Managing Plantations in Indonesia

Peter Benjamin

Aug 2015

In every advertisement for Managers and any other senior position in Indonesia there is always a statement “Candidates With Indonesian Experience Preferred”. This is always the case with Indonesian companies.

At the same time, many Malaysian companies with plantations in Indonesia also send their Managers to gain more experience and exposure. The Managers can learn from the unique nature of doing business there. The different cultures across the archipelago require a Manager to be sensitive to them.

In Kalimantan, there are different ethnic groups, including the Dayaks the Maduras, and the Javanese who went there on the Trans-Migration program. These groups also consist of different religions, Muslims, Christians, Hindus, etc. The Managers will need to understand these groups, because every issue, group or area is different. We cannot apply the same solution everywhere.

For example: In a Dayak community, who are one of the most difficult to handle, the majority are Christians. In these areas we only send Local Managers who are Christians. The reason being, to handle these communities you have to attend their community functions. You have to entertain the Kepala Desa (Head of the village). The local delicious food is always served which also consist of pork, and free flow of alcohol. The same applies to Papua. Frequent courtesy call on the village head is important to maintain a good relationship. Always remember to bring along a good branded “drink”.

In Muslim majority areas, the scenario is different. The important thing is to give a courtesy call on the local village head. The importance to give respect should not be overlooked. This applies to all regions in Indonesia, irrespective of ethnic group, religion, etc.

Sumatra is a different scenario altogether. North and Central Sumatra, though do have unique problems and issues that crop up from time to time, and can be solved with the assistance of the local heads and authorities. South Sumatra is a more difficult area to manage. Here we need special skills in patience and toughness. A very good relationship with the local heads and authorities should not be overlooked. A solution comes also at a very high price. Intimidation and threats are common here, and as mentioned earlier, one needs special skills to manage them.

Papua is a different culture altogether. It is important here too to be firm and maintain good discipline to get things moving. Constant hindrance to operations is common, however problems can be settled at a negotiated price. Alcohol consumption is an issue which is difficult to overcome. During the night your employees, fully intoxicated might call you by your first name, will shout at you for all the scolding and shouting you have done during the course of the working hours. Next morning, they will forget what they did last night and at times even apologize to you and call you “Boss”.

Managers need to understand and study how local issues are handled. Yes we have local staff who are engaged to handle local issues. The challenge for Managers is how we monitor the local staffs too. The key persons in villages need to be identified who can assist the company whenever a need arises. Normally these are the Kepala Desa. He, and below him the Kepala Dusun, will become your consultant and key advisor on local matters. And these can come with hefty “consultation fees.” But Managers need to have control, and negotiate these fees.

Going up the ladder on local issues, Managers need to constantly keep in touch and pay courtesy calls to the Chamats and the Bupati. They being advisors to the Company on local and land matters, can ask for hefty “advisory fees” as well. These  too are negotiable, and Managers need to have a firm control.

On land matters, claims over land, even if land permits or titles are obtained, are a frequent occurrence in Indonesia. This is where the “consultants and Advisors” play a major role. And off course, at a price.

Managers should not forget, operations in Indonesia are most of the time in remote areas and there is a need to work very closely with the villages. Many of these villages are in dire need of infrastructure and amenities. Government assistance may arrive only after a very long wait. This is where companies play a major role and in the process win over the villagers to work peacefully with you. Get to know the issues. Draw up a long term CSR program and discuss this with the Village Head and the Villagers. Set specific programs for each year. The important thing to remember is, once you have given your commitment, fulfil them on time. This will be greatly appreciated.

In Indonesia for the development of oil palm, there is a Plasma scheme (Small holders’ scheme). This normally is set at a minimum of 20% of the Inti or planted area of the company. It is important that these schemes are planted in parallel with the company’s planted area or ahead of the company’s area. This will help in a long way since the villagers know that they have an area which will provide a steady income. These areas normally come under a co-operative scheme with villagers as members.

Another big challenge is how to manage the local managers and staff. Whenever an expatriate takes up a position in the company, it is common to see local staffs testing his capability. Issues are created or brought to his attention for advice or action, though these can be handled by the locals themselves. Managers must be careful not to fall into this trap. It is important to understand the situation and give sound advice or take appropriate action. It is also important to be firm and have good control over every aspect of the operation. Never be seen to be weak or indecisive. You will lose control of your area of responsibility if this happens. Discipline is of utmost importance.  Once you win over them and gain their respect, then things will be a lot easier. But never let your guard down.

Some examples of my experience in Indonesia...

When I was a District Manager in a forestry plantation in Riau, Sumatra, three months after I was posted in a remote area, and even before I settled down in my new job, I faced land issues with the locals. It reached a point where our security guards had fights with the locals. The stuation was very serious that we had a police battalion stationed at our site.

To overcome this tense situation, I requested my Managers to arrange for meetings with all the Kepala Desa surrounding our area, which covered 35,000 Ha. My Managers were reluctant with the fear of backlash from the locals. However I insisted and went ahead with meeting the Kepala Desas in their village. We were surprised at the warm reception accorded to us and their willingness to talk to us. I highlighted to them that the company was there to stay and we need to work together. I worked out a plan to engage more locals from the surrounding villages and provide business or contract opportunities for them. We provided employment for 300 workers and also contracts for the villagers and I never had an issue with them until I was transferred.

I was also involved in CSR programs with the surrounding village. In one example, the company built a very big mosque in the area. I was involved in the project and ensured it was completed on time and provided all the assistance to the villagers. During the opening ceremony we were all invited. There were all the Government personnel, media, Regional Controllers, etc.

When it was time for the opening ceremony, the Kepala Desa came to me, held my hand and told me, that I should perform the opening ceremony. I was totally caught off guard. I went over to the Regional controller, who was a Muslim, and told him he should do the honour. He told me “Its’ an honour that they invited me to do the opening ceremony. Go and do it, don’t worry.”

I will never forget that day. The company never had a problem in this area.

In every area that I worked, I always ensured that CSR programs, the small holders’ scheme (Plasma program) were implemented first. We had fewer issues and if any issues did crop up, we were able to discuss and solve them amicably.

This goes to show the importance of engaging with the local people and contributing to CSR programs.