Doing Business in Indonesia

With a population of more than 275 million people, around 300 different ethnicities and languages, and the largest Muslim population in the world, Indonesia provides a unique and diverse backdrop for doing business.

Indonesia is rich in natural resources, acquiring much of its wealth from gas, oil and other mining activities, while services comprise the majority of the country's GDP. Agriculture also plays an important role in the Indonesian economy.

Despite the positive aspects of Indonesia's business setting, an extremely complex and dynamic bureaucratic environment can be frustrating for expats doing business in Indonesia. Changes occur frequently, and it can be difficult to keep track of these. Nevertheless, expats who can be patient and learn the local style of doing business are sure to succeed in Indonesia.

Fast facts

Business language

Bahasa Indonesia is the main language in Indonesia. Although English is widely spoken by the younger generation, especially in Jakarta, having an interpreter or learning a few key phrases in the local language may be helpful. Dutch and many regional dialects are also spoken.

Business dress

Business attire is generally conservative. Suits and ties are appropriate for men in formal business situations, while long-sleeved batik shirts are also acceptable. Women should be well covered and not expose their shoulders or legs. Due to the heat, loose-fitting cotton fabrics are best.

Business hours

Office hours are usually 8am to 4pm or 9am to 5pm, Monday to Friday. Many offices are also open until about 1pm on Saturdays. Some offices may close for an extended period on Friday afternoons for Islamic prayers.

Greeting

A handshake is the standard greeting. Expats should always use the right hand to shake hands; the left is considered unclean. A slight nod of the head is also an acceptable greeting.

Gifts

Gift-giving etiquette may vary according to the specific ethnic group one is dealing with. Gifts are not usually opened when received, and alcohol and pork products should be avoided if the receiver is Muslim. Offer and receive gifts with the right hand only.

Gender equality

Indonesia is still a patriarchal society. Although women are not specifically targeted for discrimination in the workplace, men typically still tend to hold more senior positions and earn higher salaries.

Business culture in Indonesia

Indonesia is a key player in Southeast Asian trade. Cultural identities here have developed over centuries and have been influenced by Chinese, European, Indian and Arabic traditions. Identity in Indonesia is often formed by one’s ethnic group, family and place of birth.

Religious and cultural traditions also play an important role in Indonesian society. This is reflected in Indonesia’s business practices. Adapting to the business environment in the country may vary depending on the city or region in which one is operating. The ethnicity of the individuals one is doing business with may also play a role.

Communication

Bahasa Indonesia is the official language of Indonesia. English and Dutch are spoken in many business circles, particularly in Jakarta, while many indigenous languages are also spoken throughout the country. Expats would do well to learn a few key phrases and how to greet their Indonesian counterparts in the local language – this marks a great sign of respect.

Hierarchy

As with the wider Indonesian culture and society, Indonesian business culture is hierarchical, holding great respect for status. Decisions are made from the top down, although there are usually also group discussions. Titles are very important in Indonesian business circles. Indonesian associates should be addressed by their full title and name.

Saving face

Indonesians are generally friendly and hospitable people, and the concept of saving face should be noted. This concept is about avoiding shame and maintaining harmonious relationships. Indonesians are careful about how they communicate and often adopt an indirect communication style to avoid offending anyone. As a result, they may not always say what they mean. Even when someone says "yes", this may indicate that they hear what someone said rather than agreeing with it. This should be noted to avoid confusion when engaging in negotiations with Indonesian business associates.

Relationships

Doing business successfully in Indonesia frequently hinges on understanding that decisions might take a while, and many meetings may need to be arranged before a final agreement is made. Indonesians like to carefully consider any business proposition and place great emphasis on trust and relationship-building. Expats may find their Indonesian business associates are more interested in building personal relationships before entering business dealings.

Indonesians also generally prefer to maintain harmony, and one should always maintain a calm demeanour, speaking politely and respectfully during meetings. Trying to put pressure for the hard sell or raising one’s voice during negotiations is not likely to be met with success.

Dos and don’ts of doing business in Indonesia

• Do exercise patience – Indonesians prefer to take their time and consider business propositions carefully
• Do keep in mind the business etiquette in Southeast Asia; for instance, face-to-face meetings are valued more than written communications in Indonesia
• Don't give or receive anything with the left hand – always use the right hand or both hands together
• Don't stand with your hands on hips or arms folded as these stances are considered aggressive and rude
• Do leave enough time to get to business meetings, especially in Jakarta and other larger cities, as traffic congestion is a constant hindrance
• Do be respectful of Indonesian associates. Avoid applying pressure or being confrontational and speak gently in business meetings.