Time for new era of labor relations

By James Castle

JAKARTA (JP): Reformasi offers an opportunity for a new era in Indonesian industrial relations. Unfortunately, authoritarian central control, mutual suspicion and even brutality characterized 30 years of industrial relations under the New Order.

This history is the reason for the atmosphere of confrontation, mistrust and hostility that is poisoning relations between labor and management today. In turn, poor labor relations are discouraging new investment and contributing to the country's economic malaise.

Contrary to public perception, labor law in effect during the Soeharto era was one of the most pro-labor sets of legislation in the region. Unfortunately, its implementation, like so many other aspects of the New Order, was weighted in favor of the unscrupulous both on the side of employers and employees.

Those willing to bribe or otherwise bend the rules often got favorable results. Those who played by the rules usually lost and often were punished for trying.

From the employee point of view, there was no true freedom of association. Only one labor union was legally sanctioned and all others were treated as illegal organizations.

When workers tried to avail themselves of their substantial protection under the law, it was common for unscrupulous employers to collude with government officials to deprive them of their rights.

Even worse, as we know from the case of the late Marsinah in East Java, workers seriously protesting their treatment were sometimes subjected to torture and even murdered.

From the employers' perspective, those who tried to play by the rules all too often suffered.

They frequently found themselves the subject of extortionate demands from labor and unsympathetic hearings in manpower tribunals if they did not offer financial gratuities in advance.

One of the most sensitive areas and the one perhaps most abused by employees is termination with cause.

When obtaining proof of employee misbehavior or theft, most companies found little support from the labor department bureaucracy or the legal system and were often sued in turn by criminal employees.

Consequently most companies simply tried to reach financial accommodations with unscrupulous employees, usually meaning they paid severance bonuses to employees who had committed crimes because there was no effective legal recourse.

The controversial regulation PP-150/2000 is really an overreaction to these abuses of the New Order government and the improper implementation of existing manpower rules by unscrupulous employers and government officials to the detriment of workers and their rights.

Unfortunately, this regulation was never discussed with employers and, indeed, seemed to contradict other discussions held with Indonesian business groups prior to its implementation.

Consequently it establishes extreme positions which will actually harm Indonesian labor because it discourages companies from hiring workers, and it discourages foreign investors in export-oriented industries from coming to Indonesia because of uncompetitive labor rates.

It also confirms the rights of criminal employees to seek redress from the employers they have abused.

As a result it is not surprising that honest employers who attempt to follow the law feel that the government has turned its back on them and has implemented yet another uncompetitive tax on business.

This further discourages business in an already difficult economic climate.

On the side of the workers, the regulation makes no distinction between the relatively well-off, privileged white- collar workers whose skills actually remain in short supply and the semi-skilled or unskilled blue-collar workers, the true buruh, who are in such great supply that they have extremely limited bargaining power.

Like fuel and energy subsidies which were well intended, the practical impact of PP-150 is to benefit the middle and upper class, not the low-income workers most in need of social safety net protection.

Unfortunately, discussions today that attempt to solve particular labor disputes or, more broadly, to establish mutually beneficial policies, often end in shouting matches rather than dispassionate negotiation.

It is not surprising the majority of Indonesia's current labor leaders have shown themselves more adept at demonstrations and shows of force than negotiations, because shows of force are the way they have been received for thirty years.

Physical abuse to which legitimate labor leaders were subjected during the New Order has naturally generated a physical response.

One should not expect workers to immediately trust the motives of either the government or employers. Much more dialog is needed.

Both sides must make every effort to remain calm while reasonable solutions are found to complex regulatory and legal issues. Rights of capital, management and labor must be respected in any solution. It is often forgotten in the heat of industrial disputes that labor, management and government depend on each other.

If there are no investors, no owners and no managers, where will workers find employment? On the other hand, if there are no loyal, dedicated workers, how can companies succeed in today's extremely competitive global market? If there is no labor harmony and successful economic activity, how will the government establish a reasonable tax base to fulfill its obligations to its people?

Given the past history of confrontation, suppression and false harmony that have characterized industrial relations here, it is not surprising that the first years of the reform movement have brought emotional confrontations.

What is important is that all parties quickly realize that confrontation hurts both sides.

There are no winners if businesses are stopped because of strikes or are closed because of high labor costs.

On the other hand, if employers do not treat their employees fairly and Indonesia does not progress economically to the point where it can pay its workers living wages, the social harmony so necessary to conduct business successfully will be missing.

In industrial relations, labor, management and the government are not enemies or competitors.

They are partners in the economic growth of Indonesia and in raising the living standards and quality of life for all Indonesians. Discussions and negotiations should be conducted in this spirit.

The writer, of the Castle Group, chairs the American Chamber of Commerce in Jakarta.