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Indonesia: A Survey Of U.s. Business Opportunities

  • Book Title: Indonesia: a survey of U.S. business opportunities
  • ISBN 13:
  • ISBN 10:
  • Author: United States. Bureau of International Commerce
  • Category: Business & Economics
  • Category (general): Business & Economics
  • Publisher:
  • Format & Number of pages: 320 pages, book
  • Synopsis: Indonesia: Projected National Development Budget by Sectors During Repelita II (1974 / 751978/79) (in millions of .... and telecommunications systems consulting, data processing services, programing, systems analysis and design, as well as ...

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Using Innovation Ideation to Identify Growth Opportunities

Using Innovation Ideation to Identify Business Growth Opportunities Challenge

Organizations are challenged daily to find new ways to grow their business. Our client, a Fortune 500 Global Medical Device, was focused on growth through innovation — creating new products to fulfill an unmet need for its customers. They embarked on their strategic planning phase and asked our research teams to help:

• Uncover and validate unmet customer needs that could be used for future product innovation.

• Validate a new surgical product concept against unmet needs in order to receive management approval and funding to support further product development.

• Identify innovative business opportunities to support business growth for the short-term (two-year), mid-range (five-year), and long-term (10-year) time frame.


Our team started by clarifying themes and identifying key topics for a discussion guide. This guide would be our foundation for understanding our clients’ past research and key topics of interest and would help us build a survey aimed at surgeons and nurses that would help validate our client’s concept and market interest. Upon creating the survey, we then deployed it to 170 surgeons and nurses. To provide additional insight, we then co-generated new ideas with industry experts and stakeholders. This included a one-day workshop composed of a cross-functional team of client R&D, business development, regulatory, and marketing representatives, to cover:

• How can we fulfill current customer unmet needs?

• What does the operating room of the future look like, and what products does it need?

• How do the needs of emerging markets differ, and how do we provide for them?

• In what novel ways can we incorporate health economic data early in our product development process?

• How is the market dynamic evolving, and how must we adapt to it?


Our workshop resulted in the generation of 40 ideas for our client, including: Product Innovation

• Novel formulations with enhanced product performance characteristics.

• Addition of agents to promote faster healing and reduce risk of hospital-acquired infections.

Product Delivery Innovation

• Design applicator for use in emerging surgical procedures.

• Develop an automated product preparation system to decrease risk of human error.

Customer Service Innovation

• Create online product training modules to train operating room staff remotely.

• Provide training via mobile devices with dedicated product support.

Our customized scorecard allowed our client to uncover a broad spectrum of ideas ranging from product innovation to customer service and product delivery innovation, separate the ideas into short-, medium-, and long-term opportunities, and prioritize opportunities for strategic planning purposes. With a healthy innovation pipeline for future business growth, our client could build a better business case for management funding of further concept development.




Indonesia: a survey of U.S. business opportunities

Everything from understanding government regulations and tariffs, to the right labeling and gaining local representation comes into play when doing business in Indonesia. Getting the basics down can prepare you for market entry.

The Federation of International Trade Associations (FITA), whose members include more than 450,000 trade-related organizations, created this resource, which provides an introduction to the Indonesia market. Use the links on this page to navigate to additional information about the country’s economy and political structure, business environment, and standards for selling, buying, and operating a business.
Indonesia and International Trade

This profile of Indonesia market was prepared by the Australian Trade Commission (Austrade), the Australian Government’s trade and investment development agency. It reviews Indonesia’s economic climate and provides information and statistics about trade relations.
County Overview

Here, Austrade reviews Indonesia business opportunities and etiquette. This page also offers information about such topics as tariffs; import restrictions; product certification, labeling and packaging; methods of quoting and payment; and various documentation and tax issues.
Doing Business in Indonesia

UK Trade & Investment, a division of the government of the United Kingdom, created this downloadable PDF report on doing business in Indonesia. The report provides introductory information about the market, advice to companies that want to export to or do business in Indonesia, and a guide to etiquette, language and cultural concerns.
Indonesia Trade Information

The U.S. Department of Commerce prepared this report, which you can download in its entirety or by chapter. While the report includes chapters dedicated to the sale of U.S. products and services in Indonesia and leading sectors for U.S. export and investment, it also addresses topics of more universal interest, such as Indonesia’s:
  • Political and economic environment
  • Trade regulations and standards
  • Investment climate
  • Trade and project financing
  • Business travel and
  • Contacts, market research and trade events
Indonesia 2014 Country Commercial Guide

Understanding market-specific issues, such as licensing, employment issues, getting credit or starting a business or franchise, is critical in moving into new countries.

The World Bank’s “Doing Business In” project compares business procedures and economic regulations in 181 countries throughout the world. This page provides introductory information about the Indonesia market. This in-depth report includes chapters about dealing with licenses, starting or closing a business, employing workers, getting credit, protecting investors, paying taxes, enforcing contracts, and trading across borders in Indonesia. Most World Bank materials are published in English, Spanish, Portuguese, French, Russian, Chinese and Arabic.
Doing Business in Indonesia Overview

This World Bank chart summarizes the procedures, schedule requirements, and costs associated with setting up a business in Indonesia.
Starting a Business in Indonesia

Cultural Issues
Business success abroad depends not only on the quality of your products and services, but also on the knowledge and respect you show for the customs and manners of business people in your host country. These guides will help you to ensure that your business conduct in Indonesia makes a positive impression.
Language, Culture, Customs and Business Etiquette
Doing Business in Indonesia

The materials listed in this section are designed to help you stay up to date regarding developments in Indonesia trade regulations and procedures and the latest business news so you can optimize your potential in this booming market.

Indonesia has emerged as a major regional economic player, and its international profile continues to grow with its participation in the G-20 and other international economic forums. The United States welcomes and strongly encourages Indonesia’s growing leadership role in the global economy and is committed to partnering with Indonesia to expand our trade and investment ties.

  • 2013 imports totaled US$700 million
  • Major imports include machinery and equipment, chemicals, fuels, and foodstuffs.
  • 2013 exports totaled US$183 million
  • Major export commodities include oil and gas, electrical appliances, plywood, rubber, and textiles.
  • Major export partners are: China (14 percent of the total exports), Japan (11 percent), the United States (10 percent), India (8 percent) and Singapore (7 percent).

