Understanding Different Ethnic Cultures in Indonesia and How They Do Business: Part II

by | Dec 17, 2020 | Study Insight | 0 comments

Part II: The Bataknese, Minangnese and Chinese-Indonesians.

Source: Art Museum Lata Mahosadhi

Indonesia is home to over 1,300 ethnic groups. Despite its long historical contact with foreigners, Indonesians remain as “island people” who keep their traditional cultures. They are very proud of their heritage and the period of history they went through together in reaching independence only solidified it. In the first part of our article, we have discussed the unique cultures of the Javanese, the Sundanese and the Balinese. We answered the questions of “to what extent do these ethnic cultures conform to the national culture” and “what implications are there for international companies”.

In this second part of the article series, we will explore cultures outside the islands of Java and Bali. Flying around 1007.22 kilometres to the Northwest, we will land on the island of Sumatra where the great Sriwijaya empire once laid. Once again, because of the extensiveness of the number of ethnic groups in Indonesia we were not able to cover them all. For this article, we will focus on Bataknese and Minangnese that originated from Sumatra. We also noticed from our interviews for the article that the Chinese-Indonesians were brought up a lot as a prominent group in Indonesia’s business landscape. We will, therefore, also explore this culture and see if there are any notable differences between their culture and the national culture.

Minangnese: Takuruang Nak Dilua, Tahimpik Nak Diateh

Source: Historica Wiki

The Minang (or Minangkabau) people majorly reside in West Sumatra and are divided into different clans such as Chaniago, Piliang, Sikumbang, and Tanjuang as indicated by their family names. They are known to be fond of trade and creating their own businesses. Based on data from Dinas Koperasi dan UMKM in Indonesia, it is estimated that the number of micro, small and medium enterprises in West Sumatra amount to more than 900,000 entrepreneurs by the end of 2015.

The Uniqueness of Minangnese Culture

The Minangnese culture adheres to Indonesia’s national culture, however, not to the degree that the Javanese and Balinese do. While their culture is also collectivist and hierarchical, the Minangnese are much more direct in communicating.

Also, unlike the people in Java and Bali, the Minangnese historically have a stronger trading culture. Most parents of Minangnese children are entrepreneurs. Therefore, since childhood, Minangnese children have been involved in managing their family’s business, starting from looking after the shop, helping in packaging goods, to taking merchandise stocks from suppliers. With this culture that has been passed down from generation to generation, most Minangnese prefer to open their own business rather than living as a worker. Some say that the Minangnese wouldn’t mind becoming dishwashers in restaurants, but while working, their minds would explore different opportunities so that later they can open their own restaurant business.

In his book, “Rahasia Bisnis Orang Padang”, Bustami Narda stated that the Minangnese have very strong principles in doing business. First, to not fear starting small without a big capital. They would not shy away from starting at the bottom. In fact, they are accustomed to starting a business from scratch by selling, for example, safety pins and hair combs. Another principle is to focus on the business being run; doing it wholeheartedly and patiently building it up.

Minangnese people also tend to merantau (wonder or migrate). Therefore, most of them learn to be courageous and live independently from a young age. A strong asset for the Minangnese to be successful in rantauan (the place they migrate to) is the fear of failure and being cimeeh (ridicule) in the village if they come back home unsuccessfully. “A Padang migrant will be ashamed to return to his village if he has not succeeded. He will feel worried that he will be ignored if he returns poor,” wrote Bustami. On the other hand, “Going home with success would create an endless story among the villagers.”

The Minangnese Way of Business

Minangnese are good at managing business finances and they are quite calculating in spending money. The assumption that they are “stingy” is often attached to them. However, rather than painting this in a negative view, this is actually a positive trait for business as they are observant and thorough in their investments. In offering deals, therefore, foreign companies should really emphasize why the deal would be beneficial to them. For example, why would it enable the Minangnese to earn more? Instead of focusing on benefits in the short-term, highlight the benefits in the long-term.

Takuruang Nak Dilua, Tahimpik Nak Diateh” is one of their proverbs which means that you can always create an opportunity out of failure. It is an encouragement for young Minangnese to not back down when they experience a loss in their business and to bravely face challenges instead. Therefore, Minangnese are more likely to take risks in their business. The final straw in decision making is not necessarily the risk that is attached to it, but the opportunity that they would get from it.

