Background To Business in Indonesia

The development of business in Indonesia has, for many years, been inextricably linked to political
influence and patronage. It has been virtually impossible to make progress on any major project
without the right level of influence with senior people in the relevant government ministry - and the
closer one's contacts to the President, the better.

The most recent Asian currency crisis has forced the government to address some of the cronyism
inherent in all business dealings - and certain progress is being made in this area. The issues of
corruption and graft had reached such a scale that the World Bank, reportedly, had a special category
in its cost calculations for major projects, just to cover these unaccountable expenses.

Such contentious issues as bribery and corruption aside, the Indonesian approach to business shares
many similarities with customs and practices found in neighbouring Malaysia - hardly surprising as
both countries contain a Muslim, ethnic Malay majority and a small but commercially
disproportionately influential Chinese minority. Attitudes and concepts of acceptable behaviour,
therefore, focus on such issues as the need to show respect to seniority, the unquestioning acceptance
of hierarchical structures and the constant striving for the development and preservation of harmony
within the group environment.

Indonesian Business Structures

As often happens, the prevailing cultural norms of society are reflected within the business
structure of the country. Therefore, businesses tend to be extremely hierarchically
organised with decision-making controlled at the top by either a small group of senior
managers or by the senior family member.

A sense of hierarchy permeates the whole organisation with employees preferring the
manager to make decisions and allocate tasks. Initiative, proactive thinking etc. are not
really viewed as positives or even desirable as they could be seen as an implied
criticism of the manager and the structures of the organisation.

Promotion and selection are often based more along relationship lines than on pure
performance criteria (as viewed from the western perspective.) Thus, nepotism is rife
in Indonesia and viewed with little or no concern. The high-profile cases surrounding
the Suharto family amply illustrate how deep-rooted family ties are in the region.
Indeed, as connections with the government or other organisations are the key to
success, it could be argued that promotion through family connection is probably the
most effective approach under the circumstances.

The hierarchical nature of most organisations in Indonesia has given rise to the
development of a vast and unwieldy bureaucracy - and this is especially true when
dealing with the civil service. (Civil servants who are notoriously badly paid very often
have two jobs and are, therefore, not always at their desks to perform the service you
require - patience is often sorely tested.)

Indonesian Management Style

The concept of 'Bapakism' is often discussed with regard to approach to management in
Indonesia. 'Bapak' literally means father and 'Bapakism' refers to the absolute need
Indonesians feel to show respect to elders or superiors. The role of the manager is to
 accept the position of superiority and to use that position to further the aims of the
organisation or group. The manager is expected to make decisions and to convey them,
in detail, to subordinates. The subordinate then expects to carry out those instructions
to the letter (no more and no less), even if it is obvious that the instructions or
decisions are flawed. A subordinate would not disagree with the boss - and especially
not in public.

In return for accepting the role of manager and the loyalty that naturally accrues from
that position, the manager is expected to look after group interests as well as the
interests of the individuals within the group. Special attention should be made to
ensure that people are not placed in a position where they could possibly 'lose face'. Do
not give people roles which will stretch their capabilities, hoping that they can learn
from any mistakes they make - mistakes made can cause loss of face. Similarly, any
praise or censure is best addressed to the whole group rather than any individual -
being singled out can cause enormous embarrassment.

At peer level, managers will be expected to reach decisions through a consensus-

forming process, which can prove very time-consuming. It is important that during
these peer level discussions all parties strive to maintain the harmony of the group.
Any individual who is perceived to be causing disharmony is likely to be viewed with
suspicion.

Indonesian Meetings
Hierarchy also plays its part in the meeting situation and it is important that the right amount of
deference is paid to the senior people present. An Indonesian delegation will often enter the room in
hierarchical fashion, the most prominent members entering first. The conduct of meetings can
sometimes seem very formal to some western business people who have a naturally more informal
approach. Try to maintain an upright, alert body posture and avoid slouching in the seat, crossing legs
or pointing the soles of feet at anybody.

Business cards are essential items as they give the information necessary to decide who are the senior
people present. Cards will be exchanged at the beginning of meetings. Take their card with your left
hand and, after studying it carefully, place it in your card wallet or on the desk in front of you. (Your
business card should be of high quality and contain as much information as possible, including your
title, corporate position and educational qualifications.)

Initial meetings can often be dominated by seemingly inconsequential, small talk which has little, if
anything to do with core business matter. These introductory sessions can be an essential part of the
all-important relationship-building process and should not be rushed or viewed as inconsequential. It
is during these sessions that the whole basis for future co-operation is made.

