Business Picture

Business in Asia –
Komodo Dragons, Bali, and Batik

by Sue Dockstader

This is part three of our ongoing series on doing business in Asia.
The beautiful beaches of Bali, the awesome surf of the tiny island of Nias, the colorful batik fabric, and the carnivorous lizard known as the Komodo Dragon, are perhaps more familiar aspects of Indonesia than its prominence in the world of satellite technology. As the first, and possibly the only developing nation in the world with its own orbiting satellite, Indonesia is understandably proud of its progress in telecommunications, where barely a decade ago making an international telephone call was a virtual impossibility. According to the Indonesian-based General Dynamics Space Systems Division, the proximity of Indonesia to the equator makes it an ideal location not only for growing spices, but also for launching satellites.

The 13,700 islands which make up the Republic of Indonesia span three time zones over a width greater than the distance from Florida to Alaska. The population of close to 180 million people is mostly of Malay stock with the Melanesians of the island of Irian Java (the Indonesian half of New Guinea) constituting the second largest ethnic group. Historically the Malay people split into many small sub-groups and dispersed throughout the archipelago giving rise to the development of widely varying family structures and language groups. There now are nearly 300 separate linguistic groups in Indonesia, but the majority of Indonesians understand the national language, Bahasa Indonesia. Commonly English and Chinese are spoken in the business community, and as a relic of the country’s colonial past, some older people still speak Dutch.

Adding to the diversity of the development of these islands, the people of Indonesia have been influenced by both their Asian neighbors and warring European traders who have squabbled for hundreds of years over the valuable produce of the fabled "spice islands." An interesting deal was struck in 1667 between the Dutch, the colonial rulers of these islands for over 350 years, and the English. By the Treaty of Breda the tiny nutmeg-growing island of Run was traded for a then remote Dutch America known as Manhattan.

Religion is another area of diversity. The small but influential portion of the population which is Chinese adhere to Confucianism; however, the majority of Indonesians follow Islam. As the world’s fourth most populous nation this means there are more Moslem adherents here than in the whole of the Arab world. The remainder follow Christianity, Buddhism, and Hinduism. Each of the four main religions is recognized with at least one public holiday per year, so it must be remembered that Ramadan as well as Christmas and Easter are celebrated when scheduling a trip.

The national motto, "Bhinneka Tunggal Ika," usually translated from the ancient Sanskrit to mean "Unity in Diversity" explains much of the philosophy of the modern Indonesia and the cohesion between this mosaic of peoples and cultures. Despite ethnic and religious differences there is an overwhelming desire on the part of all Indonesians to maintain harmony. This motivation even extends to the business world where it can be misleading to an unsuspecting foreigner. When negotiating, it is essential to remember that your Indonesian counterparts always will avoid confrontation and disharmony and aim to maintain their own and other people’s dignity. Never lose your temper or show any other signs of aggression, even unintentionally.

Standing with your hands on the hips is impolite. It is the stance taken by traditional Indonesian dancers to signify contempt, anger, or aggression to their audience and your actions will be interpreted in the same way, however innocent your intentions.

Indonesians hate to say "no" and prefer to maintain harmony by remaining vague and evasive. They will avoid having to admit that they lack certain knowledge, that they are wrong or that they are unable to complete a certain business transaction. A proposition is rarely turned down immediately, but if you are told that something requires "further consideration" or "more information" before a decision can be reached, it is likely that this is the Indonesian way of saying "no way."

Indonesians always prefer to do business with family or people they know and like. Fostering a good personal relationship is imperative to business success. Although the attractiveness of the deal or the product will influence negotiations, these matters will be secondary to the interaction of the business partners. The "getting to know you" process often can be a protracted affair requiring many preliminary meetings before any real business is discussed. Consequently from an American perspective, business in Indonesia can be a frustrating and agonizingly slow process.

On one trip to Jakarta, I was trying to arrange a meeting with a prominent lawyer, whom I understood to be involved in a large number of joint ventures with foreign companies. It proved to be impossible until I mentioned it to one of my clients who managed to arrange an "audience" for me easily. The reason? His daughter was married to the lawyer’s son. Having been lucky enough to meet this highly sought-after lady, I assumed she would be extremely busy and that I should not waste her time so she could get down to business immediately. In fact we spent one and a half hours talking about our families, our respective law practices and the state of the world in general. It soon became clear to me that she had no intention of discussing anything even vaguely related to business until we had become more acquainted and she had established whether or not she liked me.

