Aspects of Industrial Relations in ASEAN 9789814376747

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Occasional Paper No . 78

Aspects of Industrial Relations in ASEAN

Institute of Southeast Asian Studies The Institute of Southeast Asian Studies was established as an autonomous organization in May 1968.1t is a regional research centre for scholars and other specialists concerned with modern Southeast Asia, particularly the multi-faceted problems of development and modernization, and political and social change. The Institute is governed by a twenty-one-member Board of Trustees comprising nominees from the Singapore Government, the National University of Singapore, the various Chambers of Commerce, and professional and civic organizations. A ten-man Executive Committee oversees day-to-day operations; it is chaired by the Director. the Institute's chief academic and administrative officer.

Aspects of Industria l Relation s in ASEAN

by Basu Sha rma

liE

INSTITUTE OF SOUTHEAS T ASIAN STUDIES

Published by Institute of Southeast Asian Studies Heng Mui Keng Terrace Pasir Panjang Singapore 0511 All rights reserved. No part of this publication may be reproduced , stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying , recording or otherwise , without the prior consent of the Institute of Southeast Asian Studies .

©

1985 Institute of Southeast Asian Studies

ISBN 9971-988-94-X ISBN 0073-9731

The responsibility for facts and opinions expressed in this publication rests exclusively with the author and his interpretations do not necessarily reflect the views or the policy of the Institute or its supporters.

Contents List of Tables v1 List of Figures v11 Acknowledgements IX Introduction I. Towards a Conceptual Framework: Industrialization and the Evolution of Industrial Relations Patterns 5 Review of the Literature 6 Reconstructing the Prevailing Views 9 Stages of Industrialization and Patterns of Industrial Relations 17 II . The Environment: The Economies and Labour Markets 23 The ASEAN Economies 23 The Labour Markets 32 III . Institutional Factors and Evolution of Industrial Relations in the ASEAN Countries 43 Indonesia 43 Malaysia 49 Philippines 57 Singapore 62 Thailand 68 Similarities, Differences and Patterns 76 Concluding Remarks 80 IV. Summary and Conclusions 85 Bibliography 89 The Author 97

List of Tables Page 1. Growth Rates of Gross Domestic Product of the ASEAN Countries , 1970-81 2. Per Capita Gross National Product of the ASEAN Countries, 1974-81 3. Sectoral Shares in GOP of the ASEAN Countries , 1970-81 4. Labour Force , Employment and Unemployment in the Philippines , 1971-82 5. Labour Force , Employment and Unemployment in Malaysia , 1971-82 6. Labour Force , Employment and Unemployment in Singapore , 1970-82 7. Labour Force , Employment and Unemployment in Thailand, 1971-80 8. Labour Absorption Coefficients for the ASEAN Countries 9. Sectoral Shares in Employment in the ASEAN Countries, 1970-81 10. The FBSI and Its Affiliated Member Unions in Indonesia, 1974-83 11 . Company Regulations Approved by the Ministry of Man-power and Transmigration in Indonesia, 1976-83 12. Number of Work Stoppages , Workers Involved and Days Lost in Indonesia, 1975-82 13 . Trade Unions and their Members in Malaysia , 1966-83 14. Collective Labour Agreements in Malaysia , 1970-82 15. Number of Work Stoppages , Workers Involved and Days Lost in Malaysia , 1966-82 16. Trade Unions (Registered , Cancelled and Total) and their Membership in the Philippines , 1966-83 17. Collective Bargaining Agreements and Workers Covered in the Philippines, 1966-83 18. Number of Work Stoppages , Workers Involved, and Days Lost in the Philippines, 1966-82 19. Trade Unions and their Members in Singapore , 1966-83 20. Collective Labour Agreements and Workers Covered in Singapore , 1966-82 21. Number of Work Stoppages, Workers Involved, and Days Lost in Singapore, 1966-82 (vi)

24 24 26 33 33 34 34 36 38

46 47 48 52 54 55 58 61 62 65

66 67

22. Trade Disputes in Singapore , 1970-82 23. Labour Unions in Thailand , 1972-83 24. Number of Work Stoppages, Workers Involved , and Days Lost in Thailand, 1966-82 25. Variations in Aspects of Industrial Relations in ASEAN 26. Selected Investment Incentives Acts and Labour Legislation in the ASEAN Countries

68 72 75 79 81

List of Figures Page 1. A Model of the Evolution of Patterns of Industrial Relations in Industrializing Countries 2. Industrial Relations in Malaysia

(vii)

20 56

Acknowledgements In the course of writing this monograph I have greatly benefited from the comments and suggestions of many individuals. I am particularly grateful to Professor Koji Taira of the University of Illinois at Urbana-Champaign , Professor Pang Eng Fong of the National University of Singapore , Professor K. S. Sandhu of the Institute of Southeast Asian Studies, Professor Susumu Hagiwara of Hosei University , and Professor Joseph Krislov of the University of Kentucky . I would also like to express my sincere appreciation to the Institute of Southeast Asian Studies for awarding me a fellowship in 1983 to complete this study. At the Institute , Dr Tan Loong-hoe and Dr Sharon Siddique were always helpful and generous and I wish to thank them both. B.S.

