Workers Strike in Indonesia - Essay Example

? Workers Strike in Indonesia The recent workers strike in Indonesia was seen to result in massive losses for the employers in the country. The economic impact of the strike was considerably massive in in light of the fact that the country has a fast growing economy that is heavily reliant on robust exports. This paper seeks to establish what was the cause of the strike, what were the reactions of the key stake holders as well as establish the effects of the strike. It also looks at the possible legal implications of the strike as well as highlighting the solutions that were reached by the stakeholders in resolving the crisis. Workers Strike in Indonesia Introduction Workers Strike in Indonesia According to police estimates that were given by the police spokesman Col. Rianto, More than 2 million workers working in more than 80 industrial estates and about 700 companies recently went on strike in Indonesia. The striking workers were mainly demanding for increased wages on their part as well as opposing the hiring of contract workers in the country (Jakarta Globe, 2012). The practice of hiring contract workers in the country allows for employees to hire workers on temporary one year contracts without having to provide them with any benefits. This practice that is commonly referred to as “outsourcing” has been vehemently opposed by the union and was cited by the Confederation of Indonesian Workers’ Union Mr. Raweyai as being the main disgruntling factor behind of the worker’s strike (Jakarta Globe, 2012). Mr. Iqbal, who serves as the Chairman of the Indonesian Labor Assembly (MPBI) pointed out that besides the abolition of outsourcing, some of the other agendas of the strike were to try and advocate and demand for a pay hike for all the workers as well as improved health security for them to be implemented before 2014 as opposed to, 2019 as the government had planned. According to a ruling that was made in January by the Constitutional Court in Indonesia, the practice of outsourcing was termed as being highly illegal and unconstitutional and was deemed as being a major violation of the rights of workers all over Indonesia. The Closure and Pulling out of the Country by Major Companies in Indonesia Ten of some of the biggest companies in Indonesia have threatened to shut down their production units in the country a result of the worker’s strike in the country.Many of these foreign investors could simply not accept the situation that had seen some of the labor unionists intimidating workers who worked at the factories that had banned their workers from participating or supporting the strike in any way (Jakarta Globe, 2012). According to the deputy Chairman of the Indonesian Chamber of Commerce, Mr. Simanjorang, as a result of the unfavorable employment policies in Indonesia, the country is currently less competitive in comparison to some of the other countries in Asian such as Cambodia and Vietnam. Both Vietnam and Cambodia have been seen to be providing lower wages for their workers as compared to Indonesia by about 10%. They have also been seen to provide better industrial facilities for international organizations setting up production units in the countries (Jakarta Globe, 2012). Relocation by these companies into other countries will have an adverse impact on unemployment levels and will create a largely negative investment climate in Indonesia. The move by these companies has been attributed to be mainly driven by legal uncertainties as regards labor issues in the country. The companies were compelled to immediately shut down their production and business operations during the strike which severely affected their import and export operations and was seen to lead to fairly large losses on their part. The strike caused estimated production losses amounting to close to close to about 1 trillion Indonesian Rupiah which is about $104 million (Jakarta Globe, 2012). Why Indonesian Employers Prefer using Outsourcing Services Most of the companies employing employees in Indonesia prefer to use outsourcing in the employment of their workers. Some of the benefits that accrue to companies using this system include the fact that the concept of obtaining the services of both part time as well as full time skilled staff in these other countries helps in the generation of a lot of business growth opportunities. By using this models, the companies stand to gain from obtaining the services of qualified employees at the cheapest prices possible (Langfield-Smith, 2000. Another benefit that Indonesian companies gain from the use of outsourcing services is that by using outsourcing services such as cleaning and repair services, they stand to obtain better services at reduced costs as outsourcing frees them up to concentrate on their core businesses. Outsourcing services provides are able to provide these services at cheaper costs and quality as compared to if these companies attempt to outsource the services themselves (Langfield-Smith, 2000. Some of Indonesia’s laws such as the Manpower law No. 13 that was