ILO Conventions in Malaysia and Indonesia - Essay Example

Running head: ILO conventions in Malaysia and Indonesia ILO conventions in Malaysia and Indonesia s Contents Foreword-------------------------------------------------03 1. Executive Summary-------------------------------------04 2. ILO --------------------------------------------------06 3. Introduction -----------------------------------------06 4. Factors to be considered for the implementation of ILO-10 a. Competitive advantage---------------------------------10 b. Change in Economic structure--------------------------11 c. Technological factors---------------------------------12 d. Social and Cultural factors---------------------------13 e. Malaysia: Vision 2020 goal----------------------------14 5. Proposed Initiatives----------------------------------14 6. Summary of proposed initiatives and actions-----------14 7. References--------------------------------------------16 Foreword: This report is a blueprint for effects of the implementation of ILO on the growth of the economies of Malaysia and Indonesia. It contains practical and suitable recommendations for the Economic, Regional and Social set-up of countries from the Development Committee of PK manufacturing company for increasing the sustainable growth and competitiveness of the both the economies and their contribution to regional and universal prosperity. The Committee is expecting that the implementation of these initiatives and recommendations will lead to prosperous growth of both the economies, as Malaysia will be able to achieve its vision 2020, the Indonesian economy will be able to achieve competitive advantage in regional areas. On behalf of the PK Manufacturing Company development Committee, I present this report to the respected governments of Malaysia and Indonesia jointly. Executive Summary: Perhaps the foremost social responsibility levied upon private and public organisation in recent decades is the adoption of fair and just employment practices. This responsibility is being increasingly codified in law and various governmental orders. Its influence is becoming increasingly pervasive through a constant series of federal court decisions as well as steady enlargement in the size and scope of administering agencies. Despite the unjust pressure from the International agencies and Governments of the developed nations it will neither fruitful for the economy of the developing countries nor for the labour of these countries to implement these principles in shape of the social clause of WTO or the ILO directives. Factors contributing to this argument are many and varied, which include: Difference in economic conditions. Difference in technology and skills. Dependence economies of both the countries on Labour intensive industries. Loss of competitive advantage in international trade. Hindrance in achievement of vision 2020 for Malaysian Government. The developed nations argue that the ILO standards are not intended to fix a uniform wage level or to establish universal employment conditions but are intended to making the conditions of the labour better all over the world. This argument is not powerful enough which can force the Governments of Indonesia and Malaysia to accept the implementation of the social clause of WTO. If the Governments of the developed countries are not intended to protect their job market shocks and really want to provide the labour all over the world they can achieve their goals by providing these countries with technological and financial support. This will automatically lead to the prosperous economies of these countries in turn bettering the living standards of the labour all over the world. ILO: International Labour Organisation is an international agency, which take care of the rights of the labour all over the world. ILO presents the guidelines, which allow the workers to form their organisation in order to help them to bargain and to safeguard their rights, settled a universal standard of minimum wage, a limit to working hours i.e. eight-hour day and forty-eight-hour week, ban on child labour etc. Although ILO does not adhere the similarity of the working conditions all over the world (Alcock, 1971) but it has settled some basic standards which are now enforced by most of the International agencies and Governments while undertaking the trade agreements. Not all the terms and conditions are unacceptable but some of them can adversely effect the market conditions in Indonesia and Malaysia. Accepting the enforcement of ILO principles can lead to the failure of Malaysia to achieve her goal of vision 2020. For Indonesia the implementation of ILO principles can lead to the loss of competitive advantage in shape of cheap labour. Introduction: With the increase in the trend of globalisation the industrialised countries are facing the disturbances in their labour markets due to the low wages and easy employment conditions in the developing countries. In order to minimise these labour market shocks the Governments of the industrialised countries are building political pressure against the developing countries to implement uniform principles for labour all over the world. By taking these steps the trade unionists in the developed countries are trying to save the jobs and investment flow to pour in to the economies of the developing countries where wage rates are low and whose environmental and labour standards are either soft or non-existent" (Donahue AFL-CIO 1996). Most of the European nations and the American unions are backing the implementation of the social clause in the WTO which will make all the member states to follow and implement uniform principles all over the world. Failure to follow these regulations will lead to the implementation of trade sanctions against the country. According to the Trade Union Advisory Committee of the OECD: "the increasing integration of the world's economies demands that...core standards should be applied by all countries regardless of their level of development or social priorities." The European union is also emphasising the need of fair trade in shape of demanding the free trade in the world. The demand for the implementation of the uniform