Introduction This wo rk is concerned wit h two main issues : emerging trends in inc.lu tria l re latio ns sy terns in the member countries of the Association of o uth ea. t Asian Nations ( ASEAN ). and inter-country variations in the systems of industrial relations of the e countries. The purpose of addrel>Sing these i ·ues as to work out a basi for reflecting on pro pects fo r co-operat aon among the member countries of ASEAN in the field of andu tnaJ rela!l n . AS AN as an association of five Southea t A ian countries. name ly, l nd ne aa . Malaysia. the Philippine . Singapore. and Tha1land . 1 It has experaenced a healthy development in ats less than two decade!> of e astence The: member nation have defined and redefined the scope of theii common antere t over the years. They have identified ,·anou.) ar e ~ fo r co- peration . and have a tively promoted the idea of regwnahsm The area o f labour and indu trial relations has al o come undc:r the pur aew of E N an the last few year . regaonal approach to labour nd tndustrial relations has become an amportant theme to the go ernments . labour and employer in the countne . Tha.s approach bas the undertone of being different an mode and method fr m that prevalent in the more developed countne ·. The A EA Labour Mini ters ' Meetings, the ASEAN ' unCLI f Trade U moos ( crtJ) . and the ASEAN Confederation of mpl yer ( E) ace the f rmal orgaruzatioos through wb.icb this concern a beang expressed . nd plans of a tion for a-operation and c~.H>rdmauoo an the field of labour and industrial relations are being proposed . ~ The ade f ~ek.mg common ground for co- pention in thi ;uea as a wdrome one . But we should note with some frustration that not much c ncrete progre h been made io this respect et. San ·e co-operati n or integ,att n or coo ergeoce is f ilitated by urularitie and prohibited by dissimilarities in n ti nal industrial relations sy ·rems of member ountrie . tlle extent of their di ersitie .tnd their enduring nature wall ultimately determin the scope for perauon . lt become . therefore . necessary toe amine. firstly , the emerging trends an or pauerns f e oluti n of the indu tri l rel ri ns s t ms of the member countries, and then to Loo.k. · t the enduring nature of the ariauons among them. atiooal mdu ·tnal relati n . y tems are the produ ts f intera u n between a tors and en irooments. · re.e main t >rs l 1

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ASPECTS OF INDUSTR IAL RELATI O NS IN ASE AN

managem ent , and governm ent) and four major environm ental subsystems (economi c , legal, political , and socio-cul tural) have frequentl y been mentione d in industrial relations literature . 3 Although all of these environm ental factors may contribut e to shaping patterns of industria l relations systems in industrial izing countries in varying degrees, it may be assumed that the economic environm ent plays a predomin ant role . The basis for this assumpti on is the fact that the phenome non of industrial relations is a product of economic developm ent or industrialization . However , industrial ization is largely determin ed by the speed and style of capital accumula tion . As countries begin to go through the process of industrial ization, they move from one state of structura l condition s to another . The dictates of developm ent begin to change along with this movemen t. This , in turn , ge nerates different requirem ents of capital accumula tion . But the philosoph y of the ruling elites and their policies on industrial ization considera bly affect the process of capital accumula tion .4 Nowhere has this phenome non become so true than in today's developin g countries . It may , therefore , be logical to try to relate requirem ents of capital accumula tion as created by the dictates of developm ent at various levels of structura l transform ation and as perceived by governm ental elites to the evolution of patterns of industrial relations. This is the line of analysis and argumen t followed in this work . This study is organized into four chapters. Chapter I presents a review of the relevant literature , and develops a conceptu al framewo rk for the analysis of the evolution of patterns of industria l relations in the course of industrial ization in the developin g countries . Chapter II examines major aspects of economic environm ent in the ASEAN countries with focus on the extent of structura l transform ation of their economie s and labour markets. Chapter III analyses institutio nal factors and the patterns of industrial relations in the ASEAN countries as they have evolved over time . The concludin g chapter summari zes the analyses, argumen ts and findings of this study , and suggests its implicatio ns for public policy and for further research .

INTRODUCfiON

3

Notes

1. With the entry of Brunei in 1984. ASEAN has six members at present . Since the

research was done before then. Brunei is not within the purview of this work . 2. The ASEAN Labour Ministers' Meeting of 1-3 April1975. which took place in Jakarta , Indonesia . generated political will for co-operation in the area of labour and industrial relations . The ASEAN Concord. which came out of the meeting of the Heads of States of the ASEAN member countries in Bali . Indonesia. on 22-25 February 1976, took note of this. Consequently. the first meeting of the A SEAN Labour Ministers was held in Baguio City. Philippines. on 17-19 May 1976. The outcome of this meeting was a Seven-point Program of Action. Encouraging the growth of responsible trade unionism. creating more room for tripartism . and continuing the exchange of information were included in this Program of Action . The second meeting of the ASEAN Labour Ministers took place in Pattaya . Thailand. in May 1977, and the third one in Kuala Lumpur. Malaysia. in May 1980. Both meetings reviewed the progress, and emphasized the exchange of information . The fourth meeting took place in Singapore on 6-7 September 1982. One of the major outcomes of the meeting was a proposal for setting up an ASEAN Centre for Industrial Relations . On the labour front . the ASEAN Confederation of Trade Unions, established in September 1980, has remained active in promoting the theme of co-operation among trade unions of the region . On the employers front. the ASEAN Confederation of Employers , established in 1978. has been pursuing similar goals . 3. There are at least three distinct theoretical approaches to the study of labour and industrial relations . They are the systems approach. the political-economy paradigm, and the social relations framework . The interaction paradigm mentioned here is related to the systems approach . See Dabscheck (1983). pp . 485-506. 4. See Kerr et al. (1964). especially chp . 3.

I

Towards a Conceptual Framework: Industrialization and the Evolution of Industrial Relations Patterns

The complex interplay between workers and their organizations, employers and their representatives or associations, and government agencies concerned with relationships between the two has become a subject of great concern and of inquiry over the last several decades. Scholars have researched into and elaborated on various themes of this important subject. However, the facts have remained scattered and a series of empirical findings disjointed in the absence of a cohesive conceptual framework . The realization of this state of the art has led some scholars to attempt to develop some conceptual frameworks for the analysis of the phenomena of industrial relations. A conceptual framework is necessary in order to develop a systematic body of knowledge in a field . It provides tools of analysis which help to select relevant information from "mountains of facts" and to analyse them in a meaningful way. But a researcher's values and convictions play a major role in his or her search for relevant information , or selection of variables for analysis, and thereby the development of a conceptual framework. Naturally, such has been the case with the conceptual frameworks developed by researchers of the "Western culture" realm to analyse and to understand industrial relations systems of the Western, more developed countries. 1 However, these frameworks have serious limitations in so far as their applicability to the analyses and characterization of industrial relations systems evolving in many non-Western industrializing countries is concerned. 2 This means that there is a need to reformulate or to reconstruct the prevalent views on the matter. To do so in a modest way for the purpose of analysing the evolution of industrial relations systems of the A SEAN countries is the objective of this chapter. The chapter is organized into two parts. The first part presents a brief review of the literature on the evolution of patterns of labour movement and industrial relations . The second part reconstructs the history of thought on the matter in the light of the structural transformation taking place in the industrializing countries. From this exercise will follow a set of propositions, or hypotheses. The subsequent

