The insider view: Jakarta
Published: 18 Jun 2014 By Taken from FM Magazine June 2014
We examine how business is conducted in cities around the world, with local experts acting as guides
Indonesia’s economy has been growing in resilience since it emerged from the Asian financial crisis of the late 1990s, according to Christopher Chan FCMA, CGMA, president and director of tyre manufacturer Gajah Tunggal. He says that this was tested in late 2008 during the global financial crisis.
“The economy was able to withstand initial uncertainties and grow by more than 4 per cent in 2009 alone – in contrast with negative growth in some neighbouring economies. Since then GDP has been growing at up to 6 per cent a year,” Chan says. “Even with weaker commodity prices and softer export markets prevailing, in 2013 it registered growth of about 5.7 per cent. Forecasts suggest a continuing positive outlook, with new foreign direct investments, a fast-growing middle class, a young demographic profile (60 per cent of Indonesian citizens are aged under 30) and a maturing coalition government that supports sustainable policies for both business and labour.”
Akalangka De Zoysa ACMA, CGMA, general manager at food manufacturer Dolphin Indonesia, observes that Indonesia has immense potential, given that its population of 254 million represents the largest national market in South East Asia.
“With a growing middle class and upper middle class, there are plenty of prospects for consumer growth here. Indonesia is blessed with natural resources, too: it occupies a top-five ranking for most natural resources in the world,” says De Zoysa, who is originally from Sri Lanka.
The country is due to hold its presidential election early next month. Joko Widodo, the opposition candidate representing the Indonesian Democratic Party of Struggle, is widely expected to win it. According to De Zoysa, Widodo has “proved himself as the governor who transformed Solo”, a once-troubled city in central Java.
“He has a hands-on approach to leadership that has also seen him tackling the challenges faced by Jakarta, where he is the current governor,” he adds. “Indonesia’s citizens are generally optimistic that he will become president. I think this augurs well for the economy.”
A growing awareness of the need for sustainable ecological practices and the increasing push for better corporate governance are some of the key business developments in Jakarta, Chan reports.
“Corruption, which was reputed to be rampant in the past, is being addressed progressively after the government’s formation of the Corruption Eradication Commission in 2002. This has shown significant independence and achieved bold successes in recent years to earn both respect and fear. It’s curbed the growth of, if not eliminated, malpractice,” he says.
Andre Khor FCMA, CGMA, finance director of Shell Indonesia, warns that competition for talented employees is “very hot, as multinationals are poaching staff in an already tight market. Local conglomerates seeking yet another diversification fix can – and will – compete against you too.”
He adds: “More foreign money is gushing in as overseas investors seek a slice of the pie. This makes Jakarta a very, very dynamic place to operate in. You need to be prepared to roll with the punches and seize opportunities when they present themselves – as, no doubt, they will.”
Apart from improving the quality and competitiveness of products and services, the progressive companies of Jakarta are seeking to identify their stakeholders’ aspirations and then pursue strategies that could relate to those ambitions, Chan argues. He recommends joining a relevant industry body and/or the employers’ association Apindo, as this is useful for obtaining industry updates.
“Do not presume that unions are anti-management,” he adds. “With constructive engagements and communications, some companies have very supportive unions.”
The Indonesian style of doing business differs significantly from that of the rest of South East Asia, according to De Zoysa.
“I come from a Commonwealth country and most of the nations in South East Asia – apart from Indonesia – are also members of the Commonwealth, so their approach is similar. But, when dealing with an Indonesian business person, it’s always better to work out what wavelength they are on instead of assuming that it’s going to be similar to yours,” he says.
“In my six years of working with Indonesian colleagues, I have come across only a handful who are able to work on the same wavelength as mine. In all other cases I’ve had to adjust to their vibe. These few individuals are mostly products of Indonesia’s prestigious state universities.”
De Zoysa continues: “For any expat working with Indonesian conglomerates and mid-scale foreign-owned firms here, the biggest issue is the language barrier. If you’re to communicate effectively, you have to learn the language. Once you are able to do this, you will be fortunate enough to discover the real Indonesia and how warm and friendly its citizens are. The most important thing is to come to Indonesia with an open mind and have patience when dealing with its citizens.
“Your local colleagues will look to you for guidance, especially in a crisis, so you need to meet these expectations as an expat manager. That’s the most effective way to gain their trust and respect. The CIMA qualification has more than adequately empowered its members to have confidence and a hands-on management style, which is essential for working here.”
Indonesia by numbers
GDP in 2013 (purchasing-power parity): $1.29trn
Indonesia is the world’s 16th largest economy
GDP growth in 2013: 5.3%
CPI inflation in 2013: 7.7%
Unemployment in 2013: 6.6%
Population: 254 million
Source: CIA World Factbook