ILO helps Indonesia on labor, trade policies

The International Labor Organization (ILO) has initiated an educational workshop with the Indonesian government, in an attempt to formulate trade policies and create a coherent labor market in the region.

The ILO works on a tri-partite basis, bringing together governments, employers and workers to promote decent work around the world.

Following a Free Trade Agreement (FTA) between ASEAN countries and China that was signed in November 2002, growing international trade and direct foreign investment have had an important effect on employment and working conditions in Indonesia.

The ILO intends to promote an adequate understanding of these effects, and has coordinated the workshop with the Manpower and Transmigration Ministry, the Indonesian Employers Association (Apindo) and trade unions, to facilitate this. The project is being funded by the European Union, and is being implemented in four developing countries, including Guatemala and Bangladesh.

Ralf Peters, the ILO’s chief technical advisor, told The Jakarta Post that “our objective is to come up with ideas about a coherent trade and labor market policy — an important issue that is not only of interest in the four pilot countries [of which Indonesia is one] but also in others, including developed countries”.  

“Trade is increasing significantly,” he said, “so it is affecting more and more workers. In Indonesia, the export to GDP ratio is 30 percent — meaning that a higher share of the population is producing for the export market. But as Indonesia has a relatively open [market], it also has to compete with imports.

“We find this situation all over the world — trade has increased by around 6 percent every year for the last decade, whilst world GDP has increased only by 3 percent. Trade is therefore increasing twice as fast as GDP, so it affects more and more lives. It is thus important to make a link to employment. Other countries have increased their growth rates by being export-oriented, we’re trying to understand whether this would be suitable for Indonesia”.

According to an ILO report, empirical evidence shows that trade integration often depends on economies’ abilities to address labor market adjustment challenges, in the face of the liberalization of international trade and trade policy reforms (of which the China-ASEAN Free Trade Agreement is an example).