5

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ASPECfS OF INDUSTRIAL RELATIONS IN ASEAN

chapters will be devoted to testing these hypotheses against the realities of the ASEAN countries . Review of the Literature Many questions pertaining to the nature of labour relations are answered differently due to different assumptions concerning industrial relations strategies of actors . And until recently, the emphasis was on the strategies of trade unions . At one extreme , Marx suggested a strategy of radical collective action for industrial workers .3 At another, Perlman suggested a strategy of " job action " for " scarcity-conscious" blue-collar workers .4 These two strands of thought have guided much of the thinking of industrial relations scholars even today . Both Marx and Perlman theorized about the labour movement on the basis of their understanding of events and experiences in the industrialized countries . But the non-Western developing countries are not repeating the experiences of the now industrialized countries . Therefore, some scholars have pointed out the inadequacies of these old models , and have indicated a need to formulate new models of labour movement and industrial relations .5 Kassalow has argued that unionism begins relatively early in the industrialization process of the newly industrializing countries, and that union recognition is no longer a problem. This was not the case with the industrialized countries. Because of this difference , the evolution, structure and quality of trade unionism in the developing countries may not be comparable to that of the developed countries. 6 On the contrary , the political-social-economic milieu of newly developing countries may have generated their own laws in the development of trade unionism and industrial relations .7 And many scholars have been trying to explain industrial relations phenomena evolving in the newly developing countries of Asia and Africa with the theories of Marx and Perlman as the points of departure . Putting an end to colonial rule was one of the common objectives of labour organizations , political parties, and the intelligentsia in many developing countries prior to their independence . And they formed an alliance to achieve that common goal. Consequently , the labour movement became an integral part of the riationalliberation movement in many of these countries. Proponents of the thesis of political unionism in the developing countries have often argued that even after independence, labour has maintained its alliance with the political parties, and that the industrial relations strategies of workers and their organizations have followed a political course.

TOWARDS A CONCEPTUAL FRAMEWORK

7

A survey of the experiences of a number of newly developing countries led Galenson to conclude that there were "two great conceptions of labour market organization confronting one another. " 8 In one conception, trade unions were administrative arms of the state, subordinated to the ruling political party . Their function was to help the government realize its production-oriented goals. In another conception , they were "sectional interests'' . trying to improve their lot by means of collective bargaining. In this sense, they were consumptionoriented, and obsessed with the idea of increasing their share of the income. Galenson predicted that workers' organizations in the newly independent countries would eventually " opt for one or the other of these systems" . And he saw a greater possibility for government control of labour organizations in the developing countries. A lack of stable membership a a consequence of uncommitted labour force led to weak union which did not have strong bargaining power.ln this situation, the maximization of political power rather than the maximization of bargaining power became the goal of union leaders. This is the reasoning Galenson provided in support of what Bates calls the " political substitution' bypothesis.9 Another seminal work related to labour in the developing countries is lndu.stritJ/i.sm and lndwtriJJI Man . 10 This work attempts to analyse the evolution of industrial relations in the developing countries by developing and utilizing the concept of "industrializing elites ' . One major hypoth · coming from this work is that patterns of or strategies for industrial relations vary according to variations in the type of industrializing elit . Although the concept is said to have limited application to explain the universe of industrial relations systems, it still appears to be quite useful in understanding certain aspects of behaviour of the g vemmentaJ elit of some of the rapidly industrializing countries. A lightly different conception of trade unionism in newly independent countries came from Millen. who offered a spectrum of categ ries . with the American model at one extreme and the Russian model at the other. 11 He viewed most of the trade unions of newly de doping countries as being caught up in political activities at the expense of econ mic functions . This view was based upon the umpti n that I bour leaders in ne>A•ty independent countries considered political chang a prerequisite for economic and social change. Despite his awaren of the rapidity of changes talting place in the developing countries. be rted that developing countries would stay with political unionism for many years to come . Sidney Sufrin. writing about unions in emerging societies. sug~ ted a view simil r to that of Millen. However, his argument was different in that he derived orientations of I bour actions on the basis of

8

ASPECfS OF INDUSTRIAL RELATIONS IN ASEAN

the economic system prevailing in the newly developing countries. Sufrin contended that most of the newly independent countries had a politically controlled economic system, and that the system required politically oriented economic actjon by workers; 12 that is to say, there was no choice for labour but to take political action . Related to the thesis of political unionism is the Sturmthal hypothesis which states that environmental factors such as labour market conditions and the skill mix of the labour force determine industrial relations strategies of workers in developing countries. Sturmthal holds the view that the emphasis of the labour movement will be on political unionism as long as the supply of unskilled labour to the "capitalist" sector is unlimited, and that when labour becomes limited and scarce, the emphasis shifts to economic unionism. 13 This hypothesis is based on the concept of bargaining power in which the abundance of labour weakens, while the scarcity of labour strengthens. the bargaining position of trade unions. And the labour market conditions that are likely to evolve in the course of industrialization have been conceptualized following the well-known Lewis model of economic development with unlimited supplies of labour. 14 Elias T. Ramos has recently proposed a dualistic model of industrial relations strategy which draws upon the analysis of the Japanese experience done by Solomon Levine. 15 The argument advanced is that the national trade union centres travel through political routes to pursue the interests of workers . However. the local trade unions tend to be inward-looking. and pursue their so-called pragmatic goals at the worksite by means of economic actions. In addition. Ramos has suggested that trade unions in the modern private sector pursue the path of economic unionism whereas trade unions in the traditional and government sectors pursue the path of political unionism . While these models or frameworks have tried to examine and analyse industrial relations strategies of trade unions with varying degrees of success, the extent to which the models have covered the rich variety of industrial relations experiences of newly developing countries remains to be explored. In earlier times. the plight and strategies of workers and their organizations commanded much attention because the power of trade unions to fight against "bourgeois" employers largely determined the nature of industrial relations. But the situation in the developing countries today is quite different because the counterparts of the nineteen.th and twentieth century bourgeoisie of the West against which the labour movement had to fight do not exist there. Therefore. as Kassalow correctly asserts, the state plays a dominant role in industrial relations in today's developing countries. 16 Keeping in mind these developments, in the pages that follow a conceptual framework

