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Competitive Pressures and Labour Rights. the Indonesian Oil Palm Hariati Sinaga: Competitive Pressures and Labour Rights. The Indonesian Oil Palm Plantation and Automobile Sectors Labor and Globalization, edited by Christoph Scherrer, Volume 19, ISBN 978-3-95710-272-0, Rainer Hampp Verlag, Augsburg, München 2020, 307 S., € 29.80 While the link between trade liberalisation and labour rights has been mostly studied at a national level, this book analyses this relation at a sectoral level. It draws on case studies of oil palm plantations and the automobile sector in Indonesia. Two main research questions guide the book: 1. How do labour- and capital-intensive sectors in Indonesia respond to competitive pressures brought about by trade liberalisation? 2. What are the implications of such responses on labour rights in the two sectors? Employing the Global Production Network approach, the book analyses power relations between the state, firms, and labour. It shows how competitive pressures brought about by trade liberalisation have different impacts on labour rights in the automobile and the oil palm plantation sectors. While sectoral characteristics (e.g., capital- or labour-intensity, capital mobility, skill requirements) shape the diverse impacts, they are actually products of power interplays between the state, firms, and labour. Key words: Trade liberalisation, labour rights, employment, labour regime, labour agency, global production networks, palm oil, automobile, Indonesia Hariati Sinaga has recently finished her PhD at the University of Kassel, Germany. Her research interests are labour rights, trade liberalisation, global production networks, and gender. Labor and Globalization Volume 19 Edited by Christoph Scherrer Hariati Sinaga Competitive Pressures and Labour Rights The Indonesian Oil Palm Plantation and Automobile Sectors Rainer Hampp Verlag Augsburg, München 2020 Bibliographic information published by the Deutsche Nationalbibliothek Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data are available in the Internet at http://dnb.d-nb.de. ISBN 978-3-95710-272-0 Labor and globalization: ISSN 2196-5382 First published 2020 Zugleich: Dissertation zur Erlangung des akademischen Grades der Doktorin der Wirtschafts- und Sozialwissenschaften (Dr. rer. pol.), Universität Kassel, Fachbereich Gesellschaftswissenschaften, 19. Sept. 2017 Cover photo: A car nearby oil palm plantation in Riau, Indonesia. Picture taken by Hariati Sinaga. © 2020 Rainer Hampp Verlag Augsburg, München Vorderer Lech 35 86150 Augsburg, Germany www.Hampp-Verlag.de All rights reserved. No part of this publication may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publisher. In case of complaints please contact Rainer Hampp Verlag. Table of Contents Acknowledgements v List of Abbreviations vii List of Tables xi List of Figures xiii Chapter 1 Introductions 1 I.1. Trade Liberalisation and Labour Rights: State of 2 the Art I.2. Standard Trade Theories on Trade Liberalisation 6 and Labour Rights I.3. Research Questions 11 I.4. Summary of Findings 12 Chapter 2 Indonesian Oil Palm and Automobile Sectors 15 2.1. Indonesian Oil Palm Plantation Sector 15 2.1.1. Historical Background 15 2.1.2. Profile of the Oil Palm Tree 17 2.1.3. Why Oil Palm? 17 2.1.4. Palm Oil Production and Domestic 20 Consumption 2.1.5. Export Destinations 21 2.1.6. Employment in the Oil Palm Plantation 23 Sector 2.2. Indonesian Automobile Sector 23 2.2.1. Historical Background 24 2.2.2. Why Automobile? 24 2.2.3. The Automobile Sector’s Performance 25 2.2.4. Employment in the Automobile Sector 32 Chapter 3 Theoretical Frameworks 35 3.1. Chain Frameworks and the Global Production 35 Network Approach 3.1.1. Genealogy of Chain Frameworks 35 3.1.2. The Global Production Network 40 Approach 3.2. Value Chain Governance and Power Relations 44 3.2.1. Upgrading and Power Relations 49 i 3.2.2. Upgrading and Standard Trade Theory 53 3.3. The GPN Approach and Power Relations 56 3.3.1. Labour Relations and the GPN Approach 66 3.3.1.1. Local Labour Control Regime 78 3.4. Conceptualising Power in the Global Production 83 Network Approach Chapter 4 Methods 91 4.1. Identifying GPN Actors 98 4.1.1. Indonesian Oil Palm GPNs 98 4.1.2. Indonesian Automobile GPNs 101 Chapter 5 How the State and Firms in Indonesian Oil Palm 105 Plantation Sector Mobilise Power 5.1. Institutional Arrangements and the Role of the 106 State 5.2. Analysing the Power of the State in the 115 Indonesian Oil Palm GPN 5.3. Private Actors and the Inter-firms Relationships 120 5.4. Case Study of Oil Palm Plantations in Riau 129 5.5. Another Source of Institutional Arrangement: 143 the Increasing Role of Private Voluntary