When President Suharto’s 32-year stranglehold on Indonesia crumbled in 1998, Western multinational corporations faced a brutal choice: pay bribes to an expanding army of corrupt officials, or find another way to survive.
A groundbreaking study published in the Journal of Business Ethics reveals how four European companies navigated this treacherous transition—and ultimately discovered they could fight corruption by becoming indispensable partners rather than vulnerable targets.
The research exposes the hidden mechanics of corporate survival during one of the most dramatic political upheavals in modern Southeast Asian history, offering lessons for businesses worldwide as democratic institutions face mounting pressures.
From One Boss to Hundreds
Under Suharto’s dictatorship, corruption followed simple rules. Pay the strongman’s inner circle, and business flowed smoothly. “Before, you paid a lump sum in Jakarta and you could be certain you had smoothed things out,” explains the Wall Street Journal account cited in the study.
But Indonesia’s sudden democratization shattered this system. Power scattered to 34 provincial governments and over 400 district administrations, each hungry for their cut. “Now you pay a lot of small amounts locally, and you can’t be sure things will be smooth,” the study notes. “It is a continuous, confusing, and discouraging process.”
The research team analyzed four major European subsidiaries across alcohol, dairy, consumer goods, and electronics—companies that had operated in Indonesia for decades and witnessed the complete transformation of the political landscape.
The Survival Playbook
The study identified three distinct survival strategies as companies adapted to Indonesia’s changing corruption landscape:
- Suharto Era (1967-1998): Direct relationships with regime insiders and local partners who handled “dirty work”
- Transition Period (1998-2014): Outsourcing corruption to third parties while building competitor alliances
- Democratic Era (2014-2024): Embedding in communities through sustainability partnerships and national development goals
During the chaotic transition years, companies developed desperate workarounds. One alcohol manufacturer relied on local competitors to arrange government meetings: “They asked for a meeting with the government, and we showed up. They just sat in the back and were quiet during the meeting. We did the talking.”
An electronics company admitted using installers and consulting agencies as intermediaries: “For that you had third parties. That was the only way. These things were done through the installers or advising agencies, but directly we couldn’t do that.”
The Ethical Evolution
What makes this study remarkable isn’t just its documentation of corporate corruption—it’s how these companies eventually escaped the cycle entirely. Faced with stricter home-country anti-bribery laws and enforcement, the multinationals discovered something unexpected: they could gain more influence by solving Indonesia’s problems than by paying bribes.
Companies began partnering with Indonesian government agencies on sustainability projects, supporting national export goals, and hiring from local communities surrounding their factories. One dairy company executive explained their transformation: “We have developed cross-sector partnerships with many government departments; our CSR team supports the government’s sustainability objectives. By doing so, we have direct access to high-level government officials.”
Rather than remaining vulnerable outsiders perpetually targeted for extortion, these companies became indispensable partners in Indonesia’s development—a status that paradoxically protected them from corruption demands more effectively than any bribe.
Global Implications
The Indonesian case offers urgent lessons as democratic institutions face pressure worldwide. The study reveals that corruption isn’t fixed—it evolves with political systems, creating both dangers and opportunities for multinational corporations.
Most critically, the research challenges the assumption that companies operating in corrupt environments must inevitably become corrupt themselves. Instead, it suggests that strategic community embedding and alignment with national development goals can provide sustainable alternatives to bribery.
As one company executive noted: “Obviously, there is still a lot of corruption in Indonesia. And because of the chance of corrupt practices, it was far better for us to keep a healthy distance with certain government officials.” The key was finding ways to support the government while avoiding the corrupted elements within it.
For multinational corporations facing political upheaval in emerging markets—from democratic backsliding in Eastern Europe to regime changes across Africa—the Indonesian experience suggests that the most sustainable survival strategy may be becoming too valuable to extort.
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