T O WARDS A CONCE PTUAL FRAMEWORK

9

will be developed to analyse evolving patterns of industrial relations in these countries . Reconstructing the Prevailing Views The brief discussion of the prevailing views on the labour movement and industrial relations presented above suggests that some of the models of labour movement and industrial relations are based on a bipolar (that is, communist bloc versus capitalist bloc) view of the world . This view of the world which was popular thirty years ago is no longer valid . Moreover, neither the assumed alliance between political parties and trade unions, nor the labour supply condition appears to be a major determinant in the evolution of the patterning of the labour movement and industrial relations in newly developing countries. This is because the assumed alliance has not remained static over time. The labour supply factor has also not been as forceful a factor as assumed. The process of industrialization in newly developing countries appears to be different from what it was in the industrialized countries. As Wipper points out : . . . the British and American patterns of industrialization in which a wealthy entrepreneurial class provided both the capital and knowhow is not the pattern found in today's developing societies where, rather, the State is the prime agent of industrialization . 17

Since industrial relations is distinctly a phenomenon related to industrialization , the prime agent of industrialization occupies the central stage in industrial relations. What this means in the present context is that industrializing elites are bound to have a profound impact on the evolution of labour movements and industrial relations patterns in newly developing countries. Hence , some understanding of the behaviour of industrializing elites is a prerequisite for a good grasp of the evolving patterns of industrial relations. Attempts to understand the role of governmental elites in the process of industrialization in the less industrialized countries raise three important but interrelated questions. The first question is why governmental elites in less industriaJized countries pursue a course of planned industrialization . The second question is what requirements are to be fulfilled when a planned course of industriaJization is followed . And the third question relates to the mode of financing preferred for the rapid industrialization of their countries. We shall try to answer the first question by reference to the ideology of economic nationalism, the

10

ASPECfS OF INDUSTRIAL RELATIONS IN ASEAN

second question by the "catching up" hypothesis, and the third by the context of public fiscal behaviour.

Economic Nationalism and Planned Industrialization The most powerful factor that caused the political map of the Third World to be redrawn in the middle of this century was nationalism . It worked as a powerful weapon to overturn colonial rule and to regain sovereignty and independence in Asia and Africa . However, the elites of the newly independent countries soon realized that political independence meant little as long as their countries were econom ically dominated by external forces . This was the general background for the rise of economic nationalism in these newly developing countries. Economic nationalism is , in a sense, a derivative of political nationalism. Its understanding requires so me knowledge of nationalism in general. Hence, a brief review of prevailing views on the topic is in order. Similar to a religious feeling , nationalism is an emotional fervour. It may be conceived of as a sentiment, as a state of mind , or broadly , as a belief system . 18 Like any great philosophical system, it penetrates the heart , and reaches the mind at one and the same time . Since it encompasses the heart and the mind , it ignites the passion and interest simultaneously. For Rosseau , nationalism was the mirror-image of a collective will , identified with the will of individuals . I \I It was free from external interferences and internal divisiveness . In this conception , it was a communal individuality - that is, it was individualism but realized by the community of a people as a whole . In the Kantain dualistic system , nationalism was the free and autonomous will actualized by the universal consciousness for the purpose of " self-determination " . 2° From the point of view of the Hegelian philosophical system, nationalism was a soul or a spiritual principle arising out of the history and nature of mankind . Out of these various streams of thought , A.D . Smith has abstracted two versions of the theory of nationalism , namely , the romantic or the Germanic version and the core doctrine . 2 1 The Germanic version of nationalism stresses three outstanding factors : uniqueness , naturalness, and objectivity . A nation is an outcome of language, customs, history , and institutions. The commonality of these factors leads towards the creation of a nation. The common mental characteristics framed thereby tend to be unique in their manifestation . And the distinctive spirit of the nation is objectively featured as the common mental characteristics are based on external

TOWARDS A CO NCEPTUAL FRAMEWORK

11

differences with their objective values. A .D . Smith presents the essence of this version of nationalism in these words: The life of the nation is a continual struggle, but once it has achieved the sovereignty of statehood, it has realized itself in all its uniqueness. 22

The core doctrine assumes that humanity is naturally divided into nations with their own peculiar characteristics. The se lf-realization of these peculiar characteristics is possible only through its identification with collective freedom; hence, the emergence of a nation-state and the need for the ideology of nationalism. Kedourie has asserted that three contingent casua l factors characterize the theory of tlationalism : a) the Kantian philosophical dualism ; b) exclusion of intelligentsia from the affairs of the state; and c) the breakdown of traditional ways and stab le co mmunities . ~ 3 He has correctly observed that nationalism in Asia and Africa was mainl y a reaction to the colonial rule which excluded the intelligentsia fro m the affairs of the state. In line with this thesis. Minogue has noted that nationalism cannot really be a struggle of different internal factions within a country; rather, it should be directed against a foreign government in some manifestation . ~~ Even if it looks like a struggle of internal factions. there will be some hints at foreign involvement in such forms as an "agent of a foreign power" o r an "imperialist agent' '. Based upon this conceptualization. he has developed a three-stage model of nationalism . The first stage involves an awareness of national suffering or oppression under the yoke of a foreign power. The second stage is the re al struggle for independence . The third stage is that of consolidation which is characterized by economic nationalism . Minogue's thoughts on this matter are worth quoting: The nation, it is believed, can only be consolidated once it has become a developed economy . This is a belief which projects the consolidation into an almost e ndless future, for the concept of a developed economy is determined by what happens in the most economically advanced areas of the world . But this shift or emphasis is one way in which nationalist theory is likely to liquidate itself a nd shunt the energies of men into the more familiar paths of economic development. 25

