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New COVID-19 test for Indonesian companies: How they treat their employees
During this public health crisis, the best—and not necessarily just the biggest—companies and large family businesses in Singapore, Indonesia and across Asia should step forward and up in their treatment of employees at home and abroad.
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ommitting to models of virtuosity, sustainability and the strongest environment, social and governance (ESG) standards when times are good is one thing. Adhering to these principles when the going gets tough is another matter, and tough times may well still lie ahead.
According to Reuters, National Development Planning Minister Suharso Monoarfa told a parliamentary hearing in late June that four million to 5.5 million people could lose their jobs this year, pushing the unemployment rate to 8.1 to 9.2 percent and the highest in more than a decade. In 2019, in contrast, the rate was 5.28 percent. The unemployment rate may remain between 7.7 percent and 9.1 percent in 2021, he added.
And Rosan Roeslani, chairman of Indonesian Chamber of Commerce and industry (Kadin), according to Reuters, expects new rounds of layoffs by August, adding to an estimated 6.4 million jobs that have been lost so far.
Indonesian, American, Singaporean and other business leaders, take note. Civil society must be engaged, and governments will have to play a role, whether through policy changes or direct or indirect financial support.
The ongoing COVID-19 pandemic has wreaked havoc across the Indo-Pacific region, displacing populations, challenging governments and healthcare systems, and even stretching the limits of “conscious capitalism” in some of the world’s most developed economies. This includes in both Indonesia and the United States.
Even wealthy Singapore, with its exemplary governance, infrastructure, and business environment, has faced challenges. We see this firsthand as the city state is home to the Milken Institute Asia Center, where we both serve as fellows of this non-profit, non-partisan economic think tank.
During this public health crisis, the best—and not necessarily just the biggest—companies and large family businesses in Singapore, Indonesia and across Asia should step forward and up in their treatment of employees at home and abroad. Business owners, executives and investors can help ensure that long-touted ESG leadership is not simply a buzzword from when times are good.
Regardless of what laws mandate, all stakeholders must focus on what the virus bodes for ESG standards implementation. While the best environmental and governance practices have been embraced by many companies, their true test now emerges in the “S,” or social issues space.
Traditionally, the “S” in ESG has covered several topics, including product safety and consumer protection, labor practices, workforce diversity, and human rights across a company’s supply chain.
How companies in Indonesia treat their employees in a given market now will influence how their business and product brands are perceived long after the pandemic. This will include treatment of female workers, contract employees and part-time staff.
Economic challenges are significant. Countries face what the International Monetary Fund (IMF) projects to be the worst recession since the Great Depression. According to the International Monetary Fund’s June 2020 world economic outlook report, the global economy is projected to shrink by 4.9 percent in 2020, a stark contrast to the 3.3 percent global GDP expansion for this year that it forecasted in January.
For Southeast Asia, the IMF expects the "Great Lockdown" recession to lead to an overall decline of some 2.0 percent in 2020 GDP of the five largest ASEAN economies—Thailand, Singapore, Malaysia, Indonesia and the Philippines.
The coronavirus has tremendously disrupted business and society. Companies continue to cut costs and re-evaluate their workforces, and countless employees live in fear over their job security.
Growing job loss numbers underscore the scale of the global coronavirus shock. In the United States, unemployment filings—while no slowing—reached more than 26 million by the third week of April, nullifying all job gains made since the end of the last recession. And in economies with limited social safety nets and where large portions of the workforce constitute the informal sector, the loss of a job can be even more devastating on individual households.
The number of people in Indonesia living below the poverty line may well rise to between 26.2 million to 27.5 million, according to Suharso. The increase would represent a poverty rate of 9.7 percent to 10.2 percent in a country with more than 260 million people.
Amidst these challenges, however, anecdotes abound of major businesses around the world vowing to take care of their workforce through a variety of new measures.
In the US, software company Salesforce has pledged “not to conduct any significant layoffs over the next 90 days,” and will continue to pay its hourly workers while offices are closed.
In India, metals and mining company Vedanta Resources has established a $13 million fund that promises to benefit daily wage workers, employees and contract workers, and spread awareness of preventive health care around various communities.
And Citi Singapore has announced a US$850 one-off special compensation award for employees earning below a minimum designated amount, as part of a global initiative to help more than 75,000 workers.
Importantly, large corporations are not the only ones showing the way. Numerous smaller businesses with significantly fewer resources have also stepped up to strengthen safety nets for their employees via innovative measures.
In Germany, where small and medium-sized enterprises (SMEs) collectively employ more than 60 percent of the workforce, Instagram and other social media platforms have been put to good use with hashtags such as #supportyourlocals reportedly used to encourage patrons to support SMEs and their employees.
Good leadership is innovative. Good leadership is contagious.
Whether in Indonesia or elsewhere, difficult times call for all companies—small, medium, and large, and family-owned, privately-held or publicly-listed—to work towards greater employee security. Protecting employees today will enable businesses to establish a strong foundation for continued success and legitimate ESG bragging rights in a post-pandemic world.
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Curtis S. Chin, a former US ambassador to the Asian Development Bank, is the inaugural Asia fellow of the Milken Institute. Abhinav Seetharaman is the Princeton-In-Asia fellow at the Milken Institute Asia Center in Singapore.