Indonesia’s bilateral chambers of commerce offer some opportunities for networking that can help you establish new connections with importers in Indonesia. The following resources can help you explore your potential in this rapidly changing market.

KADIN stands for 'Kamar Dagang dan Industri', or Chamber of Commerce and Industry. It is the umbrella organization of the Indonesian business chambers and associations. KADIN is focused on all matters relating to trade, industry and services, and is highly committed to tapping potentials and synergies of the national economy, offering a strategic forum for Indonesian entrepreneurs.
Indonesian Chamber of Commerce and Industry Page

Through its bilateral committees the Indonesian Chamber of Commerce and Industry actively supports the development of trade and investment between Indonesia and a large number of partner countries. The dedicated committees consist of entrepreneurs preparing for business delegations and match-makings and act as first contact point for bilateral business ventures. They work on developing further the bilateral economic relations by advising the Government of Indonesia and the respective partner governments. From this page you can see KADIN Indonesia Bilateral and Multilateral Committees:
Bilateral Comittees

Official Logistics Partner



National Center for APEC


The APEC CEO Summit is the Asia-Pacific's premier business event and provides unparalleled opportunities for business executives to:

  • engage in dialogue with APEC Economy Leaders, Ministers, and high-level government officials;
  • discover business opportunities through networking with CEOs from hundreds of top Asia-Pacific companies; and
  • forge connections with thought leaders from around the region and the world.

Under the theme of “Quality Growth and Human Development,” this year’s Summit will bring together in Lima APEC Leaders from the world’s most dynamic economies, speakers from the world’s top companies, and over 700 CEOs from across the Asia-Pacific region. The program will feature two days of discussions, presentations and dialogue on a wide range of issues that will impact the future development of the region, including innovation, trade, sustainability and disaster resilience.

This year's Summit will be held from November 17-19 in Lima, Peru.


Each year, the Summit draws hundreds of the nation's top business leaders, intellectuals and media personalities. Together they serve as the voice of U.S. business in interactive discussions with APEC Leaders and participate in private dinners and bilateral side meetings with government officials from across APEC’s 21 economies.


The APEC CEO Summit is the most prestigious business event in the region and is the premier platform for APEC Leaders and business executives to discuss the future of Asia-Pacific economies with a focus on expanding trade and investment opportunities.

In addition to the official program, senior U.S. delegates have the opportunity to participate in invitation-only side meetings with Leaders of APEC economies and senior U.S. government representatives, which are organized by the U.S. APEC Business Coalition.

To see photos of past CEO Summits, click here. To see videos of addresses and discussions at past CEO Summits, click here .


Participation of U.S. delegates in the Summit is coordinated by the National Center for APEC (NCAPEC) and its enterprise Pacific Summit Resources (PSR) on behalf of the organizers of the Summit. To express interest in receiving an invitation for an executive, please complete the form at this link: APEC 2016 CEO Summit Delegate Invitation Request.

*U.S. Delegates are participants who represent companies headquartered in the United States, regardless of their current place of residence or citizenship.

If you have any questions about participating in the Summit, please contact Darcie Vaughan .


The organizers of the 2016 APEC CEO Summit have designated NCAPCE/PSR as the exclusive U.S. Strategic Partner to support program planning and sponsor relations efforts in preparation for the event. The NCAPEC/PSR team led organization efforts for the successful APEC 2011 USA CEO Summit in Honolulu, Hawaii and served as a Strategic Partner for the recently held 2012 Summit in Vladivostok, Russia, 2013 Summit in Bali, Indonesia, 2014 Summit in Beijing, China, and 2015 Summit in Manila, Philippines.


PricewaterhouseCoopers partners with the Summit organizers to promote and launch the annual PwC APEC CEO Survey. Throughout the year, the research team at PwC surveys industry leaders across the APEC Region on the challenges they have faced in the last year and their outlook for business development in the coming year. See their recent reports here:




South Asians Heavily Reliant on Informal Money Transfers

Share this Story South Asians Heavily Reliant on Informal Money Transfers 512 million consumers use informal means to conduct transactions

This article is the first in a two-part series on payments and remittance behavior in South Asia and Indonesia highlighting results from a new Gallup study funded by the Bill & Melinda Gates Foundation. Jake Kendall is a staff member of the Bill and Melinda Gates Foundation.

WASHINGTON, D.C. -- Nearly 800 million South Asians and Indonesians, which equates to 60% of the adult population in the South Asian region and Indonesia, sent or received a payment or remittance in 2012. The majority of the South Asian and Indonesian respondents did so informally, with 512 million people sending or receiving cash in person or sending it informally in some other way.

Remittances or payments could have been domestic or international; sent to friends or family, a school, or other institution; or received from the government, a nongovernment employer, or from the sale of crops, produce, or livestock. Sri Lanka and Indonesia had the highest number of respondents reporting such payment or remittance activity, at 84% and 83%, respectively, in the 12 months before the survey. Those in Afghanistan were the least likely to report these types of transactions, with 46% responding that they had either received or made a money-based transaction.

Most Remittances, Payments, and Money Transfers Are Domestic

Of those surveyed, 3% reported sending or receiving remittances from friends or family based internationally. In contrast, those in South Asia and Indonesia were nearly six times more likely to report sending, receiving, or bringing in a domestic money transfer involving friends or family in the 12 months before the survey.

About three in 10 South Asian and Indonesian respondents (32%) made at least one payment to a school, company, or other institution, making this type of payment the most common across all transaction types surveyed. The majority of these school/company/institution transactions were cash only (84%) in nature, and Sri Lankans (60%) and Indians (57%) led in conducting these types of transactions.

Four percent of all people who took the survey reported being cheated or losing money when either sending or receiving it, domestically or internationally, in the 12 months before the survey.

Of those, 76% reported losses during the process of receiving an informal cash transfer, while 24% reported the loss during an electronic transfer or some other way. Respondents who conducted formal electronic transactions as well as those who conducted only informal cash-based transactions reported losses, thus indicating that both types feature some risk.

Wealthy, Highly Educated, and Young Most Likely to Conduct Electronic Transactions

Those who were young, female, well-educated, or in in the wealthiest income quintiles were more likely than other demographics to use electronic transactions to make or receive a payment or remittance.