The stage theory of nationalism indicates the place of economic nationalism in the historical life of a nation . The theory also suggests that nationalism purports to serve as a powerful ideological force in

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OF INDUSTRIAL RELATIONS IN ASE ;\N

directing economic po licies for rapid industri a li za tion in the less deve loped countries. Thus. economic nationalism may he viewed as a powe rful weapon for economic freedom o n the sa me plane as r o litical nationalism with respect to political indepe nde nce. H a rry Johnson has argued th at eco no mic nationa lism is "co nce rned with establishing the se lf-respect of membe rs of the na tio n in co mpari son with me mbers of o the r nat io ns a nd with crea tin g a di stincti ve identity" . 26 This implies that o ne of the main compo ne nt s of eco nomi c nationalism is a comparative pe rspecti ve with regard to the economic performance of a nation . Smith 's arg ume nt th a t na tio na li sm "provide s the ideological dri ve for mo bilizi ng unde rdeve lope d areas into co mposite puritannica l na tio ns bent o n rapid industri a li zat io n in the tee th o f outside competition " may be unde rstood as a further e labora ti o n n n the importance of economic nati o na li sm for industri a li zat itm. ~ 7 Since economic natio na li sm has a comparative dimension. governmental elites in newl y industri a lizin g countries te nd to pursue economic po licies that aim at th e creati o n of a n eco no my simil a r to those of nation s that a re considered econo mi ca ll y successful and powerful. However. the creation of such an eco nomy may no t he possible if the elites rel y tota ll y o n market forces . This is because the efficiency of market forces in newly developing co untri es has ofte n heen questioned ; gross imperfectio ns in ca pit a l as well as in labour marke ts have often bee n no ted . And the a lternative is gove rnm e nt intervention s to correct the "social defect s of ma rk et m ec h a ni s m " .~" T hi s is th e rationale for economic planning in the deve lopi ng co untri e s. Now. the questio n is how the e lites generate conse nsus a mo ng th e people they govern . The ave rage citizens of eve ry " nor ma l' ' country have a taste for economic growth. o r industri a li zatio n . In tenn s of economics jargon . indust rializatio n is a supe rior good . Therefore . they expect their government s to devise ways that will eve ntu a ll y lead to thi s end . Thus, the objectives of the gove rnm e nt a l e lit es and the expectations of the average citizens tend to converge . The e lites may . th e n . think that they have bee n authorized to plan the process a nd to implement it. This is consistent with the theo ry of socia l choice which requires "public officials" whose "one ai m in life is to implement the values of other citizens as given by some rule of co llective decision making" . 211 This is also consistent with the ass umptio n of the theory of groups and organization s which asserts that " the State is expected to further the common interest of its citize ns ... ~~~ Thus , economic nationalism is the unde rlying ideologica l force for planned industrializa tion in the developing countries . Once the deter mination and will of government al elites to follow the path of pl a nned industrializa tion is understood , the next ste p is to a nswer the second

TOWARDS A CONCE PTUAL FRAMEWORK

/J

question posed at the beginning of this section, namely, what are the basic requirements of planned industrialization? Swte Participation and "Catching-Up "

For latecomers in the arena of industrialization , "catching-up" with the industrialized world becomes one of the major objectives in organizing and advancing economic activities. This is more so in countries where national le aders are the industrializing elites . As Kerr et al. have asserted. " The nationalist leader promises a rapid rate of industrialization to catch up with advanced nations and to remove the stigma of backwardness" . 11 However. this requires " telescoping of centuries of Western progress into a few decades of planned change" .·12 But market s. left alone. may not be able to telescope centuries into decades . That is why the role of the state is substantially greater in today·s developing countries than it was in the developed countries at a comparable level of industrialization . While the participation of the state in t!conomic activities has been incrc:asing in both less mdustrialized and more industrialized countries. different schools of economic thought have viewed its developmental role differentl y. For exa mple. the classical school of economists assumed that state interference in economic life jeopardized the natural tc:ndenc y for man to obtain the greatest satisfaction from limited re sources. While the errors of free market enterprises were likely to neutralize une another. state intervt!ntion was likely to produce large and enduring errors . On the other hand . Marxists claim that the state is no more than a weapon of the capitalist class. devised to serve its own class interest. They think that each stage of capital accumulation is accompanied by threa ts to destroy certain conditions for the reproduction of the capitalist system . And government bas a specific function to correct the contradictions created by capitalism itselt -'.1 In contrast. the neo-classical school has a different view or the matter. Firstly. the government is considered inferim to the market system as an organizer of economic activitic:s ..\.1 Secondly, the growth of the public sector is considered to retlect the growth of the power and intluence of politicians who may use public resources to favour their voters and related pressure groups. Hence. state participation in economic activities is assumed to lead to a misallocation of resources . However. the neo-classical view is not acceptable to lh.e K.eynesians. ~eynesian economists think that government expenditures create effective demand in depressed economies, the effect of wbic.h will oo growth-stimulating rather than growth-depressing. ·' 5

