Commentary: Language barriers block businesses off from Indonesia

CANBERRA: For the past decade, the Indonesian government has stepped up efforts to mandate the use of the Indonesian language in all aspects of life.

These regulations reach beyond the traditional role of language in culture and education, and encroach into the business space.

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This regulatory saga, unique to Indonesia, involves multimillion-dollar lawsuits and repeated attempts to manage foreign workers and businesses language.

READ: Commentary: Indonesia is reopening for business even with record high COVID-19 infections

PUSH FOR THE INDONESIAN LANGUAGE

The effort began with Law No 24/2009 that seeks to protect the sanctity of the national flag, language, emblem, and anthem by regulating their reproduction and use.

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Beyond its common application in state communications and education, Article 26 of this law also states that the Indonesian language must be used in all agreements involving Indonesian organisations and individuals.

While no sanctions are specified for not complying, this law created risks. Two court proceedings in 2013 and 2017 quoted Law No 24/2009 to dispute the validity of English-only contracts between Indonesian companies and their foreign suppliers.

The Indonesian court ruled that these contracts breached the law and are thus null and void, sending shockwaves through the international legal and business community in Indonesia.

READ: Commentary: Jokowi needs to do better in making economics his priority for Indonesia

Foreign personnel were also targeted. In late 2013, a Ministry of Manpower regulation stated that foreign workers must “be able to communicate in the Indonesian language”.

This was clarified two years later as possessing an Indonesian language competency certificate. The foreign business community was understandably apprehensive.

Concerned about deterring foreign investment, Indonesian President Joko Widodo instructed the then-manpower minister to roll back the restriction. But pressure from the House of Representatives led to the re-introduction of a milder requirement in Presidential Regulation No 20/2018, which requires employers to facilitate Indonesian language training for their foreign workers.

Next came Presidential Regulation No 63/2019, an implementing regulation for the language component of the 2009 law. While it clarified the hierarchy of contract languages, it further specified situations where Indonesian must be used, including verbal and electronic workplace communications.

WATCH: Indonesia's foreign employees learn the national language | Video

IMPACT ON FDI

Foreign direct investment (FDI) is a prominent feature of this ongoing language policy debate. Even local businesses claim that such regulations will sour the appetite of international investors.

The ease of communication logically promotes business links, but to what extent might restricting investors language options prove detrimental to FDI?

Quite considerably, as it turned out. When Bappenas, the Indonesian Ministry of National Development Planning, asked international executives in ASEAN countries for suggestions on changes to public policies, two of the three proposals were on language – revising Presidential Regulation No 63/2019 and translating key regulations into English and other international languages.

READ: The Big Read: With globalisation in retreat, ASEAN can offer Singapore a way forward in post-COVID world

Furthermore, studies suggest Asian multinational enterprises (MNEs) prefer using their own language in headquarter-subsidiary interactions. They often place their own nationals as expatriates in overseas subsidiaries to minimise communication errors and maintain a degree of control.

Language restrictions are particularly relevant for Japanese MNEs – the second largest senders of capital and personnel to Indonesia in 2018. A 2018 survey by the Japanese External Trade Organisation (JETRO) of 15 host economies in ASEAN, Southwest Asia and Oceania also suggested the significance of language in the international operations of Japanese MNEs.

When asked to rank the top five merits of these host economies, almost all listed “fewer linguistic/communication problems” or “good living environment for Japanese expatriates” except for Indonesia and Laos.

It seems that Indonesian policymakers may have unintentionally deterred one of the countrys most important sources of FDI.

JAPANESE PROFICIENCY

Studies have shown economies with a higher level of proficiency in the Japanese language, measured by proficiencies in Japanese as a second language and level 2 Japanese, receive more FDI from Japan.

Meanwhile, the effects of level 2 English skills on Japanese FDI are unclear.Read More – Source

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