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«Social Standards in Indonesia – A Review of Existing Tools and Regulations April 2003 Social Standards in Indonesia – A Review of Existing Tools ...»

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Social Standards in Indonesia – A Review of Existing Tools and Regulations April 2003

Social Standards in Indonesia

– A Review of Existing Tools

and Regulations


Bianca Kühl

April 2003

Social Standards in Indonesia – A Review of Existing Tools and Regulations April 2003


1. Introduction

2. International Law and the Ratification of the ILO – Core Conventions

2.1 Labour Law Reform

2.2 Activities of the ILO to Safeguard Workers’ Rights

3. Alternative Labour Regulation Tools

3.1 Social Clause

3.2 ILO Declaration on and OECD Guidelines for Multinational Enterprises

3.3 Framework Agreements

3.4 Global Networks of Trade Unions and International Works Councils

3.5 Social Labelling/Ethical Consumption

3.6 Codes of Conduct

3.7 The UN Global Compact and UNIDOs Triple Bottom Line (TBL)

3.8 Social Protection and Poverty Reduction Strategies – Programmes of International Financial Institutions (IFIs)

3.9 Trade Union Perception of Alternative Labour Regulation Tools

4. Conclusion



Appendix………………………………………………………………………………………26 Social Standards in Indonesia – A Review of Existing Tools and Regulations April 2003

1. Introduction Free trade has for a long time been seen as the only way to develop the countries in the “third” world. Only when the ministerial conference of the WTO in Seattle in 1999 failed, it became quite clear that free trade without social justice cannot continue. Today, there is more and more consideration of the relationship between economic globalisation and the social situation in the world. It is estimated that 1/3 of the global labour force - or one billion people - are unemployed, underemployed or belong to the working poor. Many jobs were relocated from the industrialised countries to developing countries. Export processing zones in developing countries have offered multinational corporations areas to operate without restriction. Although they offered opportunities for employment and income, the working conditions are hazardous (Sengenberger 2002). Women in particular found jobs in the newly created world market factories. Between 70of the workforce in export processing zones are females aged 15 to 25 (Wick 1998). In Indonesia, half of the working age population are female (71.3 million), and 52,8 % of the 98.8 million labour force are female (www.worldbank.org).

National labour laws seemed to be no longer sufficient to protect the workers. The absence of strong regulations and an efficient law enforcement machinery allowed economic players to exploit the work force in less developed countries. Beyond this, weak labour unions and a labour hostile environment helped multinational enterprises to grow enormously. For a long time neoliberal economists, who argued that the existence of institutions and social standards hinder economic progress, were believed to be right. The World Bank and IMF also followed these arguments. However they could neither reduce poverty nor implement humane working conditions in industrial workplaces. Initiatives other than the big institutional actors tried to develop tools to fill this gap. These initiatives were mainly the global unions and labour related NGOs, but also consumer associations.

In February 2002, the largest pension fund in the US, the California Public Employees Retirement System (CalPERS), which manages a total of US $150bn in retirement savings, announced that they would no longer invest in four East Asian countries (Thailand, the Philippines, Malaysia and Indonesia). This decision was reached after conducting a review of its funds using criteria including social issues and human rights. Although the fund had invested only an estimated US $250million in this region, there are fears that other investors – smaller funds - might follow this example. CalPERs will continue to invest their money in developing countries, but they will first look at the laws and at the institutional capacity to implement the laws, such as the actual conditions in a country concerning child labour, forced labour, freedom of association and discrimination.

Ethical investment is quite a new aspect in the advocacy of human rights. Other tools became

–  –  –

more common during the last three decades. In the field of labour regulation and the protection of workers’ rights, soft laws beyond the national and international labour laws were designed and introduced. The following paper will draw a picture of the relevant attempts for implementing labour rights and social standards in Indonesia.

Indonesia Since 1997 Indonesia has undergone deep political and economic changes. Of all South-EastAsian countries, Indonesia was hit hardest by the Asia crisis with a negative GDP growth rate of 13,7% in 1998, and it has not yet recovered.

–  –  –

Source: Central board of statistics and Deutsche Bank, Indonesian Newsletter, Febr. 2003 Besides the economic changes, the Indonesian population faced a new political situation when the country turned from a dictatorship into a democratic process. It is still in a period of transition, struggling to become a new country. A lot of new democratic laws had to be developed and to pass the new democratically elected parliament. Day-to-day life has changed enormously. It turned out that with the fall of the corrupt regime of Soeharto, the whole country was at the brink of collapse. Corruption, Collusion and Nepotism had become more or less a reality. Today the government under President Megawati tries to continue the reform process but the speed of reform has slowed down remarkably. The intention is to build a stable country which will attract investors.

Regarding the situation of the workers, they still face huge problems today. Due to the crisis, many lost their jobs and many were pushed into the informal sector, which employs about 65% of all workers. The drop of the real income was tremendous. Out of a labour force of 98.8 million people in 2001 eight million were openly unemployed and probably another 30 – 35 million were underemployed (www.bps.go.id/sector/employ/table1.shtml).