made in 2003 have been viewed by most employers to be severely impeding the investment climate in the country. The laws are seen to provide both the employees as well as the employer’s limited flexibility in any attempts aimed at terminating employment contracts. They are seen to often demand for rather high amounts of total severance pays to workers, this a factor which has been seen to cause most of the employees difficulties in the event that they have to lay off workers. As a result of this, most of these employees can be seen to prefer using outsourcing services. Opposition to Outsourcing by Indonesian Workers Employment Relationship Practices Most of Indonesia’s laborers oppose the move by most of the employing companies to use outsourcing services as this has seen to the development of a situation whereby he workers are given one year employment contracts without any benefits. Outsourcing has been seen to deny them basic health benefits as well as forcing them to work at minimal wages (Langfield-Smith, 2000. The practice of outsourcing as perceived by most Indonesians has been viewed as being mostly negative and the Indonesian government has been blamed for its lack of formulating clear polices that will guide the practice of outsourcing (Jakarta Globe 2012). The number of job opportunities that are available to Indonesian workers are found to be rather few in comparison to the amount of labor that is available. The situation is further compounded by the relatively low skill levels of the Indonesian workers which have caused them to have a relatively weak bargaining position. This situation can be seen to be exacerbated further by some of the companies that are seen to be little concerned with maintaining the welfare and rights of their workers in their business practices (Jakarta Globe, 2012). APINDO’s Efforts to Improve the Situation The Indonesian Employers Association (APINDO) has taken upon itself efforts at mending the relationship between the employers as well as employees in Indonesia. APINDO sought to reassure the companies that wanted to move their operations out of Indonesia that they would make efforts aimed at resolving the conflict with the Indonesian labor organizations. APINDO has lobbied some of the relevant authorities in an attempt to try and resolve the problems raking both the employees as well as the employers within a period of about two months (Apindo, 2012). According to APINDO’s chairman, after the October 3rd strike, some of the foreign investors in Indonesia had already started locking up their factories while several others had already started laying off some of their workers. This has been witnessed across numerous industrial estates all over Indonesia. The Association view is that outsourcing in business is not necessarily a negative business practice and it plans to legally challenge any attempts made by the Manpower and Transmigration Minister Mr. Iskandar to make a ministerial decree that would limit the provision of outsourcing services to only be used in the provision of cleaning, driving, catering and various support services at mining sites (Apindo, 2012). Apindo’s head of the Advocacy and public policy division Mr. Susilowati supported the opinion that it would be impossible to bring to an end the use of outsourcing services in Indonesia as a result of the immense advantages it had brought to both the workers and investors in the country. The use of outsourcing services in Indonesia has been legally limited for use only in some of other peripheral support services such as cleaning and driving. However some of the companies abuse this policy by using outsourcing services in their core industry and business areas in efforts aimed at attempting to avoid their paying workers fringe benefits which can sometimes be rather expensive. According to Apindo, if outsourcing was to be banned in Indonesia, both the downstream as well as the upstream business activities would have to be majorly undertaken by some of the larger companies that have the necessary resourced as well as capacities capable of handling these activities. This will result in a situation whereby the larger international companies will eventually end up shutting out most of the smaller companies. It can thus be shown that outsourcing actually happens to play a major role in efforts geared at encouraging entrepreneurship as well as the progressive development of most of the smaller local companies. Outsourcing is seen to be both indirectly and directly helping to employ millions of Indonesians all over the country mainly through the medium and small enterprises (Apindo, 2012). It is also apparent that when a company decides to outsource, there could be a major reason for doing so. For example, a company may require specialists in a given department, who can not be found in locally. In this regard, the government may benefit as well. This can be in terms of the company training local employees from foreign employees with certain skills or competence that is not available locally. In fact, it is true to argue that outsourcing have