VZCZCXRO4240
PP RUEHCHI RUEHDT RUEHHM
DE RUEHJA #4465/01 0961043
ZNR UUUUU ZZH
P 061043Z APR 06
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC PRIORITY 2381
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHBY/AMEMBASSY CANBERRA 9292
RUEHGV/USMISSION GENEVA 7333
RUEHC/DEPT OF LABOR WASHDC

UNCLAS SECTION 01 OF 03 JAKARTA 004465 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EAP/IET AND DRL/IL 
DEPT OF LABOR FOR ILAB 
 
E.O. 12958: N/A 
TAGS: ELAB ECON EINV PGOV PHUM KJUS ID
SUBJECT: GROWING WORKER PROTESTS AGAINST CHANGES IN LABOR 
LAW 
 
REF: A. JAKARTA 1645 - AMBASSADOR DISCUSSES LABOR REFORM 
     ¶B. JAKARTA 3563 - INVESTMENT CLIMATE PACKAGE 
 
Summary 
------- 
 
¶1.  (SBU) Indonesia experienced its largest labor protest in 
at least four years, as Indonesian workers took to the 
streets of Jakarta and other major cities on April 5 to 
oppose the GOI's plan to amend the basic labor law.  The 
proposed amendments would scale back 2003 concessions to 
workers and loosen restrictive labor practices imposed on 
business, commonly cited as major impediments to investment 
and employment creation.  Unions have coordinated a plan for 
rolling demonstrations through May 1, and have discussed a 
possible nationwide strike.  The Vice President and the 
Manpower Minister both signaled a tactical retreat from 
earlier plans to seek passage of the amendments by June. 
President Yudhoyono quickly stepped in, calling a tripartite 
meeting for April 7 with unions and employer representatives 
to find common ground and a way forward.  Union leaders deny 
any political motivation, but the opportunity is ripe for 
opposition elements to bolster and fuel the demonstrations. 
Labor sector reform is the weightiest component in 
Yudhoyono's new investment climate package.  Like other 
significant reform efforts facing Indonesia, success will not 
come easy.  End Summary. 
 
Largest Labor Protest in Years 
------------------------------ 
 
¶2.  (U) Labor demonstrations against the GOI's plans to amend 
the 2003 Manpower Act reached new levels on April 5, as the 
All-Indonesia Trade Union Confederation (SPSI) organized 
large protest actions in Jakarta and other major cities.  A 
senior SPSI leader claimed that 57,000 workers turned out in 
the capital, while media reports cited 20,000 or more 
protesters.  Even at the lower range estimates, this marked 
the largest labor protest in the capital since at least 2002. 
 The Jakarta protests focused on the Presidential Palace 
(Yudhoyono was in Papua) and Vice President's office, forcing 
a perfunctory meeting with VP Jusuf Kalla.  Late in the day, 
some demonstrators destroyed property along a major Jakarta 
artery, including at least one bus which they attempted to 
set on fire.  Police detained 16 persons for destruction of 
property.  Traffic in the city center was snarled for hours. 
 
 
¶3.  (U) News reports cited protesters numbering in the 
thousands in the major cities of Medan, Surabaya, and Batam. 
Other cities on Java, including Malang, Semarang, and Bandung 
experienced smaller demonstrations.  Earlier protests in 
Bandung forced the precautionary closure of 140 out of 600 
textile plants, according to the press.  The Indonesian 
Employers Association (APINDO) claimed millions of dollars in 
business losses as a result of protests that began in late 
March. 
 
Unions Reject Roll Back of 2003 Concessions 
------------------------------------------- 
 
¶4.  (U) The three major trade union confederations, which 
represent some three million members, stand united in their 
opposition to GOI amendments to the Manpower Act, a major 
component in the Government's new investment policy package. 
GOI amendments have focused on creating greater labor market 
flexibility by rolling back concessions to organized labor in 
the areas viewed, by regional standards, as either too 
generous to employees or too restrictive on business.  Former 
Manpower Minister Jacob Nuwa Wea, during the Megawati 
administration, negotiated the 2003 passage of the Manpower 
Act over a period of two years while he remained the chairman 
of the SPSI labor confederation.  Proposed changes include: 
 
-- Contract Labor:  Ending restrictions on types of jobs that 
may be conducted by contract labor, and extending the maximum 
length of work contracts from 2 to 5 years. 
 
-- Outsourcing:  Abolishing restrictions on types of work 
that may be outsourced. 
 
-- Minimum Wages:  Removing reference to "minimum physical 
needs" as a basis for government determination of minimum 
wages. 
 
 
JAKARTA 00004465  002 OF 003 
 
 
-- Strikes:  Stipulating prosecution (one option) or 
dismissal without severance pay (another option) for workers 
participating in illegal strikes. 
 
-- Severance/Service Pay:  Reduction in number of months of 
required severance and service pay in case of dismissal. 
 
