Chic Shoes and Sweatshops in Indonesia

At four-thirty in first light the taped prayers begin to chant from the minarets of the mosque in the sprawling slums of Bekasi, outside Jakarta. The day’s early humid heat fills the filthy spaces between the huts and godowns, sending up a rank odor from the open sewers where chickens and pigs feed. By six, many of the 6,500 people employed in the nearby PT Tong Yang shoe factory are on their way to work.

Many consider themselves lucky to find a job. But it barely gives them enough to live on – about 140,000 rupiah (£41) per month for an average of twelve hours a day. Although the minimum wage is 3,750 rupiahs (£1.10) per day, many Indonesian companies ignore it, or undercut it by demanding overtime without pay. Even at the minimum wage, it is difficult to feed a family – rent alone for a two-room hut can run £28 per month, and meat, fish, and fresh fruit are beyond the reach of many households. The International Labor Organisation estimates that 88% of Indonesian women earning the minimum wage are malnourished, and a majority of their families also.

PT Tong Yang manufactures running, sport, and walking shoes for the American shoemaker Reebok, which produces 15 million pairs of shoes in Indonesia, nearly 30% of its total output. But Reebok is not alone in benefiting from Indonesia’s impoverished workforce, amenable labor laws, and corrupt military regime. Converse, Nike, Calvin Klein, Liz Claiborne, and other brand names more associated with the chic upper middle class than Indonesia’ sweltering ghettos all benefit from worker conditions little different that those in the sweatshops of Victorian England. Foreign investment in Indonesia in 1993 exceeded $10 billion, with clothing, shoes, and electronics the major sectors. But “ Indonesia’s economic progress, investment in manufacturing, and rising export earnings,” says Goenawan Mohamed of Jakarta’s Center for Human Rights Study, “have hinged on meager labor wages.”

Reebok produces about 30% of its shoes in Indonesia, and Nike 25-30%, in huge factories like Bekasi, and most of the rest in China and Thailand. However like most multinationals they do not own their Indonesian factories, instead using subcontractors such as PT Tong Yang. Over the subcontractor’s head is the constant threat, if productivity diminishes or wages rise, that the company will move elsewhere, such as to China, Bangladesh, or Vietnam, where conditions are more compliant. This threat is nothing more, Indonesian authorities say, than free enterprise: if one company in our country has higher standards, it can’t compete.

“Companies and countries compete for the worst laws,” states Tohap Imanungkalit, an official of the Indonesian Workers Welfare Union, “and the weaker the laws are the better.” As world markets open up under GATT’s new Uruguay Round, the cycle will accelerate. American consumer activist Ralph Nader argues that GATT “pits country against country in a race to see who can set the lowest wage levels, the lowest environmental standards, and the lowest consumer safety standards.” In the short run, the upper middle class consumer can buy more Reeboks, more designer label clothes, but in the long run everybody loses.

The philosophy behind GATT is that expanding world markets will draw income from the richer nations to provide work for the vast labor pools of the poorer nations. China’s record economic annual growth rate of 8 to 10 per cent is termed an example; even Indonesia’s growth has been averaging 5 to 6 per cent in recent years. If this trend continues, the World Bank estimates that Indonesia’s per capita annual gross domestic product may rise from today’s $700 to $1,000 by the year 2000.

Developing economies, many economists argue, must go through a low-skilled, low-wage phase before achieving greater growth – as once did Taiwan, Korea, and even Japan. Nike keeps 125 expatriates working full-time in Indonesian factories to assure that safety, wage, and other requirements are met. Most western companies have memorandums on working with Indonesian subcontractors; Nike’s requires among other things health care, vacations, pregnancy and menstrual leave, and a minimum wage. And Nike points out that whereas an Indonesian footwear factory worker earns about £1.15 per day plus benefits, farm workers earn £0.16 per day with no benefits. In China, Nike notes, the Guangdong shoe factory worker is paid more than a professor at Beijing University.

Spread over some 17,500 islands astride the equator, Indonesia is gifted with sun, good soils, a rich and diverse ecology, and the constant presence of the sea. The major islands, Sumatra, Java, Borneo, Celebes, Timor, and Irian Jaya, are rich with natural resources, principally timber, oil, natural gas, fisheries, and coal and other minerals.

But explosive birth rates and the extensive plundering of its resources have turned this largely Moslem nation into a textbook case on overpopulation. Although birth rates have declined to 2% due to intensive family planning, Indonesia is now the world’s fourth most populous nation, at over 200 million. Half its citizens are under 20; 2.5 million people enter the work force each year.

Faced with rural poverty and constantly declining soil productivity, farmers leave the land for the cities, where expanding slums offer usually just a more ferocious poverty. Java is one of the world’s most densely populated places, at 1,500 persons per square mile.
Jakarta, the capital and largest city, has swelled to over ten million, most of whom are crammed into shantytowns of open sewers, soaring crime, and dim prospects.

Only a ruthless military regime could keep the lid on such an environment of hunger, long hours, and few hopes. In this regard, Indonesia is second to none, justly renowned for its extermination in the 1970s of over 200,000 people in East Timor. But these massacres were child’s play compared to those of the 1960s.

Indonesia’s vast oil reserves (nearly 40 billion barrels) had long been craved by western oil companies. But since independence in 1945, President Sukarno had moved steadily closer to China, refusing to open these reserves to the west. Following an abortive Marxist “coup” in 1965, the U.S. Central Intelligence Agency overthrew Sukarno in 1966 and installed General Suharto as President. Under Suharto, and with the United States looking the other way, the Army slaughtered over 500,000 Indonesians – teachers, farmers, union members, students, and leftists.

Weeks later, Indonesia’s oil reserves were opened to U.S. oil companies. Now less than 10 billion barrels remain, many of them difficult and expensive to access, and are being pumped at the rate of 1.5 million barrels a day. At this rate (500 million barrels a year), Indonesia’s oil resources will last less than twenty more years, when if properly managed they might have lasted a hundred. Soon after, the country’s natural gas reserves will also be depleted.

When Indonesia runs out of oil, its economy will fall apart. Already heavily indebted (over $50 billion in 1993), the Indonesian government will not be able to maintain debt payments (debt service in recent years has exceeded 50% of domestic expenses). By then, most of the country’s remaining timber will have been logged off, the cities will be even more crowded, and downward pressures on internal employment even greater. Whatever slow and painful gains have been made elsewhere in wages and living standards will be eclipsed.

The near term prospects for Indonesia’s workers are mixed. Some foreign companies such as Levi Strauss and Gillette have imposed strict compliance with their own human rights standards, pay far above minimum wage, and offer good benefits. Levi Strauss, for instance, pulls out of factories and countries like China where its ethics and wage code are not respected.

And pressure on Indonesia’s government is increasing. The violent rape and murder last May of a 23-year-old woman, Marsinah, who had pressed for a raise in wages at her shoe factory from 50 pence to 68 pence per day, led to an international response. The feedback from the government’s closure of three weekly newspapers last summer was similarly intense, not only from abroad but from within the nation’s increasingly vocal middle class. And the arrest of striking workers last June at the Pematang Siantar cigarette factory northwest of Medan also prompted a national and international outcry.

Nonetheless, the Clinton Administration has been careful not to impose human rights strictures on arms sales or favored nation trade status. Indonesia’s other trading partners, of which Japan is the largest, have been notable for a similar disinterest in its internal policies. In the absence of international pressure, it is unlikely that Indonesia will moderate these policies, or that the fate of its factory workers will substantially improve.

Amnesty International Journal, London, Nov-Dec, 1994

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