Indonesia must find ways to attract and retain domestic and foreign talent, a BCG report finds. (Antara Photo/Rahmad Gunawan)

Commentary: Expatriate Employment Trends in Indonesia


MAY 31, 2016

As the time goes by, we are seeing a decrease in the usage of expatriate employees in key positions in multinational companies in Indonesia.

That was at least the headline of few business magazines since the year of 2010 when I first started this company.

The reason behind this is that the local employees now have the capabilities that can compete with the expat employees. The same skill set with less cost definitely attracts more companies to recruit and replace their senior expatriates to Indonesian executives.

Those multinational companies that used to have 80 percent of their senior management team who were expatriates have now decreased this number to only 20 percent.

Mostly seen is the president director as well as the finance director seat that were still handled by an expatriate employee either from the head quarter of the company or from other regions.

While other positions like sales, marketing, production, supply chain, IT, risk management and others could be handled by local executives.

The rising of the Indonesian employees quality are none the less the impact of the experience they have gained in working with multinational companies either in Indonesia or even overseas combined with their degree earned from international universities.

Realizing that the skill set of the locals are now competitive enough and the cost to company is lower compared to expats, companies decided to give this a shot, which eventually worked out.

This has however given a rise in the local executive’s salary and became a hike, as their expertise grew, their pay grew.

At some cases the only difference between a local director’s pay and an expat director’s pay was only their Expat benefits such as housing, working permit, international insurance as well as children’s school fees.

But their salary and other benefits have equalized to the ones that an expat received.

So, the question is, we still see many senior expatriates working in Indonesia. As much as this news keeps on coming, we did not see much decrease in the number of expats living in Indo. How is that possible?

The truth is that, on the contrary where the multinationals are reducing the number of expats in their organizations, the local conglomerates are increasing theirs.

These expatriates are now being hired and searched by the local corporates who needs their expertise to help grow their companies into the next level.

As I mentioned before that the “only” difference are some of the expat benefits to compare with a local director, the local companies thought differently and felt they would rather pay an expat and get insights and knowledge from them rather than paying local director that high of a package.

So although not published anywhere on paper about this, being a headhunter or in the recruitment industry, I have had the chance to see this change and that I am offering many expatriates to join with many of our local conglomerates here as an agent of change, a person or an employee that would bring our local companies into the next level of growth with the strategies used in multinational companies.

This has happened so much in the past five years that I am now used to explaining both sides how things will work and what they were to expect from both sides knowing they come from different culture and structure and needed to blend to make a fruitful relationship for making the business a success.

The mindset of reducing cost by the multinational companies have been taken in a different way by the local conglomerates and corporates, they see it as raising the investment to compete in the global market. Ironic, but beneficial to all, and saves a lot of unemployment.

Although there are many changes to be expected to happen by the expat workers when they decide to join the local conglomerate, as long as they see this as a challenge and are willing to run the extra mile to contribute, they eventually see good results and are now retained by their employers or even given better chances.

So the question now changes, who is actually losing the opportunity in Indonesia, the locals or the expatriate workers ?

Ricky Mulani is the president director of Quantum Select International, an executive search firm that helps head huny top executives for the business community in Indonesia