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In post-Soeharto Indonesia, ‘militant unionism’ – along with shrinking credit, the uncertain political climate and inconsistencies within the regulatory environment – has been identified as a major reason for foreign capital flight and domestic firm closures (Sadli 2000). Claims about the deleterious effects of worker militancy have been a focus of extensive press coverage as well as seminars , government statements and discussions among business, union and NGO think-tanks.1 Indeed, the relationship between labour activism and Indonesia’s economic wellbeing has become an influential contextual factor in the development of the Indonesian industrial relations system. This chapter discusses debates on unionism and business from a labour movement perspective. It begins by briefly outlining developments in unionism in New Order Indonesia and sketching changes in the regulatory environment and union activity in the first five years after the fall of Soeharto, before turning to the central question regarding the extent to which ‘militant’ unionism has been a challenge to business. It argues that, while the new industrial relations climate does indeed present challenges for employers, those challenges lie in developing effective mechanisms through which they can work with unions rather than in the spectre of a strong and militant labour movement bent on the destruction of business. UNIONISM IN NEW ORDER INDONESIA Indonesia has a long and rich history of organised labour. Efforts to mobilise workers have been documented since the late 19th century, and labour organisations played an important role in the nationalist movement in the late colonial period (to 1945) and under Indonesia’s first President, Sukarno (1945–67). 221 14 A CHALLENGE FOR BUSINESS? DEVELOPMENTS IN INDONESIAN TRADE UNIONISM AFTER SOEHARTO Michele Ford Organised labour entered a new phase when Soeharto’s New Order regime started to take shape in 1966–67 after an attempted coup and the ensuing massacre of Indonesians associated with the Indonesian Communist Party (PKI) and other leftist groups. Building on the concepts of functional groups formulated during the Guided Democracy period (1959–65), the New Order government introduced the idea of Pancasila Industrial Relations – a corporatist system of industrial relations ostensibly built on the ‘family principle’ and the ‘traditional’ values of ‘mutual help’ and ‘deliberation to reach a consensus’ (see Ford 1999, 2000). As part of its attempt to corporatise the representation of labour, the New Order encouraged unionists who had survived the purges to establish the All-Indonesia Labour Federation (FBSI), a single peak body comprising 21 industrial sector unions (Hadiz 1997). Civil servants and the employees of state-owned enterprises were excluded from representation; the former were required to join Korpri, the Civil Servants Corps, while the latter had no formal right to organise (Ford 1999). State control of organised labour reached new heights after 1985, when the All-Indonesia Workers’ Union (SPSI), a single union with nine departments, replaced FBSI (Department of Manpower 1997: 5–7) . Although SPSI was officially restructured as a federation in 1993 (the Federation of All-Indonesia Workers’ Unions, FSPSI) and unaffiliated enterprise unions were permitted from 1994, little real change was achieved. In practice, the New Order government effectively maintained its one-union policy by preventing alternative unions from organising above plant level. The single union was primarily an instrument of control rather than a representative body (Ford 1999; Hadiz 1997). SPSI, and later FSPSI, had little influence at the national level, and even less in most workplaces. Workers were forced to look elsewhere for means of improving their wages and workplace conditions. As a result of the strictures government placed on the formal union, most effective labour organising took place outside the officially sanctioned structures in New Order Indonesia (Ford 2003). By the early 1990s, there were four main types of oppositional labour movement organisations in Indonesia: informal grassroots workers’ groups, self-styled alternative trade unions, radical student groups and labour NGOs. These groups were part of a complex constellation of organisations involved in the organisation and representation of labour. Alternative unions and community-based worker groups – many sponsored by labour NGOs or radical student groups – did not have access to the shop floor or to tripartite forums at the national or local level. Nevertheless, these organisations had a significant effect on the degree of labour activism. Whereas the government recorded just 57 industrial strikes in 1984, 752 industrial strikes were documented in the popular media when strikes reached a peak in 1994 (Kammen 1997: 390–395).2 Although many of these strikes appear to have been spontaneous, many others were conducted or sponsored...

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