Another interesting note is that Minangnese are excellent diplomats. There are numerous household names of Minangnese diplomats such as Agus Salim, Mohammad Hatta, and Sutan Sjahrir. A key for their success lies in norms and traditions. These diplomats who are born in Minangkabau mostly come in contact with incubators named surau and lapau. They are non-formal institutions to build interactions, socialize, and discuss information. There is a saying that, if a Minangnese man does not go to lapau, he is kuper (unsociable). Minang Oktavianus, a proverb researcher, stated that lapau is a very good arena to practice one’s speech and debating abilities. Therefore, negotiating with the Minangnese might be more challenging as they are smart with words and good in debating ideas. Thorough preparation is recommended and also aims for a win-win result.

Bataknese: Naso matanggak di hata, naso matahut di bohi

Source: The Regencies Indonesia

Located in the mountainous highlands of northern Sumatra, the Bataknese is the largest indigenous group in Indonesia, accounting for 3.8% of the total population according to Jakarta Globe. They are also divided into different marga (clans), namely Batak Simalungun, Angkola, Karo, Toba amongst others where they speak the same language and practice similar customs.

Our BRIGHT Indonesia consultant said that while they are present in multiple industries, the Bataknese who reside in Sumatra (compared to the ones who live in Java) are more selective in what industries they play in; carefully selecting those that will surely thrive in Sumatra.

The Uniqueness of Bataknese Culture

Like the Minangnese, the Bataknese communicate more directly. Sometimes, due to their very straightforward-way of speaking, they are regarded as people with “tough” character in Indonesia. Their proverb, “naso matanggak di hata, naso matahut di bohi”, means “dare to say the right and wrong”. As with this philosophy, the Bataknese strongly uphold honesty and do not shy away from using blunt words. This is an important thing to know for negotiations as it is quite different from the average Indonesians. Do not twist words, talk as it is and note that the Bataknese tend to be persistent with their stand so you need to be persuasive in this aspect.

Interestingly, many notable lawyers in Indonesia (such as Mulya Lubis, Hotman Paris, and Ruhut Sitompul) come from this ethnic group. Attributes that contribute to the Bataknese success as lawyers include their assertiveness in making decisions and strong abilities to defend their arguments. They are rarely in the grey area; A is A, and B is B. This fact can expose a glimpse of how the Bataknese are in doing business.

The Bataknese Way of Business

Due to their seemingly “tough” character, doing business with the Bataknese may appear different from doing it with the average Indonesians. The contrast is even bigger when compared to the Javanese and Balinese. In a way, business communication with them is almost similar to business communication with Westerners in terms of directness and limited small talk.

The Bataknese are also quick to take advantage of business opportunities and are not afraid of risk. However, they do not like taking up business plans with unclear future outcomes as they are very consistent in doing business. So in proposing a deal, present the long-term plan and be straightforward of the risk and returns that come with it.

Also similar to the Minangnese, the Bataknese are smart in managing finances. For SMEs, this can be seen as they always carefully calculate every product price and profit. Coming to a business deal meeting prepared with a careful financial forecast is highly recommended.

Chinese-Indonesians: Sinyong and Guanxi

Source: Pinterest

The Chinese-Indonesians are a prominent group in the Indonesian business landscape. They mostly reside in the greater Jakarta area but in general, they are dispersed across different islands. There are five major Chinese tribes in Indonesia; Hokkian, Hakka, Tiochiu, Kanton and Hainan. While they have different dialects and are concentrated in different provinces, they generally hold similar principles and approach to business.

According to Juliette Koning in her paper about Chinese-Indonesians, they dominate 70% to 75% of SMEs in Indonesia. They are present in multiple industries such as chemical, electronics, paper, but according to our consultants, they are mostly involved in importing products. Koning also stated this tendency for Chinese-Indonesians to occupy the business landscape while the pribumi (or indigenous Malayo-Indonesian) occupy the political landscape is linked to the Dutch colonial era where the Dutch colonizers positioned the Chinese-Indonesians as intermediaries for European businesses to balance out power distribution.

