Unions not powerful enough to scare investors away

Unions not powerful enough to scare investors away

Vedi R. Hadiz, Author, 'Workers and the State
in New Order Indonesia', Singapore

The labor issue has been making headlines in the national
newspapers again recently. Typically, the point being made is
that workers are asking for too much given Indonesia's economic
circumstances and that if they don't lower expectations,
investors will move their operations abroad. Because of
Indonesia's dire unemployment situation, this is of course an
alarming prospect.

Local heads of business associations, as well as
representatives of Korean and Japanese investors have raised the
alarm bells by arguing that Indonesia is no longer an attractive
place to do business due to rising labor costs. They say that
countries like Vietnam, China and Myanmar are becoming much more
attractive.

Labor activists on the other hand insist that even the
impressive minimum wage increases of the last few years have only
allowed workers to keep up with the equally impressive rise in
the cost of living. Workers are not any better off than they were
four years ago.

Both parties are probably right.

Investors do have a wide array of choices in selecting their
site of operations. This is because by definition, capital is
much more highly mobile than national labor forces in this so-
called era of globalization. Thus, they wield what is called
structural power over states, and over labor.

In other words, they have a greater capacity than the labor
movement -- especially one that is weak and fragmented -- to
offer threats convincingly. Nobody believes, for example, in
spite of some heavy huffing and puffing by activists, that a
national labor strike could be effectively organized under
current circumstances. The legacy of the systematic
disorganization of labor as a social force under the New Order is
still too deeply felt.

However, most government officials will sit up and take notice
when major business figures say that there could be a "capital
strike" against Indonesia -- meaning that investors will leave in
droves for greener pastures (of course the smaller local
entrepreneur -- who is usually caught in the middle -- does not
have the same level of mobility as the Korean, Taiwanese or
Japanese investor).

It is no coincidence that the countries cited as potentially
more lucrative investment sites -- China, Vietnam, and the like
-- are ones where labor movements are heavily state controlled.
In other words like in New Order Indonesia. It would indeed be
nice for many businesses if they could operate in countries where
there is little or no labor protection, or health and safety
codes, and no rules to govern compliance with environmental
standards.

But it is probably true as well that workers expected that
reformasi would result in better living and working conditions.
In spite of the protestations of businesses over workers' high
expectations, these continue to be quite shoddy as a general
rule. The dozens of new labor organizations often cited in
newspaper reports are usually toothless -- the vast majority are
brand names registered in the Department of Manpower and
Transmigration but have no presence at all at the enterprise
level.

Many in fact had nothing to do with the initial rise of labor
protests in the early and mid-1990s -- which was daring given the
authoritarian context -- and therefore, are Johnny-come-latelies.

In truth, it was always rather naive for workers to believe
that they would reap the fruits of reformasi, or that, for
instance, a single national political leader or political party
would have their interests in mind. Workers are just too
organizationally weak to be taken that seriously in spite of
misleading reports in the press about Indonesia's new "powerful"
unions.

Most of these unions are so weak they cannot even get the
bosses to agree to sign collective labor agreements with them, as
the latter still prefer the pliant SPSI -- formerly the New
Order's sole union federation.

But it is precisely this weakness and fragmentation -- from
which businesses, whether they admit it or not -- benefited in
the past that is the cause of many of today's labor problems. No
single organization has the clout and moral authority to
negotiate on behalf of workers. The result can often be
bewildering sets of demands made on businesses -- locally, these
can sometimes even be made by thugs and extortionists posing as
labor activists.

These thugs will play the game the other way around as well.
Now that the military cannot be readily called in to squash labor
protests, it is widely known that entrepreneurs regularly call in
hoodlums -- sometimes from party militias or from "youth
organizations" -- to do the same.

But the point to be made is this: Rising labor demands are
taking place within a wider context characterized by other
sources of business displeasure with Indonesia. This includes
costly red tape and kickbacks, little or no enforcement of laws
and regulations, fears of political instability, bad
infrastructure, high energy costs, etc, etc.

Dealing with any one of these problems is just too difficult
as they affect the interests of the powerful (and often, the
greedy). One foreign investor told me some years ago that it was
easier to suppress workers than to stop providing kickbacks to
bureaucrats who can really cause problems.

There is no doubt that the wider and dire context of
Indonesia's many social, political and economic problems makes
doing business here less attractive than in comparatively stable
China. But hopefully, investors are not just picking on those too
weak to reply when they assign the whole blame on Indonesia's
workers.