Of all the Taiwanese who have written their stories in Su­ra­baya, Yudi Se­tia­wan Lin, former president director at paper makers Pabrik Kertas Tjiwi Kimia, can be considered in the class of “elders.”

Lin, who was in the first class to graduate from the Paper Manufacturing Group of the Department of Chemical Engineering at Chinese Culture University and initially worked in paper manufacturing in Taiwan, was at that time very highly thought of by companies in Indonesia. The Sinar Mas Group, which was founded by Indonesians of Chinese descent and later built Asia Pulp and Paper (APP) into the third largest paper pulp company in the world, came specially to Taiwan to recruit Lin onto their team.

Lin, who by then was still only in his 30s, went to Indonesia with several of his staff from Taiwan, and they became the core group at ­Tjiwi Ki­mia, under the flag of the Sinar Mas Group.

In 1976, the year Lin arrived in Su­ra­baya, there were only scattered Taiwanese businesses there, and the later “Go South Policy” that encouraged Taiwanese to invest in Indonesia had not even been mentioned yet. Lin and his compatriots in the company were among the few Taiwanese in Su­ra­baya. The company built a dormitory expressly for these Taiwanese staffers, and at the peak there were 200 people there including employees and their family members, just like a little Taiwanese village.

With this vanguard in place, in the middle of the 1990s, due to internal and external factors in Taiwan including policy changes and transformation of the industrial structure, there was a wave of enthusiasm for investing in Indonesia. The number of Taiwanese in Su­ra­baya increased markedly, and Erina Ho, now a member of the ROC government’s Overseas Community Affairs Council, who had gone with Lin, her husband, to work in Indonesia, got together with several Taiwanese businesspeople to set up the Su­ra­baya Tai­pei International School.

“When the school was first founded it had nothing, and it relied on Taiwanese businesspeople for textbooks and exercise books. It started out with a very motley collection of stuff,” recalls Ho.

Today the Su­ra­baya Tai­pei International School’s campus covers more than seven hectares, with expansive and well-lit buildings. The harsh conditions of the old days are long gone, but the process of the school’s founding and development from such humble beginnings bears witness to the history of Su­ba­raya’s Taiwanese business community.

Yudi Setiawan Lin and his wife Erina Ho, who together went to work in Surabaya 40 years ago, have been eyewitnesses to the city’s development.

Building Surabaya’s first freeway

Of all the stories written by Taiwanese businesses in Su­ra­baya over the past 30-plus years, one that must be told is that of the Ret-Ser Engineering Agency (RSEA).

Since being founded in the 1950s, RSEA has gone as far as Egypt and Bahrain to undertake road building and bridge construction projects. In 1973 a team from RSEA arrived in Sumatra, and in the 1980s they built Indonesia’s first freeway, from Su­ra­baya to Ma­lang. Wu ­Ching Tai, senior marketing executive for the ­Ngoro Industrial Park (NIP), states that RSEA’s main line of business was originally construction engineering, but at that time, quite incidentally, they also founded the NIP, serving as the best possible support for Taiwanese businesses.

In the 1980s, as the NT dollar appreciated and Taiwanese wages rose, many businesses found it increasingly hard to stay afloat in Taiwan and invested abroad, with Indonesia becoming the top choice. However, in Indonesia there were gray areas in the enforcement of laws of all kinds, and when added to the language barrier, Taiwanese businesses there suffered a lot.

The many difficulties faced by Taiwanese businesses at that time caused RSEA to get together with investors In­ti­land Se­jah­tera to build the NIP, easing the problem of Taiwanese firms having to buy land and build factories on their own. Starting in the 1990s, large numbers of Taiwanese businesses moved into Indonesia, and the proportion of Taiwanese firms in the NIP reached its peak, with 80% of the companies coming from Taiwan.

The NIP, which has always been sensitive to economic conditions, began to feel an upsurge in the Indonesian market five years ago. The nearly 500 hectares of land in the industrial park sold out completely, and more than 90 firms from ten-plus countries, involved in everything from medical supplies to automotive parts to food processing, clustered together in the NIP.

