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 last Asian currency crisis has forced the government to address some of the cronyism inherent in all business dealings – and a good deal of 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.

Indonesia with a population of 260 million and a rapidly growing economy, represents a significant business opportunity in such areas as electrical goods, automotive, retail and infrastructure. To access this market though, you need to understand the business culture.

A brief overview of some key concepts to consider when doing business in Indonesia

Written and Produced by Keith Warburton

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Indonesia is complex. That is hardly surprising given the fact that the country spans thousands of islands, has over 300 languages and population of about 243 million (which is rising rapidly.) Navigating your way around Indonesia is both literally and figuratively difficult.

However, Indonesia is a country which has tremendous economic potential. The Indonesian government is working hard to try to reduce the country’s dependence on exports of (raw) commodities and to diversify into both the manufacturing and service sectors. In addition to this, vast sums are being pumped into the basic infrastructure of a nation which has suffered from some core infrastructure weaknesses for decades.

About 50% of Indonesia’s population are under the age of 28 which means that the country has a huge demographic dividend with large numbers of people about to enter the workforce. This younger generation is aspirational and consumerist in nature. It could be argued that internal demand for goods and services in Indonesia is about to explode in the next decade.

Many observers believe that, provided some form of political stability can be maintained, Indonesia represents a country with massive growth potential. If Indonesia is to achieve its potential it needs a great deal of external stimulus and support. It needs Foreign Direct Investment and it needs skills and expertise. Indonesia probably needs your goods or services and you are advised to seriously consider Indonesia as a future market if you are not already operating there.

However, Indonesia is a thoroughly Asian country with a rich and unique business culture. The Indonesian approach to business is heavily relationship focused. You need to take time to develop deep and lasting alliances and you need to really understand Indonesian business culture if you are to avoid alienating potential partners.

This country profile provides an overview of some of the key aspects of Indonesian business culture in a concise, easy to follow-format. The document includes information on:

  • Background to business
  • Business Structures
  • Management style
  • Meetings
  • Teamwork
  • Communication
  • Women in business
  • Entertaining
  • Top tips