The shape of the world a generation from now will be influenced far more by how we communicate the values of our society to others than by military or diplomatic superiority. William Fulbright, 1964

Tuesday, August 23, 2005


WALKING THE TALK © Duncan Graham 2005

If you’re magnetised by books about the latest US management guru’s success formula – probably with chicken soup, cheese or herding cats in the title – turn the page now. This story is not for you.

However if you’d like to know more about running a successful business in Indonesia using Australian management skills – read on.

The key player is Australian David Montgomery, born in Scotland, educated in Ireland and at sea by the time he was 17.

Now he’s vice president director of PT Terminal Petikemas Surabaya (TPS), the East Java port’s huge international container terminal, and all without an MBA from Harvard. Or anywhere else.

Like all top executives Mr Montgomery has a swish office with a view. His shows thousands of long red, blue and green steel boxes ready to be filled with Indonesian goods for export across the globe.

But unlike many bosses he doesn’t have hot and cold running secretaries interrupting his every moment. There’s no queue of knee-knocking staff wanting his signature on sheaves of documents. Mobile phones aren’t chiming across the desk as a symphony to his importance.

Indicators of an idle enterprise? Wrong. More than one million containers pour out of Indonesia’s second major port every year. About 1,700 people work directly or indirectly for the company. More than 8,000 truckies have licences to enter the terminal, which is twice the size of Sydney’s.

TPS is also facing a major tussle with the Tax Department that is trying to impose a retrospective value-added tax on the containers and has presented a bill for US$ 7.5 million.

“The only management courses I’ve been on have been brief, in-house and specific to one task,” Mr Montgomery said.

“But early in my career as a British merchant navy navigator I was taught about management by walking. That means getting off the bridge and taking a stroll on deck, to see what people are doing and to listen to what they’re saying.

“You learn to be friendly but as an officer or manager you also have to keep your distance. Like many P and O executives I’ve worked at the coalface.

“When I first came here six years ago I told the staff that I wasn’t going to make them work harder but I was going to help them work smarter. The quality of workers here is very high. By and large they are receptive to new ideas.
“Patience is very necessary along with a sense of humor. I’m prepared to sit down and talk about anything, to see if we can find different ways of dealing with a problem.

“Sometimes you have to fight, but you must be fair. If you can’t motivate you don’t go far. I haven’t encountered many stumbling blocks.”

And the big tax bill? Surely a financial and political crisis of awesome dimensions looms: “Oh, I’m sure common sense will prevail,” said the unfazed Mr Montgomery, “there’s no point in getting worked up.”

He arrived in Surabaya just as the ink was drying on a contract for the Indonesian Government to sell half the terminal to P and O Ports. One of his jobs for P and O had been to scour the world for new opportunities. The company started negotiating with the Indonesian government early last decade but had no success till the fall of the New Order government. (See Sidebar)

Despite P & O making a huge investment and then spending US $ 50 million on upgrading plant and equipment, only four Australians settled into work in Surabaya.

“We wanted to take a very low profile,” Mr Montgomery said. “It doesn’t go down very well in Indonesia to see too many foreigners wandering around, and certainly not if they’re the type that jumps up and down and throws their hands in the air.”

Before moving to Indonesia Mr Montgomery and his wife Diana had lived in many countries and learned about the need to tread warily in other cultures. His career had taken him to Manila, Buenos Aries, Pakistan, the Russian Far East, India, Mozambique and the US.

In Indonesia he found an inflated workforce and a set of work practices that didn’t meet international standards. Ports everywhere are dangerous places, and not just because they attract thieves; trucks, cranes, forklifts and other heavy equipment add to the hazards. Safety has become a priority.

Keeping containers flowing smoothly through the yards along with the profits didn’t mean making people work excessive hours for little pay. Mr Montgomery said the feudal management-by-fear system that operates in some Indonesian businesses – including those run by overseas companies – did not apply at TPS.

“Almost everyone works a 40 hour week – it’s just not effective management to wear people down,” he said. “We pay very much higher for staff than other companies so our turnover is minimal.

“We’ve had to change mindsets and this takes time. We don’t cut corners, and this can put us at a disadvantage against those companies who don’t insure staff, pay low wages and don’t disclose profits.”

Mr Montgomery is also the vice president of the Indonesian-Australian Business Council in East Java – the major international business association in Surabaya.

He said patience and perseverance were critical qualities for overseas investors. He thought Australians tended to be successful because they were usually more egalitarian than Europeans and got on well with Indonesians at all levels.

“I can get things down into plain English and I’m lucky in being able to simplify complex issues,” he said. “However I have one major handicap – I have a mental block with languages and have to get others to interpret.

“But maybe that’s a good thing. It gives me time to cool down by the time I’ve found someone to explain what’s wrong. Working in Indonesia is extremely rewarding because you can actually see results.”


Shortly before he resigned President Suharto appointed businessman Tanri Abeng as the first Minister for State-Owned Enterprises – a job he held when President Habibie took over.

The assignment was to privatise or semi-privatise government-held industries and the Surabaya container terminal at Tanjung Perak was on Mr Abeng’s list.

The British based multinational Peninsular and Oriental Steam Navigation Company – widely known as P & O - won the bidding for 49 per cent of the terminal. It did so on the strength of its record in terminal management in Australia and 18 other countries. P & O was formed in 1837.

TPS has five commissioners, including two from P & O, and five directors. Three are Australian. The president director is an Indonesian, Adji Pamungkas.

Growth has slumped a little in the last year, a factor that TPS finds puzzling. Although the government says value of exports has risen, the number of containers has not. Maybe the contents are more expensive (TPS only knows if they are hazardous or perishable) or perhaps the exchange rate is a factor.

The 37-hectare terminal is mainly a feeder port for Singapore. It’s spacious and well organised and could almost double its capacity before further investment is required.

P and O brought in an Australian computer system. Now agents can check the progress of their cargo through the terminal by SMS messages.

Security has been tightened. Employees clock in and out using hand recognition machines which scan their palms – a difficult system to corrupt.

Although TPS has no direct competition it’s not just a licence to print money. As the majority partner the Indonesian government is keen to maximise the workforce – while its commercial partner has a different objective.

A similar enterprise in Australia would be operating with one third of the staff employed by TPS. Despite this labor costs are low. About 75 per cent of running costs in Australian terminals are for labor – in Tanjung Perak they are 25 per cent.

(First published in The Jakarta Post Friday 26 August 05)

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