Home » Doing Business in Indonesia » Cross Cultural Understanding

Business Across Cultures: New Beginnings

With the successful conclusion of the 1999 MPR session, most people in Indonesia are experiencing a new sense of optimism toward political stability, economic recovery, and cooperation with foreign governments and the international monetary institutions.

While there is still a long, long road ahead to economic recovery, Indonesia has managed to implement one of the best-case scenarios for political stability and diplomatic reappoachment. In my years living and working here, I have been amazed on several occasions at Indonesia's ability to find itself in very untenable positions and then manage to pull its posterior out the proverbial fire. They have done so again. All is not perfect and the future remains uncertain, but the more disruptive of the possible political scenarios have been avoided for the near-term.

Hopefully, political demonstrations and violence will ebb and travel advisories will expire. Travel to Indonesia by business visitors should no longer need be deferred by security concerns but rather be encouraged by the opportunities existing here. Dependents and non-essential staff should be able to return and enjoy the benefits of living in Indonesia.

All of this optimism is contagious and Indonesia has a way of throwing up unexpected obstacles. However, just as Home Office often has a distorted view of the problems faced by business here, they may have an overly optimistic picture of the changes taking place here which can work to your advantage.

We on the ground have the responsibility to keep the situation in better perspective: the very top has changed; the middle may follow; the bottom will lag behind in a kind of reformation trickle-down theory.

How this affects the interpersonal relationships in international offices and companies may be two fold: first, there is a new outspoken trait in the character of many employees; second, there is an expectation of change in the air with a growing sense that the employees deserve a reward or some kind of compensation for the months and years of sacrifice to the company during the economic crisis in the late 90s.

There was a popular joke in the New Order period that ran, “Why do Indonesians have to go to Singapore to see a dentist?” The answer was, “Because in Indonesia they are not allowed to open their mouths.”

This reflects one of the great changes that has occurred during the reformation period. Indonesians of all walks of life now have an opinion and are generally willing to share it. Moreover, many now feel it is their right to voice their opinions and are still learning when and where and at what level of intensity that expression is appropriate.

Employees of international companies that have tried to streamline operations by laying off classes of employees have recently met with organized resistance. This happens even if the company is legally compliant. For example, a major European retail chain with operations throughout Indonesia tried to replace its pool of 200 drivers. The drivers were all on contracts properly executed and filed with the Manpower Ministry. The contract terms ended and the contracts were not extended. Contractual compensation was offered. In the West, this would be a simple and normally unarguable question of contract law. In this case, however, the drivers involved refused to be released. They coordinated and physically intimidated the other contract personnel (the cleaning, maintenance, and security staff, among others) to join them in an illegal, albeit effective strike. Manpower and police refused to intervene, of course. As of the writing of this column, the situation has yet to be resolved and the company continues to operate without support staff.

The second point raised above presents different concerns. The permanent staff of international companies have, at the very least, seen their purchasing power parity drop to well below that of their expatriate counterparts. Many have also taken pay cuts to aid the company through the difficult economic times.

Many of these international companies have in the last two years used the excuse that when the situation improves, the Indonesian employees will be compensated for their loyalty. The concept of 'when the situation improves' is not well defined. This leaves the interpretation open to many definitions.

Upper management no doubt understands that the events of the last few weeks, while extremely encouraging, have little to do with immediate economic recovery. The rank and file may not see things in this same light.

Already, I have heard murmurings since the election and supposed return to normalcy that employees deserve their promised benefits.

What is probably going to be difficult for most international companies is to explain to their employees that little has changed in regard to corporate profits and revenues.

The economic effects of the hoped-for political stability may not be seen for several months or years. Companies in the Oil/Gas/Mining or Agro-business industries, who may be realizing a wind-fall profit from the current export possibilities and exchange rates, will hopefully be able to address employee concerns more quickly.

Other companies may have to face a somewhat disenchanted work force. A work force that may be expecting immediate increases in their base pay and compensation package.

This remains a difficult question for most international companies in Indonesia. If this is the case in your company, and you are not prepared to give an immediate wage increase, a message should be sent to the employees, either through writing or general meeting, that while the short-term outlook has improved and you are looking forward to increased business activity, this is not yet the time to be making benefit or wage increases. While Indonesia has succeeded in overcoming some very difficult obstacles, the effects have yet to be felt.

On a related and very important note, now is an appropriate time for your office to arrange a Selamatan for the employees (a Selamatan is a ritual meal in which members of a group participate to sustain, maintain or instill order and harmony). If this is not appropriate, then perhaps the long deferred staff party or a congratulatory event for the new president and vice-president of Indonesia would be in order. Some act to observe the transition from the old, new order to the new reformation era is expected.

This is a time of celebration for the vast majority of Indonesians. Rightfully so. The apparently insurmountable challenges of having a fairly free and transparent parliamentary election last June, of having a public referendum and MPR approval on the East Timor question, of having a secret ballot on President Habibie's accountability speech, and democratic votes on the presidential and vice-presidential candidates shows that Indonesia can overcome seemingly untenable positions thereby managing to pull its posterior out the fire, again.

This article was generously contributed by George B. Whitfield, III when he was a Technical Advisor with Executive Orientation Services.