Source: Asian Wall Street Journal Date: August 30-31, 1991
Story Type: Analysis Original Language: English
Dateline: Tangerang Byline: Richard Borsuk
Text: Full
INDONESIA SEES RISE IN INDUSTRIAL UNREST
In this boom district, where factories have been replacing rice
fields, industrial peace has given way to labor unrest.
For the past year, strikes have been breaking out nearly every
week in Tangerang, an area 30 kilometers west of Jakarta. Once-
docile workers are demanding better pay. In many cases, they seek
what they claim they aren't getting, the minimum wage set by law.
On July 1, the government raised the rate for Tangerang to the
equivalent of $1.07 a day from less than 85 cents.
FEAR OF SOCIAL DISORDER
Last week the government called in the army to help end
Tangerang's biggest labor strife to date. About 12,000 workers of
the Gadjah Tunggal Group, a big tire maker with 14 factories
inside one compound, didn't work for two days. At one stage,
protesters burned vehicles and damaged a company training center.
Although the strikes don't last long and haven't seriously
disrupted production, their rising number worries businessmen.
There is growing concern that labor unrest could spark social
disorder, particularly given a perception that they haven't
benefitted fairly from a surge in manufacturing exports during
the past four years.
One foreign factory manager, reflecting a common view, says of
the wave of industrial action: "There's something going on, and I
wish I knew what it was. Maybe people with political aims are
trying to make trouble. Maybe it's just that workers won't accept
what they accepted before."
Manpower Minister Cosmas Batubara told local reporters Wednesday
that the wave of protests shouldn't cause worries. He said it is
natural that workers are becoming more aware of their rights,
though he appealed to them to lodge protests in a calm way.
Economists, political analysts and some executives say one
obvious way to undercut current discontent is to raise minimum
wages -- and make sure all companies pay them.
While statistics aren't available, some economists question
whether the real incomes of workers are increasing. Wages are low
to begin with, they say, and inflation, which has been averaging
8% a year over the past two years, has eaten away nominal raises.
Mr. Batubara acknowledges in a book put out by the government
this year that the minimum wagese "fall far short" of covering
workers' needs. For each part of Indonesia, officials have
calculated a figure for daily "minimum physical needs". The
minimum wage also varies throughout the country.
Since the July 1 decree raising the minimum wage, daily needs in
Jakarta are put at 2,737 rupiah ($1.40) while the minimum wage is
2,100 rupiah, or 77% of the amount. In Jogjakarta, the needs are
2,276 rupiah, while the legal minimum is only 900 rupiah, or 40%
of the needs. On a national average, the minimum wage is
equivalent to 64% of the physical needs.
INCREASING SHARE
While acknowledging that wages remain low, government officials
argue that the set levels are covering an increasing share of the
minimum needs. At the start of Indonesia's current five-year plan
period in 1989, they say, the minimum wage accounted on average
for only 30% of the needs. By the end, in 1994, the target is
100%.
"I'm campaigning a lot to increase the minimum wage," says
Payaman Simanjuntak, the Manpower Ministry's director-general of
industrial relations. Although levels have been raised this year,
the government seems to feel that many companies aren't
financially strong enough to handle higher rates. "The capacity
of our enterprises hasn't been good enough to provide a good
wage," Mr. Payaman says.
In addition, a huge pool of job seekers keeps wages down for
unskilled and semi-skilled work. Officially, unemployment is only
about 3%, but other government data show that 44% of the labor
force is considered underemployed. People gather daily outside
many Tangerang factory gates to see if any jobs are open.
Low factory wages also have been one of many factors fueling the
investment and non-oil export boom the country enjoyed in the
late 1980's. Gross domestic product -- which measures the value
of goods and services, less foreign income -- has risen at an
annual average of 6% over the past five years. Labor costs have
been a big incentive for manufacturers to shift labor-intensive
operations to Indonesia from South Korea, Taiwan and other
countries where workers are scarce and expensive.
But Indonesian workers don't feel that they are sharing in the
boom. "The company is exporting to the U.S. now, but we get
nothing for it," says a 27-year old worker at a Tangerang
furniture factory. He says employees get only 1,100 rupiah a day
instead of the 2,100 rupiah they should get. "The company can pay
more, we are working efficiently," he says, "but we are small
people."
"When investment officials keep talking up the advantages of our
labor, it sounds like a promise to keep wages down," an
Indonesian economist says.
Given Indonesia's unemployment problems, wages for unskilled and
semi-skilled work will remain low for a long time. Labor
activists, in addition to attacking violations of minimum-wage
laws, say some companies that comply with the wage laws are
unfair in still paying only the minimum to workers with years of
service.
A common rationale among employers for low wages is that
productivity is low. But economists say that is to be expected if
pay isn't adequate for living costs. They also point out that low
wages choke workers' purchasing power, and so hurt efforts to
spark broad economic growth.
Tangerang's labor strife comes at a time when some companies say
they are struggling. Shoemakers in particular say they have thin
margins in a highly competitive business. Others say they need to
keep labor costs down due to high interest costs, which can reach
more than 30% a year.