/4

ASPECTS OF IND USTRI AL R EI ATIClNS IN ASFAN

The mainstream economic analysis of the participation of gove rn ments in economic activiti es does not quite apply to th e deve lopin g countries. The main rea:;on for thi :; is th e in applit·ahilit v pf th e assumption concerning th e behaviour of govern me nt al e lit es in th e more deve loped countries as "cosmic max imi ze r:;· ·. '" A desire to ma ximi ze a defined measure of social welfare is th e mo ti vat in g force for "cosmi c maximizers". Hence. the growth of public ex pe nditure~ is CW ( 197X) . Wippcr ( 19M) . p. 37 . Minogut' ( 1%7). t·hp . I. Sec Vaughan ( 1915) . Ft>r a di st·uss ion L>f the Kantian dualistic system . see Kedo urie ( 1960) . Smith (1971). lhiJ . . p. 127. Kcdnurie ( 1970) . Mino!!ut· < 19o7) . I hid . . p . 14 . Jo hnson ( 19o7) . p . 12o . Smith ( llJ7 1 ). p . I IX . Killick ( llJ 7o) . pp . loi-X4 . A rro w ( ll)oJ ). p . 107 . O lso n ( 1%5) . p . 7 . Kerr . et a l. (1%-ll. p . R9 . Sc.: Sum1 ya am.l Taira ( 197lJ). p . IX9 . S.:e Fok y (197X) . pp . 22 1-3X . MlltL>n Frit·dman is one of the chid advocates of this view . Pct.:r>on ( llJX2 ) . pp . 197-99 : and Stack ( 197!!) . pp. 880-XIJ . G illb ( llJXO) . pp . 14H-X9 . Re ynolds ( 1971 ). p . 53X.

22

A PE.CTS OF I OUSTRIAL RELATIO S IN ASEA '

JH ~e - l ~ t c tn ( 195X) . pp Xl -10 39 Chok t ( I'J79) 40 Sec Shaw ( l'i73) . See also Mc Ktnno n ( 1973 ). 41 Sec R o~ n > t c tn - R oda n (1961) . pp. 107-3R : C hc nc ry a nd Stro ut (19M) . pp . 679-733: ,u lat t ( 197X) . pp . 563.{)9 , a nd Pa pand, ( 1972) . pp . 934 -)U . 42 Ra hm a n (1%X) . pp . 137-3X : a nd G nrfin a nd E no> (1970) . pp . 313-27 . 43 Hannum (1970) , pp . 43-53 . « . Mutr a nd Bro wn ( 1\174) . p . 474 . 45. T he " o rthodox " eco nomic tho ught views the trade union as a wage-maximizi ng monopoly or ca rtel. See Ht cks (1935) . pp . I-2U. 46 Albert . Ht r>chm an ( 1\159) think s th a t ro re ign ca pit al has a " pressure -inducing" as well a~ "pressure -relievi ng" (unction in industrializing socie ties .

II

The Environment: The Econon1ies and Labour Markets

O ne part of the hypo thesis pro posed in th e preceding chapt er is th a t diffe re nt leve ls of structura l tra nsfo rm atio n ge nera te diffe rin g re quire me nts fo r ca pit a l accumul ati o n. To give substance to this propositi o n we sha ll , first , look at the process o f stru ctura l transfo rm atio n ta kin g pl ace in the ASEAN co untri es. a nd the n exa mine the po licies o n ca pital accumulati o n and industria li za tio n pursued by the gove rnme nts of th ese countries to bring abo ut the cha nges. Fo llo wing upo n this , we sha ll put toge th e r some re leva nt info rm a ti o n o n the la bo ur marke t situ ati o ns in these AS E AN co untries . It is des ira ble beca use cha nges in the structure of output a re assume d to bring abo ut cha nges in the structure of e mplo yme nt as we ll . This will , the n, set the stage fo r testing the second pa rt of the hypo thes is proposed in the preceding ch apter , that diffe re nt patterns of industrial relatio ns e me rge at differe nt leve ls of structura l transformation , as the econo mies and la bo ur marke ts are the important e nvironmental factors fo r the deve lo pme nt of an industri al re lations system.

The ASEAN Economies From the point of view of economic growth , the ASEAN countries we re amo ng the best performers in the decade of the 1960s. The ir growth pe rfo rma nce was spectacula r in the decade of the 1970s as we ll. T he growth rate of the real gross domestic product (GOP) of the ASE AN countri es as a whole was 5 .3 pe r ce nt per annum in the 1960s. It jumpe d to 7 .3 pe r ce nt pe r a nnum in the 1970s. This is re marka ble, especially in view of the fact tha t the growth rates of G OP decelerated from an ave rage o f 5 . 9 pe r ce nt pe r annum in the 1960s to an average of 5 .6 pe r cent pe r a nnum in the middle- income countries in the 1970s. T he correspo nding rates for the industria lized countries we re 5.2 pe r cent pe r annum in the 1960s a nd 3.2 pe r cent pe r annum in the 1970s . 1 Mo reove r . we sho uld not forge t tha t the wo rld economy was sluggish in the 1970s due to the recessio n , and the ASEAN econo mies, against this odd , gre w fas te r the n than in the 1960s. Inte r-country varia tions in the rates of growth of GOP are also no ticeable. T his ca n be see n by exa mining the data on G OP growth

23

24

ASPECfS OF INDU STRIAL RELATIONS IN ASEAN

TABLE

J.

GROWTH RATES OF GROSS DO MESTIC PRODUCT OF THE ASEAN COUNTR IES, JlJ711-XI

Indonesia l lJ7(1 l lJ7 1 l lJ72 l lJ?l l lJ74 llJ75 l l)76 1 in 1894 , but Indonesians were nor included 10 its member h1p. In 1~ . railway workers formed their own union - the Union of Ra1lwa~ and Tramway Personnel, o r Vereeniging van Spoor en Tramy.ay ( VSTP) and Indonesians were included among its leaders . The VSTP was very much influenced by Dutch socialist political figures. and had a strong link with the Indonesian Socialist Political Party ( ISDV) al> well . The VSTP initiated and encouraged many strik es between llJ2ll and JlJ_J , but the cost it had to pa was heavy . In J 923. the Dutch government banished the leader of the union , Mr Semaun . 111 retaliation . Three years after the banishment of Mr Semaun. another labour uprising took place . This was assumed to have ooen instigated and led by the communists . Therefore. the government cracked down on it by force , and the labour move ment went underground for a few ea.rs. In 1930, the Federation of Unions of Public Servants (PVPN) and the Federation of Unions of Employees in the Private Sector ( P Sl) were formed. Both of these federations were apohticaJ. Although the performed some trade union functions . the labour movement remained ineffective during the 1930s . It was further suppressed during the period

