Hr Practices In Indonesia

Hr Practices In Indonesia

Group members

Mariam Yaqoob 02093-033

Farzan Yahya 02093-006

Zarak Mir 02093-066

Muhammad Ali 02093-045

Dedication

We dedicate this report to our parents and our honorable teacher Sir Faisal Akbar Awan. Without their patience, understanding, support and most of love, the completion of this work would not have been possible.

Acknowledgment First of all, I would like to say Alhamdulillah, for giving me the strength and health to do this project work until it done, not forgotten to my family for providing everything, such as money, to buy anything that are related to this project work and their advice, which is the most needed for this project, internet, books, computers and all that as my source to complete this project. They also supported us and encouraged us to complete this tasked so that I will not procrastinate in doing it.

Then I would like to thank my teacher, Sir Faisal Akbar Awan for guiding us throughout this project. We had some difficulties in doing this tasked, but he taught us patiently until we knew what to do. We are also thankful to Madam Huda Khan who helped us in making of this project.

Last but not least, my group members who were doing this project with me and sharing our ideas. They were helpful that when we combined and discussed together, we had this tasked done.

Table of ContentsDedication1Acknowledgment2History of Indonesia:4Prehistory:5Hindu-Buddhist civilizations5The age of Islamic states6Colonial era:6Sukarno's presidency8Sukarno's revolution and nationalism10The New Order11Annexation of West Irian12Forcing out Suharto13Economic crisis and Suharto's resignation14Politics since 2004-201015Culture & Religion of Indonesia17Language18Music18Art19Games19Food19Diversity19Hierarchy20Face20General Etiquette Guidelines20Business Etiquette & Protocol21The Impact of Organizational Culture on the Human Resources Management Practices.23The Impact of HRM on Organizational Performance24Economy of26Indonesia26Information of the Economy27Indonesian HR Professionals (IHRP) Society33VISION33MISSION33BASIC OBJECTIVES33THE HUMAN RESOURCE PRACTICES IN THE PUBLIC SECTOR ININDONESIA34Recruitment and selection practices in the public sector in Indonesia35Compensation in Indonesia36Old-age program36Health insurance36Retirement programs36Remuneration system practice in the public sector in Indonesia37TRAINING AND DEVELOPMENT PRACTICES OF THE PUBLIC SERVANTS IN INDONESIA37Performance appraisal practice for the public servants in Indonesia38Indonesian Labor Laws41Firing41Safety41Sick Leave41Annual Leave41Injury Compensation41Dispute Resolution42Employment Relation:43Equal Employment Opportunity43Affirmative Action43Primary Responsibilities and Duties:44Disclosure Policy45Employment law in Indonesia50Sources of regulation50Scope of legislation50Contracts of employment51Termination of employment51Dismissal52Notice and prior procedural safeguards53Avenues for redress56Total Increase57Human Resources Development58Building Working Relationships with Indonesians59Employees Wage Rate and Benefits59Regulations61Talent challenges and strategies64Tax and contributions65Business context66Conclusion82

IntroductionThis report includes all about Indonesia. Its history, economy, culture and all HR practices that undergone in Indonesia.History of Indonesia:Indonesia is an archipelagic country of 17,508 islands (6,000 inhabited) stretching along the equator in South East Asia. The country's strategic sea-lane position fostered inter-island and international trade; trade has since fundamentally shaped Indonesian history. The area of Indonesia is populated by peoples of various migrations, creating a diversity of cultures, ethnicities, and languages. The archipelago's landforms and climate significantly influenced agriculture and trade, and the formation of states. Fossilized remains of Homo erectus, popularly known as the "Java Man", suggest the Indonesian archipelago was inhabited two million to 500,000 years ago. Austronesian people, who form the majority of the modern population, were originally from Taiwan and arrived in Indonesia around 2000BCE.The theories presented above could be refuted and in need of revision due to new scientific evidence presented by HUGO (Human Genome Organization) through genetic studies of the Asian races that points to a single Asian migration from South East Asia traveling northwards and slowly populating East Asia instead of the other way around which as popularly depicted above. From the scientific discovery which has been a silent evidence, it has pointed out that the South East Asian civilizations are a of much older civilization compared to the widely researched and well documented east Asians' ancient civilizations [1]From the 7th century CE, the powerful Srivijaya naval kingdom flourished bringing Hindu and Buddhist influences with it. The agricultural Buddhist Sailendra and Hindu Mataram dynasties subsequently thrived and declined in inland Java. The last significant non-Muslim kingdom, the Hindu Majapahit kingdom, flourished from the late 13th century, and its influence stretched over much of Indonesia. The earliest evidence of Islamised populations in Indonesia dates to the 13th century in northern Sumatra; other Indonesian areas gradually adopted Islam which became the dominant religion in Java and Sumatra by the end of the 16th century. For the most part, Islam overlaid and mixed with existing cultural and religious influences.Europeans arrived in Indonesia from the 16th century seeking to monopolize the sources of valuable nutmeg, cloves, and cubeb pepper in Maluku. In 1602 the Dutch established the Dutch East India Company (VOC) and became the dominant European power. Following bankruptcy, the VOC was formally dissolved in 1800, and the government of the Netherlands established the Dutch East Indies as a nationalized colony. By the early 20th century Dutch dominance extended to what was to become Indonesia's current boundaries. The Japanese invasion and subsequent occupation during WWII ended Dutch rule, and encouraged the previously suppressed Indonesian independence movement. Two days after the surrender of Japan in August 1945, nationalist leader, Sukarno, declared independence and was appointed president. The Netherlands tried to reestablish their rule, but a bitter armed and diplomatic struggle ended in December 1949, when in the face of international pressure, the Dutch formally recognized Indonesian independence.An attempted coup in 1965 led to a violent army-led anti-communist purge in which over half a million people were killed. General Suharto politically out-maneuvered President Sukarno, and was formally appointed president in March 1968. His New Order administration garnered the favor of the West whose investment in Indonesia was a major factor in the subsequent three decades of substantial economic growth. In the late 1990s, however, Indonesia was the country hardest hit by the East Asian Financial Crisis which led to popular protests and Suharto's resignation on 21 May 1998. The Reformasi era following Suharto's resignation, has led to a strengthening of democratic processes, including a regional autonomy program, the secession of East Timor, and the first direct presidential election in 2004. Political and economic instability, social unrest, corruption, natural disasters, and terrorism have slowed progress. Although relations among different religious and ethnic groups are largely harmonious, acute sectarian discontent and violence remain problems in some areas.Prehistory:Hindu-Buddhist civilizationsReferences to the Dvipantara or JawaDwipaHindu kingdom in Java and Sumatra appear in Sanskrit writings from 200 BCE. The earliest archeological relic discovered in Indonesia is from the Ujung Kulon National Park, West Java, where an early Hindu statue of Ganesha from the 1st century CE was found on the summit of Mount Raksa in Panaitan Island. There is also archeological evidence of a kingdom in Sunda territory in West Java dating from the 2nd century, and according to Dr Tony Djubiantono, the head of Bandung Archeology Agency, Jiwa Temple in Batujaya, Karawang, West Java was also built around this time.

