Labour and Industry in ASEAN 9718639004

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LABOUR AND INDUSTRY IN ASEAN

Peter Limqueco, Bruce McFarlane & Jan Odhnofi

JOURNAL OF CONTEMPORARY ASIA PUBLISHERS Manila, Philippines & Wollongong, Australia

First published in 1989 by Journal of Contemporary Ask: Publishers

Copyright 1989 in the Philippines by Journal of Conranporary Asia Publishers P.O. Box 592, Mcvzila, Philippines /099 All rights reserved. Nopartofrhis book fnag' be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now bzown or hereafter invented, including photocopying and recording, or in any information storage or rerrievai system, without permission in writing from the puOfishers.

ISBN 97/-8639-00-4 Aeknowiedgmenrs The artwork on :he cover is tauten from Evolution of Labour Legislation in Asia, published by Documentatiorefour ActionGroup in Asia,Hong

Kong.

Contents I

I

I

I

I

I

I

Preface

v

Pan I: Labour Process and the Comnrse of Industrialisation in ASEAN

1

1

The "New International Division of" Labour" and the Transfer of New Technology

3

2

Trends Affecting the ASEAN Economy Since 1960

17

3

Industrialisation and the Labour Process: The Bangkok Area

30

4

Industrialisation and the Labour Process: Penang and Kuala Lumpur

52

5

Industrialisalion and the Labour Process: The Metro Manila Area

70

6

Comparison of Trends in Three ASEAN Countries

93

Part II: Labour, Capital and Technology in ASEAN Economic Growth

101

7

Labour's Role as a Factor in Economic Growth

103

8

Capital's Role in Economic Growth

116

9

Technology and the Labour Process

131

10

Government and the Labour Process

142

11

Development Theory and Policy in the Light of Rapid Asian Industrialisation

163

Conclusion

172

Appendix: Tables

1'75

APPENDIX: TABLES 175 175 176 176 176 177 177

177 178 178

179 179

Strike participaticxi

1'79 180 Ulla PaidDup capital per worker site and ownership Strikes

g and KL firms by site

4.12 Attitudes £0 erv

180 181 181 181 182 182 182 183 183 184 184 184 185

185 186 186

Manila workers: age and sex distribution Manila

IJIHIIMCS

Distribution of surveyed labour force

186

18'7 187 188

188

Manila

188

5.11 Workers' income structure by site 5.13 Workers

189 189 189 190 190 190 191

M

192 193

Workers Workers Manila

195 196

industrialisation index 1965-80

197 197

Preface

Millions of ordinary people in Asia have made strenuous efforts over the last 20 years to improve their own economic lot and to build up the material strength of their individual nation-state. These efforts have varied in shape, scope and vitality according to the class and cultural propensities of the economic agents involved and have ranged from very high levels of success in countries like Thailand, Taiwan and Singapore to only moderate improvement in Indonesia and the Philippines. The result of these efforts, combined with capital and technology and the role of the state in economic life, has been a new level of industrialisation in East Asia generally, in both the "little tiger" countries (Taiwan, South Korea, Hong Kong, Singapore) and ASEAN (Malaysia, Thailand, Singapore, Indonesia, Philippines, Brunei). This higher level of material standard and industrialisation can, to some extent, be measured by the economists' scoreboard which flashes such illuminated signs as GDP, GDP per head, debt service ratio, etc. However, behind these macroeconomic "result variables" lies a myriad of microeconomic trends, choices, tendencies. There lies a world of previous forms of capital accumulation and market segmentation; of new forms of exploitation of new labor and new sorts of workers in the labour process, of trade union organisation and

the struggle for a better _~-sometimes against capital, sometimes against the political and military forces that tend to support business in suppressing "labour unrest." The perspective we have adopted to bring all of the diverse aspects together is this: capital, the institutions of labour exchange and the labour process must all exist before "exploitation" or the formation of new industrial profits--the source of fresh accumulation--can be properly examined. Economic history here necessarily accompanies economic analysis.

