Labor law reform deny workers a safety net

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.