8th century Borobudurbuddhist monument, Sailendra dynastyA number of Hindu and Buddhist states flourished and then declined across Indonesia. By the time of the EuropeanRenaissance, Java and Sumatra had already seen over a millennium of civilization and two major empires. One such early kingdom was Tarumanagara, which flourished between 358 and 669 CE. Located in West Java close to modern-day Jakarta, its fifth-century king, Purnawarman, established the earliest known inscriptions in Java, the Ciaruteun inscription located near Bogor. On this monument, King Purnavarman inscribed his name and made an imprint of his footprints, as well as his elephant's footprints. The accompanying inscription reads, "Here are the footprints of King Purnavarman, the heroic conqueror of the world". This inscription is in Sanskrit and is still clear after 1500 years. Purnawarman apparently built a canal that changed the course of the Cakung River, and drained a coastal area for agriculture and settlement. In his stone inscriptions, Purnawarman associated himself with Vishnu, and Brahmins ritually secured the hydraulic project.[8]The age of Islamic statesAlthough Muslim traders first traveled through South East Asia early in the Islamic era, the earliest evidence of Islamized populations in Indonesia dates to the 13th century in northern Sumatra. Although it is known that the spread of Islam began in the west of the archipelago, the fragmentary evidence does not suggest a rolling wave of conversion through adjacent areas; rather, it suggests the process was complicated and slow.[18] The spread of Islam was driven by increasing trade links outside of the archipelago; in general, traders and the royalty of major kingdoms were the first to adopt the new religion.Other Indonesian areas gradually adopted Islam, making it the dominant religion in Java and Sumatra by the end of the 16th century. For the most part, Islam overlaid and mixed with existing cultural and religious influences, which shaped the predominant form of Islam in Indonesia, particularly in Java. Only Bali retained a Hindu majority. In the eastern archipelago, both Christian and Islamic missionaries were active in the 16th and 17th centuries, and, currently, there are large communities of both religions on these islands.Colonial era:Beginning in the 16th century, successive waves of Europeansthe Portuguese, Spanish, Dutch and Britishsought to dominate the spice trade at its sources in India and the 'Spice Islands' (Maluku) of Indonesia. This meant finding a way to Asia to cut out Muslim merchants who, with their Venetian outlet in the Mediterranean, monopolised spice imports to Europe. Astronomically priced at the time, spices were highly coveted not only to preserve and make poorly preserved meat palatable, but also as medicines and magic potions.The arrival of Europeans in South East Asia is often regarded as the watershed moment in its history. Other scholars consider this view untenable, arguing that European influence during the times of the early arrivals of the sixteenth and 17th centuries was limited in both area and depth. This is in part due to Europe not being the most advanced or dynamic area of the world in the early 15th century. Rather, the major expansionist force of this time was Islam; in 1453, for example, the Ottoman Turks conquered Constantinople, while Islam continued to spread through Indonesia and the Philippines. European influence, particularly that of the Dutch, would not have its greatest impact on Indonesia until the 18th and 19th centuries.Indonesian National AwakeningIn October 1908, the first nationalist movement was formed, Budi Utomo. On September 10, 1912, the first nationalist mass movement was formed--Sarekat Islam. By December 1912, Sarakat Islam had 93,000 members.[] The Dutch responded after the First World War with repressive measures. The nationalist leaders came from a small group of young professionals and students, some of whom had been educated in the Netherlands. In the postWorld War I era, the Indonesian communists who were associated with the Third International started to usurp the nationalist movement. The repression of the nationalist movement led to many arrests, including Indonesia's first president, Sukarno (190170), who was imprisoned for political activities on December 29, 1929. Also arrested was Mohammad Hatta, first Vice-President of Indonesia. Additionally, SutanSjahrir, who later became the first Prime Minister of Indonesia, was arrested on this date. In 1914 exiled Dutch socialist HenkSneevliet founded the Indies Social Democratic Association. Initially a small forum of Dutch socialists, it would later evolve into the Communist Party of Indonesia in 1924. In the postWorld War I era, the Dutch strongly repressed all attempts at change. This repression led to a growth of the P.K.I. By December 1924, the P.K.I had a membership of 1,140. One year later in 1925, the P.K.I. had grown to 3,000 members. In 1926 thru 1927, there was a P.K.I. led revolt against the Dutch colonialism and the harsh repression based on strikes of urban workers. However, the strikes and the revolt was put down by the Dutch with some 13,000 nationalists and communists leaders arrested. Some 4,500 were given prison sentences. Sukarno was released from prison in December 1931. However, Sukarno was re-arrested again on August 1, 1933. Under pressure from radical and politicisedpemuda ('youth') groups, Sukarno and Hatta proclaimed Indonesian independence, on 17 August 1945, two days after the Japanese Emperors surrender in the Pacific. The following day, the Central Indonesian National Committee (KNIP) declared Sukarno President, and HattaVice President. Word of the proclamation spread by shortwave and fliers while the Indonesian war-time military (PETA), youths, and others rallied in support of the new republic, often moving to take over government offices from the Japanese.The Netherlands, initially backed by the British tried to re-establish their rule, and a bitter armed and diplomatic struggle ended in December 1949, when in the face of international pressure, the Dutch formally recognisedIndonesian independence. Dutch efforts to re-establish complete control met resistance. At the end of World War II, a power vacuum arose, and the nationalists often succeeded in seizing the arms of the demoralised Japanese. A period of unrest with city guerrilla warfare called the Bersiap period ensued. Groups of Indonesian nationalists armed with improvised weapons (like bamboo spears) but also firearms attacked returning Allied troops. 3500 Europeans were killed and 20000 were missing, meaning more European deaths in Indonesia after the war than during the war. After returning to Java, Dutch forces quickly re-occupied the colonial capital of Batavia (now Jakarta), so the city of Yogyakarta in central Java became the capital of the nationalist forces. Negotiations with the nationalists led to two major truce agreements, but disputes about their implementation, and much mutual provocation, led each time to renewed conflict. Within four years the Dutch had recaptured almost the whole of Indonesia, but guerrilla resistance, led on Java by commander Nasution persisted. On 27 December 1949, after four years of sporadic warfare and fierce criticism of the Dutch by the United Nations, the Netherlands officially recognised Indonesian sovereignty under the federal structure of the United States of Indonesia (RUSI). On 17 August 1950, exactly five years after the proclamation of independence, the last of the federal states were dissolved and Sukarno proclaimed a single unitary Republic of Indonesia. Sukarno's presidencyCampaign posters for the 1955 Indonesian election.With the unifying struggle to secure Indonesia's independence over, divisions in Indonesian society began to appear. These included regional differences in customs, religion, the impact of Christianity and Marxism, and fears of Javanese political domination. Following colonial rule, Japanese occupation, and war against the Dutch, the new country suffered from severe poverty, a ruinous economy, low educational and skills levels, and authoritarian traditions. Challenges to the authority of the Republic included the militant Darul Islam who waged a guerrilla struggle against the Republic from 1948 to 1962; the declaration of an independent Republic of South Maluku by Ambonese formerly of the Royal Dutch Indies Army; and rebellions in Sumatra and Sulawesi between 1955 and 1961.In contrast to the 1945 Constitution, the 1950 constitution mandated a parliamentary system of government, an executive responsible to the parliament, and stipulated at length constitutional guarantees for human rights, drawing heavily on the 1948 United Nations Universal Declaration of Human Rights. A proliferation of political parties dealing for shares of cabinet seats resulted in a rapid turnover of coalition governments including 17 cabinets between 1945 and 1958. The long-postponed parliamentary elections were held in 1955; the Indonesian National Party (PNI)considered Sukarno's partytopped the poll, and the Communist Party of Indonesia (PKI) received strong support, but no party garnered more than a quarter of the votes, which resulted in short-lived coalitions.