While there may be a wide measure of agreement about macroeconomic results, about the fact of a process of ind usttialisation in Asia under "Third World" conditions, even about social tensions, there remain widespread sharp differences on how to explain and to interpret the recent trends. For that reason we have included in this book v

Vi

Preface

quite a lot of material which aims to answer the why questions as well as the how questions. We have decided, as background, to study three countries in some depth: Thailand, Philippines and Malaysia, and to examine their labor processes, economic policies and labor politics in considerable detail. Only a relatively few books have done this and, we believe, none have had the research back up and local contacts we have been fortunate enough to be able to utilise. The choice of Thailand, Philippines and Malaysia was based not only on our acquaintance personally with two of these and on the inherent fascination of the development experience in each place, but on the place they occupy in the "ladder"

of development as second-tier NICe. 'While South Korea, Taiwan and Hong Kong are universally regarded as "firsttier" NICs, our three countries are not. We are interested in precisely what constitutes die gap between a ' 'first" and a "second" tier in the context of Asian Newly industrialised Countries. This should shed light on the nature of the labour process in developing Asia, the dynamic elements which allow one country to accelerate to first-tier statusznanufactured exports, government policy, quality of entrepreneurship, for exampleand whether ASEAN as a group is likely to become a dominant economic power. lt

should also throw light on another aspect-the widening gap between average per capita incomes of the first-tier NIls and those of Thailand, Philippines and Malaysia, with the former some four to five times the level of the latter.1 This book also aims to contribute to the growing corpus of knowledge about two aspects dominating the political economy of development of ASEAN (a) the growth of an industrial workforce, its outlook and its condition and (b) the emergence of a relatively independent industrial capitalism, Other monographs by Garry Rodan on Singapore and Richard Higgott on other areas of ASEAN (both Australian scholars) have covered some aspects of the labour process which is the focus here, but we aim to supplement such studies with the empirical evidence we have been able to obtain by Btu' own methods and efforts. For reasons of the logistic difficulties involved we

have not dealt wiM SiNgapore and Indonesia, but have chosen to concentrate on three of Me remaining ASEAN states. the Philippines can be established by reference Lo the growth rate of gross national

activities

sector, where conditions of Life and the nature of investment are very different. There

Preface vii

petty commodity production or family-based enterprises prevail rather than capitalist

production based on wage labour. Contemplating a mountain of facts about industrialisation and the labor process in the three countries, we found that the issue that became most vital was: what are the questions? Settling this problem turned out to be as difficult as the interviewing

processandcompilationoftablesanddata.Findingout"what are thequestions"proved to be a learning process and not something that could be approached in an a priori fashion.

Pajor sets of questions relating to labor, capital and the (developmental) state

ent labor force of wage-labourers (i.e., a proletariat) likely tobecommitted

_

strike action? ._ It can be seen that these are vital aspects of the labour process, which has both as

a technical and a wider social dimension. The technical side is typified by the analysis of work rhythm, safety, machine~man relations which we have set out in the case of Thailand in Chapter 3. The wider social aspect relates to class relations between capital and labour in the industrial situation in which the second-tier NICs considered in this book find themselves. Workers,

='j~>.!_i

if

,.

1

H

if

4

.

=€"

,, s

|

work: pay, effort level and job security. However, grading of skills by management,

English factory inspectors

the widercontext of ownershipof fi

cally capitalist nature of

Ecultcircumstances

viii

Preface

the young working class of ASEAN has developed self-consciousness about collective labour's ability to defend the interests of workers. We have not gone on to the issue of "how revolutionary" (or otherwise) these workers have become, as the conditions in which our surveys were undertaken were sometimes politically hazardous and did not permit this question, important as it is, to be asked. Three major questions relating to capital were: (i) How itinerant is the capital? Does it arrive just to extract medium-term

maximal profits from what is assumed to be cheap labour or does it make a more substantial contribution to the industrialisation process? (ii) What is the effect of different kinds of capital ownership on the workforce--on skill and on the labour process as influenced by technology? (iii) What involvement is there between foieign and local capital and what conflicts are engendered by the entry of oversea-based corporations? In relation to the role of the state there seem to be two broad questions: (i) How does the state handle its accumulation and legitimation functions? That is, what has the state done, in the context of relative underdevelopment, to influence the rate and structure of total societal capital accumulation and to ensure social consensus and stability? (ii) How is it that a state based largely on pre-capitalist and non-capitalist

classes can carry out an essentially capitalist industrialisation process and as a consequence create new capitalist groupings and new wage~labour relations? While the wider and narrower aspects of the labor process have been our chief cpn.5;§.r;t},.-st;.gh..issues as industrial pglicv waste nelicl and exchange f§a.Q.9-aQ£Ql_have impinge so strongly on a new workforce have, hopefully, been present in our analysis This then is a book about change in a pan of Asia studied these as second-tier

consisting of no more than packaging, mixing and assembly

_

led, quality improved and new forms . first-tier NIC by 1995, given than its strong rice-economy base continues. A second, Malaysia, while

.

