More foreigners moving out than in - true? Good? Bad?

[Puspawarna]

I recently completed a local move, and as a result got to know the advisor from the removals company that did the move for us. Her observations were really interesting. According to her, they are moving out roughly the usual number of expats this year (June through August are prime months for people to leave, since no one wants to move in the middle of the school year unless they have to). However, she said they are virtually not moving anyone INTO Indonesia. (Keep in mind that their clients are generally employees of multinational corporations - MNCs.)

Is this a troubling bit of information? (Certainly it is for the moving companies, as they need the business of moving in expats.) On the one hand, the advisor said that one of the reasons for the drop in incoming people is that the outgoing people are being replaced by Indonesians rather than expats. Assuming this is being done for the right reasons (and not because companies are cutting back on expenses, are afraid to post expats because of the JIS case, etc.), that's wonderful. After all, it makes sense to have Indonesians at the helm of Indonesian operations of international companies if possible.

However, in some cases expats with MNCs are leaving and are not being replaced by anyone, expat or local. This seems to me to be a worrying indicator for Indonesia's short-term economic growth, since like it or not, MNC activity does contribute to Indonesia's economy. Only someone with very nationalistic blinders on could fail to interpret things this way - or that's what I think, anyway.

 

[dafluff]

Welcome Puspawarna!

I think this is mainly a function of the commodities market tanking so much in the last couple of years. Despite government efforts to make it easier for expats and business in general (and yes I know it is always 2 steps forward, 1 step back, with the Indonesian Gov't), the flow simply follows the money.

Commodities drive almost everything in Indonesia and is the first piece in that domino.

 

[Puspawarna]

Thanks for the welcome, I am happy to be here

It's definitely at least in part a commodities issue (sez I, without doing any research to get statistics to back that up). Specifically, oil and gas - maybe mining too, I don't know.

The question is whether it's a temporary dip or represents a long-term trend. I know predictions in the US are that the O&G sector will make a comeback, but don't know how that will affect Indonesia.

More generally, it's interesting to contemplate whether fewer expats from MNCs is bad or not. The foreign business community always likes to point to the skills transfer that occurs when well-trained expats work side by side with Indonesians. The only thing is, that's been going on for years now. Is it still a valid argument? Or is it just rationalization?

It's hard for me to be objective on the subject, as someone who has at least occasionally been an inside observer of the foreign business community. Overall I think they mostly enrich the environment. Sure, there are some assholes, but that's true of any group.

 

[El_Goretto]

More generally, it's interesting to contemplate whether fewer expats from MNCs is bad or not. The foreign business community always likes to point to the skills transfer that occurs when well-trained expats work side by side with Indonesians. The only thing is, that's been going on for years now. Is it still a valid argument? Or is it just rationalization?

Maybe the skill transfer has really been happening and we are starting to feel its effect too (on top of the other factors mentioned above)?

 

[waarmstrong]

Follow the money. In the case of extraction based industries, there is little money to follow these days. Could be that when things pick up, and they eventually will, at least some international companies may have figured out that Indonesians are capable of managing and engineering at performance levels equal to expats. Could happen, but my guess is that when the money comes back, so will the next wave of foreign workers.

 

[tihzho]

Indonesia is tightly closed for expats as compared to China where expats are more welcomed. I feel that this helped China begin its development in the late 1980's and 90's with an influx of expats and investment money. I have a expat friend from Shanghai who has factories in Taiwan and China and has tried a few times to open a factory here in Indonesia but found the process unbelievably torturous with the government indifferent if not outright negative so he gave up in the end.

Indonesia would have been better off today had the Communists took over in the 1960's as there would have been a clean slate as it were for development without the fat cat rich business owners interfering making sure they don't have competition from more efficient foreign companies. I was directly told by some fat cat rich business owners I know that they don't want expats coming to Indonesia and their companies.

My two cents

 

[HappyMan]

MNC's don't just use expats because they are more "skilled". "Further, a high level of political risk in the host country is likely to make direct control through expatriates more important because the risks of loss of income or assets might be substantial. It also makes the speed and clarity of communication facilitated by the use of PCNs crucial (Boyacigiller, as cited by Harzing)" That quote is from an unfortunately long paper I read recently, which I can no longer find. As best I can remember, risk, communication, and compliance were the major factors in deciding whether or not to use an expat. If your local subsidiary is already established, with good communications to the head office and buying in to the corporate policies... why pay the cost and deal with the potential failure of an expat? Perhaps the MNC branches here have reached a certain point of integration at the same time as business environment factors here have improved.