standards all over the world economies is the first step towards the free trade (Brittain 1995). It is evident that the demand for the fair trade is a confined and planned measure in order to protect the developed economies from the labour market shocks due to the low wage rate and the easy employment conditions in the developing countries. By demanding the implementation of uniform standards all over the world the trade unions of the Northern countries want to confiscate the provision of cheap labour and lower standards of employment in these countries. As stated by (Bhagwati 1995) most of the Governments of Asian countries see the inclusion of social clause in the WTO as the threat to their competitive advantage of cheap labour in the international market. On the other hand the International agencies also have different perceptions regarding the matter of implementing the social clause in the WTO. According to the stance adopted by the World bank the social clause is a straight threat to the developing economies, as the organisation is aimed at the economic well being of the countries on the other hand ILO contends that the well being of the economies is related to the well being of the labour (ILO 1994). The difference in the perceptions is provoked due to different factors. Due to the strong support by the developed nations for the social clause to be included in the WTO and on the other hand the opposition by the developing countries regarding the social clause as the threat to their comparative advantage, the world trade has been divided into two lobbies. Secondly the media has given wrong impression of the social clause making it the only way out for the problem of unemployment, child labour and discrimination on sex grounds. Relating the social clause to the WTO cannot be the solution of the problems facing the labour in the developing countries. Most of the big corporations in even United States are practising the same discriminatory practices, which are against the ILO principles. Wal-Mart is one of them. "Sam Walton was admittedly old-fashioned in many respects. Wal-Mart store policies reflect many of his values. For example, store policies for bid employees from dating other employees without prior approval of the executive committee. Also, women in management positions are rare. Annual manager meeting includes sessions for wives to speak out on the problems of living with a Wal-Mart manager. No women are in the ranks of Wal-Mart's top management. Walton also resisted placing women on the board of directors. Only 12 women have made it to the ranks of buyers (they are 12 percent of all buyers. Wal-Mart is an EEOC/AA employer but has managed to get away with apparently discriminator policies." (David) Not only this Wal-Mart has also been found guilty of hiring the illegal residents on lower wages as settled by the Government. Hence the corporation maximises its profits by applying so-called non-ethical tactics. If the Governments of Indonesia and Malaysia will apply the ILO principles they will destroy their labour intensive industries by increasing the over all cost of production. Social clause is not the solution of the problems of abuse of trade union rights, child labour, and discrimination against women. These issues are the resultant factors of the social and political structure of these countries and poverty of Governments and people of these countries. Undertaking political and developmental processes can only solve these problems. Although the Government of Malaysia has taken the stance that the basic differences in perception between it and the ILO, which led Malaysia to denounce the convention several years ago, had not changed and that it does not envisage renewing the ratification but it possibly can back up from its position because of the pressure in shape of sanctions. Following factors should be considered while taking any decision regarding the matter. (Labour: US can't observe core labour standards, 1995) Factors to be considered for the implementation of ILO: a. Competitive advantage: For the labour intensive economies like Indonesia and Malaysia the competitive advantage heavily relies on the low cost of labour. In the countries like Malaysia and Indonesia where most of the population of the country is leading their life below the poverty line it sometimes become inevitable for the parents to make their child work so that they can get the basic necessities of life i.e. food, shelter and clothing. In these economies higher education is regarded as luxury which is only affordable by the upper classes. If in these countries the child labour becomes restricted, how these people will get the basic necessities. Even UNICEF has said that child labour is not necessarily harmful, that recent dismissals of Bangladeshi children under LS pressure from the US has caused a lot of social problems and that elimination of such practices would not be feasible in the foreseeable future (ICDA 18:14). Hansson (1983:94 ff) has suggested that a ban on child labour would only be practicable in manufacturing and would almost certainly only force migration to uncontrolled rural, backyard and service activities, while impoverishing many low-income families. b. Change in Economic Structure: "The economic transformation since 1970 shows that the share of the agricultural sector declined from 30.8% in 1970 to 9.3% in 1999 while the share of the manufacturing sector increased steadily from 13.4% to 30% during the same period. The share of the services sector also increased from 41.9% in 1970 to reach 54.2% in 1999." (World Employment Report 2001) The economy of Malaysia is still labour intensive. Increase in wages will lead to overall increase in the production cost in manufacturing sector. Table 2: Structural change in the Malaysian economy, 1970-1999 Gross Domestic Product (GDP) by type of activity Percent of GDP Agriculture, forestry, logging & fishing Mining & quarrying Manufacturing Construction Services GDP 1970 30.8 6.3 13.4 3.9 41.9 100 1980 22.9 10.1 19.8 4.8 40.1 100 1988 18.6 12.7 21.1 3.2 45.1 100 1990 16.3 9.4 24.6 3.5 46.8 100 1998 9.4 8.1 27.9 4.0 55.6 100 1999 9.3 7.3 30.0 3.6 54.2 100 Source: Zeti Akhtar