GROWING WORKER PROTESTS AGAINST CHANGES IN LABOR

UNCLAS SECTION 01 OF 03 JAKARTA 004465

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR EAP/IET AND DRL/IL
DEPT OF LABOR FOR ILAB

E.O. 12958: N/A
TAGS: ELAB ECON EINV PGOV PHUM KJUS ID
SUBJECT: GROWING WORKER PROTESTS AGAINST CHANGES IN LABOR
LAW

REF: A. JAKARTA 1645 - AMBASSADOR DISCUSSES LABOR REFORM

B. JAKARTA 3563 - INVESTMENT CLIMATE PACKAGE

Summary
--------------


1. (SBU) Indonesia experienced its largest labor protest in
at least four years, as Indonesian workers took to the
streets of Jakarta and other major cities on April 5 to
oppose the GOI's plan to amend the basic labor law. The
proposed amendments would scale back 2003 concessions to
workers and loosen restrictive labor practices imposed on
business, commonly cited as major impediments to investment
and employment creation. Unions have coordinated a plan for
rolling demonstrations through May 1, and have discussed a
possible nationwide strike. The Vice President and the
Manpower Minister both signaled a tactical retreat from
earlier plans to seek passage of the amendments by June.
President Yudhoyono quickly stepped in, calling a tripartite
meeting for April 7 with unions and employer representatives
to find common ground and a way forward. Union leaders deny
any political motivation, but the opportunity is ripe for
opposition elements to bolster and fuel the demonstrations.
Labor sector reform is the weightiest component in
Yudhoyono's new investment climate package. Like other
significant reform efforts facing Indonesia, success will not
come easy. End Summary.

Largest Labor Protest in Years
--------------


2. (U) Labor demonstrations against the GOI's plans to amend
the 2003 Manpower Act reached new levels on April 5, as the
All-Indonesia Trade Union Confederation (SPSI) organized
large protest actions in Jakarta and other major cities. A
senior SPSI leader claimed that 57,000 workers turned out in
the capital, while media reports cited 20,000 or more
protesters. Even at the lower range estimates, this marked
the largest labor protest in the capital since at least 2002.
The Jakarta protests focused on the Presidential Palace
(Yudhoyono was in Papua) and Vice President's office, forcing
a perfunctory meeting with VP Jusuf Kalla. Late in the day,
some demonstrators destroyed property along a major Jakarta
artery, including at least one bus which they attempted to
set on fire. Police detained 16 persons for destruction of
property. Traffic in the city center was snarled for hours.



3. (U) News reports cited protesters numbering in the
thousands in the major cities of Medan, Surabaya, and Batam.
Other cities on Java, including Malang, Semarang, and Bandung
experienced smaller demonstrations. Earlier protests in
Bandung forced the precautionary closure of 140 out of 600
textile plants, according to the press. The Indonesian
Employers Association (APINDO) claimed millions of dollars in
business losses as a result of protests that began in late
March.

Unions Reject Roll Back of 2003 Concessions
--------------


4. (U) The three major trade union confederations, which
represent some three million members, stand united in their
opposition to GOI amendments to the Manpower Act, a major
component in the Government's new investment policy package.
GOI amendments have focused on creating greater labor market
flexibility by rolling back concessions to organized labor in
the areas viewed, by regional standards, as either too
generous to employees or too restrictive on business. Former
Manpower Minister Jacob Nuwa Wea, during the Megawati
administration, negotiated the 2003 passage of the Manpower
Act over a period of two years while he remained the chairman
of the SPSI labor confederation. Proposed changes include:

-- Contract Labor: Ending restrictions on types of jobs that
may be conducted by contract labor, and extending the maximum
length of work contracts from 2 to 5 years.

-- Outsourcing: Abolishing restrictions on types of work
that may be outsourced.

-- Minimum Wages: Removing reference to "minimum physical
needs" as a basis for government determination of minimum
wages.


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-- Strikes: Stipulating prosecution (one option) or
dismissal without severance pay (another option) for workers
participating in illegal strikes.

-- Severance/Service Pay: Reduction in number of months of
required severance and service pay in case of dismissal.

