Current affairs

Changes in Indonesia's business climate

2009/11/29

インドネシアの景況の変遷

Until a few years ago, there was a lot of attention paid to the business of doing offshore development and other projects for the Japanese market in Indonesia, but I think the reason why there is almost no such business in Indonesia these days is that the labor cost has become relatively high compared to other Southeast Asian countries such as Vietnam and Thailand due to the frequent increase in UMK (Upah Minimum Kabupaten Minimum Wage).

History has proven that the B2B market for Indonesian subsidiaries and the B2C market for Japanese companies is extremely susceptible to economic fluctuations, and even though it is currently a relatively blue ocean, history has proven that if the European crisis that originated in Germany is predicted in 2017 becomes a reality and a currency crisis or Lehman-level recession hits, the Japanese will return to their home countries in a flash and it will become a red ocean.

I think that the final destination of people who want to start a business in Indonesia is probably the B2B or B2C market for the Indonesian domestic market, but with the economic development, the five senses of Indonesians are well-developed, so rather than considering the "localization" that was once said, I think that the business that puts out the Japanese quality as it is straight out will become the mainstream.

System implementation work in Jakarta now.

Indonesia is a major production base for Japanese manufacturers, and there are several industrial parks for general trading companies in the Jakarta area.

I often visit the factories in these industrial parks from my office in the center of Jakarta, but as of November 2009, after overcoming the financial crisis, the factories are in a rush to increase production, and the production lines are being boosted. If you look only at the manufacturing sector, there is no doubt that the economy is good.

Indonesia's stock prices have risen at the highest rate in Asia and are relatively stable compared to other countries. With the growing number of brokerage firms, individual investing has become a bit of a craze.

To put it bluntly, Indonesians are very susceptible to the notion that "you can make money with a PC in a room with a cooler without breaking a sweat". Therefore, the spread of online trading to individual investors is very fast.

According to my friend in Japan, the Nikkei Newspaper has been reporting on the topic of investment in Indonesia almost every day, but as a person in the IT industry here, I can't see the benefits of such a move.

It's so difficult to win new projects that it's hard to laugh at the joke that we might be the only ones outside the mosquito net.

It is said that the economic wave in the IT industry will arrive six months later, so we expect to see an increase in orders around next year.

Currently, I am working for a Japanese system company with the title of a technical officer. Specifically, this includes the pre-sales and implementation of ERP (integrated business application) packages and production schedulers, as well as network construction work.

Even though it is a system company, there are very few jobs that require you to create programs by yourself. At best, you make plug-ins (additional modules) for package software or customize simple scripts.

The job requires knowledge of system hardware and software, knowledge of business applications such as production management and accounting, and the Indonesian language.

Comparison with the days when I was an exporter in Bali

Until two years ago, the company had been exporting furniture and cloth products to Bali, a world famous tourist destination, but the recession in Japan and the shift of supply sources to China made it impossible for the company to stand still.

I am now living a normal company life, commuting from the 19th floor of an apartment in the center of Jakarta by car every morning.

Before I returned to Jakarta, I was worried that I would be able to endure this gap in my life, but once you live in a city, you can adapt anywhere.

Compared to Japan, Indonesia is far behind in the standardization of business flows through the system.

It is also true that labor costs, which are said to be rising at a high rate in recent years, are cheaper than in Japan, so it is better to hire a lot of people and use manpower tactics than to invest in expensive systems.

Even if you have a certain level of human resources, it is difficult to use a business system to the extent that it is worth the high investment, and in many cases, the business flow is broken up and becomes just a form output system.

Recently, some companies have downgraded their expensive ERP systems that were already in place in the first half of the year 2000 and downgraded them when the amortization period expired, switching back to Excel processing for everything except accounting.

The most different thing about my current position as an employee compared to when I was working independently in Bali is that I don't have to worry about money.

Even if we routinely have serious conversations about how we can manage to survive by taking on more projects in this recession, it is still "people's money" and "people's company", and employees are automatically paid regardless of whether the company's performance is good or bad.

However, I can understand the feelings of managers in these economic times, so while I don't say things like "putting the company's profits before my own," I am at least thinking about the company's profits and cash flow quite seriously.

The point is that the feeling of "If I don't make a profit, I feel bad" is always at work. It's partly because I like working with systems to begin with, but also because I have a strong sense of cost that I developed when I was working independently, I think this is an employee who is enthusiastic about his work and easy to use for management.

It seems silly to say such things by myself, but I thought it would be easy to explain my feelings of having gone from being an employee to an employer and then back to being an employee again, so I have written this presumptuously.

In the conversations between Japanese people in the area, it is very easy to talk about how to socialize with Indonesians.

I was surprised at how many Japanese people are stressed out about socializing with Indonesians. I think it depends on the position and living environment in the company, but it is impossible to live with people who have grown up in a different cultural environment in the same way as Japanese people.

I think it's sometimes necessary to point out what's wrong with the other person and try to make it better, but if you try to do this to an Indonesian, you may find yourself getting stressed out and your relationship with them will deteriorate.

If you create an environment where they can see the good in others and demonstrate their abilities in their work, they will think and act on their own.

What is now useful for me in my university seminar activities?

Although I haven't worked particularly hard on my seminar activities, finding my own subjects and preparing a report to present in front of others is the basis of my current job.

There are many opportunities to give presentations to customers in my area, but success or failure is determined by the degree of preparation.

If you do your seminar report well, you will not be able to return it openly when you are confronted by your teacher or seminar staff. If you prepare carefully, no matter how much you are confronted, even if you are a bit of a quibbler, you can confidently express your arguments. It's an exceptional joy when it leads to an order.

It's been a long time since I graduated, but the memories of those days when I was anxiously heading to the school building in Mita for my report are still fresh as if they were a long time ago.

Even if there are no seminar activities by current students, or even if you can't attend the Alumni Association, it's reassuring to know that you can make connections through this kind of bulletin.

And since China Plus One.

Before 2010, the main bases for Japanese companies to expand into Southeast Asia were Thailand and Singapore, and for companies that already have production or sales bases in one of the Indochina Peninsula, Indonesia is often attracting attention as the next frontline base in Southeast Asia.

On the other hand, there are an increasing number of manufacturers who have been expanding overseas, mainly in China, and are looking to diversify risk in Southeast Asia for the first time from the perspective of China plus one, and are skipping the Indochina Peninsula to set up a base in Indonesia.

Indonesia, with a population of 240 million, is very attractive, especially considering the size of the domestic market.

Apart from the huge domestic market, Indonesia's appeal to Japanese companies lies in the availability of abundant and inexpensive human resources.

Although Indonesian workers are by no means industrious in general terms, the labor market with a minimum wage of less than 20,000 yen (as of December 2012) is very attractive to Japanese manufacturers who need to hire large numbers of people in order to set up production bases in Southeast Asia.

For this reason, I believe that the frequent labor disputes that have become commonplace as a country risk in Indonesia in 2012 will be a major blow to the country in terms of creating job opportunities in the labor market.

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