Gary Dean
[Note: This is a modified version of an report commissioned by the East Asia Analytical Unit of the Australian Department of Foreign Affairs and Trade in July 2000, as part of a book entitled Indonesia: Facing the Challenge published in December, 2000. Views contained within this report are entirely my own and do not necessarily reflect views of EAAU, DFAT or any of its officers, past or present.]
Indonesia is not the easiest place in the world in which to do business. The 'World Competitiveness Scoreboard' currently ranks Indonesia at 45, only two places ahead of Russia (47), and in stark contrast to countries such as Australia (13), Singapore (2) and the US (1). Clearly, in terms of the measures used by the producers of this scoreboard, Indonesia at the moment is found severely wanting, with its potent brew of traditional cultures, bureaucracy, legal uncertainty and social instability combining to give it the appearance of being a rather hostile place for trade and business. Indonesia is currently undergoing a radical transition towards becoming a more modern and efficient economy, and the road ahead remains uncertain.
Nonetheless, given a proper understanding of cultural, social and legal-regulatory environments, business and investment in most parts of Indonesia is relatively safe and profitable. Many promising changes are underway in Indonesia - notwithstanding the pain being experienced by many sections of Indonesian society - and there is good reason to be hopeful Indonesia shall emerge from its present trial-by-fire to become both an attractive investment destination, and a profitable market for Western products.
This essay seeks to give an overview of those elements that are important when undertaking business in Indonesia, including the social and cultural landscape, recent developments regards 'governance', law and legal certainty, business structures, and labour issues. Much emphasis is given to the issue of culture, more specifically, the perceptions, outlooks and/or beliefs that affect human interaction. In the past, perhaps, Western business peoples understanding of 'culture' has been relegated to the realm of manners or etiquette, of simplistic 'do's and don'ts'. However, cultural misunderstanding or miscommunication is generally far more likely to occur at the level of perception and outlook, rather than etiquette. This is not to suggest that etiquette is unimportant, but merely to attempt to shift emphasis from those external or visible cultural expressions to those expressions that are not immediately obvious, in particular as this affects communication.
Nonetheless, given a proper understanding of cultural, social and legal-regulatory environments, business and investment in most parts of Indonesia is relatively safe and profitable. Many promising changes are underway in Indonesia - notwithstanding the pain being experienced by many sections of Indonesian society - and there is good reason to be hopeful Indonesia shall emerge from its present trial-by-fire to become both an attractive investment destination, and a profitable market for Western products.
This essay seeks to give an overview of those elements that are important when undertaking business in Indonesia, including the social and cultural landscape, recent developments regards 'governance', law and legal certainty, business structures, and labour issues. Much emphasis is given to the issue of culture, more specifically, the perceptions, outlooks and/or beliefs that affect human interaction. In the past, perhaps, Western business peoples understanding of 'culture' has been relegated to the realm of manners or etiquette, of simplistic 'do's and don'ts'. However, cultural misunderstanding or miscommunication is generally far more likely to occur at the level of perception and outlook, rather than etiquette. This is not to suggest that etiquette is unimportant, but merely to attempt to shift emphasis from those external or visible cultural expressions to those expressions that are not immediately obvious, in particular as this affects communication.
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