Albion Monitor

Case Study: Indonesia

by John Tanner

Workers sew shirts, shoes for two dollars a day

JAKARTA -- Check the labels on your shirt, your sports shoes or your children's toys. Chances are those well known United States or European brand name products will in fact be sourced from independent factories somewhere in Asia.

Monica, not her real name, sews shirts in Indonesia for 5,200 rupiah ($2.25) a day, when she is lucky. In October she and 180 other employees making clothing with brand names that included "Levi" and "The Gap," were paid no wages at all.

Employees said that the factory management simply refused to pay the wages. The factory, located in the town of Depok, about 15 kms south of Jakarta, is now facing protest action by the workers for their back-pay. Management did not comment.

Paid $2.35 for a seven hour day, plus another $1.30 for four hours of compulsory overtime

Karim, another pseudonym, makes sports shoes for Adidas at PT. Liutas Adhikrada in Indonesia for just above the minimum wage of 5,200 rupiah. Last year Adidas, a German company, kicked in pre-tax profits of 296 million German marks ($197 million).

Twenty three year old Karim rents a room close to the factory for 75,000 rupiah (33 dollars) a month. He is paid 5,400 rupiah ($2.35) for a seven hour day, plus another 3,000 rupiah ($1.30) for four hours of compulsory overtime.

Monica and Karim are one end of the globalization of manufacturing, which has brought rapid economic growth to South-east Asia and big profits to Western companies exploiting the cheap labor in the region. Many workers however, remain overworked and underpaid.

At Winnertex, a textile and clothing factory, in Jakarta, owner Michael Yuprapan, supplies women's underwear for C & A. The Brussels-based private company has a network of clothing stores in Europe but sources its clothing mostly from East Asia.

"The textiles and garments business is not as good as it was because of the competition from India, China and Vietnam," complains Yuprapan. "But if we keep changing all the time and catching the fashions in Europe and America, we can survive."

Yuprapan, who dropped his Chinese name of Lee when he became an Indonesian citizen, keeps ahead of the game by investing in the latest technology. His factory is packed with new computerized equipment from Germany and Japan.

"If we don't keep investing in new equipment and technology we will disappear in the future," says the entrepreneur. But capital costs rather than raw material or wages, are the biggest element in his successful family business.

Only government approved trade unions are tolerated in Indonesia

For the foreign companies, Indonesia's low cost skilled labor provides a welcome source of cheap items. The companies stay at arms length, not owning the factories but placing orders as and when they need the clothes, shoes or toys.

"Indonesia was low cost but is now developing into high tech," says Philip Chamberlain of Mondial, C & A's sourcing subsidiary. Charlain, based in Singapore, searches for suitable suppliers from Sri Lanka to the Philippines.

C & A's Code of Conduct, adopted in May this year, emphasizes the importance of "fair and honest dealings" with suppliers. It declares that "wages and benefits must be fully comparable with local norms" and have proper regard to safety.

That sounds fine and Winnertex achieves the standards set out in C & A's code. Workers are paid at least the basic wage of 5,200 rupiah a day, plus payments for overtime, a food allowance and a pension contribution.

Tuti, 22, who has been at Winnertex for six years, says as a packer she earns 54,000 rupiah ($23.50) a week. Her friend, Karnasa, who is 19, says she takes home between 50,000 and 70,000 rupiah ($22 and $30) a week doing piece work.

Adidas does not yet have a code but would support an industry-wide code.

Indeed the World Federation of Sporting Goods Industries, meeting in London later this month is expected to agree a code of conduct for suppliers of sports shoes.

"Adidas' standards may be better than the local Asian standards," says Peter Csandi, the company's spokesperson. "We are certain our supplying factories are far better than the average because, you know, we are working with high technology."

For non-governmental organizations (NGOs) in Europe and the United States, however, the question is whether these wages and conditions are good enough, particularly when compared to the profits that are made off the sweat of the poor workers.

The British charity Christian Aid for example calculates that only 31.20 rupiahs ($1.80) goes to the workers who make a sports shoes that retail in Britain for as much as $350 a pair.

"Shoe manufacturing is a key sector in developing countries," says Peter Madden, head of research at Christian Aid. "Not only does it generate jobs and earn money but it is also a stepping stone to building a manufacturing base."

For customers in Europe then, low wages in Indonesia provide cheap, well made and fashionable products. The export orders placed with the low-wage factories are also vital to the continued economic growth of Indonesia. The question now is whether Monica and Karim deserve a better deal, and how they can go about getting one.

Only government approved trade unions are tolerated in Indonesia so if workers organize they do so outside formal union structures. When a strike was organized at Winnertex, Yuprapan admits he dismissed the workers involved.

"In Indonesia, there is no freedom for trade unions," says Arist Merdeka of SISBIKUM, an NGO in Jakarta that works with factory employees. "The minimum wage is just keeping pace with rising prices."

© 1996, InterPress Third World News Agency (IPS)

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