 

[Jaime C]

I've been buying a lot of used stuff in Jakarta for our new house. I see lots of people leaving, and tons of empty "bule style" houses.

Most of those leaving are in the oil/gas fields, certainly.

 

[fastpitch17]

I've been buying a lot of used stuff in Jakarta for our new house. I see lots of people leaving, and tons of empty "bule style" houses.

Most of those leaving are in the oil/gas fields, certainly.

Jamie, I have a sister in law with a lot of apartments, houses, and kost she rents out. For the past 6 or 7 months she has been buying up departing Expat's furniture like someone pulled their finger from the dam. According to her, she hasn't seen this amount of available furniture in the past history. As for residents of her properties, mostly Indonesian celebrities now. I think she has only one expat family left. Before she had 7 or 8. All in Jakarta, Bogor, and Bandung.

Up here in Sumatra I see less and less Expats in my area. At one time there were a number of Western teachers but now there is one that opened his own business with his wife and a married couple who are on their way out now. May have already gone with the new school year. As for Westerners, we are down to 2 in my city. Both retired with Indonesian wives. The English teaching spots here have mainly been filled with Indonesians and a couple Filipinos it seems. Go to Immigration office here and people that handle to foreigners are basically sitting on their hands in their offices. Visited yesterday and after a week of their system being down, I was the only foreigner there yesterday. So, I agree they are leaving but others are not replacing them.

 

[Travellingchez]

A friend who just moved from Balikpapan said that the women's association that has been there for decades shut down a few months ago due to nobody being there anymore. So all the local charities and community projects they used to support will now lose a bit chunk of their funding. So not a positive for Indonesia at all.

 

[Puspawarna]

As best I can remember, risk, communication, and compliance were the major factors in deciding whether or not to use an expat. If your local subsidiary is already established, with good communications to the head office and buying in to the corporate policies... why pay the cost and deal with the potential failure of an expat?

Sounds like that was an interesting paper. While it might not be as high on the list as "risk, communication, and compliance," I can easily think of another factor that influences the use of expats: grooming. Before promoting an employee to a position as head of international operations, it's good to have experience in a variety of countries. So an employee on their way to the top might put in a few years working in various countries in order to learn the ropes.

Note that there is nothing inherently exclusive about this. An Indonesian could theoretically be groomed for a top international management position just as easily as could a Dutch, Japanese, or French citizen. Although the very top positions at MNCs do tend to be held by countrymen of whatever nation the MNC originated in.

 

[HappyMan]

Sounds like that was an interesting paper. While it might not be as high on the list as "risk, communication, and compliance," I can easily think of another factor that influences the use of expats: grooming. Before promoting an employee to a position as head of international operations, it's good to have experience in a variety of countries. So an employee on their way to the top might put in a few years working in various countries in order to learn the ropes.

Note that there is nothing inherently exclusive about this. An Indonesian could theoretically be groomed for a top international management position just as easily as could a Dutch, Japanese, or French citizen. Although the very top positions at MNCs do tend to be held by countrymen of whatever nation the MNC originated in.

I wish I had kept a copy of it. The author's site is no longer hosting it. It was a section of a book by Harzing, titled International Assignments, and google thinks it is still available... but it isn't.

The author may have mentioned grooming, without my noticing (I was citation hunting). What was mentioned along those lines was more about risk aversion. Companies where the parent nation of the MNC was more risk averse tended to use less host nation and third nation (neither host nor parent nation) management staff. There was also a factor of "distance of culture" to modify this. If I remember correctly, Japanese firms were given as an example for both of these factors being a negative indicator of host and third nation nationals being used as management.

I believe there were charts showing factors that increase and decrease the likelihood of a given MNC using a given type of staff as management. It really was interesting. I should also mention that it tended to focus on the upper echelons of management.

 

[Puspawarna]

If they did mention it they might not have used "grooming" as a term. In our extra-hyper-touchy-sensitive world, since "grooming" is used to describe how pedophiles get close to their victims and prepare them for abuse, it may not be in favor in more innocent settings.

Also, regardless of what you call it, I think it is a relatively new idea that's only gained strength over the past decade or two. In the past people used to worry that an expat assignment was the kiss of death, career-wise: while all the up-and-comers were sucking up at the home office, expats were stuck in what were perceived as lower-status jobs. That's pretty much changed now, I think, but it certainly was the case not that long ago.

