Revisiting two Nike factories in West Java after the economic crisis

Peter Hancock

In 1997 I published an article in Inside Indonesia (No.51, July-September 1997) titled The walking ghosts of West Java. It reported research among 20 factories and 323 female workers in rural West Java in a place called Banjaran. I found that, of all the factories studied, the two Nike factories treated their female workers extremely poorly. Women who worked in the two Nike factories (Feng Tay and Kukje) were overworked, exploited, underpaid and abused by management. In 1999/ 2000 I returned to Banjaran to conduct a follow-up study designed to measure the impact of the Asian Crisis upon factory women. Again the two Nike factories 'stood apart' from the other 18 factories. Nike continues to exploit young women (many of whom are underage), causing unnecessary hardship to its workers.

The Asian Crisis affected Indonesia more severely than any other country in the region. The purchasing power of the rupiah declined by over 140%. As a result, between 1997 and 1998 (a) the labour force in manufacturing declined from 4.2 million to 3.5 million; (b) the growth rate of manufacturing declined from 6.42% to minus 12.88%; (c) the number of establishments declined from 22,386 to 20,422. Remaining factories either shed staff, increased quotas or decreased wage costs to cope.

On the surface, Banjaran had 'boomed' during the crisis. Two large shopping malls had been built. Most of the families I revisited showed no signs of serious impacts from the crisis. However, in-depth research revealed a more accurate picture. The average monthly wages of factory women had increased from Rp 142,000 a month in 1997 to Rp 340,000 in 1999. But given the high inflation levels this increase barely accommodates the crisis. Eleven percent of the women reported that the crisis had plunged them and their families into serious poverty and their wage increases did not cover basic living expenses. All stated that the Asian Crisis made their lives very difficult and that the biggest impact were the massive price increases of staple goods. (The price of rice in the largest open market near Banjaran increased from Rp 1,008 per kilo in 1996 to Rp 2,320 per kilo in 1998). According to my household surveys, the Asian Crisis caused prices of food, cooking oil and transport to increase by 200-300% while factory salaries had only increased by just over 100%.

Government data reveal that 'real' wage costs among large and medium shoe factories decreased from Rp 3.96 billion in 1996 to Rp 3.91 billion in 1998 - a real decline despite massive wage increases. The women coped with this situation by not spending money on luxury goods and services (meat, soap, clothes, entertainment, transport or consumer goods). With the help of their families, they budgeted their wages for basic survival only.

Sixteen percent of the women surveyed also stated that, as a result of the crisis and loss of employment in other sectors, they had become the main breadwinner in the family. Their small factory wages were crucial. Only 3% claimed that their factories had become more exploitative in terms of forced overtime, working for illegal pay or in abusing women as a result of attempts to increase productivity levels. However, in focus groups and open interviews this story changed dramatically, especially among women from the two Nike factories. I quickly understood that the women were scared of losing their jobs and had been warned not to discuss their employment with researchers. This was due to the fact that the results of my previous research in 1996, once published, had impacted directly upon factory women and upon one Nike factory, Kukje.

Kukje

When the Korean-run factory Kukje changed to produce Nike shoes in 1996 it changed from one with a good local reputation to one which was highly exploitative (forced overtime, holidays cancelled and abusive managers) simply to keep Nike happy. However, in early 1998 I was informed by one of the mid-level managers at Kukje that Nike had withdrawn its contract and had used my article in Inside Indonesia as an excuse for so doing. I was informed that the general manager of Kukje became so angry that he called in government officials to Banjaran to find out who I was and who I had talked to (not realising I had interviewed him briefly in 1996). The government officials were not able to find any workers who I had interviewed, because I had completed my research carefully to ensure that none of my respondents would suffer simply for telling the truth. The result being that Kukje lost a highly lucrative Nike contract and was forced to lay off a few hundred casual daily workers, most of whom found employment in the other large Nike factory next door to Kukje, Feng Tay. In 1999, however, Kukje workers were fearful because Feng Tay were about to take over Kukje. In the interim Kukje was working to fill backorders from other factories, including Nike shoes from Feng Tay.

At first glance it may seem that Nike cancelled its contract with Kukje because it was concerned about worker exploitation and child labour in Banjaran. However, if Nike were genuinely concerned after reading my publications in 1997 they would have cancelled Feng Tay's Nike shoe-making contract as well as Kukje's, as Feng Tay was undoubtedly the worst of the 20 large and medium factories studied in 1996/97.

