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Doing Business : New Shots Fired in Indonesia Wage War : U.S. labor is urging trade action against a land where daily take-home pay is measured in cents.


TANGERANG, Indonesia — Suyatmi, a shy, 20-year-old factory worker, is too poor to know much about sneakers. She never heard of Bo Jackson and is too skinny to care about aerobics. Her world consists of a rented, five-foot-square room in a shantytown where she sleeps on the concrete floor with three other young women.

Every day at 7 a.m., Suyatmi begins work at P. T. Hardaya Aneka Shoes Industry, one of six companies in Indonesia making sports shoes for Nike Inc., the spectacularly successful U.S. sporting goods company. Her production "line" of 30 workers produces 350 pairs of Nike's glitzy footwear a day.

Suyatmi and her co-workers earn a base salary of 1,900 Indonesian rupiahs a day, the equivalent of just 91 cents. Working a six-day week, with at least two hours of overtime each day, she takes home about $14 per week and is provided with lunch and a bus ride to work.

"Some days it's hard," she said. "But I'm just happy to have a job."

Workers like Suyatmi are at the heart of a deepening controversy between the Indonesian government and American labor unions and human rights groups, which charge that manufacturing workers are routinely exploited here.

Last month, the Bush Administration surprised union activists by announcing it has agreed to review workers' rights practices in Indonesia before deciding whether to continue granting Indonesian products a special import status called zero-tariff benefits. Losing the benefits would hurt Indonesian exporters.

The Indonesian government acknowledges the problem of poor wages but says that revoking its import status would only cost jobs and make life harder. Nike argues that it provides employment for thousands of workers and that its contractors endeavor to conform to local labor laws.

The controversy highlights a continuing debate not only in Indonesia but throughout Asia's rapidly developing economies about the costs and benefits of developing export industries based mainly on the availability of cheap labor.

From South Korea to Taiwan and Thailand, industries that depend on low-cost labor--such as textiles and shoes--have helped these countries climb the ladder of industrialization, raised living standards and eventually propelled them toward more prosperous high-tech manufacturing. Now, countries such as Indonesia, Bangladesh and even Vietnam want to get a foot up the ladder, too.

Next month, U.S. Trade Representative Carla Anderson Hills will hold hearings on petitions filed by the human rights group Asia Watch and the International Labor Rights and Education Research Fund that accuse Indonesia of pressing development at the expense of workers' basic rights.

"The right to freedom of association, the right to strike and freedom from forced labor are not guaranteed in Indonesia," said the Asia Watch petition. "In fact, when workers have attempted to form independent unions or to carry out strikes, they have been hindered by excessively restrictive government regulations and by harassment, intimidation, intervention and beatings by members of the Indonesian security forces."

With a population of 185 million and an economy dependent on oil exports, Indonesia faced a clear imperative to create jobs. The development of manufacturing has helped the country achieve breathtaking growth, with the gross domestic product, a measurement of goods and services, rising at more than 6% a year for the last decade. Textile and apparel exports grew 35% in 1991 alone, reaching $3.5 billion, while footwear exports rose 62% to $955 million.

Foreign investors have been attracted to Indonesia by its political stability, abundant labor and low wages. President Suharto's ruling Golkar Party has governed with a firm hand since 1965, tolerating no political opposition or unrest. Until 1989, strikes were banned.

The other side of the export coin consists of the harsh conditions in which many workers toil.

"The situation here is similar to the end of the last century in America and Europe--half work and half slavery," said Jakarta labor activist Indera Nababan, who closely monitors the shoe industry. "The workers are exploited for low wages. They are subsidizing the development of the country."

A report prepared by the U.S. Embassy in Jakarta noted recently that while the gross domestic product has surged, workers' real wages--pay after taking account of inflation--have been "basically flat" since the late 1980s.

Instead of using a national minimum wage, Indonesia sets minimum pay on a regional basis. In Tangerang, an industrial boom town an hour's drive from Jakarta, the minimum wage is 2,100 rupiahs, about $1 a day, and that is set to rise to $1.20 next month. Only 75% of the minimum has to be paid in cash, however, and the remainder can be food or transportation.

By government estimates, the minimum wage here is equal to just 67% of what officials have termed the "minimum physical needs"--a marketbasket of expenses such as food and housing that is considered the basic poverty line.

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