Globalization and social dialog in Indonesia

Globalization and social dialog in Indonesia

The following article is based on a paper presented at a
seminar on globalization by Iftikhar Ahmed,director of the
International Labor Organization (ILO), Jakarta. The seminar,
which was held in Jakarta from Aug. 24 to Aug. 26, 1999, was
organized by the International Labor Organization, the Japanese
Embassy and the Indonesian Ministry of Manpower.

JAKARTA (JP): Social dialog means an exchange of views among
organized interest groups in the labor market on social policies.
Voice mechanisms include both informal ad hoc as well as
permanent institutions for discussion and negotiations.
Participants of social dialog broadly speaking include organized
civil society groups in addition to the traditional trade union
and employers' organizations.

As we are all aware the phenomenon of globalization broadly
consists of the widening and deepening of the integration of
national economies through international trade and increases in
financial flows among nations.

In this sense, the mutually beneficial interlinkages between
the process of globalization and the promotion of social dialog
could be enormous.

Globalization in Indonesia is virtually synonymous with the
export-led growth period beginning from the mid 1980s.

One important way in which globalization has contributed to
social dialog is through the mobilization of international
support for the ratification of the fundamental human rights
conventions of the ILO. As we are aware the ratification of
convention 87 on the freedom of association has led to a
proliferation of trade unions.

This provided the basis for social dialog which led to the
subsequent ratification of the three core conventions concerning
forced labor, discrimination in occupation and employment and
minimum age of employment.

Simultaneously, the labor law reform process including the
formulation of the trade union bill and the labor dispute
settlement bill was propelled by social dialog.

The process of globalization (which coincides with Indonesians
export boom era from the mid 1980s until the present crisis), the
acceleration of urbanization, industrialization and formulization
of the labor market promoted high levels of employment, reduced
income inequality, narrowed wage differences in term of gender
and skills.

A 1995 survey of industry covering nearly 23,000
establishments employing over 400,000 workers, revealed that
foreign-owned companies (covering electronics, garments, toys and
footwear) hired a larger proportion (more than one-half of total
employment) of women workers as compared to that of privately-
owned industries and wages paid to all of their workers are twice
as high as that of those paid by private companies to their
employees.

That globalization is favorable to women's employment is
revealed by the same survey which found that the larger the
fraction of a company's output was for exports the larger the
fraction of women in the company's total workforce.

The benefits of globalization are also accompanied by hazards
as the country becomes more susceptible to external shocks
through the volatility in the flow of international financial
capital.

The set back in the short-term to socio-economic progress as a
consequence of the economic crisis should be distinguished from
the longer-term benefits of globalization as discussed above.

Emerging empirical evidence from the post-crisis period in
Indonesia suggests that manufacturing companies involved in
massive retrenchment of women workers at the initial stages,
hired younger women workers with lower wages when they reopened
their business subsequently. Compared to male workers, it appears
that the women are the last to be hired and the first to be
fired.

As we are all aware, much of the world's cheap labor is
female. As globalization permits footloose corporations investing
wherever labor is cheapest, there are many examples of
multinational companies moving from country to country and
leaving thousands unemployed and driving down wages. This
nightmare is now a reality as foreign investment relocates for
instance, from Indonesia to Vietnam in search of even cheaper
labor.

Furthermore, profits from foreign investments are not always
directed to higher remuneration or improved working conditions of
the lowly paid toiling workers.

Indeed, one major footwear multinational company did not
hesitate to pay a sports super star a fee for advertising its
shoes which amount was the equivalent of what this company pays
its entire Southeast Asia workforce, mainly female in one entire
year.

The process of social dialog could help minimize such adverse
impacts of globalization. Indeed, trade union participation in
the independent civil society monitoring of the social safety net
program in Indonesia will improve the targeting and extension of
social protection to the poor affected by the recent negative
impacts of globalization.

The adverse social impacts of the crisis born out of the
globalization process (sudden reversal of the flow of short term
capital) has strengthened social dialog which needs to be
consolidated by making permanent the social institutions for
social dialog.

Indonesia has to guard against repeating the experience of
other crisis-hit countries of East Asia where collective
bargaining coverage is low and smaller than trade union
representation which is also weak.