Remembering that Kukje is still making some Nike shoes and that it is being, or about to be, controlled by Feng Tay, the results of research among women who worked there during the follow up study are relevant, and do reflect Nike production practices. Workers at Kukje worked on average 17.2 hours of overtime each week, on top of their mandatory 40 hours per week. The average overtime hours for the entire cohort of women studied in 1999/ 2000 was only 9 hours per week. Kukje women stated that their employment was unstable despite high levels of overtime and that the factory did not pay full wage rates regulated by the government. Despite the fact that Kukje workers completed about twice as much overtime as the average for the cohort, they were in fact paid less than the average of Rp 340,000 per month. The average wage for Kukje workers each month was Rp 330,000. Considering the large amount of overtime these workers completed, their wages should be much higher than the average.

Feng Tay

Feng Tay has blossomed as a result of the Asian Crisis. Instead of shedding staff it was able to increase workers in line with larger orders for Nike shoes in 1999/ 2000. Nike women worked on average 24.6 hours of overtime per week and were often required to work on Sundays due to orders. However, Nike women at Feng Tay were being paid relatively well. On average they earned Rp 490,000 each month. But this came at a cost. Feng Tay does not provide buses for local women, who must pay for their own transport costs. It does, however, provide free buses for workers outside the region. The women I interviewed claimed this was because management thought that local women were too lazy and made trouble. Bringing in outside labour was a new phenomenon designed by Feng Tay management to offset 'local' worker disputes.

Another interesting aspect was the lack of uniforms at Feng Tay, as all other factories used uniforms. In 1996 they usually wore pink uniforms. In 1999 they were not issued uniforms because women were 'in and out' so quickly that uniforms were not needed.

Women usually leave after a few months, exhausted by the constant overtime and lack of holidays, on top of which comes a very sound system of managerial exploitation and domination of young women. Further, Feng Tay is continuing with the illegal practice of sick leave arrangements described in my 1997 article. Feng Tay has a new policy now, which also goes against national labour laws. Sick women must report to the factory doctor and get a medical certificate. If not they are docked Rp 30,000, even if they have a certificate from another 'non-partisan' doctor. Forcing sick women to treck down rough mountain roads to the factory reflects the attitude of Feng Tay to workers and the fact that factories in Indonesia continue to make up their own laws.

To cope with increased orders, Feng Tay management has diverted some to Kukje or created quotas. Women are given a very large quota and paid overtime and a bonus. However, the bonus is paid in the form of a T-shirt and not money as traditionally expected. Recent strikes in Jakarta reflect this trend to replace money bonuses for hard work and the meeting of difficult quotas with nominal gifts. Another new trend I learned of was that the leftover Nike shoes which could not be sold were destroyed by management. The workers could not understand why they were not given to the workers, and claimed that some workers tried to steal them to sell due to the crisis, but most were caught and sacked.

Fifty four percent of the women who were asked about the impacts of the Asian Crisis upon their factory life reported no real change except the high cost of living. The remaining 46% stated that the crisis meant that either more overtime was required, that their bonuses were stopped or that their working life became more stressful as a result of increased quotas. These 46% were predominantly from Feng Tay or Kukje. To be fair to Feng Tay there was one garment factory in Banjaran from which the average overtime worked among women was 31 hours per week. However, these women were all piecemeal workers earning very poor wages in a sector renowned for exploitative practices.

The labour force in manufacturing was actually funding the battle against the impacts of the Asian Crisis in Indonesia. I saw plenty of evidence of this in Banjaran, and specifically at Feng Tay. In 1997 I concluded that 'Feng Tay is the negative result of the combination of international capital, Indonesian capital, a Western corporation (Nike) and a developing country's desire to industrialise quickly'. I see no reason why my conclusions in 2000 should change. Indeed, the crisis has provided industrialists more power.

In April 1999 Nike became a member of the Global Alliance for Workers and Communities. An alliance designed to assess and improve working conditions in overseas factories and communities. I have some ideas in those areas.

Peter Hancock (hancock@deakin.edu.au) lectures in International Development Studies at Deakin University in Melbourne.