINESE INTERVIEWED REFERRED TO A MALAYSIAN-STYLE NEP NEW ECONOMIC POLICY AS ONE MEANS OF REDUCING ETHNIC TENSIONS IN INDONESIA THIS WOULDN'T HAVE TO BE EXPLICITLY RACE-BASED THEY ARGUE FOR ANY PROGRAMS TO HELP THE POOR WOULD INEVITABLY FOCUS ON PRIBUMI THE LONG-TERM SECURITY OF THE CHINESE COMMUNITY IS DEPENDENT ON THE UNCLASSIFIED UNCLASSIFIED ELIMINATION OF INDONESIA'S ENORMOUS SEETHING UNDER-CLASS EXPLAINED ONE PERANAKAN ECONOMIST THE REAL GRIEVANCES OF THE POOR MUST BE ADDRESSED THERE IS SIMPLY NO OTHER WAY FOR THE CHINESE TO BE SAFE THOUGH PERANAKAN PROFESSIONALS ARE OUT IN FRONT WITH THIS AGENDA MOST PERANAKAN AND SOME TOTOK BUSINESSMEN INTERVIEWED EXPRESSED STRONG SUPPORT FOR THESE IDEAS THOSE WHO WANT TO WAIT AND SEE 38 C THE VAST MAJORITY OF TOTOK BUSINESSMEN FALL IN THIS CATEGORY TOTOK ARE TRADITIONALLY NOT INTERESTED IN POLITICS DEMURE FROM DISCUSSING THE POLITICAL AND WANT ONLY A STABLE POLITICAL AND ECONOMIC ENVIRONMENT IN WHICH TO DO BUSINESS THESE CHINESE EXPRESSED THEIR CONTINUING SUSPICION OF THE GOVERNMENT CONFIDENTIAL JAKART 04098 09 OF 10 030725Z PAGE 04 CONCERNED THAT IT HAS NEITHER THE LEGITIMACY NOR THE j OWER TO MAINTAIN LAW AND ORDER AND STABILIZE THE ECONOMY EVERY BUSINESSMAN INTERVIEWED BELIEVED THAT THE ECONOMY WOULD NOT RECOVER IN THE ABSENCE OF POLITICAL STABILITY AND HABIBIE WAS SEEN AS STILL BEING WEAK CREDIBLE INVESTIGATIONS OF THE KIDNAPPINGS TRISAKTI SHOOTINGS AND THE MAY RIOTS AND RAPES ARE SEEN AS KEY TO POPULAR CONFIDENCE IN GOVERNMENT AND MOST DOUBTED THE HABIBIE GOVERNMENT'S ABILITY TO CARRY OUT SUCH INVESTIGATIONS THE BIGGER BUSINESSMEN SAW THE IMF AND CGI MONEY AS NECESSARY BUT IRRELEVANT IN THE LARGER SCHEME OF THINGS SINCE MOST OF THE MONEY WILL BE USED TO UNDERWRITE SUBSIDIES AND COVER GOVERNMENT SHORTFALLS THEY ARGUE THE MONEY WILL NOT JUMP-START INDONESIA'S MORIBUND ECONOMY BUT JUST KEEP THE PLACE AFLOAT IF THE ECONOMY CONTINUES TO DETERIORATE MOREOVER THEY EXPECT THE CHINESE COMMUNITY WILL AGAIN BE THE TARGETS OF SOCIAL UNREST 39 C IN THE SHORT TERM THEN THERE IS LITTLE OPTIMISM AND NO PLANS TO REINVEST EVEN PERNAKANS DETERMINED TO STAY AND WILLING TO FIGHT FOR GREATER SOCIAL AND POLITICAL RIGHTS ARE WAITING TO SEE WHAT UNFOLDS BEFORE RECOMl'-1 ITTING RESOURCES INVESTMENT SAID ONE PERA1 AKAN BUSINESSMAN REQUIRES LONG-TERM CONFIDENCE AND RIGHT NOW EVERY DAY WHEN I WAKE UP I DON'T KNOW WHAT I WILL FIND JAKARTA IS RIFE WITH RUMORS OF