Y

Preface ix

dependent for a good deal of its fortunes on rubber and tin, has done well with its exportpromotion zones and has the outer trappings now of a modem economy. The third case, the Philippines, did well in Me 1960s and 1970s until collapse in the early 1980s with the Marcos regime 's failure to maintain legitimacy. It has made a reasonable recovery since those days, although living conditions for labour remain bleak and financial markets have not yet succeeded in bringing about an effective utilisation of available loanable funds. Since the early part of the 1980s strategies of economic development being employed have become clearer. In the Philippines, export-oriented growth strategies bear the main weight of economic policy. Ideas of giving partial protection no the domestic producer-goods sector seem to have been abandoned in spite of aWorld Bank recommendation in 1979. The success of export-processing zones (especially Bataan) has been rather mixed. Some have closed, others have moved out. Malaysia has both a growing sector of imported capital~goods and growth of domestic efforts to produce markets related to services, tin~mining and tree-products. At the same time it has rather successfully operated free trade zones in Penang and its outlying area, as well as in Kuala Lumpur and Petaling Jaya. An important effort in recent years to get a Research and Development program going in order to encourage technological upgrading implies there is a future for more capital-goods production in Malaysia. In Thailand, policy-makers have three prongs to economic strategy: first, a strong rice economy, second, production of textiles as a main export lever, third, growth of some machinebuilding and other parts of heavy industry such as chemicals, plastics and rubber products. No attempt has been made to elevate export-oriented growth to dogma or to rely heavily on free trade zones. We have paid due attention to basic facts about the contribution of labour, capital and technology in accelerating productivity. Here our basic perspectives have been as follows.

First, privatecontrol of thelabour process is undertaken to get the best combination of effort and wage-eamingsfrom the viewpoint of capital. This does not exclude job training, improved work environment and higher than average wages insome industries. In joint~venture investments, quite a few of these more favorable features are likely to be present. The key relationships here are time, effort and earnings in relation to levels of technology. Second, in firms using modern technology, even where labor unions are weak, it has been the skilled workers who have been used to organise workers for the shopfloor labour process. In the "next-tier" NICs, countries represented by Thailand, Malaysia and the Philippines, companies do not outlay a large amount on fixed costs, but they reduce such costs where they exist by getting a larger market share. If they can do'this, real product per man hour rises. If not, the company relies on other ways

to maintain real product per man hour-on unions to keep the labor-process working

X

Preface

smoothly in the relatively labour-intensive context of a technology that represents no huge fixed-cost outlay. During the period of growth of the manufacturing arms there is also the growth of domestic finance-houses which help new manufacturing development. Fixed costs, the key to future returns, have to be "carried" during a transition period, and this means outside financiers will be required. Malaysia and Thailand have, in particular, witnessed revolutionary changes in the role of their domestic finance-capital systems over the last two decades. These aspects need careful attention although the technical aspects of work-environment, technology level, specialisation, regional concentration and external economies of scale also remain important. The framework of analysis increasingly required was one which looked at capital accumulation and creation of a working class as part of the same process-two sides of the same coin. The use of this is to find out how capital is being accumulated in pockets of the economy by all kinds of entrepreneurs and on the larger industrial sites by exporboriented manufacturers. It is also to assess the role of the emerging worldng class in creating new economic prospects. We have called this book Labour and Indusoyin ASEAN. This is to emphasis that we consider that an important part of our cont:r1°bution has been a study of the economic condition and ideological outlook of the labor~force, besides giving the brief review common in most books concerning economic development, and of the contributions of capital, technology and government policy. One consequence of the "missingresearch"on labour in some accounts is thatgaps haveappeared in commentary on Asian economic performance written from such widely divergent perspectives as dependency theory and neo-classical economics. We hope to have closed some of these gaps with the results of our surveys and our analysis of them. Two points need to be made in conclusion to avoid misunderstanding. First, we axe not saying that wage-labour is a new phenomenon in ASEAN, as it has been around