Unions Plan Coordinated Demos through May 1 
------------------------------------------- 
 
¶5.  (SBU) We spoke with senior officials of SPSI and the 
Indonesian Prosperity Trade Union (SBSI) on April 5-6, along 
with ILO and NGO representatives, and mid-level officials in 
the Manpower Ministry.  The union officials noted good 
coordination between the three major labor confederations, 
which also include the Indonesian Trade Union Congress 
(KSPI), for continued protest actions, at least through May 
Day (May 1).  To keep the heat on in Jakarta, the 
confederations have agreed to take turns launching 
demonstrations, with SBSI next up for protests in the capital 
on Sunday, April 9.  National leaders have told their 
constituent unions that they are free to mobilize together 
with other confederations in the provinces. 
 
¶6.  (SBU) Both SPSI and SBSI noted discussions of nationwide 
strikes on either May 1 or May 20 (National Awakening Day) as 
a last resort if the Administration does not back down on the 
amendments. 
 
VP and Minister Signal Tactical Retreat 
--------------------------------------- 
 
¶7.  (SBU) In the face of the large protests in Jakarta, VP 
Jusuf Kalla and Manpower Minister Erman Soeparno signaled a 
possible tactical retreat from earlier confident plans to 
push through the amendments quickly, possibly as early as 
June.  Both Kalla, when receiving 10 leaders of the protest, 
and the Minister in public comments described the draft as in 
an early stage, requiring discussions with union and employer 
representatives before submission to the legislature.  They 
said unions had launched the protests based on a 
misunderstanding that the GOI had finalized its proposal.  On 
April 6, Manpower officials told us there were, in fact, no 
draft amendments, only concepts for discussion. 
 
Yudhoyono Quickly Steps In 
-------------------------- 
 
¶8.  (SBU) SPSI and SBSI informed us that President Yudhoyono 
has called for unions and employer representatives to meet 
with him at the Palace on April 7 in an attempt to find 
common ground on the labor amendments.  Whereas union 
officials were undecided about an earlier offer to meet with 
the Manpower Minister, SPSI and SBSI immediately agreed to a 
discussion chaired by the President himself. 
 
Unions Deny Political Motivations 
--------------------------------- 
 
¶9.  (SBU) Publicly and privately in conversation with us, 
union leaders have denied their protests have any political 
motivation or links to party politics, fighting off this 
knee-jerk assumption in a country with a solid tradition of 
rent-a-crowds.  An SPSI senior leader told us the protests 
remained "pure" and unrelated to political interests.  While 
unions are clearly opposed to the amendments, staunch 
Megawati loyalist Jacob Nuwa Wea remains SPSI chairman and 
other opposition figures, including retired General Wiranto, 
have links to senior SPSI officials.  A labor NGO noted that 
SPSI has no disposable union funds and bringing out 20,000 or 
more protesters required financial backing from somewhere, 
suggesting support from Megawati's Indonesian Democratic 
Party for Struggle (PDI-P) or other Yudhoyono opponents.  In 
the past, unions themselves -- institutionally weak and 
poorly financed -- have been unable to sustain national 
protest actions over any length of time absent external 
support. 
 
Comment 
------- 
 
¶10.  (SBU) With the Manpower amendments, Yudhoyono faces the 
challenge of pushing through a controversial measure that 
nevertheless constitutes an important component in economic 
and investment climate reform.  Labor market inflexibility is 
 
JAKARTA 00004465  003 OF 003 
 
 
a frequent complaint of the business community here, with 
Indonesia's practices largely out of step with competing 
countries in the region.  Like the fuel price increases, the 
issue is ripe for exploitation by Yudhoyono's political 
opponents who would find it easy to organize and fund rowdy 
protests that feed off of populist, anti-capitalist 
sentiments.  Unlike fuel prices, however, the labor laws only 
directly impact one third or less of Indonesia's 100 million 
plus work force with the remaining two-thirds in the informal 
sector or unemployed and largely unaffected by formal 
regulations.  Those most concerned, the organized workers 
belonging to the three major union confederations, constitute 
only roughly 10 percent of the formal sector employees. 
 
¶11.  (SBU) ILO, NGO, and APINDO observers attribute the 
widening labor protest to mismanagement of the process on the 
part of the Manpower Ministry and the Administration, which 
despite understanding of the controversial nature of the 
proposed changes, failed to initiate a serious dialogue with 
union leaders or develop a consensus based on long-term 
economic interests shared by labor and employers alike.  The 
relationship between investment promotion, job creation, and 
expanded union membership (as opposed to the shrinking union 
ranks of recent years) might constitute one important point 
of common ground.  In conversations with us, the union 
officials have complained as bitterly about the lack of 
government consultation as they have the substance of the 
amendments.  The Administration must now correct this 
approach, and deny opponents an easy platform from which to 
cause trouble, in order to keep the key labor reform portion 
of its investment package on track.  Yudhoyono's quick 
attention to the brewing labor protests is one positive sign. 
 Like other significant reform efforts facing Indonesia, 
success in changing the country's labor environment will not 
come easy. 
PASCOE