Seventy-five percent of men, compared with 45% of women, reported making or receiving at least one transaction in the 12 months before the survey. However, women who made or received a payment or remittance were more likely to have done so electronically (11%) than men (8%).

Older respondents were more likely to say they made or received a remittance or payment at least once in the 12 months before the survey. Those aged 15 to 18 were least likely to have made or received a remittance or payment (45%) in the last 12 months. However, for respondents in this age group who did make a transaction, they were the most likely of all age groups to have done so using only electronic methods.

In general, the higher the level of education, the more likely respondents were to have made a remittance or payment transaction sometime in the 12 months before the survey. Education also played a role in determining which type of transaction a respondent was most likely to carry out. Those with the highest level of education were more than twice as likely to use electronic means to make a transaction as those with a high school education or less to do the same.

Respondents' income level was also indicative of the types of transactions they made. Of those who made or received remittances or payments, 82% of those in the poorest income quintile chose informal means such as sending or receiving money through a family member or friend, or bringing it themselves, while 53% of the wealthiest used these methods. The wealthiest were roughly three times as likely to use electronic payments -- including bank transfers, mobile money transfers, electronic transfer services (e.g. Western Union), or a post office -- as were the two poorest income quintiles.

There is a largely untapped market of 512 million people in South Asia and Indonesia who currently conduct informal cash-based transactions, including using informal money carriers, sending the money by bus or traveling friends, or simply carrying cash themselves to deliver it in person. That people are frequently using options to transfer money with inherent risk illustrates the importance of providing safer, better options to transfer money.

Electronic transactions are most likely to appeal to certain demographics within a population, including those who are young -- who are likely to be more informed about new technologies -- the wealthy, and the highly educated.

Although global organizations involved in the field tend to focus on international remittances, this study shows that few respondents reported sending or receiving payments or remittances from an international source. There are far more market opportunities for those institutions who are interested in domestic remittance, payment, or money-transfer business opportunities.

There are ample business opportunities for public and private-sector actors, however there is still a long road to the full integration of technology in the South Asian and Indonesian remittance and payment markets. While the study shows that 83% of survey respondents have access to a mobile phone, these countries lag far behind in Internet saturation, with 6% of respondents saying they had access to the Internet at the time of the survey. Thus, mobile-based banking options may be a prime target for increasing formal transactions, while Internet-based banking options or transfer capabilities only have the potential to reach a small segment of the highest educated and wealthiest of the population at this time.

For complete data sets or custom research from the more than 150 countries Gallup continually surveys, please contact us .

Results are based on face-to-face interviews with 1,000 adults, aged 15 and older, conducted September-October 2012, in five South Asian countries and Indonesia, plus 2,540 adults in India. Regional totals represented in this article are population-weighted averages, accounting for the population size of a country. For results based on each sample of national adults, one can say with 95% confidence that the margin of sampling error ranged from ±2.4 percentage points to ±3.8 percentage points. The margin of error reflects the influence of data weighting. In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

Gallup's coverage area includes entire countries, including rural areas. The sampling frame represents the entire civilian, non-institutionalized adult population. Exceptions include areas where the safety of interviewing staff is threatened, scarcely populated islands in some countries, and areas that interviewers can reach only by foot, animal, or small boat.

For more complete methodology and specific survey dates, please review Gallup's Country Data Set details .

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Business opportunities move Russia-Asia cooperation forward

Business opportunities move Russia-Asia cooperation forward

Delegates at the 15th St Petersburg International Economic Forum. Source: Press photo

The 15th St Petersburg International Economic Forum (SPIEF), which was held last week, had a strong Asian flavor. Analysts say this is a clear sign that businesses from the continent are reacting positively to Russia’s overtures. Addressing SPIEF delegates last week, Vladimir Putin noted that cooperation with China, Japan, South Korea and ASEAN countries is one of Russia's priorities.

Alexey Volostnov, Business Development Director, Russia, at Frost & Sullivan, says Russia is increasing its efforts in establishing meaningful cooperation with APEC countries, where investment potential is quite high. He believes Russia’s trade with members of the grouping may double in the next few years.

Analysts point out that while China, India, Japan and South Korea are already on Russia's investment map, ASEAN countries lag behind.

The fact that Myanmar Vice President U Nyan Tun was given a slot in the keynote plenary address at the SPIEF alongside President Putin surprised many visitors to the forum. Analysts say there were economic reasons behind such a move.

Victor Tarusin, executive director, Russia-ASEAN Business Council, says Myanmar, which is now deeply influenced by the United States, is a country to “be friends with.” There are several Russia-Myanmar joint projects in gold mining, while Russia’s Bashneft and Myanmar’s Nobel Oil have a project in oil and gas exploration.

According to the 2014 Global Investment Trends report by UNCTAD, FDI flows to Russia fell by 70 percent to an estimated $19 billion. Most FDI flows (both inwards and outwards) in Russia go through offshore financial centers, particularly Cyprus, the British Virgin Islands and Luxembourg.

At the moment, ASEAN countries account for less than 2 percent of foreign direct investment (FDI) in Russia, according to various estimates. At the moment, ASEAN countries account for less than 2 percent of FDI in Russia, according to various estimates. Besides increasing cooperation in energy, defense and infrastructure sectors, which are mostly government-to-government, private businesses are yet to start exploiting the existing potential. However, there are some success stories.

Vietnam in Focus

Vietnam stands out among its Southeast Asian neighbors in terms of both trade volumes and mutual investments with Russia. The major investments are in the oil and gas sector, through joint ventures between Vietnam Oil and Gas Group (Petrovietnam) with Russia's Zarubezhneft and Gazpromneft.

Vladimir Mazirin, director of the Vietnam and ASEAN Center at the Russian Academy of Sciences, points out that investments in Russia are attractive for Vietnam today since they offer very high rates of return. “Vietnam is ready to expand its investment in the oil and gas sector as its economy is growing rapidly and its energy resources are not enough,” Mazirin says. He adds that currently oil and gas projects account for up to 90 percent of Vietnam's investments in Russia, while cooperation in other sectors as well as involvement of private business is negligible.