Wu Ching Tai, senior marketing executive for the Ngoro Industrial Park.

Behind success, tribulations

Bob Yen, chairman of the IDP Group, and Kenny Lee, president director of Le­zen Indonesia, came to Su­ra­baya to invest in new factories there at about the same time. Both had to overcome many trials and tribulations to achieve success, and both have given their all to Su­ba­raya’s development.

Inside the IDP factory building, we see racks filled with a display of exquisite paper bags marked with the names of European designer brands such as Chanel, Prada, and Gucci—all of which came off IDP’s production lines. In another place are hung four clocks showing the times in Indonesia, China, New York, and the UK, clearly indicating the global domain Yen has built for himself, all starting from a foothold in Indonesia.

Before going to Indonesia, Yen ran a trading company. Later, in response to a request from a client in the UK, he began making small batches of paper bags (mostly for use in wrapping gifts), which are not difficult to manufacture. He sold them into the UK and other locations.

At that time Yen’s small factory in New Ta­ipei City’s Xin­dian had only 30 employees, but its labor-intensive form of production meant that it came under pressure from the appreciation of the NT dollar and Taiwan’s sharply rising wage costs. After visiting mainland China and several Southeast-Asian countries, Yen found the investment environment in Indonesia to be more stable than in the other locations, so in 1991 he came to build a factory in Surabaya.

Not long after the factory was built, the Asian financial crisis occurred. IDP, which specializes in selling to overseas markets, was one of the very few firms to make a profit out of it. This was because production costs plummeted due to the huge depreciation of the Indonesian currency, the rupiah.

In 2000 IDP expanded its territory beyond Indonesia, as Yen decided to build a factory in Su­zhou, mainland China. Later he also opened offices in the UK and the US. Today IDP employs 800 people, and produces hundreds of types of bags, on its 3.6-hectare factory site in Indonesia.

When you walk into the factory belonging to Le­zen Indonesia that Kenny Lee built up single-handedly, the products displayed on shelves are instead pair after pair of men’s and women’s fashionable leisure shoes.

The starting point of Lee’s story in Indonesia is similar to that of the great majority of Taiwanese businesspeople. Before coming to Indonesia, Lee had a small shoe factory in Taiwan, and sold most of his products abroad. He similarly felt the twin pressures of an appreciating NT dollar and rising wages in Taiwan, so he went on fact-finding trips to mainland China and Southeast Asia. Lee eventually decided to set up a factory in mainland China, but then the Tiananmen Incident occurred, so at the recommendation of some friends he turned to Surabaya to build his factory.

“At that time, Taiwanese businesspeople all came here single-handedly. The pain behind the success that others see, and the suffering that is not easily expressed, all had to be endured alone in a foreign land,” says Lee.

In 2001, Lee’s company faced a crisis of customers withdrawing orders. This was because his company mainly produced shoes for American golfing brands, and after 911, American customers felt qualms about Muslim countries, and were not willing to give orders to a company that was located in one. The company’s business was greatly affected, but fortunately, through an introduction by a friend, he was able to make up the shortage of orders.

With the rapid development of the Indonesian economy, the land in the Ngoro Industrial Park has sold out.

The second generation takes over

Second-generation Taiwanese businessman Paul Wang took over the management of his family’s company, Metals Indonesia. Although he didn’t have to start from scratch as the previous generation did, he has long understood their experience from the stories they would tell. After his father invested in Indonesia, Wang came to join him there at the age of 11.

In 2004, Paul Wang cut short his studies in Japan to return to Indonesia and help run the family firm. To understand the company’s operations as quickly as possible, Wang, who was only in his early 20s, would spend most of his time each day at the production lines.

“Outside pressure is only a secondary issue. It’s unfortunately the conflicting management philosophies of different generations within Taiwanese businesses that are the biggest challenge.” In Wang’s analysis, Taiwanese businesses in the early days were fighting on their own in a foreign land, beset by market challenges and often suffering setbacks. “After a while, the decision-making model came to be, ‘whatever the boss says goes.’” Given that most small and medium-sized enterprises have no professionally trained managers, when they bring in members of the younger generation, who believe in putting expertise first, to join in the management of the company, this plants the seeds of inter­generational conflict.