 

[Rainman]

I recently completed a local move, and as a result got to know the advisor from the removals company that did the move for us. Her observations were really interesting. According to her, they are moving out roughly the usual number of expats this year (June through August are prime months for people to leave, since no one wants to move in the middle of the school year unless they have to). However, she said they are virtually not moving anyone INTO Indonesia. (Keep in mind that their clients are generally employees of multinational corporations - MNCs.)

Is this a troubling bit of information? (Certainly it is for the moving companies, as they need the business of moving in expats.) On the one hand, the advisor said that one of the reasons for the drop in incoming people is that the outgoing people are being replaced by Indonesians rather than expats. Assuming this is being done for the right reasons (and not because companies are cutting back on expenses, are afraid to post expats because of the JIS case, etc.), that's wonderful. After all, it makes sense to have Indonesians at the helm of Indonesian operations of international companies if possible.

However, in some cases expats with MNCs are leaving and are not being replaced by anyone, expat or local. This seems to me to be a worrying indicator for Indonesia's short-term economic growth, since like it or not, MNC activity does contribute to Indonesia's economy. Only someone with very nationalistic blinders on could fail to interpret things this way - or that's what I think, anyway.

Majority of the expat here are not teachers. Having lived in the south. They are the mining and Oil & Gas guys. Have u notice the oil price today coupled with Indonesia banning export of raw mineral? These resulted in closure of many O&G companies which means PHK with one company that my friend worked in received the golden hand shake together with 450 others. Some or the management level are all Bule. Statistically, last I read were 250,000 retrenched from O&G worldwide. China Just Retrenched 1.8 million in the coal and Steel mining industries.

And above is the main reason most bule are leaving as their offices closed and not the local replacing the expat.

The collapse in oil prices has so far claimed more than 200,000 jobs worldwide. Leading the bloodbath are the oilfield service giants; Schlumberger has axed more than 20,000 oilfield service workers, about 15% of its staff. Rival Halliburton is cutting 18,000, Weatherford International 14,000, and Baker Hughes 13,000. Among the big integrated oil companies Royal Dutch Shell appears to have the highest total with 7,000 laid off.

PS : My Friend was in Weatherfrord Jakarta.

 

[Pak Asam Manis]

Majority of the expat here are not teachers. Having lived in the south. They are the mining and Oil & Gas guys. Have u notice the oil price today coupled with Indonesia banning export of raw mineral? These resulted in closure of many O&G companies which means PHK with one company that my friend worked in received the golden hand shake together with 450 others. Some or the management level are all Bule. Statistically, last I read were 250,000 retrenched from O&G worldwide. China Just Retrenched 1.8 million in the coal and Steel mining industries.

And above is the main reason most bule are leaving as their offices closed and not the local replacing the expat.

The collapse in oil prices has so far claimed more than 200,000 jobs worldwide. Leading the bloodbath are the oilfield service giants; Schlumberger has axed more than 20,000 oilfield service workers, about 15% of its staff. Rival Halliburton is cutting 18,000, Weatherford International 14,000, and Baker Hughes 13,000. Among the big integrated oil companies Royal Dutch Shell appears to have the highest total with 7,000 laid off.

PS : My Friend was in Weatherfrord Jakarta.

Sorry if I'm being dense, but can you clarify the statement "having lived in the south"? Apart from a grammatical complaint which I will leave aside, do you mean the south of ... what? The south side of Jakarta?

Yes, that's true, O&G and mining - and their support services - make up a much bigger percentage of expat workers in the country than teachers, to be sure (though there are probably - or WERE probably - thousands of foreign teachers working in Indonesia, including "bule", Filipino, Chinese, Indian and other nationalities).

I'm not sure why you mention this after quoting Puspa's post though, as it doesn't seem to mention anything about teachers, and I don't think anyone has claimed here that the majority of expats in Indonesia are teachers ... in any case, to some extent both of those categories of expat worker are being affected by some of the same factors, but one thing that is very different is that demand for foreign teachers probably hasn't really dropped much (if at all). The "resources" and the "need" (although this is arguable) and desire for foreign teachers, especially native or "near-native" English speakers, is still there. The need and desire for foreign workers in O&G or mining and support sectors obviously fluctuates with the state of resources, market price and national policy, but the latter is clearly affecting both:

http://www.economynext.com/Empty_ho...esia_s_expat_exodus_gathers_pace-3-5386-.html

"POLICY CONFUSION

A PwC survey of 53 firms in the oil and gas sector, released in May, found that almost three-quarters of respondents expected a smaller expat workforce in future, partly because of tighter controls on hiring foreigners. (http://pwc.to/28OGZ0V)

Indonesia opened up dozens of business sectors recently to foreign investors in a move described by President Joko Widodo as a "Big Bang" liberalization of the economy.