The first steps to diversify trade and investments have already been taken. A deal was signed between the Ho Chi Minh City and Moscow administrations in May to establish a Vietnamese industrial corridor in the Moscow region. Under this agreement, Vietnamese companies will process seafood, manufacture garments and set up other small scale units in the cluster and Russia will provide land, infrastructure, incentives and work permits.

Analysts say the free trade agreement between Vietnam and the Eurasian Economic Union will motivate investors and give rise to new preferential policies for important investment projects, although the real effect of it will only be seen in the distant future. Mazirin believes if all projects discussed between countries recently are realized, Vietnamese investments in Russia, currently estimated at $2.5 billion, will double in the next two years.

Private ASEAN footprints

Victor Tarusin from Russia-ASEAN Business Council says Thailand, Indonesia and a few other countries show positive dynamics in economic cooperation with Russia.

While Russian small investments in Thailand are limited mainly to tourism, jewelry manufacturing and IT, Thailand has been active in Russia's agriculture sector for a decade. Thai food manufacturer Charoen Pokphand Foods invested in various regions in Russia. In the Moscow Region, the group built a high-tech animal fodder mill. It also invested in a pork farm and other projects in food manufacturing and retail.

Indonesia is also increasing economic cooperation with Russia. Bilateral trade between Russia and Indonesia, which was estimated at about $3.4 billion in 2013, has increased by about 30 percent since then. Russia and Indonesia are implementing two joint investment projects: the construction of a special-purpose road that can be used for transporting coal and other cargoes in Eastern Kalimantan province and an aluminum refinery. Each project is valued at over $2 billion.

In Malaysia, apart from active cooperation in defense, there is activity in the gas sector, electronic appliances and equipment, and IT technologies. According to Malaysia's Ministry of International Trade and Industry, bilateral trade with Russia in 2014 touched $3.3 billion. A delegation of more than 30 businessmen from Russia headed by Russian Minister of Economic Development Aleksey Ulyukayev will visit Malaysia in August.

In Cambodia, Russian General Satellite Corporation (GC Group) is providing technological solutions for satellite broadcast projects and manufacturing consumer electronic and digital set-top receivers. The GC group launched Cambodia’s first digital TV broadcasting project, One TV, jointly with the largest Cambodian private operator Royal Group.

Southeast Asian countries also attract Russian telecom and IT companies. Telecommunications operator VimpelCom operates in Cambodia, Laos and Indonesia through partner agreements.

Russia's largest antivirus security software company Kaspersky Lab, today an international holding registered in the UK, operates across Southeast Asia with offices in Indonesia, Malaysia and Thailand. IT-security group InfoWatch managed by Natalya Kaspersky, co-founder of Kaspersky Lab and ex-wife of Eugene Kaspersky, is actively expanding in the Southeast Asian market starting with Malaysia and Vietnam where it works with local partners.

Analysts agree that two-way investment cooperation between Russia and the emerging economies of Asia will continue to grow over the next few years.



Indonesia: a survey of U.S. business opportunities


October 28, 2016

Global Opportunities: In order to meet its Paris climate agreement targets, Canada’s government recently announced a nation-wide carbon pricing plan. In July 2016, the city of Vancouver in Canada’s westernmost province of British Columbia adopted a new policy that will require zero emissions from new buildings by 2030. The province of Alberta just recently adopted changes to its building codes to make buildings more energy efficient that will go into effect in November 2016. These changes to policies and building codes in Western Canada offer tremendous potential for Swiss know how and products in the green building sector. More…

October 27, 2016

If the TTIP agreement between the EU and the USA is concluded, certain Swiss industries may experience disadvantages, while others are likely to be less affected. These are the results of a recent study based on an analysis of customs data and commissioned by Switzerland Global Enterprise (S-GE). More…

October 27, 2016

Switzerland Global Enterprise (S-GE) is inviting successful exporters from Switzerland and Liechtenstein to compete for the Export Award 2017. The award will be presented on May 18, 2017, on the occasion of the Forum for Swiss Foreign Trade (AWF) in Zurich. More…

October 25, 2016

In times of global warming, also the construction industry is developing new environmental friendly ways for the construction of buildings. Bernhard Gafner is an expert in mass timber engineering and will talk about the opportunities for Swiss Cleantech SMEs that could provide their products and services in Canada. More…

October 24, 2016

Official fees for trade mark applications, renewals and recordals of licenses increase effective on 29 September 2016. Fees for changes of name, changes of address and assignments remain the same. There is a new official fee for filing a trade mark opposition. More…

October 24, 2016

Switzerland wants to simplify trade with developing countries. With this in mind it is introducing a new system, REX. So from January 1, 2017, new certificates of origin will be used in trade with developing countries. More…

October 20, 2016

Opportunities for Swiss SMEs: New projects from Brazil’s Investment Partnership Programs, which include RFPs of biddings for the port, mining & energy, railway, road and water treatment stations’ sectors. More…

October 17, 2016

The Saudi Food and Drug Authority (SFDA) now regulates some borderline products as drugs rather than medical devices. For affected products currently registered with the SFDA as medical devices, their registrations will remain valid until they expire. The Saudi Arabian government has officially shifted oversight of certain borderline products from medical device to pharmaceutical regulation. More…



JPRI Working Paper No

Japanese-Style Management Revisited
by Chalmers Johnson

Corporate Culture in Asia: Perspectives on Indonesian, Japanese and American Management
Foreword by Chalmers Johnson

O ne of JPRI's goals is to reestablish among educated Americans the need for and an understanding of "area studies." The contemporary American social science academy, particularly its economics and business segments, denigrates such knowledge as cultural trivia, anecdotes, mere history, or a preoccupation with esoteric languages. It contrasts with such knowledge its own devotion to "theory," usually meaning abstraction not involving any skills or any research. We at JPRI mean by "area studies" empirical, inductive, country- and culturally-specific tests of any and all claims to universal truth. The following essay by Kathryn Young offers an example of this kind of approach.

We also take up Indonesia in this Working Paper because it is the locale for the 1994 APEC summit meeting and because it is the centerpiece of the U.S. administration's so-called Big Emerging Markets (BEMs strategy) and its attempt to deal with Japan by going around or bypassing it. For further details on both of these aspects of Indonesia's growing importance, see (1) speech of Jeffrey E. Garten, Undersecretary of Commerce for International Trade, before the 54th annual Chicago World Trade Conference, September 20, 1994; and (2) "Kanka dekinai 'Nihon baipasu ron'" (We Can't Ignore the 'Bypass Japan' Theory), Foresight, editorial, September 1994, p. 3.