INSTITUTI ONAL FACfORS AND EVOLUTION

45

of the Japanese Occupation (1942-45). However, this suppression led to a revival of political uni onism as members of many of the trade unions joined nationalists who were fighting for the independence of 1 Indonesi a . In 1945 , the trade union federation, 8arisan 8uruh Indonesia (881). was formed . Its main function was to organize and to form the L81 - the Indonesia n Labour Army . The 8811ater split into the Federation of Indonesian Labour Unions (GAS8Rl) and the Indonesian Labour Party {P81 ). The former was supposed to take care nf trade union functions , while the latter. that of political affairs. The GAS8RI eve ntually became the Sentral Organisasi 8uruh Seluruh Indonesia (S08SI) , o r the All Indonesia Trade Union Federation . The pcril)d from the I\J50s to the mid-IY60s saw intense trade union rivalrv • in lndonesta .4 Following the political changes in 1965. the S08SI was banned because: of its alleged involvement in the communist coup. Neverthele..s. the trade union move ment was still visible even though it was fragmented . There were four maJor labour federations still functioning in Indonesia- the S811. the K81M . the G08SIL and the SARBUMUSI . T he ··New Order"' government tried to restructure and unify the labour movement . The formation of the indonesian Workers Joint Action Front (KA 81) m 1%6 and the Indonesian Workers' Council in 1%9 were steps towards achieving this goal. Finally , the Federasi Burub Seluruh Indonesia (FBSI). or the All Indonesia Federation of Trade Umons. was formed on 20 February 1973. It has become me sole representative of tbe rrade unions in the private sector since then. In additton . there are two other federations: Korps Pegawai Republik Indonesia ( KORPRI ), or the Republic of Indonesia Civil Servants' Corps, which repres.!nts government empk>yees, and Korps Karyawan t KOKAR) whtch repreSC!nts employees of government enterprises. The Indonesian labour legislalion defmes a trade union as "an· organization volumarily established by and for workers. consisting of units within a field of industrial activity. which belong to a central body . ·, j Once a union meels the structural requirements of the national trade union centre, it is registered without any problem. Once a tirade union is registered . employe-rs ba~e a legal duty to recognize it . The question of majority representation is nol imponant . Trade unions i.n Indonesia are organaed along vl!rtic'allines. At lbe top is lbe FBSl. and at ttle bouom ace plant-level or loc.al~level unions. Between the two are unions organized at region al or provincial lcvet. and aa city or district level. Thus, there are five levels of trade onioR otganization. Table 10 presents data 011 member uniODS affiliated to the FBSJ .

46

ASPECTS OF INDUSTR IAL R ELATI ONS IN ASEA i..:

TABLE

Year IIJ74 IIJ75 IY7o 1977 197X IIJ7Y 19XO 19XI 19X2 19X3*

JU.

THE FBSI AND ITS AFFILIATE D MEMBER UN IONS IN INDONESI A, IY74-X-'

Re!(ional or Provincial Le ve l 21 2o 2h 2o 2o 2o

2h 2o 2o 2o

City or District Level

S ub - Di ~ trid

Lew I

:11

-II

oY

1(~1

X-l X'J 134 137 17o lXI lXI 217

loS 17o 227 133 31)5 -lo7 477 )(ll)

Plant or Local Le,e l o:::>x 1.71:1 -l.X'J5 h.l:'i7 7.579 X.IX2 X.55-l IJ .OI-l 9. 11l7 Y.244

* as at 31 August 19X3 SouRCE: Sub . Dit. Bina Orhup. Ministry of Manpowe r and Tran.,migra tion .

Figures on trade union members hip are not available . The increasing trend in the number of plant-level or local level unions may be indicative of a rapid growth of trade unionism . However . it cannot be said with any certainty that an increase in the number of trade unions automatically leads to an increase in members hip . The organization represent ing the employe rs' side in industrial relations is the Perhimpu nan Uusan Sosial Ekonomi Pengusah a Seluruh Indonesia (PUSPI), the Indonesi an Employe rs' Association . It was established in January 1952, and has been authorize d by the KADIN Indonesia (the Indonesia n Chamber of Commer ce and Industry) to represent the employer s on industrial relations and manpow er issues. It has also been recognized by the Ministry of Manpow er, Transmig ration and Cooperat ives as the sole represen tative of KADIN Indonesi a to deal with matters related to manpowe r and industrial relations. 6 The aims and objective s of the PUSPI are to represen t employe rs' interests in tripartite negotiati ons and in the Arbitrati on Court, to play an active role in reviewing labour laws and regulations, to foster co-opera tion to promote industrial peace, to represen t all employe rs in dealing with the governm ent and the union, and to contribut e to create a harmonio us industrial relations climate in the spirit of the Pancasila labour relations. 7 The industrial relations system in Indonesi a is overly legalistic. Many provisions pertainin g to the terms and condition s of employm ent are set by legislation. However , some collective bargainin g takes place .

IN STITUTI ON A L FA CTORS AND EVOLUTIO N

47

There were 4,567 collective labour agreement s in effect as at March 1983. The number of workers covered by these agreement s was 554 ,072 . The Act on Collective Labour Agreemen ts enacted in 1954 still provides the legal fr amework for collective bargaining. The Act does not specify an y statutory limit on bargainable issues . It stipulates. however. that a collective labour agreement can be concluded only for a period of two years . The Act also states that a collective labour agreement is legally binding on the parties .8 However, a recent National Workshop on Operation al Improvem ent of Pancasila industrial relations has recommen ded that a collective agreement be of a voluntary

character.'~

The employee- employer relationships in Indonesia are predominantly paternalist ic . The labour market is characteriz ed by a high rate of underemp loyment and a very low level of wage-employment. These factors discourage workers from entering into employme nt contracts with employers on a .collective basis. Companie s employing more than 25 employees are required to formulate company regulations specifying terms and conditions of employme nt in writing. These company regulation s erroneous ly give the impression of being a substitute for collective bargaining agreement s. Relevant data on the number of company regulation s approved by the Ministry are presented in Table 11 . With the exception of workers in "vital industries" , the right to strike is guarantee d by law . Strikes are. however, not tolerated because industrial conflict is not compatible with the tenets of the Pancasila philosophy . but they have not disappeare d completely. On the contrary,

11. COMPANY REGULATIO NS APPROVED BY THE MINISTRY OF MANPOWER AND TRANSMIGR ATION IN INDONESIA , 197(>-83

TABLE

Year

Total Applied

Total Approved

1976 1977 1978 1979 1980 1981 1982 1983.

