26 July 2016
David Downs / General Manager, Projects
Recently a group of 22 business leaders accompanied the Prime Minister of New Zealand on a trade mission to Indonesia. Across two-and-a-half packed days, the delegation met with Indonesian business counterparts; with local and central government officials and politicians; with New Zealanders living and working in the region; with their customers, suppliers and partners. There were presentations from local experts, economists, tax and legal professionals and from the New Zealand trade and diplomatic experts working in Indonesia.
It was a condensed masterclass in doing business in one of the world’s largest countries, which represents a large opportunity for New Zealand businesses. The business leaders were CEOs,
Chairs and senior executives from large and small companies, across a number of sectors (Dairy, Food, Aviation, Engineering, Energy, Tourism, Education). Many had deep experience in growing business internationally, so the trip to Jakarta and Surabaya was a chance for them to expand their knowledge of the Indonesian archipelago and business context.
At the conclusion of the trade mission, we asked the business leaders to summarise their key insights from the trip – the things that Google won’t tell you – to share the experience with New Zealand companies who are contemplating going into the market there.
Many of the lessons can be applied to any market, and in our experience are common findings across missions, particularly in this part of the world.
Here are the four key areas the combined group of business leaders thought others should know.
Don’t underestimate Indonesia
There is a tendency to underestimate Indonesia in one of two ways; both dangerously false.
Firstly, one could imagine the country as a poorly developed market, perhaps even a bit backward. Certainly some of the headline statistics would lead you to that conclusion – GDP per capita of USD$3,500 (a tenth of New Zealand’s); a tax base of only 10 percent of the total population; large parts of the country having no access to electricity, or water; dairy herd sizes of only three to five cows per farmer. If you want to see a developing market, you will.
However, this perspective masks a broader story of a rapidly emerging country, with a new type of sophistication and a hunger for a more advanced lifestyle, which in many ways they are already starting to enjoy. The people are engaging and curious, and have a natural openness to working together, and to working with New Zealand businesses. As one leader put it, the country is nowhere near as backwards as Kiwis think. Don’t mistake the unintelligible for the unintelligent.
The second fallacy is that the obvious large opportunity presented by this rapidly changing market means doing business there will be easy – after all, I only need 0.001 percent of the market to buy my product. That sort of thinking will mislead you as to the importance of long term relationship building and the sheer difficulty of breaking in. “Think Big, Start Small, Move Fast” was key advice from a local business leader and property magnate. One of our New Zealand cohorts described how he has been to Jakarta seven times, and hasn’t had a deal yet, although one is now materialising for him.
In a presentation from the Indonesian Government’s investment arm, they were proudly saying they have lowered the overhead of setting up a particularly type of business in Indonesia – from over 100 permits and three years, to now “just” 40 permits and one year. Things take time here. Get a snapshot of the Indonesian market.
Soft stuff is hard
Saying ‘doing business in Asia is all about relationships’ is so often repeated it is now a cliché – but like many clichés, it’s also true. The consequence of this truism though is not often teased out: if relationships are critical, how do I build them? Where do I start? The business leaders from New Zealand with experience in the market reflected that the ‘soft stuff’ of relationship building is actually a difficult skill to learn.
"One of the New Zealand business leaders said he’d been trying to communicate with his partner in Indonesia via email, until our team there told him to try WhatsApp – he thought it seemed a bit forward, almost too informal – but when he tried he had a response within minutes."
Doing business in New Zealand means we have a fairly uniform business environment and social context – Kiwis know how to talk to one another, we can form relationship fairly quickly, we have accepted practices and norms. It's critical not to think you can simply transfer that way of working into a whole new context – this is a common failing we see in many markets. Offshore, Kiwis need to re-learn the very basic skill of relationship building in business.
Some of the examples we saw brought this home for the leaders – it’s of course a gross simplification, but Indonesians are typically more reserved than Kiwis. Many don’t drink of course, and their culture and religion forms an important part of their work life. Yet (somewhat perversely), they’ll want to know about your family, background and history before doing business with you. Sharing food is a part of the business context, but not in the normal Kiwi way – it’s likely to be more formal, more stilted, and a business dinner will require more effort – and lay off the red wine.