Yet business groups say there are mixed signals from the government, which imposes restrictions apparently under pressure from protectionist voices around the president.

The manpower ministry is encouraging companies to hire more Indonesian workers and is tightening its scrutiny of the work permit applications from foreigners, said Ratna Agustina, a director at a firm that provides services to expats.

The government also sets an age ceiling of 55 years for foreigners employed by oil and gas contractors, downstream businesses and supporting service providers - with certain exemptions for top executives or those with skills deemed crucial.

"If they are above 55, the assumption is that many have ailments and are less productive," said Taslim Yunus, a spokesman for the energy regulator.

Adding to the regulatory uncertainty, the government last year introduced requirements for foreigners to be proficient in Indonesian and for companies to hire 10 locals for every expat, only to backtrack less than 12 months later after businesses raised strong protests.

The manpower ministry did not respond to requests for comment."


The downturn in foreign expat workers from the OGM sector also trickles down to affect both expats and locals working as teachers and staff in schools which serve those expat communities:


"The Australian Independent School in Balikpapan, a city in Indonesia's resource-dependent province of East Kalimantan, expects a 36 percent reduction in its student body this year, said human resources officer Ni Ketut Novia. Three international schools in the city have shut over the past 2-3 years due to the mass layoffs at mining contractors and a drastic cut in expat allowances, she said."

as well as obviously affecting the Indonesian service sector heavily in cities with a previously thriving / growing or at least significant expat population.

To me the thing that stands out is the "mixed signals" effect. Fluctuations in market prices for commodities and subsequent upturns and downturns are inevitable. But as long as government policy simultaneously reflects the opposing aims of "get it in" (foreign investment) and "get 'em out" (foreigners generally, unless they are tourists with money to spend or rich investors), this ambivalence will continue to show in economic effects on the country, and in combination with global economic shifts, could eventually result in the "Indo expat" becoming something of an endangered species. I wouldn't bet on the trend stopping any time soon, unfortunately.

 

[Missnaughty]

In Houston, many Indonesian expats has been sent home due to company cutting expenses. Most are working in O&G and Financial. The number reach 000s. And this summer, I noticed many houses in my area left empty and up for lease/sale due to repatriation.. Having said that, I have many Shanghai expats friends who are moving to Jakarta some to Singapore due to business expansion (or they said they will be localised if chose to stay in China).. so what happened in Indonesia is more likely due to the crisis..

 

[Smallworld]

Here I found some article about it. It confirms what other people in this thread have already said.

http://www.reuters.com/article/us-indonesia-expatriates-idUSKCN0ZD33V

 

[Rainman]

Sorry if I'm being dense, but can you clarify the statement "having lived in the south"? Apart from a grammatical complaint which I will leave aside, do you mean the south of ... what? The south side of Jakarta?

I live in Pondok Indah area for more then 10 years. So Kemang and Blok M is where I hang out every night and joined the Indo Expat Pool league. (http://www.jakartapoolleague.org/?open=league) and most of my team member are all teacher of the 3 pubs I played for over the years.

Moved to BSD and still meet teachers every time u go to the pub here. It does give the impression that teachers are everywhere. When I visited Sinar Mas Academy then. The list of teacher they paste on the wall state more then 100 names and mostly from China, Some Bule of course.

 

[Pak Asam Manis]

Here I found some article about it. It confirms what other people in this thread have already said.

http://www.reuters.com/article/us-indonesia-expatriates-idUSKCN0ZD33V

This is the same article linked (and quoted) in my post above. The link I posted was a re-post from another site, as I was looking for the original article from Reuters (the one you've linked here) but didn't find it. The content of the article is the same, however.

 

[HappyMan]

You guys may remember that one of the stated reasons for refusing an IMTA to employees over 55 was "possible health issues". I assume that absenteeism was the reasoning behind this, as the national healthcare isn't great (so I'm thinking that an IMTA fee covers health costs). But then, I've just been reading that absenteeism is negatively correlated to age. Am I missing something here, or is manpower just saying random things without any data behind them?

http://www.gov.scot/Publications/2009/09/24131201/21