Local Politics and Chinese Indonesian Business in Post-Suharto Era

Abstract

(ProQuest: ... denotes non-USASCII text omitted.)Susanto, a Chinese Indonesian living in Medan, is a distributor of stuffed toys. He runs his business from a shophouse located in the central city area. He started his business in 2003, and the business has remained small-scale. He brings in stuffed toys from Jakarta and sells them to customers in Medan. He has 15 employees working for him, most of whom are indigenous Indonesians.Susanto revealed to me that after the end of the New Order regime, the central government has become stricter in collecting taxes from business enterprises. Business owners need to declare their revenues, calculate the taxes they have to pay, and make payments accordingly. Tax officers later visit the companies to check their actual revenues. If they find that the business owners have under-reported their revenue, instead of penalizing them, the tax officers usually ask for bribes to cover up the tax fraud. Susanto emphasized, however, that even if a business owner has paid all the necessary taxes, tax officers usually create fictive taxes and charges and request the business owner to pay accordingly. Moreover, tax officers often demand higher bribes from businesspeople who are ethnic Chinese, as they are deemed to be doing better than other businesspeople. For this reason, Susanto and many local Chinese businesspeople have found it expedient not to declare their actual revenues, knowing that honesty does not pay and will lead to even more taxes and bribes. Instead, they wait for the officers to visit and negotiate with them the rates of the taxes and bribes requested and only then pay their taxes. In my interview with him, Susanto said, many other businesspeople and I feel bad about it, we have no choice but to pay them [the bribes] since we have to survive.1) Susanto also revealed that he and other Chinese businesspeople preferred not to fight against the extortion because they were afraid of running into trouble (Mandarin: pa mafan, ...) if they did so. They would rather pay the bribes to avoid any further problems. This indicates also that Chinese businesspeople possess enough economic capital to pay the bribes in order to protect their business.Susanto's story indicates the ambivalence among Chinese toward democratization in post-Suharto Indonesia. Although democratization has opened spaces for them to live their culture and express their ethnicity, it has not led to the emergence of good governance that promotes the rule of law, transparency, and accountability, as corruption remains endemic in state institutions. This poorly developed democratization creates, therefore, an even more ambivalent situation for Chinese Indonesian businesspeople. On the one hand, they remain the targets of extortion and corruption by power holders; on the other hand, they play a role in perpetuating the corrupt, predatory politicalbusiness system. It is also important to note that the local business environment in post-Suharto Indonesia is crucially influenced by local politics, especially after the implementation of regional decentralization in 2001. If corrupt practices plague the local government, this will certainly lead to a corrupt and muddy business environment. Moreover, if institutionalized gangsterism is dominant in a particular locality, the local business community will encounter more harassment and extortion.This study shows that Chinese Indonesian businesspeople in Medan encounter more harassment and extortion than their counterparts in Surabaya, because institutionalized gangsterism is dominant in Medan. However, it is important to note that although Chinese Indonesian businesspeople in Surabaya do not experience as much harassment and extortion, they still play a crucial role in perpetuating the corrupt local business environment. In this article, I look at how local politics that is infused with corrupt practices and institutionalized gangsterism has led to the emergence of a corrupt and muddy business environment in post-Suharto Medan and Surabaya. …