Labor law reform deny workers a safety net

Surya Tjandra, Jakarta Legal Aid Institute, Jakarta

The plan to ratify the manpower bill has triggered controversy a number of times. Hundreds of workers and activists including those affiliated with the Committee against Labor Oppression (KAPB) rejected the endorsement of the manpower bill by the House of Representatives (DPR) on Feb. 25, which ended in a clash between the police and demonstrators. On Tuesday, protesters hit the streets again.

The endorsement only went through about a month after Daniel Citrin, senior adviser to the International Monetary Fund (IMF), questioned its delayed ratification.

The manpower bill is among the package of three labor laws targeted by the government and the House for ratification in April or earlier. The three constitute the labor law reform policy launched by the government with the aid of the International Labor Organization (ILO) in 1998, to replace Law No.25/1997 on Manpower Affairs and the entire body of labor legislation in Indonesia.

As in many Third World countries, particularly since globalization, our labor law reform has become neoliberal in nature. The labor law system has become a means to promote economic efficiency by, among other things, reducing costs through a flexible labor market.

Before the economic crisis, in its evaluation of Indonesia's labor legislation, the World Bank stated that "the (Indonesian) workers are overly protected" and that "the government should stay out of industrial disputes" (The Jakarta Post, April 4, 1996). This statement was issued as part of the bank's attempt to create "industrial harmony between workers and employers" given increasing labor instability.

The government, partly prompted by the crisis, submitted the manpower bill to the House (later ratified as Law No.25/1997 on Manpower Affairs), leading to widespread protests. The law was ratified with unsolved issues stemming from provisions that tended to "legalize" the harmful practices developed by the New Order.

Mounting pressure imposed by the international community and the need to improve the image of the New Order forced succeeding governments to suspend the law several times, until its annulment by the House through a bill pending its signing by the president. The government forwarded the three bills instead.

In August 1998, the government received a direct contact mission from the ILO assigned to evaluate Indonesia's labor legislation and draft a program for the country's labor law reform (Jakarta ILO press release, Aug. 25, 1998).

According to a 1999 ILO report, the labor law reform program covers "the review, revision, formulation or reformulation of practically all labor legislation with a view to modernizing and making it more relevant to and in step with the changing times and requirements of a free market economy".

Earlier an ILO official in Jakarta said: "The ILO stands ready to provide technical assistance requested by the government redrafting its labor legislation ... We will provide whatever support we can to help create a sound labor relations framework that will promote economic development while giving effect to ILO Conventions ratified by Indonesia" (Jakarta ILO press release, Aug. 18, 1998).

"Economic development" in a "free market economy" has clearly become a dominant principle in the "technical assistance" provided by the ILO.

In December 1998, the labor law reform program was adopted by the Ministry of Manpower with the signing of the Letter of Intent between this ministry and the ILO, witnessed by then president B.J. Habibie (Jakarta ILO press release, Dec. 23, 1998).

To replace the 1997 manpower law, the government submitted three bills: The labor unions bill (passed as Law No.21/2000), the labor protection and development bill, and the industrial disputes settlement bill, as part of a package of three labor laws.

What changes will be brought about by this "reform" and what are the potential effects on workers?

The new manpower bill shifts the mechanism of labor dispute settlement from the central and regional settlement committees (P4) to the industrial court -- a branch of the public courts of justice.

Thus, employers will no longer need permission to dismiss employees. Labor unions and employers are accommodated through a bipartite ad-hoc judge system, while most complaints will be handled by "voluntary arbitration" through a "bipartite forum" between employers and workers as individuals in their workplaces.

However, with the obligation that all labor issues must first be settled in the "bipartite forum", the influence of labor unions will be reduced and the effectiveness of the joint working consensus (KKB) weakened, as is the case in South Korea.

Though the bill also covers conflicts of interests between labor unions and employers, there is no obligation requiring the latter to acknowledge and negotiate it with the former.

In the case of Hong Kong, the absence of such a provision has reduced the need for collective negotiation as the main function of labor unions, and the greater part of consensus between workers and employers is achieved by informal or "ad-hoc" negotiation.

But given the corrupt judiciary, the "industrial court" will give rise to more problems.

The other objection concerns the legalization of outsourcing, which will relieve the employing company of the need to bother about wages and other allowances for workers -- they become mere commodities in transactions between the first company and the firm recruiting outsourced workers.

Outsourcing takes place nationally between companies at home as well as globally between overseas companies and Indonesian labor recruitment firms. The workers serving these sub- contracting firms are on a contract basis so that there is practically no employment security or labor insurance. This is what the KAPB describes as a tendency toward "modern slavery".

The idea behind the "labor law reform" is evidently to replace the whole labor law system that tends to be protective for workers, with labor legislation that is more flexible and favorable to business interests.

All this will be for the sake of "efficiency", and to draw more investment, a need that is often said to be at odds with protective labor legislation.

When many workers were threatened with dismissal, with virtually no government ability to protect them, at least the required permission for labor dismissal would curb the wave of dismissals.

Workers are not the main factor involved in "economic inefficiency". A labor analyst, Dennis M. Davis from Capetown University, wrote last year that in the South African case other factors included rationalization of the production process as a result of global competition, which produced a greater impact on export and investment performance than protective labor legislation.

Sony's withdrawal from Indonesia, as admitted by its own spokesman, was the result of the company's strategy to respond to global competition rather than merely due to the labor situation.

Davis emphasized that even if a country has to experience impoverishment with a high rate of unemployment, the government should resist the temptation to lower its labor standards.

A country needs to respond to global pressure, but this should be carried out based on a framework agreed upon by employers and unions. Without social safety networks to protect the majority from impoverishment, proper labor protection standards and concrete schemes geared toward manpower skills promotion and empowerment, Indonesia will never be capable to respond to the global challenges facing it.