Kathryn Young's essay also illustrates that JPRI is not exclusively or even primarily an academic organization, as the membership of our Board of Advisers makes clear. Our focus is on policy, and we intend to serve the needs of diverse groups in attempting to understand policy toward Japan and its implications.

Chalmers Johnson
President, Japan Policy Research Institute
Santa Monica, California

American and Indonesian Management: Creating Cultural Synergy
by Kathryn Young

T he world economic spotlight is focused on Indonesia as host to the November 1994, APEC meeting. Overshadowed by its other, more visible Asian neighbors, Indonesia is unfamiliar to many American business people. To the extent that it is known, often the perception is a negative one. This is due to the tendency of some groups in the U.S. to concentrate on Indonesia's human rights, workers' rights and environmental problems. It is time to look beyond those issues and focus instead on the business opportunities Indonesia offers to American firms.

With a population of 190 million people, Indonesia is the fourth largest country in the world. It has enjoyed sustained economic growth, averaging above 6% per annum over the past five years. There is a growing middle and consuming class, especially in the capital city of Jakarta. Over the past decade the Indonesian government has sought to reform the economy through a series of deregulation and debureaucratization packages. One of the latest relaxations in foreign investment requirements was announced in June, 1994. For the first time, 100% unrestricted foreign equity ownership of local projects is allowed in almost all sectors of the economy. In addition, minimum capital requirements for foreign investors have been eliminated. These new regulations are targeted at attracting foreign companies to help develop Indonesia's small and medium-sized industries, especially in high-technology businesses. A second package was issued later in June, reducing import duties on a number of items in the agricultural, health and industrial sectors. The purpose of this latest package was to lower manufacturing costs and increase competitiveness of Indonesian exports. Further reforms are expected to follow. These recent policy moves are based on Indonesia's increased need for private resources to finance its current economic development. They are also in response to increased competitive pressures in the region. Neighboring countries, including Vietnam, China, and India are vying with Indonesia to attract foreign capital, technology, and management know-how.

Indonesia's trading and investing partners are mainly other Asian countries, especially Japan. Japan accounts for approximately 20% of the value of Indonesia's foreign investment and imports, while absorbing 30% of Indonesia's exports. A wide spectrum of U.S. companies also have a presence in Indonesia, particularly those in the oil and gas, mining and other extractive industries. The U.S. government recognizes Indonesia's market potential for American companies. It was recently named by the U.S. Department of Commerce as one of the world's "Ten Emerging Markets."

Assuming that the opportunities Indonesia offers are sufficiently communicated to the American business community, and assuming that the political and economic stability that Indonesia has enjoyed over the past 25 years continues, there should be an increase in U.S. investment. As new U.S. investors move into Indonesia they will need to employ Indonesian managers. Whether through joint ventures, wholly owned enterprises or other arrangements, the success of these enterprises ultimately will depend on how well U.S. and Indonesian managers work together. To work effectively together means recognizing cultural similarities and differences and then managing the impact of the diversity. In the field of organizational behavior, this is known as creating cultural synergy. As most multinational companies have learned (many the hard way), failure to understand the complexities of a culture can lead to expensive business mistakes.

Results of a recent survey of graduate business students at Prasetiya Mulya Graduate School of Management, one of Indonesia's most prestigious business schools, suggest that the MBA-educated Indonesian manager of today is in an excellent position to work with U.S. managers. Drawing upon traditional Asian and uniquely Indonesian cultural norms, these MBA managers have also embraced Western management values. Results of this survey indicate that Americans may find it culturally easier to work with modern Indonesian managers than with those from other, more inward-looking, tradition-bound societies such as Japan, China, and South Korea.

Many Indonesian businesses, particularly those in the capital city and business center of Jakarta, are in transition. They are moving away from the dominance of family-owned and controlled enterprises toward those that are more professionally managed. New professional managers are beginning to move into positions of power. Many of the management values of these new professional MBA-educated Indonesian managers fit comfortably with the business approach of many American companies. At the same time, these professional managers appear to be retaining the strongest of traditional Indonesian values. The challenge for American companies is to recognize and work through the cultural dimensions of this new emerging business environment.

Building on Similarities

American managers may find several areas in which they share management values with their Indonesian counterparts.

Planning, Evaluating, and Innovating --Indonesian MBA managers are likely to feel comfortable participating in a formal planning process, in setting and measuring goals and creating action plans. Change is acceptable when the old ways cannot meet new demands. Customs and traditions may no longer be the most important driving forces. This attitude is a break from the past in that Indonesian MBA managers may be less concerned than their traditional colleagues, and many of their Asian neighbors, with ensuring harmony at all costs. Task-completion, over harmony, is emerging as a new value among the modern Indonesian manager.

Communication --Survey results show that Indonesian MBA managers increasingly favor two-way over one-way communication and are beginning to be comfortable with a more direct style of communication. While direct communication may be increasing in the workplace among some managers, indirectness still remains a strong behavior trait of many Indonesians. But Indonesians are more accustomed to dealing with straight-forward and direct Americans than Americans are with the subtle and complex Indonesian. Often an American manager is expected to know what an Indonesian is thinking or feeling, even if it has not been verbally expressed. Many Americans have difficulty in this area, as most are not accustomed to dealing with non-verbal behavior.

Recruiting, Selecting, and Rewarding --Some Indonesian managers appear to be shifting away from an ascription toward an achievement orientation. These Indonesian managers are accepting that "what" you accomplish and "what" you know are valid differentiating criteria in the workplace. This differs from the usual Asian and traditional Indonesian tendency to value "who" you are and "who" you know. In many Asian countries, and to some extent still in Indonesia, social background and family ties are often more important than a person's qualifications for a job. Interestingly enough, in Indonesia, a number of female executives have been quite successful because they have been able to capitalize on their family backgrounds, notwithstanding their gender.

Training --Most Indonesians are comfortable in a contextual, experience-focused learning environment. A U.S. company will find that its training programs will be successful to the extent that they are locally relevant. Sending "canned" training programs from corporate headquarters is bound to fail. If a company wishes to use its corporate training programs, they must be adapted to take into account local operating conditions and cultural differences.