since before 1945 in manufacturing establishments. What we say is that there has been a tremendous growth in new wage-labour employed in manufacturing and that those involved are young and female to a very large extent- There has been an accompanying fall in those employed in "domestic mode" manufacturing such as putting-out, knitting and loom-work in the household etc? Second, we have made two strong observations on "structural transformation" of the economy in the three"second-tier" NICs represented by such countries as Thailand, Malaysia and the Philippines. One was that this transformation had been steady in the direction of deepening the technical level of the labor process in manufacturing. The other was that government policy has been at least as significant an "input" of transformation as free trade impulses based on "comparative advantage" and that other domestic changes in social relations should be the main focus of study rather than external shocks, external dependency, MNC "control" etc. These are observations

Preface

xi

findings on domestic

no Ayudhya workers who helped us in the tie

tiles. Parts of our today. We offer this study of a segment of that world as a modest contribution to achieving a clearer overall picture. Peter Limqueco Bruce McFarlane Jan Odhnoff

NOTES TO PREFACE 1.

See tables 1 and2 in Harry T. Oshima "Human Resources in Asian Development," Occasional Paper Series, No. 3 (1986), Association of Development Research and Training Institutes of Asia.

2.

In the Philipplmes, for example, the "domestic" share of manufaauxing employment fell from 70%

in 1976 m 38% in 1980.

PART ONE Labour Process and the Course of Industrialisation in Asean

Part I, which encompasses the first six chapters of this book, takes a look at the rapid transformation of social classes in the ASEAN region since the 1960s and traces the nature of new labor processes in Thailand, Malaysia and the Philippines. Based on a detailed survey of industrial workers in these three countries-their living conditions, occupational background, attitudes to factory work and participation in trade unionsPartl explains, in the course of its wider elucidation of industiialisation in the three ASEAN countries, the accelerated development of an Asian working class. Chapter 1 looks at the changing shape of the world division of labor, the process of evolution of the international economic system, and the exact ways individual countries reacted to it seem to us to be essential background to an understanding of the present international division of labour. In chapters 2-6 we emphasize some of the matters which arise from internal movements in political power, the balance of class forces and domestic capital accumulation. Specifically, Chapter 2 examines the changes in leading economic sectors over time and change in the proportion of the workforce absorbed by sectors of the economy which accompanies industrialisation.

Chapters 3 to 5 analyse the data from the surveys taken in Greater Bangkok area, Kuala Lumpur, Penang, and Metro Manila area. The basic questions posed were: a) What is the nature of the workforce; b) What is the condition of the new work force, and c) What is the level of consciousness of the new workforce? Chapter 6 compares the trends in the diree countries and gives background

information on several key elements of the unfolding development process from which evaluation can be made of such issues as labor market segmentation and income distribution by sex, by technological level of site and by ownership category. The survey results as well as conclusions drawn present a challenge to much conventional wisdom about development contained in modernisation theory and the more radical dependency approach used by many social scientists and historians.

I

Chapter I New International Division of Labour and the Transfer of New Technology II

The, Changing Shape of the World Division of Labour

SinceSmith and Marx it has been realised by political economists, that the concentration or socialisation of production has to be seen as mediated through the system of exchange. It does not take place directly Within the labour process of the enterprise itself, but results from the reciprocity between a growing division of Iabour and the extension of the market. This is a new experience for developing countries-~the relatively autonomous peasant household of more backward agricultural systems is receding as the dominant unit of production. Agriculture is being replaced by manufacturing (and often by manufacturing for export) as well as the growth of "service" industries-not only in the informal sector, but in banking, insurance and money markets. This trend is most evident among the ASEAN states in Singapore, is Exchange (or the "extent of the market") at the international level has been the key. Not only has it overcome the limits imposed by a small domestic market, but . . '=' . _ ' f $5 . . . production even in periods of moderate global ; ~ - \ "

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