COMING RIOTS AND UNREST LEAFLETS ARE CIRCULATING WARNING OF IMPENDING ATTACKS ON CHINESE WOMEN AND CHILDREN AND CHINESE IN GENERAL DO NOT FEEL PHYSICALLY SAFE CONFIDENTIAL END OF DOCUMENT CONFIDENTIAL PTQ0808 UNCLASSIFIED a-_ PAGE 01 ACTION EAP-Ol JAKART 04098 UNCLASSIFIED 10 OF 10 030725Z ACDA-08 'ACDE-OO AGRE-OO AID-OO AIT-03 ClAE-OO SMEC-OO CTME-OO DINT-OO DODE-OO DS-OO EB-OO EUR-01 EXIM-01 E-OO IO-OO H-01 IM-01 TEDE-OO INR-OO ADS-OO MMP-OO NSAE-OO NSCE-OO OIC-02 OPIC-Ol PA-OO PM-OO PRS-OO P-OO STR-OO T-OO USIE-OO PMB-OO DSCC-OO G-OO NFAT-OO SAS-OO 033W ------------------5AE58A 030725Z 38 R 030708Z AUG 98 FM AMEMBASSY JAKARTA TO SECSTATE WASHDC 2888 INFO AMCONSUL HONG KONG ASSOCIATION OF SOUTHEAST ASIAN NATIONS DEPTTREAS WASHOC USDOC WASHDC AMEMBASSY SEOUL AMEMBASSY TOKYO AMEMBASSY CANBERRA AMCOlITSUL SYDNEY AMEMBASSY BONN AIT TAIPEI 0926 USMISSION GENEVA USCINCPAC HONOLULU HI AMCONSUL SURABAYA INFO LOG-OO CEA-Ol SRPP-OO FRB-OO L-Ol OMB-01 SSO-OO DRL-04 CON F IDE N T I A L SECTION 10 OF 10 JAKARTA 004098 CONFIDENTIAL PAGE 02 JAKART 04098 10 OF 10 030725Z BANDAR SERI BEGAWAN PLEASE PASS EAP A S ROTH HONG KONG FOR TREASURY ATTACHE QUINN DEPARTMENT FOR EAP PIMBS EB OMA INR IL STATE PASS FEDERAL RESERVE FOR LANDRY COMMERCE FOR 4430 MAC MlKALIS AND 6904 TD OEPC IEPD DEPARTMENT PASS FOR EXIMBANK FOR IMAM PASS USDA FOR FAS AID w FOR ANE UNCLASSIFIED ACQ-01 DOEE-OO FBIE-OO ITC-01 OIG-04 SP-OO PRM-01 UNCLASSIFIED MANILA ALSO FOR USADB USCINCPAC FOR FPA AMB SALMON E O 12958 DECL 08 02 08 TAGS PGOV ECON EIND PINR KPRP PHPM PINS PREL ID SUBJECT A CLOSER LOOK AT THE INDONESIAN CHINESE MOST CONTACTS HOPE THAT NEXT YEAR'S ELECTION WILL LEAD TO A GREATER DEGREE OF POLITICAL AND ECONOMIC STABILITY THOUGH THEY ACKNOWLEDGE THAT THINGS WILL LIKELY BE MESSY IN THE RUN UP TO THE VOTE IF THE ELECTION IS RUN FAIRLY A CREDIBLE GOVERNMENT IS INSTALLED AND THE MACRO-ECONOMY SHOWS SIGNS OF STABILIZATION THE CHINESE WILL REINVEST BUT FIRST WE WANT TO UNDERSTAND THE NEW RULES OF THE GAME II S ID ONE TOTOK CERAMICS EXPORTER II WE DON'T WANT SPECIAL CONFIDENTIAL PAGE 03 JAKART 04098 10 OF 10 030725Z TREATMENT LIKE THE CRONIES GOT IN THE PAST FREE FAIR AND STABLE BUSINESS ENVIRONMENT IS ALL THAT WE NEED TO PROSPER 40 C WHEN PRESSED ON WHO THEY WOULD VOTE FOR IN THE COMING ELECTION 18 OF 22 CONTACTS SAID MEGAWATI'S PDI PDI INSIDERS AND OTHER SOURCES TELL US THAT CHINESE MONEY IS FLOWING INTO PARTY COFFERS THOUGH