The Uniqueness of Chinese-Indonesians

Important Chinese morals are sinyong (trust) and guanxi (good relationships). Therefore in a way, the Chinese-Indonesians share aspects of the national culture in terms of the significance of building a relationship prior to business deals. Guanxi, in particular, is shown through their tendency to look for partners or colleagues from the same ethnic group, especially in handling finance. Reasons for this stated in interviews include “being more comfortable”, “having the same perspective moving forward”, and having “the same common ground”.

Konning stated, however, that the older-generation of Chinese-Indonesians expressed disappointment as the younger generation no longer makes use of some business practices considered ‘Chinese’. Hence, their culture is somehow evolving. Reasons stated in Konning’s paper include the cultural influences in which this younger generation grew up, and how most studied abroad where they learn new ways of running a business.

Despite some generational difference, establishing a relationship remains a vital part of business. Interestingly, Chinese-Indonesian business partners usually provide gestures such as providing meals in meetings and giving a drive-home for their partners after a meeting. Business is also often done on a golf course. So approach them respectfully and maintain a good relationship even after the business deal. It is also advised to find mutual interests.

The Chinese-Indonesian Way of Business

In doing business, the Chinese-Indonesians are strongly disciplined and committed. Based on interviews with several different consultants, they expressed that the Chinese-Indonesians also have a confidence level that is higher than average in Indonesia. Faiz Ahadina, a consulting partner of BRIGHT Indonesia, remarked that:

“When I was looking for Indonesian partners for this foreign company, I approached multiple businesses. Of those companies, I found that the average Indonesians are insecure and reluctant to meet with the foreign company when they feel that they have limited experience in the industry or their office is not particularly fancy or located somewhere strategic. They often back down under the reason they are ‘new in the industry’ or their ‘office is currently messy’.

But with the exact same situation, Chinese-Indonesians almost always go for the meeting. And when we went to the meeting in their office, it was also in someplace remote (not in the big business areas), not that big or fancy. But they don’t pay too much attention to it. I guess their principle is just to ‘go-ahead’, first taking the opportunity and seeing where it lands.”

The same principle applies to orders. Our consultants stated that they never shy away from big orders that might go beyond their capacity, they are tenacious in working overtime and finding different tactics to fulfil orders.

Another notable difference in doing business is that the Chinese-Indonesians do not really care if they have low or high margins, they care more about the quantity sold. In fact, they often prefer having lower margins because the price would be lower and they would sell more. In contrast, the average Indonesians care more about margins rather than attracting customers.

Slightly different from the national culture, business meetings with Chinese-Indonesians also tend to be more formal and have a specific business focus. They rely more on fact and reason, as opposed to emotions and intuition. They also are competitive in negotiations, especially the Chinese-Hokkiens from Medan who have a high hustling spirit.

Implications for International Companies (Part II)

Overall, the Minangnese, Bataknese, and Chinese-Indonesians value relationships in business according to the national culture. However, they all are more direct in communicating and emphasize reason rather than emotions in decision-making, unlike the Javanese and Balinese as previously mentioned in the first part of our article. This might be attributed to history as unlike the agricultural society of Java and Bali, most Sumatrans and Chinese-Indonesians are either sailors or traders. Do note these differences in negotiations. Be more direct in communicating your deal, prepare good propositions with a solid win-win approach, and you don’t have to be risk-averse as long as the returns from your deal are promising.

As a warning note, while this article provides generalized information of the ethnic groups, they may not necessarily apply to individuals. Being prepared with background information of your Indonesian partner is excellent preparation, but be careful not to stereotype or be biased before getting to know the actual individual.


Set Strategy with BRIGHT Indonesia

With Indonesia’s diverse culture, ethnic and customs, understanding about business culture, language barriers, and the need for a good connection within the market are very important in entering Indonesia’s market. By knowing the differences, it can be one of the strategies to enter the market.

BRIGHT Indonesia can help you to enter and run the business expansion smoothly. Our Business Registration and Establishment, Stakeholder Relations Management, Business Partnership Engagement, and Business Incubation and Accelerator services can help you in expanding and developing your business, register and establish your products and company, as well as obtain the work and stay permit in Indonesia ((expatriates utilization plan (RPTKA), expatriates utilization permit (IMTA), limited stay permit (KITAS)) easier. 

We focus on supporting private sector clients with the development of corporate or business unit strategies and helping public sector organizations with public policy. For further information, email to info@brightindonesia.net.

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