Labor activists and some economists reject the notion that
companies can't be made to pay more. "You can't let your interest
burden be borne by the labor -- the people with the least
income," says economist Kwik Kian Gie.
In many cases, it appears that companies don't pay the legal
minimum because they can get away with not doing so, at least for
a time. While most offenders are local businesses, government
officials early this year lectured several Korean joint ventures
about paying the minimum at factories set up in Tangerang to make
sport shoes for export to the U.S..
Endang Basuni, a Manpower Ministry official in Tangerang, said
after helping end a strike at a Korean-run factory in February
that he didn't face similar problems with other foreign
investors. "I don't know why Korean bosses find it difficult to
pay," he said. In that strike, at joint venture PT Pratama Abadi
Industri, workers said they were getting only about 1,200 rupiah
a day instead of the legal minimum at that time of 1,600 rupiah.
Management denied the charge but declined to discuss details of
compensation, including an allegation by employees that 200
rupiah of their pay was in effect deducted to cover the cost of
the company buses they rode to work.
Jeffrey Ballinger, Jakarta representative of the Asian American
Free Labor Institute, says there have been thousands of labor-law
violations in recent years, but only a small number of
prosecutions. Last year, some factory owners violating wage laws
received short jail sentences and small fines, but critics say
there weren't nearly enough prosecutions. The Manpower Ministry,
contends Mr. Ballinger, "totally lacks the political will to
start the real enforcement of the law."
Mr. Payaman says his ministry has sufficient inspectors and is
undertaking proper enforcement, though he admits they "can't do
it everywhere. That's true in all countries." He also says the
ministry doesn't prosecute cases when it initially finds
violations. Owners are first given education and then "guidance"
on abiding by the law. If on a third visit, they still don't
comply with the law, "then we bring them to court," Mr. Payaman
says.
However strictly laws are enforced, increased talk about tackling
violations by itself may be changing the labor scene. The annual
U.S. Embassy report on labor trends says news reports of efforts
to enforce laws and punish employers violating them "created a
climate which encouraged industrial protests and made employees
more aware of their rights".
Indonesian workers are allowed to be members of a union, but only
one union is permitted, the All Indonesia Workers Union, known by
its Indonesian initials SPSI. But in the wake of surging labor
strife, the SPSI has been called ineffective by some members and
politicians.
Part of the problem is that only a small percentage of workers
are organized in SPSI units. Arsyad Achmad, deputy head of the
Tangerang branch, said that of 800 companies in the district big
enough to have SPSI units, only 167 do. Factory owners have
blocked formation of units, he says, because they're afraid that
the workers will then find out that up till now the companies
have violated their rights.
Some labor activists take a different view, disparaging SPSI. One
organizer working in Tangerang says the units "have no teeth".
Shortcomings in SPSI have spawned some sentiment in favor of an
independent but unsanctioned union -- Serikat Buruh Merdeka --
created last year.
Mr. Payaman says the government won't recognize the organization.
"It's a human-rights movement, not a labor movement," he says,
adding that "It's politics, and we don't want to play with
politics any more." Members of the new union say their intention
is to help workers not getting aid from SPSI.
In the government's view, the presence of SPSI units in factories
as a channel of communication should make strikes unnecessary.
But the presence of SPSI didn't help at Gadjah Tunggal, the tire
maker, as workers appeared to lack confidence in the chapter's
leaders. Some workers say those leaders were appointed by the
company, and too close to it. Sjamsul Nursalim, vice chairman of
the company, says that if the workers didn't like the SPSI
leaders, "they should go to the government and say these people
are not good enough."
There are widely differing versions of what happened at Gadjah
Tunggal. Some workers say the strike started because the company
failed to raise minimum wages on July 1 in line with the
government decree. Mr. Nursalim denies the charge, saying Gadjah
Tunggal pays "much above" the minimum wage; new workers, he says,
get about 3,000 rupiah a day. He blames the strike on "external
involvement" by unspecified activists who intimidated workers to
leave their jobs. Workers say their grievances with the company
grew when one of their colleagues was taken from his home for
questioning by security officials.
It appears that the industrial action at Gadjah Tunggal may have
involved intimidation all-around -- perhaps by strikers to make
other workers join, then by the army to get employees back at
work. On the first day of resumed operations, groups of about 80
employees surrounded by 20 soldiers -- several with rifles, the
rest with clubs -- got a lecture from a military officer on why
and how they should return to work.
But some Indonesia media, labor organizers and members of
Parliament say a show of force isn't the answer. Marzuki
Wilhemus Bokha, secretary-general of the SPSI, says such heavy-
handed actions as took place at Gadjah Tunggal will "only work
temporarily," as they don't tackle "the basic problem of wages
and protection of workers."
Overall, tensions could easily remain in Tangerang. Mr. Arsyad of
the local SPSI office says, "As long as companies violate the
rights of the laborer, it's hard to expect there will be no more
trouble created by the workers."