more advantages than disadvantages. Studies have documented that outsourcing has increasingly played a crucial role in improving the performance of various businesses (Anwar, 2004). The concentrated Efforts that are being made by Apindo are aimed at ensuring that the government takes steps at addresses the issue of outsourcing in such a manner that outsourcing services are implemented all over Indonesia without inadvertently pitting the interest of the employers against those of their workers. If this was to happen, most of the foreign investors and employers would be forced to prefer implementing policies aimed at mechanizing their production processes. Mechanization of the production processes in these factories would eventually have an enormous detrimental effect on the Indonesian nation as a whole with the largest affected group being the youth (Apindo, 2012). Consequences of the October 3rd Workers Strike In Indonesia A direct consequence of the workers strike in Indonesia is that Indonesia’s president Yudhoyono and Economy Minister Rajasa both agreed to look into how they would be able to improve on country’s worker’s benefits and welfare especially in relation to outsourcing. The president had agreed that the practice of using workers who happened not to enjoy any benefits was an illegal practice and measures should be taken to ensure that the spread of this practice is stemmed and not allowed to take root in the country. The severance of the strike which had the effect of closing down more than an estimated 5000 factories that were spread out across 12 provinces was seen to have a significant impact on Indonesia’s economy. Indonesia’s economy grew by about 6.5 percent over the past year (2011). This growth has caused the country to be seen as an island of positive economic growth in the midst of comparably giant economies of some countries such as India, China and Japan which seem to be slowing down. Indonesia’s economy is largely fueled by both an expanding middle class that is solely responsible for increasing the country’s domestic consumption, as well as, robust exports on its part (Jakarta Globe, 2012). It can thus be seen that the massive strike had a relatively significant impact as most of the factories were unable to export their products as their operations were severely crippled. The strike has resulted in a situation where it is feared that most investors willing to invest money into the country might fail to do this resulting in losses for the country. Some of the observers say that the worker’s strike was a sign that thelabor unions in the country were significantly increasing in both influence and power. This is a factor that might serve to further scare investors looking to invest in Indonesia (Jakarta Globe, 2012). Indonesia’s manpower minister Iskandar has called for meetings with the leaders of the various labor organizations in the country as well as other concerned parties to try and work out a solution to the problem. He has been quoted as asking for enough time to allow him to meet with all the leaders and parties concerned so as to be able to effectively resolve the problem (Jakarta Globe, 2012). It is apparent that there has been a gradual transformation on how the government approaches industrial relations in Indonesia. This is mainly in relation to rush to reforms since the fall of President Suharto in 1998. The labor law in Indonesia occupies a peculiar place in the national legal system in regard to it significant role in addressing labor issues in the country. According to the article by Ridwan, et al 2012, Apindo noted that the decision by 10 companies to relocate to other countries was due to several labour issues that they claim hamper the investment climate. In addition, there was a concern about the intention by the manpower and transmigration minister to issue a new ministerial decree to limit out sourcing to selected sectors. It is noted that a national wide strike by workers was to be called off only if the MPBI’s demands were met. These included eradication of outsourcing, rejection of low labour wages, and implementation of national health insurance. The constitution court in decision No. 27/PUU-IX/2011 declared articles 65(7) and 66(2)(b) of Law No. 13 of 2003 (“Manpower Law“) unconstitutional. This is in regard to failure by fixed term employment contracts used in outsourcing arrangements to provide a clause that protects the rights of existing workers when a company decides to switch to outsourcing. In regard to this decision by the constitutional court, apart from the government issuing ministerial statements about its decision on limiting outsourcing, there should be an amendment of the manpower law in such a way that the protection of rights of the outsourced and that of the already existing workers is addressed. According to the Ministry of Manpower and Transmigration Republic of Indonesia, article 4(c) of Minister of Manpower and Transmigration Decree No. KEP.101/MEN/VI/2004, stipulates the procedure for granting licenses to manpower services provider companies (Decree 