3.585 4,535 5,702 7,850 8,4n 9.274 11 ,119 11 ,239

2,551 4,089 5,309 7,312 7,589 8.780 10.689 10,778

• as at March 1983. SouRcE: Sub. Dit. Pengurusan Persyaratan Kerja Pada Perusahaan Swasta. Ditjen Binawas, Depneker.

48

ASPE C TS OF INDU STRIAL RELATI O NS IN A SE A N

rABLE

12.

N U MB ER O f W O RK STO PPAGES. W O RK ERS I NVOLVED AND DAYS LOST IN INDONESIA , 197S·Il2

Year 1'.17) IY7o 1

r

Procedural

Procedural

"Tl )>

Q 0

;l::l

Vl

)>

z

Not tolerated

Allowed (banned [rom Oct. 1976 to Jan . 1981)

Allowed (banned from martial law period until Jan. 1981)

Allowed (sympathy and political strikes banned)

Allowed

0

m < 0 r

c

-l

0 z

Sou acE: Compiled by the author.

~

80

ASP ECTS OF I NDUSTR I AL RELATIONS I N ASEAN

while that of Sin gapore , an acco mmod ative o ne. Th e pa tte rn in betwee n th e two may be termed as co nflictu a l. Ho w ca n we explain th ese var iatio ns? Following the lin e of a rgum e nts deve loped in thi s study, one of th e exp la na ti ons for the va ri at io ns in the patterns o f industri a l relations as id e ntifi ed for th e ASEAN co untri es may be found in the degree or int e nsit y of th e need for capita l acc umul a tion . Some indication of such a nee d may be reflected in th e e nactm e nt of various investment incentives acts. These were discussed in C hapter II . In addition, it was argued th a t gove rnm e nts will a lso e nact labour le gislatio n in o rder to bring about labo ur re lati o ns in lin e with th e dictat es of industrialization . The m ajor pi eces of la bo ur legis latio n enacted or amended in the ASEAN co untri es in the last few decades have bee n discussed in this chapter. It may be worth examinin g whether th e re is a ny close correspondence between th e enactment of investment ince ntives acts and labour legisla ti o n . This info rm a tio n is summarized in Table 26. The summ a ry in Table 26 indicates that there is a close corresponde nce be twee n th e two with respect to th e timin g of the e nactments. This evide nce substa nti a tes th e a rg ument th a t th e dicta tes of eco no mic development o r of st ructura l tran sfo rm a ti o n a nd re la te d requirements for capital accumul ati o n profo undly affect public labo ur po licies, a nd th e re by p att e rn s of evo luti o n of industri a l re la tio ns. In other words, the hypothesis th a t diffe re nt leve ls of stru ctura l tra nsfo rm a tion lead to diffe re nt pa tte rn s of industri al re lat io ns is co rrobo rat ed.

Concluding Remarks In thi s chapter, the m ajo r features of th e industri a l re la ti o ns syste ms toge th e r with the evo lution of th e labour move me nts in each o f the A SEAN countries have bee n prese nt e d . Secondly, simil arities in th e e me rging tre nd s in indust rial re latio ns in th ese co untries have bee n delinea te d , taking no te of th e maj o r variations in so me important aspects of the ir indu stri a l re lati o ns syste ms . Finally, a n a tt e mpt has been made to establi sh a syste ma tic re la tio nship between e me rgin g patterns of indu stri a l re la tio ns in th e ASEAN co untri es a nd the leve ls of structural transformation or stages of industri a liza tio n of these co un tries. The analysis has bee n ca rri ed out in the m a in by usin g th e argum e nt of the need for capital accumulation in the co urse of industriali zation. This may be subject to challenge on the ground th a t th e approach is rather unidime nsio nal . Howe ve r , it is co nte nded that th e co nceptua l framework developed in C hapte r I and applied to the ASEAN co untri es

TABLE

Investment Incentives Acts

26.

SELECTED INVESTMENT INCENTIVES ACTS AND LABOUR LEGISLATION IN THE ASEAN COUNTRIES

Indonesia

Malaysia

Philippines

Singapore

Thailand

Foreign Capital Investment Law No. I of 1967 (amended by Law No . 11 of 1970)

Pionee r Industri es Ordinance 1958

In vestme nt Ince ntives Act 1967

Investment Incentives Act 1968 (amended in 1971 )

Export Ince ntives Act 1970

Pionee r Industri es Ordinance 1959

Indust ri al Inves tme nt Act 1962 (a me nded in 1967)

Presidential Decree No. 33 of 1981

Investme nt Ince ntives Act 1967

z

....,

(/)

Alien Business Law 1972 In ves tment Pro mo tion Act 1977

=i c j

0

z

)>

..,r )>

Labour Legislation

Act of 1969 on Manpowe r Tripartite Seminar on Pancasila Labour Relations 1974 National Workshop on Pancasila Labour Relations 1981

SouRCE: Compiled by the author.

Trade Union Ordinance I 959

General Order No .5 , 1972

Industrial Relations Act 1967 (amended in 1971 and 1980)

Labour Code 1974

Industrial Rel ati ons Ordinance 1960

Labo ur Dispute Settle ment Act 196:'

Cl0

Industrial Relati ons Act 1968 (amended in 1972 and 1982)

Labour Protection Ordinance 1972

0

Labo ur Relatio ns Act 1975

;:o (/)

)>

z

rn