Doing Business in Indonesia | Navigating Business Culture

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Indonesia is an archipelago in Southeast Asia spread across thousands of islands in between the Pacific Ocean and the Indian Ocean. Notable islands include Sumatra, Java, Bali and parts of Borneo and New Guinea. Indonesia is the world’s third most populous democracy which has seen rapid economic growth since the late 1990’s. With over 281 million inhabitants Indonesia boasts the largest population of any Southeast Asian nation. Over half the nation’s population live on the island of Java which is home to the Indonesian capital and largest city Jakarta as well as the second largest city Surabaya. An ASEAN leader, a G20 economy and a rising middle class have allowed Indonesia to become attractive to both expats and foreign investors looking to expand into Southeast Asia.

The official language is Indonesian (Bahasa Indonesia) which is a standardised form of Malay and widely used in the country’s media, education, governance and business. As well as Bahasa Indonesia most Indonesian’s will also speak at least one of the over 700 local languages each carrying rich traditions, oral histories, and cultural values that have been passed down for generations. Meanwhile those in urban areas can be proficient in English owing to Indonesia’s growing close business relations with the English-speaking world.

Indonesia’s economy has continued to grow rapidly over the last 20 years following the fallout of the Asian Economic Crisis in the late 1990’s, becoming the largest in the ASEAN group and the only G20 member in Southeast Asia. An upper middle-income country, Indonesia’s economy is consumer-driven with a strong market for goods and services. Additionally, Indonesia has become a major exporter of crude petroleum and natural gas and is one of the world’s largest suppliers of rubber, palm oil, coffee and cocoa. The mineral rich archipelago is also a leading exporter of nickel, coal and tin whilst the rise in electronics manufacturing has coincided with the emergence of a young highly educated technology savvy workforce.

Tourism continues to be a significant contributor to the Indonesian economy, thanks to the vast natural beauty of the islands with places such as the island Bali and the Komodo National Park popular destinations for visitors. Other popular destinations include various UNESCO World Heritage sites, such as that of the Borobudur Temple and the Prambanan Temple, and the urbanised cities of Jakarta and Surabaya.

Business culture in Indonesia

Indonesia is a collectivist culture, very similar to other Southeast Asian countries, focused heavily on group harmony, saving “face”, and relationship driven. As is often the case, the wider cultural norms of a country reflect in the business norms too. Indonesian businesses tend to be quite traditionally hierarchical, with top-down decision making from either a small senior management team or a senior family. This hierarchy is observed throughout the entire organisation, with workers looking to their managers for guidance and decisions. Unlike in western business organisations, taking the initiative and being proactive is not encouraged and can be frowned upon in some companies, as they can be viewed as a criticism of the organisation, the manager, and a cause of losing “face” (embarrassment).

While Indonesia is still a male-dominated society, the position of women is quite different from other Muslim countries. They are allowed to vote, have full civil rights, and quite a few can be found in leadership positions.

Mirroring Indonesian familial structures and cultural norms, management style in Indonesia can be described using the Indonesian word Bapakism. The word Bapak means father in Bahasa Indonesian, with Bapakism referring to the expectation of showing absolute respect to elders and superiors.

Managers are expected to embrace their superiority and take charge of their team, while their workers are expected to defer to the manager in decision making. Team members are expected to carry out tasks exactly as they are set out, not deviating from the plan unless previously agreed by the manager or another member of the senior management team. There is also a shared sense of loyalty between a manager and their team, with the manager expected to represent the team’s interests to the wider organisation and the team to never act in a way that causes embarrassment to the manager. It is more advisable to give praise to the wider team rather than give it individually, as this helps promote better group harmony and team cohesion. At all costs, the importance of maintaining group harmony is of the utmost importance for Indonesian managers.

In Indonesia, communication styles are generally indirect, polite, and relationship-oriented, reflecting the country’s strong cultural emphasis on harmony and respect. Meetings tend to be formal and initially their purpose is building relationships. It is unrealistic to expect initial meetings to lead to straight decisions.

Hierarchy and age are respected, so deference to elders or authority figures at meetings is common. In business contexts, these same values apply as building trust and personal relationships often comes before formal negotiations, and decisions may take time. Clear refusals are rare, with “yes” sometimes meaning “I understand” rather than agreement, so patience and attentiveness to context are essential for effective communication.

In social settings, people also try to avoid confrontation and may communicate subtly to preserve “face,” using soft tones, smiles, and nonverbal cues. Smiles do not always indicate amusement or approval. Frequently smiling can mask embarrassment, shyness, disapproval, and other feelings of distress. Accordingly, you may sometimes see Indonesians smiling or laughing at what they might consider inappropriate moments.

Many variations of naming patterns exist in Indonesia. It is often best to ask people politely how to address them correctly. In that case, make sure you do the same for your own name. Properly pronouncing your counterparts’ names is important. Academic and professional titles are valued and should be used until you are invited to do otherwise.

In Indonesia, both business and social etiquette emphasise respect, modesty, and harmonious relationships. Politeness and patience are highly valued, and public displays of anger or confrontation are generally avoided. Socially, greetings are warm but reserved, often involving a light handshake and a smile, while using titles and showing respect to elders is important. In business settings, punctuality is appreciated, though meetings may start flexibly, and building personal relationships and trust often takes priority over quick decisions. Modest dress, careful use of body language, and sensitivity to hierarchy are key to making a positive impression in Indonesian culture.

Gift giving in both social and business contexts is a thoughtful gesture that helps strengthen relationships, though it should be done with sensitivity. Socially, gifts are commonly exchanged during special occasions such as holidays, weddings, or visits, and are usually given and received with both hands as a sign of respect. While in business settings, gifts are modest and symbolic rather than expensive, as overly lavish gifts may be seen as inappropriate or create discomfort. It is important to consider cultural and religious norms such as avoiding alcohol or pork-related items, and gifts are often opened later rather than immediately, reflecting humility and politeness.