Problem-Solving Tasks --Americans will find that Indonesian managers are likely to favor a pragmatic over a theoretical approach. They will also find that MBA-trained managers are quite accustomed to using a "cost-benefit" approach in analyzing alternative solutions in problem situations.

Dealing with Differences

In looking at the areas of differences between Indonesian and American managers, particular attention should be paid to the following areas:

Organizing and Controlling --As in other parts of Asia, Indonesians tend to place more emphasis on the interests of the group over the individual. Many Indonesians consider the competitive, self-focused attitude of Americans as out of place. Experience of U.S. multinationals operating in Indonesia has shown that often local Indonesian managers do not want to be held individually accountable for decisions and outcomes. What may happen is that the group will coalesce around the individual to ensure that no one "loses face." A more productive approach to organizing and controlling might be for the American manager to seek input from the group, up-front. However, Indonesians are still more comfortable than most Americans with a hierarchical organization structure, and so after seeking group input, a manager may still have to make a decision himself rather than seeking to reach a consensus. The value placed on hierarchy appears to be diminishing somewhat in Indonesia; and its importance is greater in other Asian countries, such as Japan, Korea, and Thailand. Nonetheless, organizational controls--such as planning systems, goal-setting, targets, and employee rules--are more acceptable in Indonesia (and probably more necessary) than they are in a typical American company.

Recruiting, Selecting, and Rewarding --As American firms develop local career management plans, they need to be sensitive to the collectivism of Indonesian society. In Indonesia the emphasis remains on the group and the need for affiliation is quite high. Consequently, the desire for promotion may be less strong than in the American context. In many cases, other measures of recognition may be more meaningful. Directly evaluating an employee's performance will need to be done more delicately than in an American company. Corporate evaluation tools may need to be revised. An employee's strategy for advancement may be quite different in Indonesia than in America. For example, low-key approaches are often seen as the way to progress. An employee seeks to make the boss, or "Bapak," rather than him or herself, look good. When promotions are necessary, American companies may run into problems if they promote an individual solely on the basis of merit, without checking to ensure that the person is also respected and socially accepted by other members of the organization.

Managing Conflict --The American tendency to be confrontational will be counterproductive in Indonesia. Like most other Asians, Indonesians dislike stress and overt signs of emotion. They expect their superiors always to remain calm, even under the most trying of circumstances. Again, the importance of not embarrassing an Indonesian, or of not allowing him or her to lose face, cannot be overemphasized.

Integrating Business and Social Relationships --Indonesian managers share with many of their Asian counterparts the value placed on personal relationships in a business setting. In Chinese cultures this is known as "Quanxi," which refers to the complex and intricate network of personal relationships that pervades all aspects of one's life. Quanxi emphasizes reciprocity, trust, and implicit understanding between the parties. There is no separation between business and social in a quanxi relationship. Americans may feel uncomfortable with the high value placed on the personal element in the workplace.

The above guidelines are only intended as starting points for American managers. Each company must also consider its own unique corporate culture and how it fits within the Indonesian context. American companies will find that as business relationships with their Indonesian partners progress, a unique synergy and working dynamic will emerge. To the extent that American managers strive to become multicultural managers, by being sensitive to and understanding of cultural differences, the chance of success of the American-Indonesian venture will be enhanced.

KATHRYN YOUNG was a Visiting Lecturer at Prasetiya Mulya Graduate School of Management, Jakarta, during 1992-1994. Before that she was manager of import-export operations for CalComp, a leading computer graphics company, located in Southern California; and she also served as Director of International Economic Policy at the U.S. Chamber of Commerce in Washington D.C. She is currently a free-lance consultant to American companies seeking partners or wishing to do business in Indonesia.

Japanese-Style Management Revisited
by Chalmers Johnson

Th e key insight of Japanese management as it relates to employees is that modern manufacturing and advanced services require human capital, not just skilled or unskilled workers. By human capital I mean the combined talents of people who do not understand each other in terms of manager, owner, and worker, but rather as members of an integrated group, as shain (staff), pooling their mental and physical capacities in a corporate venture, much like a farm household. Reliance on human capital results in fewer lost days due to labor disputes, mitigation of class conflicts, enhanced labor commitment to work, higher product quality and much greater quality control, and many other aspects of mature industrial competitiveness. During 1994, Japan still lost many fewer working days to strikes than the United States, Germany, Italy, France, or Britain.

Whereas the major capital expense in mass production is machinery, the major capital expense in high-tech manufacturing is human staff who can design, build and innovate an on-going line of products in an enterprise's primary area of technical expertise. In order to attract, retain, and motivate such expensive human inputs into production, a firm must have some degree of tenured employment, job rotation, on-the-job education, shallow hierarchies of authority, and worker internalization of the enterprise. Japanese management delivered these qualities through the invention and perfection of what has come to be called the "three sacred treasures"--lifetime employment, enterprise unionism, and seniority wage scales.

It was this managerial innovation, combined with astute industrial policy and the American alliance, all of which were achieved in Japan over a considerable period of time and after intense labor strife in the postwar's first decade and a half, that led to the country's high-speed economic growth and the achievement during the 1990s of very high levels of per capita income. In my article on the appearance of Japanese-style management in the United States [California Management Review. Summer 1988: 34-45], I argued that American management, in order to compete with and surpass Japanese achievements in manufacturing, needed to match Japan's commitment to human capital--if not necessarily copy Japan's particular institutions for doing so.

Six years later the Americans have regained considerable competitive ability after an intense and difficult period of restructuring. They did so as a result of Japanese competition--that is, they began to learn how to meet the challenge of Japan in terms of quality and price of merchandise. But the Japanese themselves seem to have fallen into disarray during the same period. They are no longer sure of the fundamental value embedded in their management style and are engaged in costly programs to move manufacturing overseas and cut back on domestic employment.