In such a situation, labour laws alone cannot protect the rights of the workers. Especially with regard to the core labour standards developed by the Prohibition of Forced Labour (ILO Conventions 29, 105), the Prohibition of Child Labour (ILO Convention 138), the Prohibition of Discrimination in Employment (ILO Conventions 100, 111), the Freedom of Association and the Right to Collective Bargaining (ILO Conventions 87, 98) as well as other important international labour standards concerning living wages (ILO Conventions 26, 131), working hours (ILO Convention 1) and health and safety (ILO Convention 155). Alternative labour regulation tools, or so-called soft laws, are becoming more and more important in the protection of workers (www.ilo.org).

As far as internet or paper based sources are quoted, they are named in this paper. In addition, Social Standards in Indonesia – A Review of Existing Tools and Regulations April 2003 a lot of information was gained through interviews with actors of trade unions, NGOs, associations and corporations, either by telephone or by email or personal contacts.

2. International Law and the Ratification of the ILO – Core Conventions With the downfall of Soeharto, the way for a new and more democratic labour law was opened. Interim-president Yussuf Habibie signed the ILO Core Conventions. This also ended the more than thirty years of state guided workers’ organisations who had to serve the interests of the employers or the company owners, but who never paid attention to the workers.

Indonesia has ratified all ILO Core Conventions

No. 87 and No. 98 Freedom of Association, ratified under Presidential Decree 8 of 1998 and Collective Bargaining, ratified under Law Number 18 of 1956 (cf. Act No. 25 of the year 1997, Art. 27 & 48-54) No. 29 and No. 105 Forced Labour, have been applied in Indonesia since the Dutch Colonial Rule, the latter has been ratified under Law Number 19 of 1999 (cf. 25/1997 Art.12) No. 100, ratified under Law Number 80 of 1967, and No. 111, Non-Discrimination, ratified under Law number 21 of 1999 (cf. 25/1997 Art. 5 & 6). According to Indonesian Labour Law women workers are entitled to two days of menstruation leave per month, and pregnant women to three months fully paid maternity leave.

No. 138 (ratified in 1999) Minimum Age (cf. 25/1997 Art. 1/20 & 21). Indonesian Labour law No. 25 of 1997 stipulates that the employment of children under the age of 15 is prohibited.

Compulsory schooling in Indonesia ends at the age of 14. Indonesians between 15 and 18 years of age are allowed to work under special circumstances, but only for four hours during the day.

No. 182 (ratified in 2000) Worst Forms of Child Labour (cf. 25/1997 Art. 95-97)

as well as the following Conventions:

No. 19 Equality of Treatment (Compensation for personal injury due to industrial accidents) No. 27 Dock Work (The Marking of the Weight of Heavy Packages Transported by Vessels) No. 45 Employment of Women on Underground Work in Mines of All Kind (cf. 25/1997Art.98) No. 69 Work on Ships (The Certification of Ships’ Cooks) No. 106 Weekly Rest & Paid Leave (cf. 25/1997 Art.100-103) No. 120 Hygiene in Commerce and Offices No. 144 Tripartite Consultation to Promote the Implementation of International Labour Standards (cf. 25/1997 Art.38) Certain Conventions have not yet been ratified but are codified in the national law. The national labour law allows for a normal working week consisting of 40 hours (7 hours from Monday to Friday and 5 hours on Saturday), and a legal maximum of overtime of 14 hours per week. This is even better than the demands of the ILO Convention No. 1 on Working Hours.

Furthermore, Indonesia did not ratify ILO Conventions Nos. 26 and 131 on Living Wages. In Indonesia, regional minimum wages are revised by the Governor of the Province in January of each year and published by the Ministry of Labour. The legal overtime pay is a supplement of 50 % for the first hour overtime and of 100 % as from the second hour onwards.

Social Standards in Indonesia – A Review of Existing Tools and Regulations April 2003 Another Convention not ratified was ILO Convention No. 155 on Health and Safety. According to Indonesian labour law, there must be a health and safety committee with the participation of workers in factories with at least 100 employees, and a health and safety manager in factories with at least 50 employees.

2.1 Labour Law Reform As you can see from the boxes above, most of the corresponding national regulations of the core labour standards and other ILO Conventions are regulated in Act No. 25 of 1997. This law was already enacted during Soeharto’s time. With the political changes and the downfall of the dictator, workers demanded the repeal of this law. They felt it was against their interests and was made in an undemocratic manner as well as against the substantial contents of the core ILO Conventions. The demand for changes to the existing labour laws became part of the reform agenda. Due to the ongoing protests of the workers and their trade unions, then President Habibie decided to suspend Act No. 25 of 1997 up to 1 Oct. 2002. Three new laws should replace the law: a Trade Union Act, an Industrial Relation Dispute Settlement Act and a Manpower Development and Protection Act. The work should have been completed by October 2002, but it is still not finalised.

Eventually, in August 2000, the new Trade Union Act was enacted. Despite the protest of some unions, it was signed as law No. 21 of 2000 by then President Abdurrahman Wahid, also called Gus Dur. The new law is a substantial improvement despite several drawbacks. Due to the political stalemate between President Wahid and the Parliament (DPR), which resulted in nonactivity, the other two bills on Manpower Development and Protection, known as PPK (in the latest version it is called Manpower Bill, RUU-K), and on Settlement of Industrial Relations Disputes, known as PPHI, were not attended to for a long time. Only by the end of 2002, Parliament started again their deliberations concerning the two bills.

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