As the first generation of Taiwanese business­people ages, the next generation is going from strength to strength, and the issue of succession naturally comes up. Fortunately, the younger generation of Taiwanese has kept the flexibility of the older generation, while adding the professional approach of the US and Europe. “Going into the Indonesian market, Taiwanese definitely have an advantage,” says Paul Wang.

IDP Group chairman Bob Yen has used Surabaya as a base to build a paper bag empire.

Indonesia is making progress

In contrast to the previous generation of Taiwanese businesspeople, who have at least 20 years of experience in country, Swanson Plastics Indonesia, which finished setting up its factory only in July of this year, is one of the newest Taiwanese businesses to join the ranks of Su­ra­baya firms.

Swanson is a subsidiary of the USI Corporation, and mainly produces plastic films for use in diapers, tampons, and other personal hygiene products. The reasons they chose to set up in Indonesia were that “on one hand, we are following in our clients’ footsteps, and on the other, we see commercial opportunities in Indonesia’s domestic market,” says Wayne Wu, Swanson’s production manager.

Indicators on which the company bases its decisions whether or not to invest in a location include total population, birthrate, and degree of modernization, and the newly rising Indonesian market satisfies its conditions in all these respects. Wu explains that Indonesia, with 260 million people, ranks fourth in the world terms of national population. The birthrate is also extremely high. As women join the workforce, their incomes will increase and their time to invest in housework will shrink, so their willingness to use diapers, tampons, and other hygiene consumables will rise.

Six years ago, when Swanson decided to check out Indonesia for possible investment, they visited Jakarta and Su­ra­baya, which are the core production areas for hygiene products. Unexpectedly, when they were in Jakarta, which has long been plagued by traffic congestion, they also encountered an onslaught of heavy rains, and the city’s main roads were flooded. In fact, a variety of conditions that made it disadvantageous to locate a factory in Jakarta became apparent, and after careful consideration, they chose to invest in Surabaya.

Several decades on, today more than 300 Taiwanese firms are in Su­ra­baya. As for the changes in Su­ra­baya, Grace ­Huang, who over the years has spent several periods working in Indonesia, and is currently chairwoman of the Surabaya Taiwan Business Club, has some profound observations.

“Back in the day, the first wave of Taiwanese firms to settle in Su­ra­baya were mainly automotive hardware makers who moved out of the Dafa Industrial Park in Kao­hsiung,” Huang says.

Later, industries such as textiles and garments moved in. In ­Huang’s memories of the old days, what followed was a hard life in a foreign land. The bustling shopping centers that now appear in Su­ra­baya were all built in recent years. In the early days Indonesia’s infrastructure was inadequate, roads were not as they are now, and the availability of telecommunications services was patchy.

These old circumstances are being transformed, and the degree of change has been especially large in recent years. For example, says ­Huang, in the past the whole area around the Su­ra­baya Taiwan Business Club was overgrown wasteland. But in recent years, as the income of local people has risen, new-style residential complexes of a kind you rarely saw in the past are being built one after another.

“There’s still room for improvement, but Indonesia is making progress!” Grace ­Huang declares.

The paper bags and boxes used by many leading brands are made by IDP.

The paper bags and boxes used by many leading brands are made by IDP.

Lezen Indonesia president director Kenny Lee relates the joys and tribulations of making his way in a foreign land.

Because its labor costs are low, Indonesia has become the choice for many Taiwanese businesses as a place to invest and build factories.

Coming in with a professional management model, second-generation Taiwanese businessman Paul Wang has made his family’s company even stronger.

Wayne Wu, production manager at Swanson Plastics Indonesia.

The Heroes Monument in Surabaya.

Grace Huang, chairwoman of the Surabaya Taiwan Business Club, has high expectations for Surabaya’s future.