In order to understand why the Japanese management style was so effective at one time and is no longer so effective in Japan today, we must distinguish between the value it sought to introduce in its enterprises--the idea of human capital--and the means chosen to achieve it--the three sacred treasures. The Japanese economy has been put under great strain in the wake of the bursting of the bubble economy because of strategic mistakes made in its relations with its trading partners, and because it has confused the sacred treasures themselves with what they were intended to achieve--namely, the active involvement of labor in the success or failure of the enterprise. It is critical to the future of the Japanese economy that it do two things: first, overcome the mistakes that tend to isolate it from its trading partners and, second, reform its management style by altering only the means chosen to unleash human capital, not the value of human capital itself. The Japanese appear to be in the process of making the older American mistake--ignoring human capital while focusing only on the short-term bottom line. Let me look at each of these aspects of the problem.

It is probably true that the three sacred treasures have outlived their usefulness, although that is anything but self-evident. The problems of manufacturing at the end of the twentieth century and into the twenty-first century require even greater cultivation of human capital, but this can no longer be achieved solely through career job security (so-called lifetime employment) or seniority wages. Demographic changes and the need to incorporate women more effectively into the labor force demand that other means be found to cultivate human capital. The techniques used by Japan from approximately 1960 (the Mitsui Miike coal mine strike) to approximately 1990 (the end of the Cold War and the disintegration of the USSR) in order to retain and motivate workers are no longer the best techniques. But before we consider alternatives to them, it must be stressed that what is wrong with Japanese management today is not the three sacred treasures. It is instead the Japanese government's commitment to one-way trade. Japan's closed markets, its favoring producers over consumers, and its devotion to exporting its way out of the post-bubble recession constitute the main problems. That is what is driving the value of the yen to unprecedented levels and causing Japanese corporations to scrap lifetime employment in desperate attempts to stay afloat. Until Japan's practice of adversarial trade is ended, no change in management style alone will make any difference.

During 1993, NTT announced that it planned to get rid of 10,000 employees during the coming two years. By the end of October 1993, it had induced some 4,100 people, including 800 managers, to take voluntary early retirement. Most of these people were in the 40 to 57 age bracket, and two-thirds were switchboard operators, mostly women. This was the largest buyout executed by any company in Japan, and it cost NTT some 20 billion for the first year alone. Many other companies tried traditional solutions to the problems of labor costs--shift of production workers to sales and service, lending excess workers to affiliates, and creating subsidiaries just to employ the redundant--but nothing worked. In January 1993 Pioneer publicly told 35 middle managers that they had the choice of taking a buyout or being summarily fired. Okuma Machine Tools tried to cut its retirement age from 60 to 56 in order to force out highly paid older workers despite their lengthened life expectancies. The Ministry of Labor estimated that the rate of unemployment could go from 2.6 percent to 6 percent on the basis of current trends. Some 6.6 percent of Japan's total production has been transferred to overseas factories, with predictions that the number might well rise to 12 percent. A vicious cycle had set in: Japan's massive trade surpluses cause the yen to appreciate in value against other countries' currencies, which in turn cuts profits, puts pressure on jobs, and lowers consumer spending, thereby fueling still another export drive as the only way to stay in business and try to avoid massive unemployment, which causes the yen to appreciate still further.

The trade surpluses are the primary cause of the pressure to end job security and cut human capital. Until these surpluses are brought under control and reduced significantly, the attempt to regain competitiveness by abandoning the three sacred treasures will not only not work but will also severely weaken Japan's future productive capacity. International trade, according to the GATT treaty, is supposed to be mutually advantageous. But trade with Japan is only of advantage to Japan, unless one is a supplier of raw materials and then Japan wants the materials only in an unprocessed, low-value-added form. For the past twenty-five years the United States, the European Community (now the European Union), and Japan's other trading partners have sought to negotiate a more balanced trading relationship. But nothing has worked. The Japanese economy is still characterized by remarkable differences in domestic and foreign prices, and Japanese consumers are able to enjoy the full strength of the yen only by travelling abroad. As the Nihon Keizai Shimbun noted, prices in Japan for the main industrial products have remained virtually unchanged at the same level since the yen began to appreciate in value in 1985 (May 29, 1994, p. 3).

Because of this persistent structural imbalance in trade with Japan, during 1993 and 1994 the American trade negotiators sought to find and agree upon some indicators that would show whether Japan was actually complying with its verbal agreements to lower trade barriers. The Japanese bureaucrats balked at this, unleashing a press offensive charging that the Americans were "protectionists" committed to managed trade, and at the Clinton-Hosokawa summit in Washington in February 1994, they formally said "no." The bureaucrats did so even though the most influential politician in the country, Ozawa Ichiro, proposed in his best-selling book Blueprint for a New Japan (1994, p. 124) that the Americans should be given 10 percent of all transactions of each of Japan's keiretsu. This is a much more radical form of managed trade than any suggested by the Americans. It is increasingly well understood abroad that, in Barry Keehn's words, "Constitutional provisions aside, bureaucrats do not advise Cabinet ministers in Japan, they instruct them" (The Times. London, July 5, 1994). In that context the rest of the world gave up on negotiating with Japan and let the most ruthless of markets take over--namely, the market in currencies. The yen went well above 100 yen=US$1 and seemed headed toward making Japanese goods saleable only in Japan's domestic market.

The Japanese government understands these relationships, and its own advisory organs have urged on it a course of reform. At the end of May 1994, the Basic Issues Subcommittee of the Industrial Structure Council, chaired by Tsujimura Kotaro, released its report on the industrial structure needed for the next century. This was not the usual MITI "vision statement" but, according to Kyodo News, "reflects a strong sense of crisis among council members about the future course of the Japanese economy" (June 16, 1994).

The subcommittee's proposals come to the heart of the matter. Japan must shift from an export dependency that stresses such products as automobiles and household appliances to a much more balanced trading relationship "determined by domestic demand." Such a change will begin to relieve the basic contradiction of the Japanese economy--tomeru Nihon mazushii Nihonjin (rich Japan, poor Japanese)--and will cause Japan to absorb a much larger share of the exports from the newly industrialized nations, southeast Asia, and mainland China than it does today. The latter shift is indispensable to peace and stability in the area in a post-Cold War world. It will also greatly enrich the lives of Japanese consumers.

The subcommittee's report further urges the country to "promote mobility in labor markets," meaning a shift away from career job security for male heads-of-households toward wages based on merit rather than seniority and the opening up of executive and highly paid positions to women and men in their 60's. This will obviously entail a much greater frequency of job-hopping, which does not imply the end of a reliance on human capital, only that it must now be secured in new ways, such as through workers' ownership of capital, giving executive opportunities to women, and competition among firms.