Coat of Arms of the Republic of Indonesia, adopted 1950By 1956, Sukarno was openly criticising parliamentary democracy, stating that it was "based upon inherent conflict" which ran counter to Indonesian notions of harmony as being the natural state human relationships. Instead, he sought a system based on the traditional village system of discussion and consensus, under the guidance of village elders. He proposed a threefold blend of nasionalisme ('nationalism'), agama ('religion'), and komunisme ('communism') into a co-operative 'Nas-A-Kom' government. This was intended to appease the three main factions in Indonesian politics the army, Islamic groups, and the communists. With the support of the military, he proclaimed in February 1957, 'Guided Democracy', and proposed a cabinet of representing all the political parties of importance (including the PKI).[44] The US tried and failed to secretly overthrow the President, while Secretary of State Dulles declared before Congress that "we are not interested in the internal affairs of this country." [45]Sukarno abrogated the 1950 Constitution on 9 July 1959 by a decree dissolving the Constitutional Assembly and restoring the 1945 Constitution.[44] The elected parliament was replaced by one appointed by, and subject to the will of, the President. Another non-elected body, the Supreme Advisory Council, was the main policy development body, while the National Front was set up in September 1960 and presided over by the president to "mobilise the revolutionary forces of the people". Western-style parliamentary democracy was thus finished in Indonesia until the 1999 elections of the Reformasi era. Sukarno's revolution and nationalismCharismatic Sukarno spoke as a romantic revolutionary, and under his increasingly authoritarian rule, Indonesia moved on a course of stormy nationalism. Sukarno was popularly referred to as bung ("older brother"), and he painted himself as a man of the people carrying the aspirations of Indonesia and one who dared take on the West. He instigated a number of large, ideologically driven infrastructure projects and monuments celebrating Indonesia's identity, which were criticised as substitutes for real development in a deteriorating economy. Western New Guinea had been part of the Dutch East Indies, and Indonesian nationalists had thus claimed it on this basis. Indonesia was able to instigate a diplomatic and military confrontation with the Dutch over the territory following an Indonesian-Soviet arms agreement in 1960. It was, however, United States pressure on the Netherlands that led to an Indonesian takeover in 1963. Also in 1963, Indonesia commenced Konfrontasi with the new state of Malaysia. The northern states of Borneo, formerly British Sarawak and Sabah, had wavered in joining Malaysia, whilst Indonesia saw itself as the rightful rulers of the Malay race and supported an unsuccessful revolution attempt in Brunei. Reviving the glories of the Indonesian National Revolution, Sukarno rallied against notions of British imperialism mounting military offensives along the Indonesia-Malaysia border in Borneo. As the PKI rallied in Jakarta streets in support, the West became increasingly alarmed at Indonesian foreign policy and the United States withdrew its aid to Indonesia. Indonesia's economic position continued to deteriorate; by the mid-1960s, the cash-strapped government had to scrap critical public sector subsidies, inflation was at 1,000%, export revenues were shrinking, infrastructure crumbling, and factories were operating at minimal capacity with negligible investment. Severe poverty and hunger were widespread. The New OrderDescribed as the great dalang ("puppet master"), Sukarno's position depended on balancing the opposing and increasingly hostile forces of the army and PKI. Sukarno's anti-imperial ideology saw Indonesia increasingly dependent on Soviet and then communist China. By 1965, the PKI was the largest communist party in the world outside the Soviet Union or China. Penetrating all levels of government, the party increasingly gained influence at the expense of the army.On September 30, 1965, six of the most senior generals within the military and other officers were executed in an attempted coup. The insurgents, known later as the 30 September Movement, backed a rival faction of the army and took up positions in the capital, later seizing control of the national radio station. They claimed they were acting against a plot organised by the generals to overthrow Sukarno. Within a few hours, Major General Suharto, commander of the Army Strategic Reserve (Kostrad), mobilised counteraction, and by the evening of 1 October, it was clear the coup, which had little coordination and was largely limited to Jakarta, had failed. Complicated and partisan theories continue to this day over the identity of the attempted coup's organisers and their aims. According to the Indonesian army, the PKI were behind the coup and used disgruntled army officers to carry it out, and this became the official account of Suharto's subsequent New Order administration. Most historians agree that the coup and the surrounding events were not led by a single mastermind controlling all events, and that the full truth will never likely be known.While the PKI's role in the events of the night of 30 September-1 October remains debated, the effects on it were devastating. The PKI was blamed for the coup, and anti-communists, initially following the army's lead, and encouraged by Western embassies, went on a violent anti-communist purge across much of the country. The PKI was effectively destroyed, and the most widely accepted estimates are that between 500,000 and one million people were killed. The violence was especially brutal in Java and Bali. The PKI was outlawed and possibly more than 1 million of its leaders and affiliates were imprisoned. Throughout the 1965-66 period, President Sukarno attempted to restore his political position and shift the country back to its pre-October 1965 position but his Guided Democracy balancing act was destroyed with the PKIs destruction. Although he remained president, the weakened Sukarno was forced to transfer key political and military powers to General Suharto, who by that time had become head of the armed forces. In March 1967, the Provisional People's Consultative Assembly (MPRS) named General Suharto acting president. Suharto was formally appointed president in March 1968. Sukarno lived under virtual house arrest until his death in 1970.Suharto was the military president of Indonesia from 1967 to 1998In the aftermath of Suharto's rise, hundreds of thousands of people were killed or imprisoned by the military and religious groups in a backlash against alleged communist supporters.[53] Suharto's administration is commonly called the New Order era. Suharto invited major foreign investment, which produced substantial, if uneven, economic growth. However, Suharto enriched himself and his family through business dealings and widespread corruption.[55]Annexation of West IrianAt the time of independence, the Dutch retained control over the western half of New Guinea, and permitted steps toward self-government and a declaration of independence on December 1, 1961. After negotiations with the Dutch on the incorporation of the territory into Indonesia failed, an Indonesian paratroop invasion December 18 preceded armed clashes between Indonesian and Dutch troops in 1961 and 1962. In 1962 the United States pressured the Netherlands into secret talks with Indonesia which in August 1962 produced the New York Agreement, and Indonesia assumed administrative responsibility for West Irian on May 1, 1963.Rejecting United Nations supervision, the Indonesian government under Suharto decided to settle the question of West Irian, the former Dutch New Guinea, in their favor. Rather than a referendum of all residents of West Irian as had been agreed under Sukarno, an "Act of Free Choice" was conducted 1969 in which 1,025 Papuan representatives of local councils were selected by the Indonesians. After training in Indonesian language they were warned to vote in favor of Indonesian integration with the group unanimously voting for integration with Indonesia. A subsequent UN General Assembly resolution confirmed the transfer of sovereignty to Indonesia.WestIrian was renamed Irian Jaya ('glorious Irian') in 1973. Opposition to Indonesian administration of Irian Jaya (later known as Papua) gave rise to small-scale guerrilla activity in the years following Jakarta's assumption of control.History of East TimorIn 1975, the Carnation Revolution in Portugal caused authorities there to announce plans for decolonisation of Portuguese Timor, the eastern half of the island of Timor whose western half was a part of the Indonesian province of East Nusa Tenggara. In the elections held in 1975, Fretilin, a left-leaning party and UDT, aligned with the local elite, emerged as the largest parties, having previously formed an alliance to campaign for independence from Portugal. Apodeti, a party advocating integration with Indonesia, enjoyed little popular support.Indonesia alleged that Fretilin was communist, and feared that an independent East Timor would influence separatism in the archipelago. Indonesian military intelligence influenced the break-up of the alliance between Fretilin and UDT, which led to a coup by the UDT on August 11, 1975, and a month-long civil war. During this time, the Portuguese government effectively abandoned the territory, and did not resume the decolonisation process. On November 28, Fretilinunilaterally declared independence, and proclaimed the 'Democratic Republic of East Timor'. Nine days later, on December 7, Indonesia invaded East Timor, eventually annexing the tiny country of (then) 680,000 people. Indonesia was supported materially and diplomatically by the United States, Australia and the United Kingdom who regarded Indonesia as an anti-communist ally.Following the 1998 resignation of Suharto, on August 30, 1999, the people of East Timor voted overwhelmingly for independence in a UN-sponsored referendum. About 99% of the eligible population participated; more than three quarters chose independence despite months of attacks by the Indonesian military and its militia. After the result was announced, elements of the Indonesian military and its militia retaliated by killing approximately 2,000 East Timorese, displacing two-thirds of the population, raping hundreds of women and girls, and destroying much of the country's infrastructure. In October 1999, the Indonesian parliament (MPR) revoked the decree that annexed East Timor, and the United Nations Transitional Administration in East Timor (UNTAET) assumed responsibility for governing East Timor until it officially became an independent state in May 2002.

Forcing out SuhartoIndonesian Revolution of 1998University students and police forces clash in May 1998.In 1996 Suharto undertook efforts to pre-empt a challenge to the New Order government. The Indonesian Democratic Party (PDI), a legal party that had traditionally propped up the regime had changed direction, and began to assert its independence. Suharto fostered a split over the leadership of PDI, backing a co-opted faction loyal to deputy speaker of the People's Representative CouncilSuryadi against a faction loyal to Megawati Sukarnoputri, the daughter of Sukarno and the PDI's chairperson.After the Suryadi faction announced a party congress to sack Megawati would be held in Medan on June 2022, Megawati proclaimed that her supporters would hold demonstrations in protest. The Suryadi faction went through with its sacking of Megawati, and the demonstrations manifested themselves throughout Indonesia. This led to several confrontations on the streets between protesters and security forces, and recriminations over the violence. The protests culminated in the military allowing Megawati's supporters to take over PDI headquarters in Jakarta, with a pledge of no further demonstrations.Suharto allowed the occupation of PDI headquarters to go on for almost a month, as attentions were also on Jakarta due to a set of high-profile ASEAN meetings scheduled to take place there. Capitalizing on this, Megawati supporters organized "democracy forums" with several speakers at the site. On July 26, officers of the military, Suryadi, and Suharto openly aired their disgust with the forums.[On July 27, police, soldiers, and persons claiming to be Suryadi supporters stormed the headquarters. Several Megawati supporters were killed, and over two-hundred arrested and tried under the Anti-Subversion and Hate-Spreading laws. The day would become known as "Black Saturday" and mark the beginning of a renewed crackdown by the New Order government against supporters of democracy, now called the "Reformasi" or Reformation. Economic crisis and Suharto's resignationIn 1997 and 1998, Indonesia was the country hardest hit by the East Asian Financial Crisis,[58] which had dire consequences for the Indonesian economy and society, and Suharto's presidency. At the same time, the country suffered a severe drought and some of the largest forest fires in history burned in Kalimantan and Sumatra. The rupiah, the Indonesian currency, took a sharp dive in value. Suharto came under scrutiny from international lending institutions, chiefly the World Bank, International Monetary Fund (IMF) and the United States, over longtime embezzlement of funds and some protectionist policies. In December, Suharto's government signed a letter of intent to the IMF, pledging to enact austerity measures, including cuts to public services and removal of subsidies, in return for receiving the aid of the IMF and other donors. Prices for goods such as kerosene and rice, and fees for public services including education rose dramatically. The effects were exacerbated by widespread corruption. The austerity measures approved by Suharto had started to erode domestic confidence with the New Order and led to popular protests.Suharto stood for re-election by parliament for the seventh time in March 1998, justifying it on the grounds of the necessity of his leadership during the crisis. The parliament approved a new term. This sparked protests and riots throughout the country, now termed the Indonesian 1998 Revolution. Dissent within the ranks of his ownGolkar party and the military finally weakened Suharto, and on May 21 he stood down from power. He was replaced by his deputy JusufHabibie.President Habibie quickly assembled a cabinet. One of its main tasks was to re-establish International Monetary Fund and donor community support for an economic stabilization program. He moved quickly to release political prisoners and lift some controls on freedom of speech and association. Elections for the national, provincial, and sub-provincial parliaments were held on June 7, 1999. For the national parliament, Indonesian Democratic Party-Struggle (PDI-P, led by Sukarno's daughter Megawati Sukarnoputri) won 34% of the vote; Golkar (Suharto's party; formerly the only legal party of government) 22%; United Development Party (PPP, led by HamzahHaz) 12%; and National Awakening Party (PKB, led by Abdurrahman Wahid) 10%.

