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New Study: Indonesia’s Factories Still Struggle with Compliance

A new study issued by Better Work Indonesia (BWI) alleges that Indonesia’s garment factories still fail to satisfy many regulations governing the safety and health of its workers.

The report, produced in collaboration with the International Labour Organization (ILO) and the International Finance Corporation, acknowledged that the factories exhibited some signs of progress but still remain inadequately compliant. Many factories are still not properly prepared for potential emergencies like factory fires, and there is a lack of training for eventual factory evacuations. Also, many factories fail to satisfy the government mandated quota that requites 1 percent of all workers hired to be disabled.

The most controversial element of the report is the claim that most factory workers are still insufficiently compensated. Wages have been a point of contentious dispute in Indonesia for over a year. While its massive supply of low-cost labor has been a point of attraction for Western retailers, low wages have ignited civil unrest, with workers taking to the streets in huge numbers protesting their alleged exploitation. Only months ago, 12 province governors were compelled to increase minimum wages by an average of 19 percent, in response to persistent strikes that were stymieing business. In 2012, there was a similar adjustment of the salary structure, raising the minimum wage by as much as 40 percent, depending upon the province in question. This pegs the minimum wage somewhere between $80 and $160 dollars per month in Indonesia.

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But many see signs of progress, as Indonesia struggles to balance the need for discounted labor and the demands of workers. Since 2011, Indonesia has been a participating member of the International Labor Organization’s Better Work program. According to the Better Work website, there have been discernible advances made. “Still in its early years, the programme has been successful in encouraging the participation of enterprises and international buyers, taking the lead in engaging with Korean multinational suppliers, which make up a large percentage of investors, and innovating worker outreach with a pilot social media project.” It has also promoted the Freedom of Association protocol, an accord designed to support workers’ rights, signed by international buyers like Adidas, Nike and New Balance.

Indonesia, nonetheless, continues to attract attention as a rising star. The E.U., U.S. and Japan already import a considerable amount of Indonesian products each year, especially apparel. More than 36 percent of all the ready-made garments produced by Indonesia are destined for U.S. shores, with another 16 percent headed to the E.U. and 5 percent percent for Japan. The total value of Indonesia’s exports to the U.S. reached nearly $12.5 billion in 2012.

The potential for Indonesia is undeniable, though, with its 260 million people, investment-friendly business environment and laser-like focus on textile and garment production. The government has also demonstrated a twin commitment to political reform and infrastructural modernization. While it doesn’t want to be pigeonholed as an alternative to Bangladesh, there are certainly new opportunities in the wake of the Rana Plaza tragedy for it to assert itself on the global economic stage.