How to cope with Indonesia’s murky business culture

Sudirman Central Business District, Jakarta, Indonesia

A recent survey on ABC News showed that Australian business people have expressed an overall reluctance to do business in Indonesia. It was considered the fourth most challenging market for exporters.

An Economist article from 2009 (equally relevant in 2014), meanwhile, cites a tradition of corruption as the element making Indonesia’s business circles insular and inaccessible. It claims that even a reformed Indonesia remains a hard place to do business, both for local entrepreneurs and, especially, for foreign investors.

So how can newcomers understand the challenges and try to avoid stumbling into those pitfalls? A new report says that when doing business in Indonesia, the differences in cultural and business behavior are among the biggest challenges for every incoming professional. Those are the lessons worth learning.

Survival of the fittest, not the strongest

In western culture, we are used to a level of organization and accountability that simply doesn’t exist in emerging markets like Indonesia. Silicon Valley investors come to Jakarta in Armani suits because they’ve heard about the island nation with a large demographic dividend that embraces all things tech.

But, often to their dismay, they find that an under-developed infrastructure, a lack of mature talent, and a puzzling business community. It renders them clueless on a playing field where they once reigned supreme. This can cause big fish foreign investors to shy away from Indonesia’s large market in favor of Singapore’s small one. Often, the underlying reason is that Indonesia’s business culture is extremely difficult to cope with.

Generally accepted apathy principles

In the US and Europe, laws and regulations exist that demand accountability and best practices. This is not the case with Indonesia. It’s not uncommon for large-scale, white-collar crimes to go unnoticed for years. The OECD recently published a report (PDF link) that explores why it’s difficult to cultivate ethical business behavior in Indonesia. Its top three conclusions were that Indonesia has inadequate law enforcement, a lack of regulations for good corporate governance (ie: generally accepted accounting practices, equal opportunity employment, worker rights, etc), and an overarching “apathetic” cultural attitude that says, “This is the way things are done around here.”

A yes is not always a yes

Culturally – and in the business world especially – Indonesians have a tendency to avoid confrontation and not rock the boat when dealing face-to-face. As an entrepreneur or investor, you may receive an encouraging grin with a pat on the back, but that doesn’t always mean you’re going to get what you want. The report by Indosight explains:

In Indonesia there is a difference in showing an agreement. First you should know that Indonesians will very rarely say “no” or openly show their disagreement. The local culture is based on the principle of harmony and consensus and thus a clear “no” to something would contradict those principles. When talking to Indonesian business partners you may get the feeling that everything you say is absolutely right and everybody agrees with your ideas and proposals. Be aware that there are different levels of “Yes”. Those levels range from “Yes, I hear you talking” [to] “Yes, I understand what you have said” [to] “Yes, I agree with you.” Until the final “Yes, we can do that!” Do not take the first “Yes” as an overall agreement.

Investing in friends

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