Politics since 2004-2010

Indonesian 2009 election ballot, since 2004 Indonesian vote their president directly.In October 1999, the People's Consultative Assembly (MPR), which consists of the 500-member Parliament plus 200 appointed members, elected Abdurrahman Wahid, commonly referred to as "Gus Dur" as President, and Megawati Sukarnoputri as Vice President, for 5-year terms. Wahid named his first Cabinet in early November 1999 and a reshuffled, second Cabinet in August 2000. President Wahid's government continued to pursue democratization and to encourage renewed economic growth under challenging conditions. In addition to continuing economic malaise, his government faced regional, interethnic, and interreligious conflict, particularly in Aceh, the Maluku Islands, and Irian Jaya. In West Timor, the problems of displaced East Timorese and violence by pro-Indonesian East Timorese militias caused considerable humanitarian and social problems. An increasingly assertive Parliament frequently challenged President Wahid's policies and prerogatives, contributing to a lively and sometimes rancorous national political debate.During the People's Consultative Assembly's first annual session in August 2000, President Wahid gave an account of his government's performance. On January 29, 2001 thousands of student protesters stormed parliament grounds and demanded that President Abdurrahman Wahid resign due to alleged involvement in corruption scandals. Under pressure from the Assembly to improve management and coordination within the government, he issued a presidential decree giving Vice President Megawati control over the day-to-day administration of government. Soon after, Megawati Sukarnoputri assumed the presidency on July 23. In 2004, SusiloBambangYudhoyono won Indonesia's first direct Presidential election and in 2009 he was elected to a second

President:SusiloBambangYudhoyono (2004) Land area: 699,548 sq mi (1,811,831 sq km); total area: 741,096 sq mi (1,919,440 sq km)Population (2010 est.):242,968,342 (growth rate: 1.1%); birth rate: 18.4/1000; infant mortality rate: 28.9/1000; life expectancy: 71.0; density per sq km: 130Capital and largest city (2003 est.):Jakarta, 13,194,000 (metro. area), 8,389,443 (city proper)Other large cities: Surabaya, 3,038,800; Bandung, 2,733,500; Medan, 2,204,300; Semarang, 1,267,100Monetary unit: Rupiah

Culture & Religion of IndonesiaThe present day culture of Indonesia is an outcome of the interplay of age-old- traditions from the time of early migrants and the Western thought brought by Portuguese traders and Dutch colonists. The basic principles, which guide life, include the concepts of mutual assistance or "gotongroyong" and consultations or "musyawarah" to arrive at a consensus or "mufakat". Derived from rural life, this system is still very much in use in community life throughout the country. Though the legal system is based on the Old Dutch penal code, social life as well as the rites of passage is founded on customary or "adat" law, which differs from area to area. ''Adat'' law has been instrumental in maintaining gender equality in Indonesia.

The culture of Indonesia has took its current shape molded by several influences that have been prevalent in the land, as a result of the long process of interaction and acculturation between original indigenous customs and a multitude of foreign influences.

Indonesian art forms are greatly influenced by religion. The famous dance dramas of Java and Bali are derived from Hindu mythology and often feature fragments from the Hindu epics such as Ramayana and Mahabharata.

The crafts of Indonesia vary in both medium and art form. As a whole the people are artistic by nature and express themselves on canvas, wood, metals, clay and stone. The batik process of waxing and dyeing originated in Java centuries ago and classic designs have been modified with modern trends in both pattern and technology. There are several centers of Batik in Java, the major ones being Yogyakarta, Surakarta, Pekalongan and Cirebon.

Indonesia is rich in handicrafts. Various forms of handicrafts practiced are: woodcarvings for ornamentation and furniture, silverwork and engraving from Yogyakarta and Sumatra; filgree from South Sulawesi and Bali with different styles of clay, sandstone and wood sculptures. These are but a few of the handicrafts found in Indonesia.

Ethnic Groups: Javanese 45%, Sundanese 14%, Madurese 7.5%, coastal Malays 7.5%, other 26%Religions: Muslim 88%, Protestant 5%, Roman Catholic 3%, Hindu 2%, Buddhist 1%, other 1%LanguageThe official language of Indonesia is known as Indonesian or 'Bahasa Indonesian'. Indonesian is a standardized dialect of the Malay language and was formulated at the time of the declaration of Indonesian independence in 1945. Malay and Indonesianremain very similar.Although the official language, in reality it is most of the population's second language. Due to the sheer size and fractured, island make-up of the country most people speak regional dialects such as Minangkabau or Javanese. These will usually be spoken at home and in the local community but at work or at school Indonesian is used. MusicWith respect to music, Kroncong is a musical style that applies guitars and ukuleles as the primary musical instruments. This style is originated in Portugal and brought in by Portuguese traders in 15th century. Sasando music comes from the province of East Nusa Tenggara. It is accompanied by an instrument made up of split leaf of the Lontar palm, which contains some likenesses to a harp.

ArtKenyah mural painting in Long Nawang, East Kalimantan is usually found among Austronesian cultures, indigenous natural motives such as dogs, ferns, hornbills, trees and human figures.

GamesThere are several varieties of traditional games like bull races in Madura, cockfighting in Bali and stone jumping in Nias. Another kind of national sport is sepaktakraw, which is started in Melaka. The patterns are alike to volleyball: to maintain the rattan ball in the air by using the players' feet.FoodRice is served as the main dish for most native Indonesians, with side dishes such as meat and vegetables. Indonesian dishes are commonly spicy by using chili peppers and spices. Some of the most popular dishes are Satay, nasigoreng, Nasi Padang, tofu and tempe.Diversity.Indonesia is a hugely diverse nation..It is made up of over 17,500 islands (6,000 of which are inhabited) which are home to over 300 ethnic groups..Each province has its own language, ethnic make-up, religions and history..Most people will define themselves locally before nationally..In addition there are many cultural influences stemming back from difference in heritage. Indonesians are a mix of Chinese, European, Indian, and Malay. .Although Indonesia has the largest Muslim population in the world it also has a large number of Christian Protestants, Catholics, Hindus and Buddhists..This great diversity has needed a great deal of attention from the government to maintain a cohesion..As a result the national motto is "Unity in Diversity", the language has been standardised and a national philisophy has been devised know as "Pancasila" which stresses universal justice for all Indonesians.Group Thinking.Due to the diverse nature of Indonesian society there exists a strong pull towards the group, whether family, village or island..People will define themselves according to their ethnic gourp, family and place of birth. .The family is still very traditional in structure..Family members have clearly defined roles and a great sense of interdependence.Hierarchy.As with most group orientated cultures, hierarchy plays a great role in Indonesian culture..Hierarchical relationships are respected, emphaised and maintained..Respect is usually shown to those with status, power, position, and age. .This can be seen in both the village and the office where the most senior is expected to make group decisions..Superiors are often called "bapak" or "ibu", which means the equivalent of father or mother, sir or madam. .Although those higher up the hierarchy make decisions Indonesians are advocates of group discussion and consensus. This ties back to the idea of maintaing strong group cohesiveness and harmonious relationships.

Face.Due to the need to maintain group harmony the concept of 'face' is important to understand..In Indonesia the concept is about avoiding the cause of shame ("malu"). .Consequently, people are very careful how they interact and speak..Although a foreigner can not be expected to understand the nuances of the concept it is crucial to keep an eye on ones behavior..One should never ridicule, shout at or offend anyone. Imperfections should always be hidden and addresses privately. Similarly blame should never be aimed at any individual/group publicly..One manifestation of the concept of face/shame is that Indonesians communite quite indirectly, i.e. they would never wish to cause anyone shame by giving them a negative answer so would phrase it a way where you would be expected to realize what they truly want to say..Bahasa Indonesian actually has 12 ways of saying "No" and several other ways of saying "Yes" when the actual meaning is "No!!General Etiquette GuidelinesMeeting and Greeting.Greetings can be rather formal as they are meant to show respect. .A handshake is the most common greeting accompanied with the word "Selamat"..Many Indonesians may give a slight bow or place their hands on their heart after shaking your hand..If you are being introduced to several people, always start with the eldest or most senior person first. .Titles are important in Indonesia as they signify status. If you know of any titles ensure you use them in conjunction with the name. .Some Indonesians only have one name, although it is becoming more common for people to have a first name and a surname, especially in the middle class. .Many Indonesians, especially those from Java, may have had an extremely long name, which was shortened into a sort of nickname for everyday conversation. .There are several ethnic groups in Indonesia. Most have adopted Indonesian names over the years, while some retain the naming conventions of their ethnicity.

