Newsmaker Interview: Said Iqbal

Investment should bring in capital, create jobs and increase workers welfare, says the chairman of the KSPI labor union

By Mary Silaban
Thursday, August 15, 2013

Labor issues are at the forefront of the current social and political agenda in Indonesia, with the hot-button issues of outsourcing, social security and universal healthcare key to worker sentiment.

The growing power of labor has also fueled intense debate over the best way to attract foreign investment and continue economic growth.

The main driver of the labor movement here is the Alliance of Indonesian Labor Unions (MPBI), which is made up of the Confederation of Indonesian Workers Unions (KSPSI), the Confederation of Indonesian Workers Trade Unions (KSPI) and the Confederation of Indonesian Prosperous Labor Unions (KSBSI).

In the third and final part of AmCham's series of interviews with Indonesia's top labor officials, we spoke to Said Iqbal, chairman of the KSPI and recent recipient of the Febe Elisabeth Velasquez Prize from the Dutch trade union FNV for his work on a "large-scale trade union campaign of lobbying, mobilization and action” that resulted in new legislation on outsourcing last year.

Said talked about what makes good investment in Indonesia, why labor relations are not an obstacle to the inflow of foreign money and what he's looking for from the candidates for the presidency next year.

AmCham: What are the main concerns of the KSPI?

Said Iqbal: Over the last five years, KSPI has consistently been concerned with several major issues: social security reform, the cheap labor policy, inappropriate outsourcing practices and weakening labor monitoring due to regional autonomy.

There was also a government policy to attract direct foreign investment by saying that the Labor Law is not applicable in exclusive economic zones, which opened the possibility of violations of labor rights. Fortunately, that policy was abolished, but we are still vigilant in case this happens again.

How do you view foreign investment?

The KSPI is not an anti-investment movement. Putting investors and labor head-to-head is not our intention. Investment is good, but good investment should increase workers' welfare. So this is about justice. In any economic theory, be it capitalist or socialist, investment should increase workers' welfare.

Indonesia has an impressive economic record. Our economic growth is one of the most progressive, our GDP ranks 16th in the world and our investment grade is quite good. All of these show that Indonesia is not a poor country but a middle-income country. But these macro indicators are a paradox. In fact, the Gini-co-efficient [which measures economic inequality] has increased. Some 2 percent of Indonesians control most of the nation's money and assets. Our standard wage is very low compared to the rest of the region  our GDP is four times that of Thailand but our average wage is one third. Our workers have very low purchasing power, so the profits made are circulated only in the money markets, not in the distribution of goods.

Even compared to the poor, workers are being treated unequally. Through the national social security program, JAMKESMAS, the poor and jobless receive unlimited health coverage while workers who pay taxes receive a maximum of Rp100 million. Workers also don’t receive pension funding, while the civil service and the military do. You can see from this that workers are being treated unfairly.

Do you think cheap labor is part of the government's efforts to attract investment?

Indonesia’s approach to economic development is an expenditure approach that consists of consumption, investment and government expenditure. I support the inflow of investment because it opens up more jobs and should strengthen workers' purchasing power. Wages should be raised to an appropriate level, not a high level. I believe if salaries are too high, this will lead to hyperinflation.

But now the question is, is the minimum wage level set by the government really appropriate? We all know that salaries should cover clothes, food and housing, the basic things. A study conducted by AK3, an independent manpower think tank, states salaries should cover 122 decent living components. The government had previously considered only 46 components and the labor movement fought for more to be included. After a national strike, the government increased this to 60. We had demanded 84, which shows that even the compensation formula used now is inappropriate.

Many times investors exacerbate the situation as they take advantage of our government’s cheap labor policy. I think capital intensive investment should not adopt this minimum wage standard and should not outsource work. But for manpower intensive investment, the minimum wage can still can be considered.

Indonesia should leave the old cheap labor paradigm and increase nationwide competitiveness by improving infrastructure. It is no secret that our infrastructure is poor, and that adds extra costs to company operations.

How big is labor’s contribution to the Indonesian economy?

Our state budget this year is Rp1,527 trillion, with 72 percent [Rp1,1100] coming from taxation and 27 percent from labor salary deductions.

But the workers get nothing in return. Workers receive no pensions, no infrastructure to benefit them, they are barely able to purchase even simple property. In other countries, the money returns in the form of good infrastructure and public facilities that increase the competitiveness of workers.

Labor relations are seen as a disincentive for potential foreign investors. What do you think of this?

According to the World Economic Forum, there are 10 things that hold back investment in Indonesia. Industrial relations is one of them, but first and foremost is infrastructure.

Our state budget policy doesn’t take into account infrastructure development, with cheap labor still seen as our most attractive selling point. But Indonesia should improve infrastructure. We all know that Tanjung Priok Port controls 80 percent of exports and imports, and we all know how truck drivers complain about the time needed to get in and out the port.

Regional autonomy is another issue. There are many regional level policies that are not in line with the pro-investment policies issued by the central government. These are some of the things that discourage investors, not labor issues.

The challenge for Indonesia, as with other developing countries, is to create strong law enforcement. I believe Indonesia will become a strong and healthy democracy, if it is supported by the right civil society and a good media.

Who, as far as the labor movement is concerned, is the right person to be the next Indonesian president?

Some names have yet to come out, so we can't be so sure who will be the right candidate, but there are indicators that can tell what makes the right person to be president. He or she should be able to create economic growth while delivering wealth. He or she must be determined in leading such a big and multiethnic country as Indonesia. There are some names like Aburizal Bakrie, Hatta Rajasa, Prabowo and Jokowi that might make strong candidates, but these figures are not flawless.

We have a positive opinion of Aburizal Bakrie as he was the one who supported the social security, but he has some downsides, and so do the other candidates.

Media plays an important role and this is our problem. Our media is controlled by big business that can endlessly promote their preferred candidates, brainwashing their audiences.  

Further Coverage

Labor Issues: Social Security

Labor Unrest in Indonesia: An Overview

Newsmaker Interview: Andi Gani Nena Wea

Labor Issues: New Outsourcing Rules

Newsmaker Interview: Mudhofir

Indonesia's New Social Security System: What do Employers Need to Know?

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