Time is elastic is Indonesia - in fact it is referred to as 'rubber time'. Do not be surprised if meetings
start late or finish late. Time is not important - the relationship is the key issue.

Gift Giving
The issue of gift-giving in Indonesia is somewhat contentious as the country has, for years, had a
reputation for large scale corruption reaching from the highest levels of government down to petty
bureaucrats and department managers within corporations.

Whilst it is true that such corruption exists, it is also true that the giving of small gifts to help develop
and maintain business relationships is also an indigenous Indonesian custom. Gifts are not usually
exchanged during first meetings but can be offered at subsequent events. To avoid any hint of
corruption, give small, corporate gifts.

Gifts should always be wrapped and will rarely be opened in front of the giver. Avoid giving any form
of alcoholic gift to any Muslim colleagues or clients. If offered a gift, accept reluctantly and with
humility.

Indonesian Teams
Indonesians are happier working towards a clearly defined team goal than when given specific
individual targets. As a basically group-oriented society where worth and status are derived from the
family or group to which a person belongs, it is seldom necessary to spend too much time developing
a good 'team spirit'.

However, it is important to ensure that the team feels secure and that all situations where team
members might 'lose face' are kept to a minimum. The skilful team leader is acutely aware of the
notion of 'face' and will be alert to any situations which threaten the sense of harmony within the
group.

Indonesian Communication Styles

Although there is a layer of very fluent speakers of English, foreign language levels are, on the whole,
nowhere near as good as are found in neighbouring Singapore and Malaysia. It may be that several
more senior figures in an Indonesian delegation are very weak in English and that a translator is
needed. In any event be aware of the possibility of misunderstanding and ensure that English is used
in a very 'user friendly way'.

People are expected to be moderate in all communication situations. Honourable people do not raise
their voices, nor do they openly disagree with people. Only disrespectful individuals would directly
speak their minds in public. It is important to be perceived as being in control of your emotions. Any
loss of control could lead to 'loss of face' on your side and your worth will be diminished in the eyes of
your key contacts. Try to speak in a quiet, gentle voice at all times.

It is difficult for people to say 'no', preferring to express disagreement very vaguely or through the
use of silence. Do not assume that 'yes' means 'I agree with you' - it is just as likely to mean, 'I
understand what you have said', which is neither agreement nor disagreement.

It is respectful to leave a pause before answering a question and, by Western standards, these pauses
can seem quite lengthy. Do not be tempted to break the pause by speaking. Be patient and allow your
contacts the space to communicate in a comfortable manner.

The use of body language and facial expressions is limited, making it difficult for more expressive
cultures to interpret responses. Do not be disquieted by a seeming lack of fervour, this is the normal
cultural approach and is not an indication of lack of interest.
Women in Business in Indonesia
Indonesia is a predominantly Muslim country, yet many women hold positions of authority within
organisations and it unlikely that female visitors will encounter any hostility from male colleagues.

Female managers should behave in a very professional manner with male colleagues, as overt signs of
friendship could be misconstrued. Be aware that, although same sex tactility is commonplace,
touching between the sexes is frowned upon.

Indonesian Dress Code

When attending normal business meetings, standard western business attire of suits and ties for men
and suits or skirts and blouse for women are appropriate.

Be aware of the heat and humidity in Indonesia - and ensure that clothes are lightweight and made of
natural fabrics. If staying for a period of time, make sure to pack ample changes of clothes.

Evening functions can be more informal with short sleeves being worn by men and trousers by
women. Only the most prestigious restaurants would expect a more formal approach.

Women should be aware of Muslim sensitivities and clothes should not be too revealing.

Top Tips on Indonesian Business Culture

Tip 1

Indonesian business characteristics are based firmly on the classic, Asian values of respect for
hierarchy and people wishing to introduce a more matrix-oriented approach may find
themselves struggling against the weight of history and culture

Tip 2

Always try to show respect for the hierarchy of the organisation you are dealing with, as well
as the senior managers of that organisation. Try not to have middle-ranking employees from
your company interfacing with the top-level managers from the Indonesian organisation.

Tip 3

Nepotism and cronyism are a fact of business life and it is essential to have the right contacts
in the right places. It may be necessary to have locals make the initial introductions - and
these introductions can prove expensive.

Tip 4
 A combination of extreme dependency on hierarchy and nepotism has resulted in the
development of extremely cumbersome bureaucracies. When dealing with these
bureaucracies, patience is needed.

Tip 5

The manager is expected to take on the role of father with all the emotional and in-depth
concern for subordinates that such a relationship entails. Respect for the manager comes from
such bonding rather than from more task-oriented issues such as technical expertise.