Indonesians are huge users of the messaging app WhatsApp – it’s a normal and almost mandatory way to communicate. One of the New Zealand business leaders said he’d been trying to communicate with his partner in Indonesia via email, until our team there told him to try
WhatsApp – he thought it seemed a bit forward, almost too informal – but when he tried he had a response within minutes. Relationships are built in different ways.
Learning a few words of Bahasa Indonesia – and how to pronounce them properly, and in what context to use them – was seen by many as a great way to show respect for the local culture and context. Read more about business and cultural etiquette in Indonesia.
The role of GovernmentNew Zealand has one of the lowest ‘Power Distance’ ratios of any culture in the world. Our informality, and friendliness has some real benefits and some create some challenges also. We also have a different attitude to the role of government in business than in countries like Indonesia.
The New Zealand delegation preparing to depart from Indonesia.
Delegates on the mission remarked how different it was having senior political figures as part of the trip, lending their credibility to the business leaders. Having the PM on the trip was described as a ‘game changer’ for some of the companies trying to break into the market.
But, even further down the layers, the New Zealand government officials from the Embassy or NZTE had access and connections far deeper than the companies might be able to get – we see this in a number of similar markets: the ‘imprimatur’, as we call it, of government can open doors for business. “I’m from the government and I am here to help” is genuine, at least in markets like Indonesia.
The other remarkable point business leaders commented on was the obvious quality of the senior Indonesian government politicians. There seems to be a new wave, with a progressive and open agenda – “openness and competition” the Indonesian President Widodo described it as. We met a number of senior political figures and their intellect and aspiration was impressive.
Similarly, we met with a number of local body leaders – Governors and Mayors of some large regions and cities, and we were impressed at their approach. The Mayor of Indonesia’s third largest city, Bandung, was one of the highlights of the trip as he talked about modernising his city, saving tens of millions of dollars for citizens in transaction costs, and in bringing design and architecture to the municipal area. A 45-year old ex-Architect with over 70 percent approval rating, he is leading his city in a major overhaul – and we saw that repeated with a number of other local body leaders too.
The challenge they all face, looping back to an earlier point, is in moving the large bureaucracy quickly. With hundreds of thousands in the civil service, a platform of policy and regulatory reform won’t happen quickly.
We need to tell our New Zealand storyOne other big insight from the mission, which again our NZTE staff based internationally will tell you is a common issue, is the need simply, elegantly, clearly, consistently, and constantly tell the story of the new New Zealand. Those of us that live here know we are modern society, with strong innovation, with a great story of partnership between the native people and the colonialists, with an openness and friendliness that welcomes strong partnerships. We know that our export market is sophisticated, our products are world leading, our position in the world is a unique asset.
However, we have a long way to go in telling that story clearly in a way that Indonesian’s understand it, we assume the other party knows it – but many of the Indonesians we met thought of New Zealand as very far away, and only know about our dairy industry.
We need to start every relationship with a solid grounding in what New Zealand is, and what we stand for – that we have Open Spaces, Open Hearts and Open Minds. That our Māori culture is a major asset for us. That we have expanded beyond just dairy farming to now be world leading in things like aviation systems, geothermal energy, value added food, and we are an ideal education and tourism destination.
We need to tell our New Zealand story, and repeat it, and repeat it again. We need to be comfortable using words and phrases of our native Māori language and leverage the emotional impact that has – in a country like Indonesia, culture is everything. In his speech to the New Zealand delegation, the Indonesian President quoted two Māori sayings – in Te Reo – to underscore his points. His grasp of the meaning of our own sayings and language was impressive, and paid us great respect. We should learn from his example, and ensure we entwine our Māori heritage, with our New Zealand story, and let this enhance our relationship building. Visit the NZ Story website to get free videos, images and tools to help you promote your business to the world.