Unilever in Indonesia: Surviving Through Challenging Times

Unilever's head office in London, England had been informed about the planned nationalization of all Dutch companies in Indonesia in November 1957. Unilever Indonesia, which was established on December 5, 1933, was also vulnerable to nationalization as the Dutch British joint venture was majority Dutch-owned with headquarters in Rotterdam.

In anticipation, the London headquarters sent a director to Indonesia. He emphasized that Unilever Indonesia's head office in Rotterdam, Netherlands, should have most of its shares transferred to London. This exit was welcomed by both London and Rotterdam.

“Unilever had one possible line of defence: it was an international company and more than half of the capital of Unilever as a holding company was owned outside Holland, mainly in Britain and America,” D.K. Fieldhouse wrote in Unilever Overseas: The Anatomy of a Multinational 1895-1965.

The process of transferring shares to London was time-consuming and had not yet been completed when the process of nationalizing Dutch companies was underway in Indonesia. Fortunately, the Indonesian government considered Unilever to be an international company, saving it from being nationalized. In 1959, Unilever's share split was 32 percent Dutch and 68 percent non-Dutch.

Lobbying

In June 1959, Paul Rijkens, former president of Unilever, together with a group of prominent Dutch businessmen held a secret meeting with Sukarno in Rome. According to J. Thomas Lindblad in Bridges to New Business: The Economic Decolonization of Indonesia, the Dutch businessmen felt that their interests were not being well served by the Dutch government who was defending West Irian, which resulted to their detriment. The secret meetings were conducted, “to reach a confidential understanding outside of negotiations with the Dutch government.”

Rijkens' move angered the Dutch government. In his biography, Ik herinner mij, Foreign Minister Joseph Luns called the “Rijkens faction” childish and disruptive to Dutch government policy.

“Those businessmen thought that by giving in to Sukarno's demands, relations between the two countries would improve and our economic activities could resume. Among the Koninklijke (oil companies) there were some who were in favor of letting go of West Irian, but this group was quieter and stayed behind the scenes. Rijkens, on the other hand, was a very active politician,” said Luns, quoted by Mohamad Roem in Bunga Rampai dari Sejarah II.

Although Rijkens' efforts failed to materialize, according to Lindblad, “such initiatives are illustrative of the basic strategy of accommodation chosen by Dutch companies in Indonesia.”  

Despite being accommodative, Unilever still became the target of takeovers driven by labor unions, especially those affiliated with the Indonesian Communist Party (PKI). Takeovers of British companies occurred during the Indonesia-Malaysia Confrontation, which broke out in September 1963.  

In October 1963, Temple, a Unilever executive from London, visited Indonesia to study the situation. He met Deputy Prime Minister Subandrio and President Sukarno separately.

“President Sukarno promised that Unilever would be allowed to continue doing business as long as it did not try to incorporate elements of colonialism,” wrote William A. Redfern in “Sukarno's Guided Democracy and the Takeovers of Foreign Companies in Indonesia in the 1960s”, a dissertation at the University of Michigan in 2010.

Meanwhile, Subandrio emphasized Unilever's position regarding the Malaysian situation and suggested that all British managers be replaced by others, even appointing a Dutch as the company's leader. He also suggested that Unilever's shares be returned to Rotterdam from London. “He wanted to make Unilever an example of cooperation between the Netherlands and Indonesia,” Fieldhouse wrote. At that time Indonesia had taken over West Irian and wanted to restore relations with the Netherlands.  

Unilever took Subandrio's advice. In December 1963, a Dutchman, IEB Quarles van Ufford was appointed to replace RBA Cantopher as president commissioner and started working in February 1964. At the same time, Unilever began replacing British managers with non-British ones. Its shares were also returned to Rotterdam.  

However, all these efforts seemed to be in vain.

Facing Confrontation

On January 18, 1964, the PKI-affiliated Unilever Labor Union (Serbuni) took over Unilever's headquarters and factory in Jakarta. Six days later, Serbuni took over Unilever's factory in Surabaya, but it remained under the control of an all-Indonesian management.  

On November 26, 1964, President Sukarno issued a Presidential Decree on the control and management of British-owned companies in Indonesia. This decree included a list of companies under the control of the related ministries. Unilever was placed under the People's Industry Department.  

According to Redfern, Unilever was specifically mentioned in a circular letter from Deputy Prime Minister III Chaerul Saleh and a decree from Minister of People's Industry Azis Saleh on February 8, 1964. Azis Saleh then formed a team called the Head of Business Authorization (KKU) chaired by Lieutenant Colonel Suwondo to maintain security so that Unilever continued to operate.

“The People's Industry Department guaranteed that there was no intention to nationalize the company or interfere with management authority, and management retained direct control over its staff, although management was subject to the advice and possibly direction of the KKU team,” wrote Redfern.

After nine months, Redfern continued, the KKU and the supervisory team came under pressure from labor unions, gradually usurping the authority of Unilever management. Unilever's business was increasingly under pressure and losing money.

However, the events of the September 30, 1965 Movement brought benefits to British companies, including Unilever. According to Mohammad Sadli, an economist who was also the architect of the New Order economy, because it was never officially nationalized by giving compensation, the New Order government under General Soeharto returned all non-Dutch companies in 1967 to attract foreign investment.

“These companies included Bata, Goodyear, BAT, Unilever, and Bir Bintang. But Dutch companies were not returned. Nationalism sentiment could not accept it,” Sadli wrote in Bila Kapal Punya Dua Nakhoda. Unilever still survives until now.

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