The Industrial Structure Council's report also contends that industrial policy needs a fundamentally new orientation. "Industrial policy, which up until now has centered on the interests of suppliers (enterprises, public corporations, and so on), needs to be changed, and a new consumer-oriented point of view adopted." This would involve among others things changing the tax laws concerning severance pay and annuities, which today discriminate against people who change jobs; and a total overhaul of the capital markets and financial system in order to encourage venture capital and the financing of new industries. The report contends that it is not necessary to worry about the hollowing out of old industries, since they need structural adjustment in any case; moving them overseas is one way to do just that. Clearly, this emphasis on industrial policy indicates that Japan will need its industrial policy apparatus just as much as it has in the past, particularly the Ministry of International Trade and Industry. Political leadership must cause the bureaucrats to redefine their tasks. The political reorientation of the bureaucracy that took place in 1970 in order to overcome the problems of severe industrial pollution is an example of the kind of change that is needed today.

Looking to the future, the subcommittee lists twelve industrial and service sectors that it contends will be the basis of future economic growth. They are housing, information and communications, energy, environmental protection, medical and welfare services, advanced distribution services, international exchange activities, the cultivation of human resources, business support and infrastructure services, and the development of new industrial technologies. All of these are in line with a redefinition of Japan as an advanced, high-consumption, high-welfare-cost headquarters economy instead of an export-dependent developing country.

The kinds of reforms that the Industrial Structure Council recommends are prerequisite to any managerial reforms intended to refurbish Japan's emphasis on human capital within enterprises. It must be stressed again that the most important changes are those that redress foreign nations' grievances against Japan because of its predatory trading practices. Without changes in the overall macroeconomic environment, Japan's trading partners will be encouraged to continue to use the yen-dollar exchange rate to punish Japan. And it is this pressure that is damaging the Japanese system of human capital more than any particular industrial relations techniques. But lifetime employment and seniority wages do need to be made more flexible for two particular reasons--the need to incorporate women into the labor force and the need to adjust to longer life expectancies of all Japanese.

Japan's demography still indicates a severe labor shortage by the early twenty-first century. Japan will need to incorporate its women and older men much more effectively into the labor force than it does now. This means scrapping seniority pay scales, introducing performance-based salaries, and abolishing job quotas that discriminate against women. One of Japan's competitive weaknesses has long been that it wastes female talent more flagrantly than any other advanced industrial democracy. The Ministry of Labor noted that during 1993, in a survey of some 5,400 companies, 40 percent of them hired only males and 42 percent had no women in management. Women were kept out by sending job applications only to men and by maintaining female job quotas. On June 3, 1994, the then head of the Economic Planning Agency, Terasawa Yoshio, speaking in light of his experiences as the former head of Nomura Securities in the United States, deplored the persistence of male-dominated hiring practices and noted that Japan's competitors were much more advanced in breaking down a gender-based division of labor. But the Minister of Labor, Hatoyama Kunio, replied that "If companies do not allot a certain number of spaces for women, they will end up hiring all men" (Kyodo News, June 3, 1994).

The growth industries of the future, as identified by the Industrial Structure Council, all require fresh market analysis and innovative product designs. Enterprises attempting to compete in them simply cannot do the required analysis if they exclude from consideration fifty percent of their potential customers. They need women in executive positions. Achieving this is a prime task for managerial innovation. Company barriers against the hiring and promotion of women must be removed, but more importantly, the entire business community must demand that women be admitted to universities on a more equitable basis or undertake on its own initiative to train women in foreign universities, where they are welcome. Managers will also have to be creative in thinking of institutional means to bind women executives to the group and to bond the group together in ways other than the nightly male drinking party. The most obvious ways to do this are through financial incentives and by promoting women into the chief executive officer's position. Innovation to bring women into the enterprise can be most plausibly achieved by putting women in charge of it.

A similar problem exists concerning the graying of Japanese society. Japan's population pyramid has changed radically over the postwar period. In 1950 people aged 65 and over constituted 4.9 percent of the population. This rose to 12.1 percent in 1990 and is projected to reach 25.4 percent in the year 2025. In September 1993, the Management and Coordination Agency reported that the percentage of people over 65 was starting to double every twenty-five years. In 1993 there were 16.9 million people over 65, or 13.5 percent of the population. This was expected to reach 14 percent during 1994, or almost double the 7.1 percent of 1970. In order to keep old people working but avoid bankrupting enterprises with large numbers of old workers who must be paid seniority wages, Japan needs several reforms. These include a universal retirement system to replace individual corporate pension plans; subsidies and tax incentives for people to acquire new skills; and an open, efficient labor market. Achieving these reforms institutionally is the task for management as the twentieth century draws to a close.

The Japanese system of human capital has been the envy of the world, and its achievements have spurred innovation in all of Japan's competitors. Every ordinary student in American schools of business administration is familiar with quality-control circles, zero defect movements, kaizen (improvement campaigns), bottom-up decision-making, and numerous other aspects of the Japanese management style. The danger for Japan is that it may have developed into a national version of the International Business Machines (IBM) corporation. IBM is notorious as a company that in the 1960s developed a winning product and strategy, then became self-satisfied and even intoxicated with accounts of its own successes, failed to pay attention to changes in its own field that threatened to make its main product obsolescent, and finally had to sacrifice huge numbers of long-service employees who had devoted their lives to the company. IBM was one of the first American firms to commit to lifetime employment well before the Japanese made it popular. The IBM case is an important warning for Japan: pay attention to fundamentals (human capital) and innovate the means of achieving the underlying goal of high-quality products or go under. It is not yet clear whether either IBM (or the U.S. as a whole) or Japan is up to this challenge as the century comes to an end.

CHALMERS JOHNSON is President of the Japan Policy Research Institute and author of Rekishi wa futatabi hajimatta (History Restarted), Tokyo, Bokutakusha, 1994. This article has been published in Japanese as part of the six-volume series entitled Nihon kaisha genron (The Principles of Japanese Companies), edited by Uchihashi Katsuto, Okumura Hiroshi, and Sataka Makoto, Iwanami Shoten, 1994.



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