Despite the optimism generated early on in 2000, the sustainability of economic recovery in Indonesia revealed several highly disturbing trends. Starting in the first quarter of 2000, the Indonesia currency, rupiah, had significantly weakened and became volatile. This, in turn, had forced a major change in the priorities of macroeconomic policy with serious implications for the recovery process. Inflation had also picked up, reaching 2.1percent in the first three months of 2001. Some macroeconomic indicators showed some early signs of a weakening in exports and declining consumer confidence.

In the meantime, the apparent deterioration in the government’s commitment towards economic reform since the last IMF review in June 2000 had also disturbed its relationship with the IMF. This resulted in an increase of political and sovereign risk, adversely affecting market confidence and posing serious threats to the state budget. The World Bank, the Asian Development Bank and the main donor countries had also raised their concerns over the lack of serious government commitment towards making progress in the implementation of several areas of reform.

President Abdurahman Wahid had also suffered from a parliamentary censure for his alleged involvement in two financial scandals. On 30 April 2001, the Parliament censured President Wahid a second time over his role in the scandals, worth a total of $6.1 million. He has repeatedly denied any wrongdoing and rebuffed calls to step down. He is likely to face impeachment in August 2001. Moreover, regional conflicts in a number of provinces raised a question concerning security in the country. Not to mention that the number of internally-displaced people had grown. This political turmoil had driven a continuing and significant withdrawal of capital from Indonesia and a blow to investors’ confidence.

The application of the new regional autonomy in January 2001, which was expected to promote a democratic system in the country, had created some confusion in the relationship between the central, provincial and district governments. Authority of central governments in the application of some policies had been questioned. This confusion had somewhat affected the operation of ILO’s technical cooperation in Indonesia.

ILO Constituents

Following the cabinet reshuffle in October 2000, the Ministry of Manpower and the Ministry of Transmigration were amalgamated. Mr. Al Hilal Hamdi replaced Mr. Bomer Pasaribu as the new Minister of Manpower and Transmigration. The Government of Indonesia is a deputy member of the Governing Body. A major reshuffle and restructuring within the Ministry has hampered the functioning of the Ministry in responding quickly to various labour problems.

APINDO, affiliated with IOE, is the main employers' organization working with the ILO. Mr Margono Djojosumarto, APINDO Vice Chairman is an employer member of the Governing Body. APINDO has been directly involved in the tripartite process of labour law reforms carried out by DEPNAKER with technical assistance from the ILO.

In its letter to the Director General dated 11 January 2001, APINDO requested ILO’s technical assistance to help employers and investors in Indonesia in dealing with labour problems due to the multiplicity of trade unions exercising their rights and freedom in a democratic environment without being aware of their legal responsibilities and obligations. APINDO calls for the ILO intervention to help Indonesia to overcome their critical labour relations predicament.KADIN (Chamber of Commerce) plays a more active role than APINDO in Indonesia’s labour and social policy direction and would be another key employers’ partner at the national level. KADIN has expressed interest in affiliating with IOE.

To date, there are 39 trade union federations registered with DEPNAKER. None of them affiliates with ICFTU. FSPSI (Federation of the All Indonesian Workers Union) and FSPSI Reformasi (separated from FSPSI because of internal disagreement) have a severe conflict of interest. Together with SBSI, which is affiliated with WCL, FSPSI and FSPSI Reformasi, is the main workers’ organization working with the ILO. This is the interim findings of a survey of trade union organizations carried out by the ILO. Mr M. Pakpahan, SBSI General Chairman, is a workers’ substitute member in the Governing Body.

Major technical cooperation activities continue to focus on the labour law reforms and awareness raising campaign on the Declaration on the Fundamental Principles and Rights at Work targeting all social partners and other organisations of the civil society, including the military and police. The ILO has provided technical assistance during parliamentary deliberation on industrial dispute settlement bill. In addition, the ILO has also provided technical comments on the draft manpower protection and development bill to be discussed in the parliament later this year.

On child labour matter, the Memorandum of Understanding (MOU) between the ILO and the Government of Indonesia on IPEC will expire at the end of 2001. The Office has initiated the process of reviewing IPEC activities in Indonesia following the ratification of ILO Convention No. 182 which will provide inputs towards the negotiation process of extending the Memorandum of Understanding.

On employment sector, the highlight of our assistance is in the reform of the national policy on small and medium enterprises. Meanwhile, under the umbrella of the assistance of the United Nations System to Indonesia, a quick assessment of the impact of IMF assistance on employment is being carried out.

On social protection sector, ILO’s technical cooperation project on review of social security system in Indonesia has begun implementation. The Office is also carrying out a comprehensive review of poverty and economic insecurity in Indonesia. The review should result in policy recommendations and institutional reform for the Government on socio-economic security. The ILO has initiated a discussion on the new Country Programme Framework of ILO in Indonesia for 2001-2005, under the umbrella of the Decent Work. Separate briefings for government group, employers’ group and workers’ group were held in the course of February and March. The national tripartite meeting on the Country Programme Framework was planned for 15 May 2001. In the meantime, the Office has convened periodic meetings on technical cooperation activities with the Constituents to promote tripartite dialogue and exchange information on technical cooperation activities.

Following the ratification of all eight fundamental Conventions of the ILO, the Government and all social partners have begun an ambitious programme to implement the fundamental principles and rights at work. In the area of industrial relations and basic human rights at work, the ILO has supported this programme through technical cooperation project to promote freedom of association and collective bargaining funded by the US Department of Labour. This project was officially launched on 1 May 2001.

The ILO will also facilitate a closed-door roundtable tripartite meeting to promote social dialogue in dealing with labour affairs in Indonesia.

Case No. 1773, involving alleged violations of trade union rights in Indonesia, remains outstanding. A new case no 2116 on infringement of the rights to freedom of association and collective bargaining is now pending before the Committee of Freedom of Association.

• ILO’s continued support to promote social dialogue in dealing with social and labour issues.
• IPEC programmes focusing on the worst forms of child labour (Priorities are being given to formulating a National Plan of Action on the Elimination of the Worst Forms of Child Labour, and action programmes in gold mining, domestic service, plantation and off-shore activities).
• The formulation of national.

Updated by CHW. Approved by RD. Last update: 17 July 2001.