Unless you are interested in the plentiful oil, gas, or other mineral reserves such as gold, to be found in some of the more remote parts of the archipelago, you are likely to be conducting your business primarily in the capital city. Jakarta is located on the island of Java, the most densely populated in the country. From the top of one of the many skyscrapers located in the "Golden Triangle" business district you will see other similarly impressive modern structures, but there also are large areas of far more modest accommodations, even in the relatively affluent capital. Indonesia has one of the lowest average wage rates in Asia, which is attracting manufacturing operations from other parts of Asia where costs are escalating. Indeed, while McDonalds plans to open 10 new restaurants in Indonesia over the coming year, the daily minimum wage in Jakarta remains less than the local price for a Big Mac - $1.85.

There are large differences between the living standards of the rich and poor, and the low threshold on "luxury" is evidenced by the fact that for tax purposes, shampoo and a bath tub are considered as luxuries, whereas soap and a shower are accepted as necessities. The Indonesian shower is of course not to be confused with the American idea of such an amenity. Outside the international hotels, a shower, or Mandi, will consist of a large tank of water and a plastic saucepan. You do not immerse yourself in the tank, as this water will be for you and all guests that come after you, but use the pan to ladle the water (usually cold) over yourself.

When planning a trip to Jakarta, try to find out exactly where and when your meetings will be held. You then can pick a hotel as close to your business location as possible and avoid the delays caused by the inevitable traffic congestion. Despite satellite technology it still can be a major problem to make telephone calls at certain times of the day in Jakarta. Hence it is wise to arrange as much of your trip as possible before leaving home, rather than planning to finalize arrangements upon your arrival.

On being introduced it is usual to shake hands, although sometimes a bow of the head is considered more gracious and follows the traditional Javanese culture that a lesser person should not have his head above that of a senior person. As many Javanese only have one name, the problem of name order sometimes encountered in other parts of Asia often does not arise. When giving or receiving something, never use the left hand which is considered the unclean hand. If you are served a drink and some food, it is polite to at least sample both, but not before your host has indicated you should do so. Punctuality is not a priority, which is just as well given the traffic congestion, and it must be remembered that someone’s late arrival for an important meeting should not be taken as an indication of disinterest.

The government encourages foreign enterprises, most of which must be by way of joint venture with local entity, with ownership of the company ultimately vesting entirely in the local party. All import, export, and distribution of foreign products is reserved for Indonesian companies, save where foreign investors are involved in manufacturing. In that case raw materials may be imported and the finished product may be exported by the foreign entity; however, it may not distribute its goods to the local market. So if you have been tempted to import the beautiful batik and ikat fabrics or other village crafts such as woodcarving and silver jewelry, you first will need to find a local agent to act on your behalf.

Whether you want to take advantage of the low cost labor and abundant raw materials of Indonesia, exploit the major gold deposits found throughout the archipelago, or import Balinese art from the hilltop town of Ubud, you must be prepared to cope with the many regulations governing foreign business interests and enforced by the country’s painfully slow bureaucracy. Your greatest assets in this fascinating and enchanting country will be persistence and patience.

Today, you will also want to consider the volatile political situation and the Asian currency crisis, while making plans to do business with Indonesia. The stability of the Indonesian business climate is definitely not something you want to take lightly!

Sue Dockstader is an English and Hong Kong lawyer who has recently moved to San Diego after spending six years in Hong Kong. This is part three in a series of articles on the issue of cultural diversity and its impact on businesses new to Asia. In future articles Sue will share advice and observations about doing business in Asia, providing a variety of facts, figures, and anecdotes to offer a taste of the Asian business environment. She will highlight some of the cultural nuances to be observed when doing business with specific Asian countries, offer practical hints and travel tips, and mention some of the obstacles (and pleasures) of being a gweilo/gei jin/farang, that is, a foreigner in Asia.

Part one in our continuing series:   Business in Asia -- A User's Guide   (February 1998)
Part two in our continuing series:   Singapore: The Next Hong Kong?   (March 1998)

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