‘Cultural Misunderstandings’ Behind Indonesia’s Foreigner Business Ban

Agustiyanti & Dion Bisara

A new regulation barring foreigners from human resource positions in Indonesian companies will help prevent cultural misunderstandings, Manpower and Transmigration Minister Muhaimin Iskandar said on Monday.

“This is to avoid any drawbacks associated with cultural differences. If there are foreigners in human resources, it can be dangerous,” Muhaimin told reporters after a House of Representatives hearing.

Muhaimin pointed to a riot at Drydocks World Graha in Batam in April 2010 that started when a non-Indonesian supervisor allegedly made a racist comment while berating an Indonesian worker for making a mistake.

The regulation from the Ministry of Manpower and Transmigration, which was released on Saturday, puts a number of personnel management positions off-limits for foreigners.

Critics say the regulation has the potential to scare off foreign investors, a concern that Muhaimin was quick to dismiss.

The regulation, he said, would still allow foreigners to hold top positions at Indonesian companies, it would simply prevent them from taking direct supervisory roles over personnel.

Philip J. Shah, tax committee chairman at the International Business Chamber and treasurer of the Indonesia Australia Business Council, said placing Indonesians in such middle-management positions was already a common practice.

“While foreign investment companies often have some expatriates involved, they usually have an Indonesian manager or director as a practical matter for various reasons,” Shah told the Jakarta Globe on Monday.

James Filgo, a senior member of the American Chamber of Commerce in Indonesia, said the ministry’s new regulation would threaten the ability of both local and foreign investors to compete in the global market.

“Even the Communist behemoth of China finally learned how to nurture, not overly restrict private enterprise,” he said. “So why is Indonesia bucking the trend and seeking to burden private industry at this critical time of national development?”

Investor Daily