Gift Giving EtiquetteGift giving etiquette in Indonesia heavily depends on the ethnicity of the receiver..Here is some general gift giving guidelines:Gift giving etiquette for the Chinese:.It is considered polite to verbally refuse a gift before accepting it. This shows that the recipient is not greedy. .Items to avoid include scissors, knives or other cutting utensils as they indicate that you want to sever the relationship. .Elaborate wrapping is expected - gold and red and considered auspicious..Gifts are not opened when received.Gift giving etiquette for ethnic Malays / Muslims:.In Islam alcohol is forbidden. Only give alcohol if you know the recipient will appreciate it. .Any food substance should be "halal" - things that are not halal include anything with alcoholic ingredients or anything with pork derivatives such as gelatine. Halal meat means the animal has been slaughtered according to Islamic principles..Offer gifts with the right hand only. .Gifts are not opened when received. Gift giving etiquette for ethnic Indians: .Offer gifts with the right hand only..Wrap gifts in red, yellow or green paper or other bright colors as these bring good fortune. .Do not give leather products to a Hindu. .Do not give alcohol unless you are certain the recipient imbibes. .Gifts are not opened when received. Dining EtiquetteDining etiquette is generally relaxed but depends on the setting and context. The more formal the occasion, the more formal is the behavior. Below are some basic dining etiquette tips..Wait to be shown to your place - as a guest you will have a specific position. .Food is often taken from a shared dish in the middle. You will be served the food and it would not be considered rude if you helped yourself after that..If food is served buffet style then the guest is generally asked to help themselves first. It is considered polite that the guest insist others go before him/her but this would never happen..In formal situations, men are served before women. .Wait to be invited to eat before you start. .A fork and spoon are often the only utensils at the place setting. Depending on the situation some people may use their hands..Eat or pass food with your right hand only. Business Etiquette & ProtocolBusiness Cards.Business cards are normally exchanged after the initial handshake and greeting. .Business cards should display your title. This helps enhance your image and credibility. .Although not required, having one side of your card printed in Bahasa shows respect. .Give/accept cards using two hands or the right hand. .Examine a business card you receive before putting it on the table next to you or in a business card case. .It is important to treat business cards with respect. What to Wear?.Business attire is generally conservative. .Women should dress conservatively ensuring that they are well covered from ankle to neck. Tight fitting clothes are best avoided..Remember it is hot, so cotton or at least light clothing is best.Communication Styles.Indonesians are indirect communicators. This means they do not always say what they mean. It is up to the listener to read between the lines or pay attention to gestures and body language to get the real message..Generally speaking Indonesians speak quietly and with a subdued tone. Loud people would come across as slightly aggressive. Business is personal in Indonesia so spend time through communication to build a strong relationship. Dealing with someone face-to-face is the only effective way of doing business..Indonesians abhor confrontation due to the potential loss of face. To be polite, they may tell you what they think you want to hear. If you offend them, they will mask their feelings and maintain a veil of civility. If an Indonesian begins to avoid you or acts coldly towards you, there is a serious problem.Business Meetings.Initial meetings may be more about getting-to-know-you rather than business. Do not be surprised if business is not even discussed..It is common for Indonesians to enter the meeting room according to rank. Although you do not have to do this, doing so would give a good impression..Indonesians do not make hasty decisions because they might be viewed as not having given the matter sufficient consideration. Be prepared to exercise patience.."Jam Karet" (rubber time) describes the Indonesian approach to time. Things are not rushed as the attitude is that everything has its time and place. Time does not bring money, good relations and harmony do. .If negotiating, avoid pressure tactics as they are likely to backfire.Impact of National Culture on Human Resource PracticesThe notion that human resource pratice is universal has been questioned. A number of human resources policy that successfully practiced in a certain country, may not successfully applied in another country. For example, pay for performance schemes which is very popular and effective in the United States and United Kingdom, it cannot successfully be a practiced in another country. The same goes for quality circle program, it has practice widely and successfully in Japan, however quality circlehas not successfully been implemented in the United States (Newman &Nollen, 1996:759).National culture also influenced on the strategic decision making and leadership style (Schneider &DeMeyer, 1991:308), and human resoure management practices such as performance appraisal (Luthans, Welsh &Rosenkrantz, 1993:743). In culture with high power distance,loyalty and obedience to superior is required. Therefore, management usually used performance appraisal based on the behavioural criteriarather than results criteria. Employees or subordinates have a minimal risk when they follow the established procedure rather than make a new breakthrough which may cause failure. Basically, performance appraisal can be differentiated based on its orientation i.e.behaviour orientationorresults orientation (Schuler & Jackson, 1990:125).A number of human resource practices have specific characteristic related to specific country. For example, life-time employment policy is very popular in Japan, however, it is uncommon practice in USA.On general, Japanese companies spend more money for social activites and recreational facilities than that of American companies (Pascale & Maguire, 1980:433).A cross cultural research involved 277 respodents in American companies, 291 Japanese companies, dan 50 European companies byolehKagonoet al., (1985) in Smith (1992:39) concluded that Japaness companies have shorther hierarchical structure, flexiblejob description, control systems upon self-dicipline and more promotion from within.Laurent (1983:75) found that in Germany, decision making is more centralized than in United Kingdom. Besides, it is common for top positions in organization occupied by outsider. Meanwhile, companies in UK tended to have promotion form within policy, and spend more money for emoloyee well-being and middle management development program. Jaeger (1986:186) conducted reserach on the applicability of human resource parctiuces in developing countries asserted that although there is strong will to replicate western human resource policies, those policies cannot be implemented successfully. Besides, it is required that to be successfully practiced, those policies must fit with the assumptions of local cultural context.For example, planning activities does not work well in the countries with low uncertainty avoidance such as in Indonesia and most African countries.

The Impact of Organizational Culture on the Human Resources Management Practices.

Organizational culture and its environment factors in which organization exist determines the way of managing the organization (Saffold, 1988:547).The relationship between organizational culture and human resources practices can be explained as follows. When the member of organization i.e. employees, understand and internalized the organzationanl culture which can be said as the way things are done around here, it will enable for employee to choose strategy, and behavior that fit with their personality as well as with the main routines of organization activities. Since Indonesia is belong to country with high power distance and low uncertainty avoidance, it is likely that organizational culture that fit with this condition is parochial type. Parochial culture is characterized by the tendecy to give much attention to some factor such as family relationship, social relation, and personal backgroud, and less attention to capability and competency needed to perform the task. Basically, parochial culture is just like a family culture, where the superior-subordinates relation is imbalance. In this culture, hierarchy is not just division of responsibility and duty, but it symbolized power and authority. The main power is on the one hand, a powerful person such as the owner or the founder of the company, where the destiny of an employee depends on the hand of the most powerfull person (the boss). There is a division of work, the boss is the planner, the other are the doer. In the high power distance society, good leader or good manager in the eye of the employees,is someone who can act like a good father (Hofstede, 1997). This type of relationship will lead to less participative management in decision making.The Impact of HRM on Organizational Performance Research by Newman & Nollen (1996:753) indicated that organization performance is better in the companies where there is congruency between national culture and human resources practice.In the unit business level, where its manager consciously practice human resource policies in accordance with countrys value, the performance of business unit i.e. return on assets (ROA), return on sales is better and employee bonus is bigger. According to Earley (1994:685) if the human resource management practices is not suitable with basic values shared by employees will cause employee are dissatisfied, uncomfortable and uncommitted. Employee will feel distractedor alienated, because their values are diference from company expectation, and therefore, theori organizational commitment and their job satisfaction will be low, and in turn they may want to quit from the job. When this condition happen for a long time, organization performance will decrease. Conversly, when human resource practice fit with the values shared by employees, organizational performance will be high.

National culture positively influence on HRM practices. Therefore, it is important for practicing managers to take cultural factor into account in formulating and adopting HRM concept from other country (espesially from Western countries). The reason is that HRM concepts always contains unspoken assumption that is underlying values in the certain society. Beside, it is important that an attempt should be done to find an alternative management science that is based on Indonesian values. Therefore, there is an opportunity for Indonesian management scholars to search and developed management practice which is consistent with Indonesian cultural values. As it is often mentioned in another study, some Indonesian organization such as Astra International Company Ltd has been successfully adopted management practices consistent with its environment so that it results an outstanding organizational performance. For the foreign companies operate in Indonesia, this research recommendates that host country culture should be taken into account in implemeting management policies. Companies must adjust their management practice in accordance with their environment so that the companies may generate successful performance.