Aziz, March 2000 c. Technological factors: While implementing the uniform labour standards, it should also be taken into consideration that most of the developing countries are not technologically advanced as those of the developed countries. Their production methods are still labour intensive rather than technology intensive. The increase in the labour cost will lead to the high cost of production lowering the profit margins from the export of the different goods. It will also be unfair to provide the labour with low technical skills with the same wages as those having high technical skills. d. Social and Cultural factors: It is not possible to implement the labour standards at universal level like other human rights. As there is a big difference in the economic circumstances and culture-specific standards. (Khor M 1994 and 1996; LeQuesne 1995). Kofi Annan, the Secretary general of the United Nations once said: "There is no single model of democracy, or of human rights or of cultural expression for all the world. But for all the world, there must be democracy, human rights, and free cultural expression. Human ingenuity will ensure that each society, within its own traditions and history, will enshrine and promote these values." The same is the case for the implementation of the uniform principles of employment in the advanced countries and in the developing countries. As compare to most of the countries in the region Indonesia is still far behind the international level of education. There is not a single prestigious university of international level. None of the university in Indonesia was included in the top 100 universities in the Asia Pacific region. Most of the top most universities in the world are situated in the European region, Japan or US. In order to bring change in the social values it is important to build the educational institutions with the vision to eradicate the unethical values from the society and cultivate the values of humanism, integration and responsibility. The developed countries are spending millions of dollars on the education of their masses. It is not only important to educate the people and labour force in both the countries but the should be provided with technical training in order to improve their skills (The Jakarta Post.com, 2004) e. Malaysia: Vision 2020 goal: "As a strategy to achieve Vision 2020, Malaysia plans to leapfrog into the post-industrial society by leveraging on the extensive utilisation of ICT as a strategic technology for national development. With information and knowledge serving as the primary factors of change and value creation, knowledge-based development has now become Malaysia's development imperative. This is desirable as knowledge is recognised as one of key strategic ingredient for our nation's success in the 21st Century." (World Employment Report, 2001) Proposed Initiatives: Summary of proposed initiatives and actions: Some times some steps taken for the benefit of a group can be harmful for other people at greater level. The increase in wages to international level will lead to production costs, these would tend to distort labour or other markets in the affected countries, thus distorting development, discouraging investment, fostering labour-displacing technologies, forcing workers out of the formal economy into the informal sector (where conditions are even worse) and so forth. The result may be the opposite of what was intended (e.g. Lawrence, 1994; Anderson, 1995). Although the principles of ILO will lead to the betterment of the labour all over the world but it should be kept in mind that the advanced countries which are demanding the implementation have different employment conditions and are very advance in technology and education. The Government of Malaysia and Indonesia should demand for the provision of the technological assistance and support in the educational and technical skill development programs from the advanced countries. The Governments of these countries should provide loans and financial assistance to the developing countries in order to make the position of labour in these countries better rather than worsening their conditions by imposing sanctions. References Alcock, A., 1971, History of the International Labour Organisation, Octagon Books, New York. Anderson, K., (1995). The Entwining of Trade Policy with Environmental and Labour Standards, Paper to World Bank Conference on the Uruguay Round and Developing Countries, Washington DC. Bhagwati J (1995). Trade liberalisation and 'fair trade' demands: addressing the environmental and labour issues, The World Economy, 18,6. Brittain L, (1995). How to make trade liberalisation popular, The World Economy, 18,6. David, F, R., Strategic Management: Concepts and cases, Seventh edition, Francis Marion University. Hansson, G., 1983, Social Clauses and International Trade, Croom Helm, London. ICDA 18:10, and see Dunkley (forthcoming): Ch 12; Foreign Report, 10 February 1994 International Labour Organisation; he social dimensions of the liberalisation of world trade, Geneva, (1994) November. Khor M (1994). Why GATT and the WTO should not deal with labour standards, Third World Network, Penang. Khor M., (1996). Reflection not adventurism needed at Singapore, Third World Economics, No 143, August 1996. Labour: US can't observe core labour standards, 1995, 7:28 AM Nov 8, 1995, retrieved as on August 08, 2006 from http://www.sunsonline.org/trade/areas/develope/ILO/11080095.htm Lawrence, R., (1994). 'Trade, Multinationals and Labour' in P. Lowe and J. Dwyer (eds.), International Integration of the Australian Economy, Reserve Bank of Australia, Sydney. LeQuesne, C., (1996). Reforming world trade: the social and environmental priorities, Oxfam Insight series, Oxford, UK. The Jakarta Post.com, (2004). Investment in education towards global society, May 16, 2004, Suroso, Contributor/Yogyakarta, retrieved as on August 09, 2006 from http://www.thejakartapost.com/yesterdaydetail.aspfileid=20040516.G01 World Employment Report, (2001). National report on the ICT sector in Malaysia, International Labour Organisation, retrieved as on August 09, 2006 from http://www.bib.ulb.ac.be/cdrom/wer_lawitie/back/mal_1.htm Read More