The document discusses socio-cultural risks in Indonesian supply chains from the perspective of an experienced executive working in Indonesia for over 10 years. Some key challenges mentioned include administrative ambiguity, unreliable vendors, local conflicts, fraud and collusion between locals and foreigners. However, the speaker remains optimistic about future opportunities in Indonesia given the growing talent pool and focus on foreign investment. Local engagement, due diligence and adapting to the culture are emphasized as ways for foreign companies to succeed despite challenges.

1. Socio Cultural risks
in Indonesia supply chains
** Names and locations withheld to protect confidentiality

2. About the speaker
 38 years old, with 17 years of experience
in India, China and Indonesia
 Born in Kuwait, university in India
 Worked with Maersk for ten years, then
assignments with Accenture, private
investors
 Cross culture shocks – corporate
western, consultancy, own ventures,
private Asian family business – seen wide
spectrum / styles to do business
 This is my tenth year in Indonesia
 My lovely Indonesian wife is expecting our
first child!
 We have 5 wonderful dogs
 Avid reader
 I love my adopted country, this is home.
Everything I say next, is with this basic
premise.

3. Bothra / Jaldhi group
• Headquartered in India
and Singapore
• USD 700 million
turnover
• Coal logistics of 500K
tons a month ex
Indonesia to India
• Previously Sulawesi
turnkey specialists
• Operators for Jambi
Coal terminal,
Sumatera
• Coal, fertilizer and oil
terminals in India
• Indonesia is one tenth
of group biz, but
growing!
• President Director of
the Indonesia unit
since 2011
CAP Corporation
• Local group set up to
support foreign
investors
• Working closely with
authorities to bridge
investor concerns
• Mainly working with the
power sector in East
Indonesia with far
eastern state own
investor operators
• Due diligence and
security
• Govt liason work
• Focus on East
Indonesia
• Advisor to the CEO
since 2013
FIST Krav Maga
• Training Indonesian
navy seals / frogmen
• Working on VIP
protection
• Corporate security
training programs
• Private training
programs
• Associate member
since 2014
• Trade and domestic
ventures with other
members
• Networking group
Built on
Trust
About the speaker’s work

4. The Indonesian experience
Culture Field operations
 Rich and diverse
culture, still followed
in daily lives
 Warm and friendly
 Deep respect for
family and society
 Open to newcomers
 Respect for history
and achievers
 Local operators,
fragmented and many
brokers
 Protect local turfs
 Lack of clarity and
knowledge
 Over promise and
shirk commitments
 Bully outsiders

5. The corporate world and Indonesian
supply chain decisions
 The Ivory tower ? Indonesia is just part of corporate
management focus, presently a small part (yet
growing)
 Corporate HQ pressure vs ground conditions
 Non urban operating areas
 Gap in capabilities
 Subcontracting dilemma

6. Typical challenges
 Administrative and legal
ambiguity
 Investment selection
 Local / social issues
 Vendor selection
 Bullying / harassment
 Internal collusion
 Procurement errors
 Asset losses
If it seems to good to be true, it probably isnt true

7. Mines that go nowhere?
 A large group invested USD 70+
million in a coal mine in
Sumatera, that had huge reserves
and a decent calorific value. The
money was paid out in full. This
was 5+ years ago, what has
happened since ?
 Transport bottlenecks and cost
sky rocketing
 Two foreign buyers, two papers,
one document
 Overlap forests, agro, pipelines

8. Trading blanks ?
 Ships waiting for cargo
 Advance payments
 License problems
 One cargo, two buyers
 Fabricated survey
reports
 Losses range from
USD 100K to upwards
of USD 5 million

9. Vendor commitments (?)
Incompetent
vendors
Advance
payments
 Breach of
contracts
 Asset thefts
 Misinformation
 Losses ranging

10. Local relations blunders
 Insulting village
elders
 Local partner
blunders
 Employment
decisions
 Local rivalries
 Ignoring CSR
 Losses upto USD
1 million (+ idle

11. Collusion and fraud
 The technical team of a
large mineral exporter,
worked with the local
owner and broker to
secure a new mine of Fe
60+ and reserves of 4
million tons.
 USD 9 million and 15
months later, the actual
Fe was proven to be 48,
which has less than half
the market value.
 Further, the deposits
were just 300K tons

13. Critical points to remember
 Overwhelmed legal system
 Money recovery challenges
 Abundant brokers and rent
seekers
 Fake documents
 Posturing and egos
 Threats
 Advance payment dilemma
 Changing goalposts

15. Future positive
 New government
mandate
 The foreign investment
board
 Maritime nation vision
 Wired gen next
 Growing talent pool
 Local corporate
confidence

16. Take away points
 Engage third party due
diligence
 Overt / Cover audits
 CSR
 Local engagements
 Own set ups
 Adapt local
 Training
 HSSE
 No short cuts

17. East Indonesia – the future growth areas
-Poor infrastructure
-Limited vendors
-Talent dilemma
-First mover opportunities

18. Indonesia – land of opportunity
and talent potential
valkyn@jaldhi.com Twitter @DmelloValkyn
If it seems to good to be true, it probably isnt true
Built on
Trust
PT CAP Corporation PT Jaldhi Marine Services
FIST Krav Maga