101), whereby the outsourcing agreement must be contain a clause with confirmation the willingness of the new outsourcing company to employ employees from a former company (Lindsey, 2008). Arguably, this goes a long way in reducing outsourcing arrangements, which are said to be abused in Indonesia. The amendments should also focus of solving the issue of temporary and permanent labor issues. As it stands of now, the current Indonesian outsourcing needs a proper articulation. In light with this, it is noticeable that some companies that consider outsourcing may find it difficult copping with the minister’s decision. In fact, according to the Act concerning manpower of the Indonesian labour law, article 1 (13) stipulates that people from foreign citizenship available for job shall be welcome to work within Indonesian territory. In light with this, it is evident that there is no particular law that limits outsourcing. Therefore, the minister would be going against the law by limiting outsourcing to few sectors. With such deliberations, companies that find it necessary to outsource can loose business especially if they maximize their profits through outsourcing. This has a great impact on the Indonesian economy. For example, according to Ridwan, et al 2012, these 10 companies employ no less than 10,000 workers. This means that if these companies relocate, all these people will be left jobless. To make the matters worst, it is feared that other companies may follow suit. This will have long-term negative effects to Indonesia especially in terms of losing foreign investors who play a crucial part in improving the economy. It is vital that the government through the manpower and transmigration minister come to a consensus on the way forward. For example, if the contentious issue is about employers seeking to outsource, the government and employers should evaluate the impact of outsourcing to both the company and the government. For example, if the issue of outsourcing tends to generate more income to the company, the government and the company can have a strategy of employing a certain percentage of workers locally. If the company exceeds the number of workers from outside the country, the government and the employer should have an agreement on the raise of tax to obtain from such a company. In addition, it is vital that necessary legislations be put in place in order to address workers grievances. Currently, the Indonesian labour law does not state catabolically on dispute resolution procedures and the rights of workers to strike (Nati, 2012). If this is not addressed, it is apparent that there will be continued strikes and misunderstandings between employees and employers. As of now, the law assumes that workers are adequately represented by labour unions, though this is not the case. Secondly, the process of disputes resolutions between workers and employers is subject to delays. In addition, the right to strike is severely limited. Conclusion After consultations with the concerned parties, the minister of Manpower and Transmigration announced that plans were underway to facilitate the enactment of regulations that would take into careful account the demands of the employers as well as the workers. The new planned regulations would help in ensuring that the outsourced workers would be entitled to receive social security benefits, holiday allowances and annual leave. The duration of time that companies providing outsourcing services can legally be allowed to hold licenses would be reduced to 3 years from the current five years. The companies would also be subject to frequent reviews that will be done after every three years to ensure that the companies constantly comply with all the necessary regulations and laws (Apindo 2012). The labor law in Indonesia occupies a peculiar place in the national legal system in regard to it significant role in addressing labor issues in the country. The decision by 10 companies to relocate to other countries was due to numerous labour issues that they allege hinder the investment climate. In this regard, there should be an amendment of the manpower law in a manner that the guard of rights of the outsourced and that of the already existing workers is addressed. Currently, the Indonesian labour law does not state catabolically on dispute resolution procedures and the rights of workers to strike. References: Anwar, C. (2004). Labour mobility and the dynamics of the construction industry labour market: (the case of Makassar, Indonesia). Gottingen: Cuvillier. Apindo. (2012). APINDO | Solutions for the Outsourcing System in Indonesia. Retrieved on 12th Nov 2012 From http://www.gbgindonesia.com/en/main/partners_updates/solutions_for_the_outsourc ing_system_in_indonesia.php. Jakarta Globe. (2012). 10 Companies to shut down their Production in Indonesia. Retrieved on 12 November 2012 from http://www.thejakartaglobe.com/business/10 -companies-to-shut-down-their-production-in-indonesia/554343 Jakarta Globe. (2012). More than 2 Million Workers Strike in Indonesia. 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