CASE STUDY IIa Australia and New Zealand: Doing Business with Indonesia There are thousands of Australians, both individually and as members of organizations, who share trade and education with Indonesia as do New Zealanders. Yet, though geographically part of Asia, citizens of Australia and New Zealand are members of cultures very different from any other in Asia. As increasingly they seek to trade in Asia, so also do they need to learn to manage such differences; and doing business in Indonesia is a good example. Travelling time by air from Perth, Western Australia, to Indonesia is slightly less than four hours, yet the cultural distance is immeasurable. In January 2007, the Jakarta Post reported GDP growth had risen to over 5%. Consumer consumption drives the economy but exports are thriving, and therein lay opportunities for Australia and New Zealand. Indonesia is a country of more than 17,000 islands and the world’s largest Muslim nation. In her lecture, Dr. Joan Hardjonoof of Monash University discussed the historical and geographic contexts of modern Indonesia. She spoke of the many clusters of islands worldwide that have come together as nation states—for example, the Philippines and some island groups in the Pacific—but described the Indonesian archipelago as in a class of its own. It is unique in terms of extent and diversity. For example, Java and Bali have fertile volcanic soils, while elsewhere the land is rich in mineral resources such as oil, natural gas, and coal. Climatic conditions vary from island to island. Some regions experience annual heavy rains and floods, while others suffer regularly from droughts that often lead to famines. With a population of more than 230 million people, Indonesia is the fourth most populous country in the world, but there is a great imbalance in population distribution within the archipelago. Settlement has always been greatest on the island of Java, and today about 60% of the Indonesian population lives there. National ties are strong, as revealed by the great response from within Indonesia to the recent natural disasters in Aceh and Nias. Unfortunately, there are still very obvious socio-economic disparities in all regions of the country. At the top of the social structure are wealthy elites, below them an increasingly demanding middle class, and at the bottom an impoverished majority. As Indonesia has become more integrated with ASEAN, North Asian trading partners have become more important: but well-to-do Indonesians now travel the world. Globalization has been the buzzword of international business for many years. International markets have split up into unified trade zones; individual marketplaces, particularly in the developing countries, are exposed to transnational pressures. Some Asian countries are pulling back from perceived threats of international contagion, but Indonesia continues to open up its markets to world enterprise. However, Australians and New Zealanders cannot expect to do business with Indonesians just because they are neighbors. They have to learn the moves.

Business opportunities in Indonesia include agribusiness; the automotive industry; business and financial services; construction and infrastructure; information and communication technology; e-commerce; education and training; environmental products and services; food and beverages; fresh produce; health and medical provisions; mining and mineral services; oil and petroleum drilling, transport and storage; and science and technology. Taking advantage of these opportunities requires skillful negotiation. One of the biggest challenges of working in a foreign country is learning how to operate in a different cultural setting. International managers tell endless stories of cross-cultural breakdowns, missed appointments, problems over differences in management style, lost orders or down time on production lines, labor problems between foreign management and local staff, and many other examples of miscommunication. Many could have been avoided or at least mitigated had the expatriate managers and their local counterparts been better prepared for differences in work patterns. Some cross-cultural behavior, such as patience and courtesy, is no more than good manners. It applies to all interpersonal communication; but in Indonesia, as in the rest of Asia, there is more need to develop a long-term relationship to produce a profit than there is in Australia or New Zealand. Relationships rely on shared expectations—for example, about how first contacts should be made, how appointments should be set and kept, how deals should be closed, how time should be managed (including the Indonesian concept of “jam karet,” or “rubber time,” that infuriates punctuality-conscious Westerners). Sensible but inexperienced international managers seek information that more seasoned veterans can provide. They might be colleagues, business associates, friends, or paid consultants, but in any case most people are eager to give advice. On the other hand, even managers with a highly developed global outlook may have too generalist a viewpoint on international business. They may overlook the need for a local perspective in each host country. Indonesia is one of those countries in which a foreign manager’s home office priorities of task over relationship, of corporate rather than human priorities, may not be the most effective ways to achieve productivity and effectiveness. Indonesian managers usually place more value on harmony, understanding, and mutual respect. It may be sometimes that this emphasis outweighs the importance of job performance and productivity. On the one hand, there are a number of concerns for Indonesian managers working with their Western counterparts. For example, they believe Westerners should make an effort to adjust to the culture, taboos, and language of their Indonesian colleagues. Foreign managers should avoid bad language that might set a bad example for the workers. They should give instructions slowly and clearly in Standard English and should ask for a paraphrase to ensure understanding. They should be willing to consider individual cases and cultural needs (e.g., prayer times or other religious obligations, time off for cemetery visits before Ramadan, weddings, funerals, etc.). On the other hand, Indonesian managers should be willing to make many adjustments to working in an international company. Important areas where Western management techniques are most successful include strategic planning and timetable deadlines, efficiency and punctuality, handling conflict, and taking responsibility. Sensitivity to the needs of employees is a management area that is seldom stressed in most Western business cultures where efficiency, productivity, and effectiveness take priority. For example, when

somebody loses their self-control through anger, distress, or confusion, Javanese will usually advise the need to “eling” (in translation, not to allow oneself to be overwhelmed by feelings and mixed-up thoughts but to regain self-control). Self-control is of high value to Javanese, maybe of the highest. This value is not unique to Indonesia. It is shared by the indigenous peoples of South Asia, the Himalayan Range and Central Asia, East Asia, Southeast Asia, and Africa; Oceania, the Caribbean, and South America; and Northern America and the Arctic: hence a common cultural emphasis on the art of making and wearing masks to represent hidden emotions. Regardless of the cultures they come from, masks convey the essential emotions. Thus situations can arise in business contexts where hiding true feelings and keeping up appearances may take precedence over solving a problem. Maintaining the harmony of the office by giving the outward appearance that there is nothing wrong is a fairly common situation in traditional Indonesian offices. Bad news may not be communicated to the boss and situations that seem insurmountable to an employee may simply be ignored. Since this behavior is not generally accepted to be part of Western culture—though certainly it exists there— Western managers need to spend more time observing and listening to their Indonesian employees than they would back home. Another reason why such attentiveness is important is that Indonesian business relationships are paternal or maternal. Workers expect their supervisors to look after their interests rather as parents do for their children; and their supervisors understand and accept this responsibility. Furthermore, the tension involved in being the bearer of bad news to one’s boss is felt very keenly by Indonesian employees, and this needs to be taken into account by supervisors and managers. The English language injunction is “Don’t shoot the messenger,” but some Indonesian workers seem to expect a firing squad when they have to report failure. Therefore, Western managers should make clear that they want and expect subordinates to come to them with questions or problems and that the response will be non-judgmental and self-controlled. Faces should be without masks; they should not portray negative emotions of anger, confrontation, or aggression. Managers in Indonesia are expected to always be polite and to keep smiling, no matter how angry they may be inside. Nevertheless, cross-cultural sensitivity works—or should work—both ways. Foreign managers should understand Indonesian culture and business customs, and Indonesian managers should be given clearly to understand what foreign managers will expect from them. CASE QUESTIONS 1. Using this case and the cultural dimensions explored in Chapter 3, discuss some of the ways in which citizens of Australia and New Zealand are members of cultures very different from any other in Asia. 2. In what respects is the Indonesian archipelago unique in Asia? 3. What characteristics of Indonesian workplaces are referred to in this profile? 4. How does the population appear to be socially stratified? 5. What are some business opportunities in Indonesia for foreign direct investment?