Economy of Indonesia OverviewIndonesia, a vast polyglot nation, has weathered the global financial crisis relatively smoothly because of its heavy reliance on domestic consumption as the driver of economic growth. Increasing investment by both local and foreign investors is also supporting solid growth. Although the economy slowed to 4.5% growth in 2009 from the 6%-plus growth rate recorded in 2007 and 2008, by 2010 growth returned to a 6% rate. During the recession, Indonesia outperformed most of its regional neighbors. The government made economic advances under the first administration of President YUDHOYONO, introducing significant reforms in the financial sector, including tax and customs reforms, the use of Treasury bills, and capital market development and supervision. Indonesia's debt-to-GDP ratio in recent years has declined steadily because of increasingly robust GDP growth and sound fiscal stewardship, leading two of the three leading credit agencies to upgrade credit ratings for Indonesia's sovereign debt to one notch below investment grade. Indonesia still struggles with poverty and unemployment, inadequate infrastructure, corruption, a complex regulatory environment, and unequal resource distribution among regions. YUDHOYONO and his vice president, respected economist BOEDIONO, have maintained broad continuity of economic policy, although the economic reform agendat has been slowed during the first year of their term by corruption scandals and the departure of an internationally respected finance minister. In late 2010, increasing inflation, driven by higher and volatile food prices, posed an increasing challenge to economic policymakers and threatened to push millions of the near-poor below the poverty line. The government in 2011 faces the ongoing challenge of improving Indonesia's infrastructure to remove impediments to growth, while addressing climate change concerns, particularly with regard to conserving Indonesia's forests and peatlands, the focus of a potentially trailblazing $1 billion REDD+ pilot project.

Information of the EconomyGDP (purchasing power parity)$1.033 trillion (2010 est.) $974.6 billion (2009 est.) $932.6 billion (2008 est.) Note: data are in 2010 US dollarsGDP (official exchange rate)$695.1 billion (2010 est.)GDP - real growth rate6% (2010 est.) 4.5% (2009 est.) 6% (2008 est.)GDP - per capita (PPP)$4,300 (2010 est.) $4,100 (2009 est.) $3,900 (2008 est.) note: data are in 2010 US dollarsGDP - composition by sectoragriculture: 16.5% industry: 46.4% services: 37.1% (3rd quarter, 2010 est.)

Population below poverty line13.33% (2010)Labor force116.5 million (2010 est.)Labor force - by occupationagriculture: 38.3% industry: 12.8% services: 48.9% (2010 est.)

Unemployment rate7.1% (2010 est.) 7.9% (2009 est.)

Central bank discount rate6.37% (31 December 2010) 6.46% (31 December 2009) Note: this figure repesents the 3-month SBI rate; BI has not employed the one-month SBI since September 2010

Commercial bank prime lending rate13.29% (30 November 2010 est.) 14.5% (31 December 2009 est.) Note: these figures represent the average annualized rate on working capital loans

Stock of domestic credit$253.1 billion (31 December 2010 est.) $192.3 billion (31 December 2009 est.)

Budgetrevenues: $119.5 billion expenditures: $132.9 billion (2011 est.)Public debt26.4% of GDP (2010 est.) 27.4% of GDP (2009 est.)

Household income or consumption by percentage sharelowest 10%: 3% highest 10%: 32.3% (2006)

Distribution of family income - Gini index37 (2009) 39.4 (2005)

Inflation rate (consumer prices)5.1% (2010 est.) 4.8% (2009 est.)

Investment (gross fixed)32.5% of GDP (2010 est.)

Industriespetroleum and natural gas, textiles, apparel, footwear, mining, cement, chemical fertilizers, plywood, rubber, food, tourism

Industrial production growth rate3.6% (2010 est.)

Electricity - production129 billion kWh (2008 est.)Electricity - consumption119.3 billion kWh (2007 est.)Electricity - exports0 kWh (2009 est.)Electricity - imports0 kWh (2009 est.)

Oil - production1.023 million bbl/day (2009 est.)Oil - consumption1.115 million bbl/day (2009 est.)Oil - imports456,700 bbl/day (2009 est.)Oil - exports322,000 bbl/day (2009 est.)Oil - proved reserves4.05 billion bbl (1 January 2010 est.)

Natural gas - production85.7 billion cu m (2009 est.)Natural gas - consumption45.2 billion cu m (2008)Natural gas - exports33.5 billion cu m (2008 est.)Natural gas - imports0 cu m (2008 est.)Natural gas - proved reserves3.001 trillion cu m (1 January 2010 est.)

Agriculture - productsrice, cassava (tapioca), peanuts, rubber, cocoa, coffee, palm oil, copra; poultry, beef, pork, eggs

Current Account Balance$8.532 billion (2010 est.) $10.75 billion (2009 est.)

Exports$146.3 billion (2010 est.) $119.5 billion (2009 est.)

Exports - commoditiesoil and gas, electrical appliances, plywood, textiles, rubberExports - partnersJapan 17.28%, Singapore 11.29%, US 10.81%, China 7.62%, South Korea 5.53%, India 4.35%, Taiwan 4.11%, Malaysia 4.07% (2009)

Imports$111.1 billion (2010 est.) $84.35 billion (2009 est.)Imports - commoditiesmachinery and equipment, chemicals, fuels, foodstuffsImports - partnersSingapore 24.96%, China 12.52%, Japan 8.92%, Malaysia 5.88%, South Korea 5.64%, US 4.88%, Thailand 4.45% (2009)

Debt - external$196.1 billion (31 December 2010 est.) $172.9 billion (31 December 2009 est.)

Reserves of foreign exchange and gold$96.21 billion (31 December 2010 est.) $66.12 billion (31 December 2009 est.)

Stock of direct foreign investment - at home$81.21 billion (31 December 2010 est.) $72.84 billion (31 December 2009 est.)Stock of direct foreign investment - abroad$33.71 billion (31 December 2010 est.) $30.18 billion (31 December 2009 est.)

Market value of publicly traded shares$361.2 billion (31 December 2010) $178.2 billion (31 December 2009) $98.76 billion (31 December 2008)

Exchange ratesIndonesian rupiah (IDR) per US dollar - 9,169.5 (2010), 10,389.9 (2009), 9,698.9 (2008), 9,143 (2007), 9,159.3 (2006)Indonesian HR Professionals (IHRP) Society

ABOUT USIndonesian HR Professionals Society, abbreviated as IHRP, is a not for profit organization of human resource professionals in Indonesia, founded in October 1999. It is a further development of the IHRP e-forum hosted at eGroups.comVISIONTo be an organization that: is a catalyst in the enhancement of the HR management competencies of its members, the Indonesian business community and the government sectors, has chapters in all provinces, has the proper strategy, plans and programs that foster the professionalism, knowledge, competency & image of its members and the Indonesian HR Professionals in general, has mutually beneficial strategic partnerships with related organizations, is professionally managed and financially sound.MISSION To provide strategic leadership in HR related areas, To provide an effective and efficient communication forum for the exchange of information and ideas on HR related topics, To provide information and recommendations to the Indonesian business communities and government on HR management and related strategies, plans, programs, policies, systems and procedures To provide world class HR management related education & training.BASIC OBJECTIVES To have the majority of Indonesian Senior HR Practitioners and a significant portion of non HR Managers and Directors as its member, To establish and operate an effective and efficient Indonesian HR Management Research Center To establish and operate an effective and efficient HR Management training, education & development center To have chapters in all Indonesian provinces

THE HUMAN RESOURCE PRACTICES IN THE PUBLIC SECTOR ININDONESIAMarch 2, 2010 by NajwaZuhur

When Indonesia entered the reformation era in 1998, there were several main reformation agendas which aimed to solve major problems in political, social and economic fields arising from the financial crisis. One of the key agendas is the reformation of the bureaucracy. However, the reformation of the bureaucracy has not progressed well. As stated by Gie (2003), the former minister of The National Development Planning Agency, there was lack of significant improvement in the public sector although the reformation era was introduced for five years. Corruption, collusion and nepotism, inefficiency in the central and regional public sector, low public service quality, and low supervisory board function still occur. Based on the report of The National Development Planning Agency (2006), it was found that Given the reality in the public sector in Indonesia, this report will examine the Human Resource (HR) practices in the public sector and discuss the effectiveness of these practices in supporting organizational performance. The HR practices examined are recruitment and selection, remuneration system, training and development and performance appraisal. The HR practices will be examined in general as those HR practices are implemented in all public sectors based on the government regulation. Then, the public sector performance of all departments and ministries will be identified. The finding of the public sector performance, thus, will be related to the HR practices implemented in the public sector and theories about HR practices in order to examine factors that influence the public sector performance. This report argues that organizational performance is influenced by HR practices. As affirmed in several publications that organizations implemented HR practices tend to have higher organizational performance (Ghebregiorgis and Karsten, 2007: Tzafrir, 2006; Lavigna, 2002: Boyne et.al., 1999: Hiltrop, 1996). Finally, minimum requirement for educational background, specific examination tests, appropriate remuneration system, decentralized training and development, selection of trainees and tangible characteristics for performance appraisal are offered as recommendations to givegive beneficial inputs to the public sector in Indonesia.

