The economic impact of cultural cluelessness

by Tonia

I came to Indonesia to find out something about the economy. To all appearances, Indonesia is an economic success story: in the 13 years since the 1997 Asian financial crisis, it has experienced remarkable success and growth. But roadblocks to economic development and foreign investment still exist. Explaining whether and how Indonesia can overcome them is the goal of my research. In Jakarta, I found a lot of “official” answers to my questions: carefully crafted policy assessments couched in staid financial language. In Bali, I found a contrasting opinion that unsettled my picture of the Indonesian economy.

During our week in Jakarta I met with an array of experts — a representative from the International Finance Corporation of the World Bank, the head of the world-renowned  microfinance operations at Bank Rakyat Indonesia, and researchers from the central Bank Indonesia — who were all more or less on the same page. After speaking with them and conducting some of my own research, I’ve been able to pinpoint several key reasons behind the success and growth of the Indonesian economy over the past decade since the 1997 crisis, and also some of the key challenges which the country faces in the future. Most gave similar reasons for why they felt there are still major roadblocks to Indonesian growth and why many foreign investors are wary of investing in the economy given these challenges (some of which will be fleshed out in upcoming articles in the Globalist).

But this week I met with someone in Bali who held a unique perspective on the reluctance of foreigners to put their money into the island’s economy. Unlike the officials from prestigious financial institutions, my Bali source had no qualms about giving his blunt, honest opinion. He held nothing back, and I’m glad he didn’t.

I met this source — an American accountant and consultant who has lived in Asia for over 17 years — at a popular German bar in Kuta on a sweltering Friday afternoon. Bali has many expats living and working on the island. Some come for the lifestyle, but others come to make a buck by navigating the island’s economy for clueless foreign businessmen.

While he admitted that corruption, mercurial laws, and other structural challenges do play a role in deterring foreign investors from entering the Indonesian market, my source claimed that the biggest problem is those investors’ limited world view. They are, he explained,  “completely ignorant about emerging markets in Asia.” According to him, Western businesspeople just don’t get the intricacies of Asian markets and consequently fail to see the growth potential of places like Indonesia. He did admit that some of the concerns my previous sources had listed–infrastructure, corruption, legal problems, reliance on the informal sector–did exist, but those who were truly perceptive  would not hesitate to work around these issues and invest in Indonesia’s economy.

Throughout our conversation, he provided us with colorful stories from his past experiences with businesspeople who still felt that Indonesia was a “bastion of deficiency” and had absolutely no conception of how the Indonesian economy actually operates. These businessmen ranged from bankers to blog writers on Yahoo! or Google. To him, this was American ignorance in action. Despite being American himself, my source was comfortable lacing his stories with utter disdain for his former countrymen.

While his stories grew increasingly long-winded as the afternoon progressed (he even told one about once taking his Javanese driver to a rock concert), the expat was more honest and frank than any of the experts I spoke to in Jakarta. Most of the officials we met with earlier were careful to choose their words according to the interests of the firms they worked for, but the expat just said what he thought: a reporter’s dream.

There are many successful expats on this island, and I’m sure their points of view vary. What I could take away from this interview was that investing time in truly understanding how a country works isn’t just respectful and rewarding — in places like Indonesia, it’s actually good for business.