Governance 5.6. The Role of Civil Society Groups and Social 149 Movements 5.7. Structural Power in the Indonesian Oil Palm 157 GPN 5.8. Discursive Power in the Indonesian Palm Oil 160 GPN Chapter 6 How the State and Firms in Indonesian Oil Palm 167 Plantation Sector Mobilise Power 6.1. Institutional Arrangements and the Role of the 167 State 6.2. Analysing the Power of the State in the 170 Indonesian Automobile GPN 6.3. Private Actors and the Inter-firms relationships 172 6.4. Case Study of Company A and Its First- and 181 Second-tier Suppliers 6.5. Structural Power in the Indonesian Automobile 191 GPN 6.6. Discursive Power in the Indonesian Automobile 192 GPN ii Chapter 7 Labour Situations, Labour Regime, and Labour 195 Agency in the Indonesian Oil Palm Plantations and Automobile Sectors 7.1. Labour Situations in Oil Palm Plantation and 195 Automobile Sector 7.1.1. Labour Situations in the Indonesia Oil 195 Palm Plantation Sector 7.1.2. Labour Situations in the Indonesian 207 Automobile Sector 7.2. Labour Control Regime and Labour Agency in 220 the Indonesian Oil Palm Plantation and Automobile Sectors 7.2.1. Labour Control Regime in the Indonesian 221 Oil Palm Plantation Sector 7.2.2. Labour Control Regime in the Indonesian 226 Automobile Sector 7.2.3. The Political Regime in Indonesia 232 7.2.4. Indonesian Labour Regulations and 238 Labour Movement 7.2.5. Labour Agency in the Indonesian Oil 243 Palm Plantation Sector 7.2.6. Labour Agency in the Indonesian 251 Automobile Sector Conclusions and Recommendations 263 References 269 List of Interviewees 287 iii Acknowledgements This book is originated from my doctoral thesis. I would like to thank all interviewees, who contributed significantly to this research, and whose names are too many to be listed here. For helping me navigating my way during the field research, I want to thank Saurlin Siagian, Haryanto Usman, Pak Aris Perdana Kusumah, Pak Wahyudi, Pak Edy Harsono, Pak Taufik, Ibu Anna, Pak Melan, Pak Supriyanto, Pak Rustan, Pak Willy, Pak Lila, Pak Siahaan, Ibu Tuti. This book would also have not been possible without the support from the International Center for Development and Decent Work (ICDD) for funding my doctoral research as well as for the providing the overall supports to the ICDD graduate fellows. I would like to acknowledge and thank Prof. Dr. Christoph Scherrer for his supervision and constructive advices to the overall research of this book. I am grateful for the supports from colleagues and staffs at the ICDD: Verna, Aishah, Asanda, Irina, Christian, Rima, Dagmar. Finally, I would like to acknowledge with gratitude the love and supports from my family and friends: my husband, Ondolan, my son, Andre, my parents, our relatives in Mainz, our friends in Kassel and Zurich. v List of Abbreviations ACFTA ASEAN-China Free Trade Agreement AFTA ASEAN Free Trade Agreement ALSI Asosiasi Lembaga Sertifikasi Indonesia/ Indonesian Certifying Bodies Association APEC Asia-Pacific Economic Cooperation APL Area Penggunaan Lain/Other Utilisation Area APOLIN Asosiasi Produsen Oleo-Chemical Indonesia/ Indonesian Oleochemicals Manufacturers Association APROBI Asosiasi Produsen Biofuels Indonesia/ Indonesian Biofuels Producers Association ASEAN Association of Southeast Asian Nations BDCC Buyer-Driven Commodity Chain BHL Buruh Harian Lepas/ casual labourer BKS-PPS Badan Kerja Sama Perusahaan Perkebunan Sumatra/ Cooperation Board of Sumatra Plantation Companies BPJS Badan Penyelenggara Jaminan Sosial Kesehatan/ Health Insurance Providing Body BTI Barisan Tani Indonesia/ Indonesian Peasants Front CB Certification Body CBU Completely Built Up CIF Cost, Insurance, and Freight CKD Completely Knocked Down CLS Core Labour Standards CPO Crude Palm Oil CSPO Certified Sustainable Palm Oil CSR Corporate Social Responsibility DMSI Dewan Minyak Sawit Indonesia/ Indonesian Palm Oil Board) EPA Environmental Protection Agency ETI Ethical Trading Initiative EU European Union FBSI Federasi Buruh Seluruh Indonesia/ All Indonesian Workers’ Federation FDI Foreign Direct Investment FFB Fresh Fruit Bunches FSP LEM Federasi Serikat Pekerja Logam, Elektronik, M FSP-BUN Federasi Serikat Pekerja Perkebunan/ Federation of Plantation Workers vii FSP-NIBUN Federasi Serikat Pekerja Pertanian dan Perkebunan/ Federation of Agriculture and Plantation Workers Union FSPI Federasi Serikat Petani Indonesia/ the Federation of Indonesian Peasant Union FSPMI Federasi Serikat Pekerja Metal Indonesia/ Federation of Indonesian Metal Workers’ Union GAPKI Gabungan Pengusaha Kelapa Sawit Indonesia/ Indonesian Oil Palm Companies Association GCC Global Commodity Chain GDP Gross Domestic Product Gerwani Gerakan Wanita
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