SITUATION OF THE PUBLIC SECTOR IN INDONESIA: A BRIEF INTRODUCTIONThe public sector in Indonesia requires people who have capabilities and skills of analysis, decision making, and policy design which is hard to accomplish if the educational background is senior high school or less. Based on data from The National Civil Service Agency (The National Civil Service Agency website, 2007), the total number of the public servants in Indonesians 3,662,336 in 2005 According to the educational background, 37 percent of public servants completed senior high school. Meanwhile, 28 percent finished undergraduate and only 0.2 percent had doctoral degrees. In addition, public servants with master degrees were only 2.5 percent. Surprisingly, there were still 2.9 percent of public servants who had elementary school background and 3.1 percent had junior high school background (for further-information refer to Appendix A). In 2006, the total number of the public servants decreases to 3.633.261 public servants (Sulistyo, 2006). The educational background of the public servants, thus, is still not adequate to meet the quality requirements of human resources in the public sector. In high school or less level, the skills of analysis, critical thinking and problem solving are less taught compare to university level because in those levels, students are taught to develop their understanding about theories.The total number of public servants works for the central government and the regional government. After decentralization was introduced at the end of 2000, the regional government was divided into two; provincial government and regency/municipality (Tjiptoherijanto, 2006). However, problems such as corruption, bribery and nepotismincreased when decentralization was implemented. Therefore, to kttowAvhy those practices still appear although the government already tried to reform the bureaucracy, understanding of the HR practices in the public sector in Indonesia is needed. The HR practices in the public sector in Indonesia are under authority of the government.Recruitment and selection practices in the public sector in IndonesiaSince decentralization, recruitment and selection is not arranged by the central government. Each regional government can arrange recruitment and selection for the public servants. However, the recruitment and selection process must adhere to the general and technical guidelines of the recruitment and selection process (Yuwono, 2001).One of the steps for the recruitment and selection process that need to be highlighted is the third step, the examinations because this step will determine whether the applicants are fit with the jobs or not. Yuwono (2001:59-60) explained that there are four steps in the recruitment and selection process in the public sector. The first step is announcement which includes description of qualifications required. Selection of applicants who meet the requirement is the next step. The third is examinations which consist of an administration test and a screening test. The administration test, basically, consists of Indonesians common knowledge such as Indonesia language, state philosophy, and state structure of Indonesia, Indonesian history, and government policy. An interview mostly about ideology is a part of the screening test. Despite the fact that these tests are important, however there is no test to measure the quality and ability of specific skills of applicants essential in order to accomplish the jobs as the public servants. Finally, the announcement of applicants accepted as public servant candidates. The public servant candidates will have a probationary period for one until two years. The regional government is involved from the first until third step. But, the central government, namely Ministry of Home Affairs and Ministry of Administrative Reform have authority for the final step.Although the recruitment and selection process of the public servants seems ideal, the reality is different. Due to the decentralization of the recruitment and selection process, many problems occur. Bribery, nepotism, question tests leakage, demonstration of results manipulation will likely occur during the recruitment and selection process (Trihusodo, 2006; Darmawan, 2005; Haris, 2005). Given these problems, the government is considering the centralization of the recruitment and selection process of public servants (Ministry of Home Affairs website, 2007; Kustiani, 2006).

Compensation in IndonesiaIndonesia's comprehensive compensation and benefits package is designed to attract, retain, and reward the people necessary to create Indonesia's longer-term growth and profitability. Wherever possible, we provide the ability for employees to participate in a range of compensation programs, which allow employees to share in Indonesia's financial success through profit-sharing and stock programs; and innovative benefits that help employees and their families achieve improved quality of life and financial security.One of the things that best highlight the Indonesian economy is its sound and rational compensation and benefits policies. Basic salary is given on a monthly basis, and an annual incentive is legally required. Some companies resort to deferred compensation while others include various allowances. Funded pension plans, which provide retirement benefits in the form of monthly pensions, are keenly eyed by the government through the Department of Manpower and Ministry of Finance. The retirement process, along with its specifications, is governed by the Pension Law and the legal entity of Dana Pensiun is created in the absence of a trust law.Most of the cost of the new social program is to be funded by contributions nominally placed on employees (3.7 percent Cur health, plus 0.3 percent for death benefits, and a contribution toward workers' compensation insurance that ranges from 0.24 to 174 percent), with a small contribution (2 percent for the old age provident fund program) nominally placed on workers. These are fully funded programs without any provision for government subsidy. The regulation requires the entire program to be administered by Astek, a state-owned enterprise, which had the mandate or administering workers compensation programs in the past. (Nayar, 1994)Old-age programThe Indonesian old-age program is a fully funded, contribution-defined program Benefits are received at age 55 and arc equal to contributions plus accrued interest. In 1991, Astek reported a gross rate return, (without subtracting administration costs) of 14.4 percent on its investment fund, while the average return from the State Bank's time deposits ranged from 20-22 percent depending on maturity (McLeod, 1993)Health insuranceThe health insurance program provides comprehensive medical benefits for the worker, spouse. and three children. Services are provided by a list of approved doctors, clinics, hospitals, pharmacies, and opticians throughout Indonesia. Each of these providers enters into a contractual arrangement with .4stek that specifies the scope of services offered, the billing and payment procedures, and the fee or price for each kind of service. Disability pensions are a proportion of earnings that varies with the degree of disability.Retirement programsThe retirement program appears to be well-defined nr paper but lacks the discipline of competition on the fund-management side. The health and workers' compensation programs have an inherent problem, which is the fact that they do not sum to rely on co-payments from beneficiaries. So far, contributions are being paid info a fund, and Astek reimburses expenses to those enterprises that make use of the program However, who is deciding on the type of services that are covered?: How is that decision reached?; and how is the question of "normal fees" resolved'' In essence. this system has to be build up to make sure it does not become a source of financial deficits for the government through Astek's budget deficits.

Remuneration system practice in the public sector in Indonesia The remuneration received by public servants is lower compared to employees in the private sector and even to employees in state-owned enterprises. Employees in the private sector can earn three to four times more than employees in the public sector (Rohdewohld, 1995 as cited in Bennington and Habir, 2003, Tjiptoherijanto, 1995 as cited in Rohdewohld, 1995, p. 103). Because of many complaints regarding the low of the salary of public servants, the government is trying to increase the salary. In 2006 and 2007, respectively, the government increased basic salary of public servants around 15% (Sulistyo, 2006, Basuki, 2006).The income of the public servants is based on three components which are basic salary, allowances and other salary supplements (Rohdewohld, 1995). Basic salary for the public servants in Indonesia is based on a Combination Scale System which refers to a combination of single scale system and double scale system. Under the combination scale system, some public servants will receive higher salary than those who are in the same rank or level (Tjiptoherijanto, 2006).Allowances received by the public servants include rice and family allowances, structural allowances, functional allowances and special allowances for the civil servants working in remote areas (Rohdcwohld, 1995; Yuwono, 2001). In addition, other salary supplements will be received when special or certain events take place such as IdulFitribonuses (the moslem holy day, but all public servants regardless their religion will have this bonuses), project bonuses, official travel, and health care (Rohdewohld, 1995).However, the low rate of remuneration cannot be seen as an exception to have less performance in doing tasks. The public servants have to be responsible in doing tasks with their best efforts. The low salary is the reality that they have to accept since they already know when they apply to become public servants.

