Editor’s Note:
This article was written in late 1999, shortly after Indonesia’s historic parliamentary and presidential transition that marked the beginning of the Reformasi era following the end of the New Order government. It reflects the hopes, uncertainties and business realities of that unique moment in Indonesian history.
While Indonesia’s political system, labour laws and economy have changed considerably since then, this article remains an interesting first-hand account of how expatriates and multinational companies experienced one of the country’s most significant periods of change. It should be read as a historical perspective rather than current business advice.
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 rapprochement. 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 twofold: 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 employees deserve a reward or some kind of compensation for the months and years of sacrifice to the company during the economic crisis of the late 1990s.
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 occurred during the Reformasi period. Indonesians of all walks of life now had an opinion and were generally willing to share it. Moreover, many felt it was their right to voice those opinions and were still learning when, where and at what level of intensity that expression was appropriate.
Employees of international companies that tried to streamline operations by laying off classes of employees sometimes met with organised resistance, even when the company believed it was legally compliant. For example, a major European retail chain with operations throughout Indonesia attempted to replace its pool of 200 drivers. The drivers were all on properly executed employment contracts filed with the Manpower Ministry. When the contracts expired, they were not renewed and contractual compensation was offered. In many Western countries this would have been considered a straightforward contractual issue.
In this case, however, the drivers refused to leave. They coordinated with other contract personnel, including cleaning, maintenance and security staff, and organised an illegal, albeit effective, strike. Manpower officials and police declined to intervene. At the time this article was written, the situation had yet to be resolved and the company continued operating without support staff.
Editor’s Note:
Indonesia’s employment legislation and industrial relations framework have changed significantly since this article was written. The situation described above reflects the business environment of the late 1990s and should not be interpreted as representative of current employment law or dispute resolution practices.
The second point raised above presents different concerns. Permanent staff in many international companies had, at the very least, seen their purchasing power drop well below that of their expatriate counterparts. Many had also accepted pay cuts to help their companies survive the economic crisis.
Many international companies had spent the previous two years assuring Indonesian employees that once conditions improved they would be rewarded for their loyalty. The phrase “when the situation improves,” however, was never clearly defined, leaving considerable room for differing expectations.
Upper management no doubt understood that the encouraging political events of recent weeks had little to do with immediate economic recovery. Rank-and-file employees, however, often saw matters differently.
Already, I have heard murmurings since the election and the perceived return to normalcy that employees deserve the promised benefits.
What will probably prove difficult for many international companies is explaining that corporate profits and revenues have not yet recovered.
The economic effects of hoped-for political stability may not be seen for several months or even years. Companies in the oil, gas, mining and agribusiness sectors, which may have been benefiting from export opportunities and exchange rates, might be able to respond to employee expectations more quickly.
Other companies may instead face a disappointed workforce expecting immediate improvements in salary and benefits.
This remains a difficult question for many international companies operating in Indonesia. If your company is not prepared to grant immediate wage increases, clear communication with employees is essential. While Indonesia has overcome some very difficult political obstacles, the economic benefits have yet to be widely felt.
On a related and very important note, now is an appropriate time for your office to arrange a selamatan for employees. A selamatan is a traditional communal meal intended to strengthen harmony, express gratitude and mark important transitions. If this is not appropriate, perhaps a long-deferred staff gathering or another event recognising Indonesia’s democratic transition would be suitable.
This is a time of celebration for the vast majority of Indonesians. Rightfully so. The seemingly insurmountable challenges of holding a relatively free and transparent parliamentary election, conducting a public referendum on East Timor, debating President Habibie’s accountability speech, and electing a new president and vice-president through democratic votes demonstrated that Indonesia could overcome extraordinary political challenges.
Historical Note
The East Timor referendum referred to above took place in 1999. Following a United Nations-administered transition period, East Timor became the independent nation of Timor-Leste in 2002.
Indonesia had once again managed to pull its proverbial posterior out of the fire.
Historical Context
Today, Indonesia is the world’s third-largest democracy and one of Southeast Asia’s largest economies. Looking back at articles written during the early Reformasi period offers valuable insight into the uncertainty, optimism and rapid changes experienced by Indonesians, expatriates and international businesses at the turn of the millennium. Preserving these first-hand accounts helps document an important chapter in Indonesia’s modern history.
This article was generously contributed by George B. Whitfield III during his time as Technical Advisor with Executive Orientation Services.