NO CHINESE INTERVIEWED A OWLEDGED MAKING DONATIONS THOSE WHO HAVE NO CHOICE 41 C THE VAST MAJORITY OF INDONESIAN CHINESE ARE SMALL ENTREPRENEURS AND TRADERS WITH LIMITED CAPITAL AND LOW EDUCATION AND THUS LITTLE CHOICE BUT TO STAY PUT WHILE SOME OF THE MORE TRAUMATIZED ARE TRYING TO GET OUT OR HAVE MOVED TO OTHER ISLANDS MOST ARE TRYING TO REBUILD THEIR HOMES STORES AND LIVES SEVERAL PRIVATE ORGANIZATIONS HAVE BEEN ESTABLISHED TO HELP THE CHINESE GET BACK ON THEIR FEET AND THE GOVERNMENT IS APPARENTLY CONTEMPLATING A SCHEME TO RECAPITALIZE SHOPS THAT WERE LOOTED AND BURNED THE PLAN IS SAID TO PROVIDE RP 300-500 MILLION PER SHOP CHINESE IN AREAS HIT BY THE RIOTS ARE DOING WHAT THEY CAN TO PROTECT AGAINST FUTURE ATTACKS BARRICADING THEIR COMMUNITIES AND ARMING THEMSELVES WITH SWORDS KNIVES GUNS AND MACE THEE ARE ALSO REPORTS THOUGH UNCONFIRMED OF AN INCREASE IN THE TRADE OF ILLICIT ARMS SHOULD ANTI-CHINESE UNREST AGAIN FLARE UP THE CHINESE SAY THEY ARE PREPARED TO FIGHT BACK CONCLUSION CONFIDENTIAL UNCLASSIFIED UNCLASSIFIED PAGE 04 JAKART 04098 10 OF 10 030725Z 42 C THE INDONESIAN CHINESE ARE A HETEROGENEOUS COMMUNITY AND LARGELY REALIZE THAT BEING ANTI-CONGLOMERATE DOES NOT MEAN BEING ANTI-CHINESE THE MINIMUM REQUIREMENTS FOR A RETURN OF CONFIDENCE AND CAPITAL TO INDONESIA ARE POLITICAL AND MACROECONOMIC STABILITY A CREDIBLE GUARANTEE FOR PHYSICAL SECURITY INVESTIGATION OF THE MAY RIOTS AND RAPES AND ACCOUNTABILITY FOR THOSE FOUND GUILTY IN THE SHORT TERM THEN THE PICTURE IS BLEAK FOR THESE CRITERIA WILL NOT BE EASILY OR IMMEDIATELY MET IN THE MEDIUM TO LONG TERM HOWEVER IF ELECTIONS AND CREDIBLE GOVERNMENT FOSTER A MORE STABLE POLITICAL AND ECONOMIC ENVIRONMENT THERE IS REASON FOR MEASURED OPTIMISM ON THE ECONOMIC SIDE WHILE CAPITAL IS INDEED MOBILE AND CHINESE LIKE OTHER INVESTORS CAN KEEP THEIR MONEY ABROAD VIRTUALLY ALL CHINESE BUSINESSMEN ACKNOWLEDGE THAT A STABLE INDONESIA WOULD PRESENT ENORMOUS INVESTMENT OPPORTUNITIES ON THE POLITICAL SIDE PERANAKAN CHINESE ARE PRO-ACTIVELY ENGAGED IN REFORMASI AND ARE PROMOTING THE KIND OF DISCOURSE NECESSARY TO FIND LONG-TERM SOLUTIONS TO INDONESIA'S LONGSTANDING CHINESE PROBLEM ROY CONFIDENTIAL END OF DOCUMENT UNCLASSIFIED This document is from the holdings of The National Security Archive Suite 701 Gelman Library The George Washington University 2130 H Street NW Washington D C 20037 Phone 202 994-7000 Fax 202 994-7005 nsarchiv@gwu edu