TRAINING AND DEVELOPMENT PRACTICES OF THE PUBLIC SERVANTS IN INDONESIAThe government realizes that to improve the skills and abilities of public servants, training and development should be done as the government knows that many public servants arc high school graduates. The government has appointed The National Institute of Administration to arrange training for all public servants. Each ministry also has its own training; however, the training held by The National Institute of Administration is seen as more important especially when a public servant wants to be promoted in the future. As a result, the public servants who have higher education will obtain more training than those who have less education (Report A, 1997, as cited in Bennington and Habir, 2003). Structural and functional training are types of the training in the public sector (Yuwono, 2001). Rohdewohld (1995) explained that structural training is held for public servants career development that is in a structural position. The functional training is held for the public servants in functional positions such as medical doctors, librarians and lecturers.However, the substance of the training which is to increase professionalism and capabilities of the public servants in doing the tasks are disappearing. Training is more likely to be means for additional income, to be promoted, and moonlighting (Report A, 1997 as cited in Bennington and Habir, 2003). Therefore, the skills of the public servants do not improve and cause inefficiency and tardiness in servicing the public.Performance appraisal practice for the public servants in IndonesiaThe performance appraisal of the public servants called as DP3 (DqftarPenilaianPelaksanaanPekerjaari) (Rohdewohld, 1995) is difficult to use because its intangible characteristic in some of the elements. The principal elements to be measured are loyalty, work achievement, responsibility, fidelity, honesty, cooperation, initiative and leadership in which the criteria for each element consist of five grades: very good (91-100), good (76-90), average (61-75), below average (51-60) and fair (under 50) (The National Civil Service Agency website, 2007). The elements such as loyalty, honesty, and fidelity have an intangible characteristic. For these elements, it is hard to set certain standards to determine the score to be given. As a result, subjectivity appears in the performance appraisal (Putranto, 2001).The performance appraisal is confidential. The appraiser must be a person who already supervises the public servant at least for six months (The National Civil Service Agency website, 2007). The result of the evaluation will be given to the public servant and the evaluators supervisor (Rohdewohld, 1995:105). The public servant can appeal if he/she objects to the result in fourteen day after the result accepted (The National Civil Service Agency website, 2007b). However, it is difficult to propose an appeal if the public servant still want to work because an appeal is seen as a rude act of challenging to supervisor.Public sector performance in IndonesiaTo know whether an organisation has performed well or not, an organization must measure its performance, including the public sector. There are no genera Guidelines from the government in order to measure the public sector performance in Indonesia (Mintorahardjo, 2006). Thus, public sector performance is usually measured by independent organizations. One of them is The Indonesian Survey Institute. This institute held a national survey to measure government performance from November 2004 to October 2006 (The Indonesian Survey Institute, 2006). There were 1,239 respondents who were above 17 years old or married by the time the survey was done. The respondents were selected by using multistage random sampling. The respondents were asked to rate 37 departments and ministries based on the score: very bad (1-1.50), bad (1.51-2.50), average (2.51-3.50), good (3.51-4.50) and very good (4.51-5.0).The result showed that all departments and ministries had a score ranging from good to average. None of them had very good, very bad or bad scores. The highest score, 3.86, went to The Indonesian National Army, meanwhile the lowest score, 3.27 was gained by Department of Forestry. The Coordinating Ministry of Economy, Finance and Investment had the second lowest score, 3.32 In addition; Department of Man Power was in the third lowest score, 3.34. Meanwhile, Department of Religion and Department of Health had the second and third highest score, respectively, 3.79 and 3.76 (for further information refers to Appendix B). Although every department or ministry had a score above average, when the public were asked about public servants performance the result was different.Based on the survey of research and development division of Kompason April 2005 and March 2007, the performance of the public sectors had shown fewer improvements according to the community. In 2005 (Triardianto, 2005), 47 percent respondents said that the public servants image was low because of the weaknesses in servicing the public. For corruption problems, 75,4 percent respondents admitted that corruption practices existed. Moreover, 53.8 percent respondents confessed that the discipline of the public servants was low. In 2007 (Sultani, 2007), 62.9 percent of respondents admitted that it needed much time when they were dealing with the public servants. In addition, 58 percent respondents considered that the public servants were easy to bribe. For work effectiveness, 65.3 percent respondents felt dissatisfied. These surveys showed that public servants performance still had not met the expectation of the community they served.The result of the public sector and public servants performance indicates the implementation of HR practices in the public sector. Inappropriate implementation of HR practices causes fewer performances in the public sector. Thus, the evaluation of IIR practices will be beneficial in order to improve the performances.

EVALUATION OF HR PRACTICES IN RELATION TO THE PUBLIC SECTOR PERFORMANCEHR practices implemented in the organization will influence the organizational performance. There many publications that give evident about those relations such as Ghebregiorgis and Karsten, 2007, Tzafrir, 2006; Lavigna, 2002, Boyne 1999: Hiltrop, 1996. Furthermore, the concepts of HR practices applied in the private sector are alike with the concepts applied in the public sector (Tilden and Kleiner, 2005. p. 44). HR practices such as recruitment and selection, remuneration system, training and development and performance appraisal influence organizational performance.The public sector performance in Indonesia is also influenced by the HR practices implemented. According to the survey done by the Indonesian Survey Institute from 2004 to 2006 it was found that the performance of all 37 departments and ministries were good. However, the result cannot clearly show the influence of HR practices. The influence of HR practices is shown when the performance is measured to the public servants such as done by Kompas. Most of the result of the survey shows that the performance of public servants is not adequate yet.The recruitment and selection process in the public sector results in less work effectiveness and less services to the community. This is because the selection process is not designed to search out the best candidates. As stated by Koch and McGrath (1996, as cited in Ghebregiorgis and Karsten, 2007), a recruitment and selection process which is complicated will result in higher employee productivity. The complicated selection will enable organizations find people with the appropriate skills and abilities for the job. On the other hand, the examination tests for public servant applicants only looks at the general knowledge and more likely to know the loyalty and the ideology of the applicants as Indonesian. The specific abilities and qualities of applicants required by the job cannot be shown through those kinds of tests. As a result, the public servants cannot create innovation that will support the jobs efficiently and effectively (Gie, 2003).

The low rate of the salary for the public servants makes the public sector hard to find the best people because this kind of salary will not attract the best people to apply as public servants. As defines by Ghebregiorgis and Karsten (2007), high compensation enables organizations to employ the best people. The best people will search for organizations which will give them attractive benefits in exchange of their best skills. As a result, the public sector employs so many people from less educational background with less skills and abilities to accomplish the tasks. Besides that, the low salary will make the performance of the public sector not optimal, because the salary which can be included as the physiological needs in the Maslows hierarchy of needs (Robbins et.al. 2005:525) cannot be a motivator for the public servants to work. Although sometimes job security offered to the public servants can be an exchange for motivation, public servants still need money to meet their needs. Therefore, bribes, corruptions and moonlighting (Gie, 2003Rohdewohld, 1995) often occur in the public sector as practices to cover up the lack of salary.The training and development for the public sectors do not emphasis specific skills needed to be improved because most of the training is only about genera! Skills and abilities needed by the public servants to do the tasks or to have promotion. Tilden and Kleiner (2005) explain that competency should underpin the training programs. By using competency-based training, the public servants who have a lack in skills will improve, thus, this also will allow less educated people to receive training. If the training and development programs in the public sector are designed to meet the need of the specific skills from the jobs, ineffective, tardiness and time consuming which are always found in the job practices of the public servants (Gie, 2003) will be overcome.Good performance appraisal should more emphasized on tangible characteristics such as employees knowledge of his/her job duties, attitude toward his/her work, ability to work independently (Gambardella, 2003), employees productivity, employees initiatives or ideas because these characteristics are more easily to be measured and can show the real achievements done by the employees. For example, employees knowledge of his/her job can be measured from how many tasks done by the employee without asking his/her supervisor or colleague and how long the employee accomplishes one task. Another example is for employees initiatives or ideas, the measurement can be such as how frequent does the employee share his/her ideas, does the employee find a solution with his/her own thoughts when facing a problem, does the employee finish his/her tasks by following procedure or create a new way which is also legal. Given these characteristics, the public servants will be treated fairly because those characteristics will minimize subjectivity.RECOMMENDATIONSThe HR practices in the public sector in Indonesia still have weaknesses in order to solve problems that always occur in the public sector. The recruitment and selection processes which only test common knowledge will make it difficult to find appropriate people for the jobs. The low remuneration will demotivate the public servants in giving their best attempt to accomplish tasks. In addition, training and development are not emphasized as skills needing improvements. Moreover, the performance appraisal consists of elements which are highly subjective.Given those realities above, the design of the HR practices need to be renewed. The HR practices will solve the problems if the design meets the need required by the public sector. It is recommended that to select appropriate public servants, the recruitment and selection need to be more specific. The minimum educational background should be a university degree. The examination test need to consist of specific tests based on the skills needed by the jobs such as cognitive abilities tests, personality tests, assessment centers (Dessler et.al. 2004) which can measure the quality and capabilities of applicants.For the remuneration system, it is recommended that salary earned can fulfill the public servants average basic needs. Besides that, to enhance individual performance, incentives or bonuses that depend on the result of their jobs or their performance appraisal can be given. It will encourage each public servant to give their best efforts for the jobs. In addition, it is recommended that training and development are arranged more by each department and ministry because they know specific skills need to be developed. Before training is held, public servants need to be assessed in order to select people who really need to be trained. Public servants that already trained need to receive an advance training to improve their skills. Finally, it is recommended that elements such as honesty, and loyalty need to be changed to other elements such as work productivity, creativity, innovation, and work knowledge. There needs to be certain standard for each element in order to give fair result for all public servants.Restructuring the HR practices in the public sector in Indonesia is necessary because the reformation of the bureaucracy can only progress if there is an attention to renew the HR practices. Although it may take periods of time, renewing the HR practices will assist the government to solve many problems that occur in the public sector such as corruption, nepotism, bribery and low performances. The HR practices recommended can be an introduction to have more development of the public sector HR practices in the future.

Indonesian Labor Laws

For many years, the Indonesian government kept a strict regulation of labor relations in the country. Labor rules were enacted by the government and employers had to obey them--failure to do so could garner jail terms and fines. In 1998, however, the country began to reform the labor sector. Labor law reforms that were implemented gave the employer and the employee more leeway to negotiate employment terms.Firing An employer can fire an employee at any time provided he gives the employee