Tip 6

Subordinates will give loyalty and dependability to those managers who are seen as worthy of
respect.

Tip 7

Decision-making is either directional (coming from the boss) or, in peer to peer situations, is
arrived at through lengthy consensus seeking discussions. The latter decision-making process
can eat up a great deal of time but little can be done to speed up the process.

Tip 8

Meetings are usually formal occasions with formal body language and communication patterns
used to try to create a sense of harmony and ease amongst the delegates.

Tip 9

Business cards are important and should be given out in a formal manner at the beginning of
a meeting. Cards should contain as much information about you as possible.

Tip 10

Time seems to be less of an issue in Indonesia than in many other countries and it is not
unusual for meetings to start late or finish late. (You could be kept waiting for up to an hour!)

Tip 11

Contracts are seen as a expression of intent to do business rather than as an absolute

statement. People expect the detail to evolve over time and would rarely refer back to the
detail of an original agreement.
Tip 12

Never create a situation where a contact might 'lose face'. This could jeopardise long-term
business. Try to ensure that people are not placed in embarrassing or awkward situations.

Tip 13

English language levels are generally lower than in some neighbouring countries and
translators may, sometimes, be needed. Take great care to speak clearly and use simple
vocabulary.

Tip 14

Remain calm and composed at all times. Avoid any show of emotion during meetings and
speak with a soft voice.

Tip 15

Try not to openly disagree with people as this can be interpreted as a lack of respect and will
probably fracture the relationship. If you do not agree, keep coming back to the subject in a
subtle, indirect way.

Tip 16

Do not assume that 'yes' means 'yes'. It could mean one of many things and can only be fully
understood through gentle probing and questioning.

Tip 17

Expect to encounter more silences during meetings than in many other countries. Do not be
stressed by these silences and allow the other side the time they need.

Tip 18

Gifts are often given and received. To avoid any whiff of corruption, give small, corporate-type
gifts.

Tip 19

Many women work in Indonesia, often reaching positions of seniority. Female mangers should
maintain a professional, slightly detached manner with male colleagues.
Tip 20

Be aware of the usual Muslim sensitivities towards such issues a alcohol, pork, being touched
by the left hand etc.

Successful Entertaining in Indonesia

It is vital to see all business entertaining opportunities as an important ingredient in the local business
mix. If you are unable to accept an invitation for whatever reason, make your apologies meaningfully
and suggest another date. The importance of these relationship-building events cannot be
overemphasized.

Detailed business issues are best left to the confines of the office. Use the meal as an ideal
opportunity to broaden out the topics of conversation and develop your personal relationship more
fully.

It is fairly unusual to be given a knife at mealtimes as the main implements used in Indonesia are a
fork and spoon. Whenever eating, passing or receiving food, use the right hand as the left hand is
considered to be unclean. (This rule applies even if you are left handed.) When you have finished your
meal, place your fork face down on your plate and cross your spoon over it.

Indonesian food can be very spicy but less spicy alternatives are available. Ask you host for some local
advice. It is polite to leave some food on your plate as a sign that you have been well satisfied with
the amount of food provided.

Remember that most Indonesians are Muslims and may not, therefore, drink alcohol. Most
Indonesians though (unless very orthodox) will not object to you drinking alcohol.

A gratuity charge of 10% is added in most good restaurants in Indonesia. If this charge has not been
added then leave an equivalent amount.

Indonesia in Figures

Land Area 1, 904,443 sq. km

Population:223 m

Population density:117 sq. km

Life expectancy:

Men: 67 yrs
Women: 70 yrs

Adult literacy:90%Average per household3.9

Divorces per1,000 :Unknown

The Economy
Currency:Rupiah

GDP:$258 bn

GDP per heads:$1,160

Employment (% of total):

Agriculture 43%
Industry 13%
Services: 44%
Unemployed: 9%Main Exports:Type:Petroleum & products
Garments and textiles
Natural gasDestinations: (% total)Japan 24%
USA 15%
Singapore 10%
China 9%

Main Imports:Type:

Raw materials
Capital goods
Consumer goods

Main countries of origin:

Japan 22%
China 13%
Singapore 12%
Thailand 8%

From: http://www.worldbusinessculture.com/Indonesian-Business-Negotiation.html

Other Useful Links:

http://livinginindonesia.info/index.php/item/doing-business-in-indonesia/

http://www.kwintessential.co.uk/resources/global-etiquette/indonesia.html

http://www.turisku.com/indonesia-tips/business-traveler/

- Content is aggregated from various websites and not owned by me.