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(Free Labour World, february 1997)
by Bernie Russell
Like a gang of outlaws running from the sheriff, Nike's Asian
sub-contractors pull out of a country as soon as democracy moves
in. They're never too hard to track down, though. Just follow
the trail to the nearest low-wage, low-standard hell-hole. Free
Labour World looks at Nike's Asian investment strategy.
In 1986, Indonesia produced less than $8 million worth of shoes for export; by 1995, that figure had risen to nearly $3 billion.
Many of the profits came at the expense of South Korea and Taiwan.
Both countries had been making shoes for the American sports-shoe
giant, Nike, since the early 1970s. In the mid-eighties, however,
they suddenly became bad investment risks The reason: democracy
had come, and had brought with it the terrifying possibility that
unions would gain new freedom, and workers would get decent wages
In fact, wages for shoe workers in South Korea tripled between
1987 and 1991.
Nike's sub-contractors - the company does not make its own shoes-had
pulled out just in time, and had headed for just the right place.
Indonesia was a sweatshop owner's dream
A Hong Kong-based consultant had rated the country the worst for foreign investment (along with China) because of rampant corruption. In the Alice in Plunderland world of sweatshop production, however, this is a plus. It means that factory owners have nothing to fear from the law. In 1988, for example, Indonesia's 700 Ministry of Manpower inspectors found more than 13,000 violations; only about 15 cases made it to the first judicial hurdle.
Wages too could be set at just the right rate. The shoe factories
in West Java paid 83 cents a day just over half of the figure
set by the government as necessary for the "minimum physical
needs' (MFN) of a single adult worker.
The MFN figure itself was designed to help prison administrators prepare their budgets.
Indonesia could also be relied on to keep labour unrest to a minimum. The government is fiercely anti-union. In April last year, the UN's International Labour Organisation (ILO) strongly criticised the regime for its total disregard of union rights.
The ILO said that there was evidence of widespread persecution of trade unionists in Indonesia, including even the murder and disappearance of union activists. (See Free Labour World 5/95.)
This year, the regime has continued its long-running campaign
of persecution against the independent union centre, the SBSI,
jailing its leader, Muchtar Pakpahan, on trumped-up charges after
disturbances at a demonstration in the city of Medan.
INTERNATIONAL CAMPAIGN
The Indonesian govemment has not been able to ignore the spreading international campaign against its record on workers' rights. It hired a top US law firm to argue its case after US unions filed a complaint under the labour rights section of America's General System of Preferences (which allows preferential access to US markets to certain countries).
And the government claimed that it was doing its best to get employers to pay the minimum wage.
But its anti-union line has not changed. As for its attitude to the minimum wage, Manpower Minister Cosmas Barurbara issued a decree allowing employers to count up to a quarter of workers' benefits, such as transportation allowances or meals, as wages. Since most employers were paying between 40 and 60 cents a day in such benefits, the decree raised the minimum wage compliance rate overnight without costing firms a cent.
Nike's response to the illtreatment of workers in its sub-contractors' plants was at first to deny that it was the company's problem at all: "we're just buyers; we don't control what goes on in the factories."
The company explained its having helped its sub-contractors to move out of Korea and Taiwan by saying that ';when a country outgrows the shoe industry, we do not abandon years of factory management and strong relationships. The entities go with us to make shoes somewhere else.
A more accurate view was probably summed up by what a Nike executive told a US union official in Indonesia during a chance meeting: "I'm your worst nightmare."
Nike has launched a public relations blitz to repair some of the damage to its image. They enacted their own Code of Conduct in ]992-but would not agree to independent monitoring.
In 1994, they hired a US accounting firm to monitor sub-contractors' behaviour. The accountants quoted examples of factories providing dormitories and meals for their workers, and said they would make sure the minimum wage was paid.
Jeff Ballinger, a former official of the AFL-CIO's Free Trade Union Institute who now runs a pressure group campaigning against abuse by Nike shoe factories, says that the code is "a charade", and dismissed the accountants' reports out of hand.
"The dormitories and the meals were best practices," he said, adding that Nike could insist on higher wage rates and still make money.
The conclusion must be that Nike is not serious about workers' rights, only about its image. If it were, it would act. It could create a division within the company to investigate workers' abuses. It could appoint someone who knew their business-say, a former US military intelligence officer-to head the division. It could hire spies to work in its sub-contractors' factories and report back to the company.
Far-fetched? Impractical? Not really. Nike has such a division, headed by such a person .
It investigates companies who overproduce and sell Nike shoes hy the back door. Now that's a serious problem.
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