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.