Unions Plan Coordinated Demos through May 1
--------------


5. (SBU) We spoke with senior officials of SPSI and the
Indonesian Prosperity Trade Union (SBSI) on April 5-6, along
with ILO and NGO representatives, and mid-level officials in
the Manpower Ministry. The union officials noted good
coordination between the three major labor confederations,
which also include the Indonesian Trade Union Congress
(KSPI),for continued protest actions, at least through May
Day (May 1). To keep the heat on in Jakarta, the
confederations have agreed to take turns launching
demonstrations, with SBSI next up for protests in the capital
on Sunday, April 9. National leaders have told their
constituent unions that they are free to mobilize together
with other confederations in the provinces.


6. (SBU) Both SPSI and SBSI noted discussions of nationwide
strikes on either May 1 or May 20 (National Awakening Day) as
a last resort if the Administration does not back down on the
amendments.

VP and Minister Signal Tactical Retreat
--------------


7. (SBU) In the face of the large protests in Jakarta, VP
Jusuf Kalla and Manpower Minister Erman Soeparno signaled a
possible tactical retreat from earlier confident plans to
push through the amendments quickly, possibly as early as
June. Both Kalla, when receiving 10 leaders of the protest,
and the Minister in public comments described the draft as in
an early stage, requiring discussions with union and employer
representatives before submission to the legislature. They
said unions had launched the protests based on a
misunderstanding that the GOI had finalized its proposal. On
April 6, Manpower officials told us there were, in fact, no
draft amendments, only concepts for discussion.

Yudhoyono Quickly Steps In
--------------


8. (SBU) SPSI and SBSI informed us that President Yudhoyono
has called for unions and employer representatives to meet
with him at the Palace on April 7 in an attempt to find
common ground on the labor amendments. Whereas union
officials were undecided about an earlier offer to meet with
the Manpower Minister, SPSI and SBSI immediately agreed to a
discussion chaired by the President himself.

Unions Deny Political Motivations
--------------


9. (SBU) Publicly and privately in conversation with us,
union leaders have denied their protests have any political
motivation or links to party politics, fighting off this
knee-jerk assumption in a country with a solid tradition of
rent-a-crowds. An SPSI senior leader told us the protests
remained "pure" and unrelated to political interests. While
unions are clearly opposed to the amendments, staunch
Megawati loyalist Jacob Nuwa Wea remains SPSI chairman and
other opposition figures, including retired General Wiranto,
have links to senior SPSI officials. A labor NGO noted that
SPSI has no disposable union funds and bringing out 20,000 or
more protesters required financial backing from somewhere,
suggesting support from Megawati's Indonesian Democratic
Party for Struggle (PDI-P) or other Yudhoyono opponents. In
the past, unions themselves -- institutionally weak and
poorly financed -- have been unable to sustain national
protest actions over any length of time absent external
support.

Comment
--------------


10. (SBU) With the Manpower amendments, Yudhoyono faces the
challenge of pushing through a controversial measure that
nevertheless constitutes an important component in economic
and investment climate reform. Labor market inflexibility is

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a frequent complaint of the business community here, with
Indonesia's practices largely out of step with competing
countries in the region. Like the fuel price increases, the
issue is ripe for exploitation by Yudhoyono's political
opponents who would find it easy to organize and fund rowdy
protests that feed off of populist, anti-capitalist
sentiments. Unlike fuel prices, however, the labor laws only
directly impact one third or less of Indonesia's 100 million
plus work force with the remaining two-thirds in the informal
sector or unemployed and largely unaffected by formal
regulations. Those most concerned, the organized workers
belonging to the three major union confederations, constitute
only roughly 10 percent of the formal sector employees.


11. (SBU) ILO, NGO, and APINDO observers attribute the
widening labor protest to mismanagement of the process on the
part of the Manpower Ministry and the Administration, which
despite understanding of the controversial nature of the
proposed changes, failed to initiate a serious dialogue with
union leaders or develop a consensus based on long-term
economic interests shared by labor and employers alike. The
relationship between investment promotion, job creation, and
expanded union membership (as opposed to the shrinking union
ranks of recent years) might constitute one important point
of common ground. In conversations with us, the union
officials have complained as bitterly about the lack of
government consultation as they have the substance of the
amendments. The Administration must now correct this
approach, and deny opponents an easy platform from which to
cause trouble, in order to keep the key labor reform portion
of its investment package on track. Yudhoyono's quick
attention to the brewing labor protests is one positive sign.
Like other significant reform efforts facing Indonesia,
success in changing the country's labor environment will not
come easy.
PASCOE