Global Supply Chains and Their Impact on the Labour Movement in Asia


Globalization and the increased internationalization of supply chains have been shaped primarily by transnational corporations, by increasingly globalizing their operations around the world in order to lower costs. Countries in need of investment and foreign exchange are put into competition with each other to attract these operations by offering their labour and natural resources. Ultimately, workers and communities in the participating countries are also put into competition against each other as they are dragged into jobs tied to global supply chains.


The significance of the global supply chain is not merely in terms of the movement of capital in search of cheap labour but also in terms of the change that it brings to the nature of work itself. The mobility and capacity of global capital have been increased and intensified through their activities of capital accumulation, and have led to massive populations being brought newly into capitalist social relations as ‘informal labour’. The expansion of global supply chains in the countries of Asiais closely linked to the still-dominant paradigm of export-driven economic development in the countries in the region – leading governments to mould their national labour force and even society in general, to meet the needs of global capital.1

The dynamic of the global supply chains started since the late 1980s with the rush of Japanese foreign direct investment (FDI) – and then other FDI from developed countries followed – into developing countries including Thailand, Malaysia, Indonesiaand the Philippines. This transformed these developing countries with significant impacts on the newly industrialized economies (South Korea, Taiwan, Hong Kong, and Singapore). In short, it was in the current phase of globalization that most of the Asian countries were forced to abandon the nationalist, protectionist and import substitution-based growth models, to adopt export-oriented development strategies relying on FDI. But this also created a hierarchical relationship even within the Asian region, i.e. between capital-exporting countries (with greater power) and capital-importing countries. It was made possible by capital gaining unrestricted mobility on the one hand and new inventions in production technology, and new revolutions in transport and communications, on the other. The factories were virtually transformed into a ‘global factory’ – a strategy aiming at the coordinated global production for the purpose of capital accumulation – in such a way that labour-intensive and environmentally costly production operations were shifted to the developing countries with abundant supply of cheap labour; meanwhile the control of the production and profits would remain in the hands of metropolitan capital or the transnational corporations, by way of maintaining a tight control (and generally no outsourcing) of technology-intensive and high value-adding production operations, and  establishing a monopoly of the brands within their markets.


Thus for example, hundreds of millions of Chinese young workers are working for electronic-producing factories in the Pearl River Delta, Guangdong Province, China, who are actually working for the brands based in Taiwan, Japanor the transnational corporations based in the developed countries of the West. These brands and foreign investors put constant pressure on the local companies for just-in-time supply, ensuring better quality and for the lowest possible costs (mainly labour costs) while virtually in complete control of the production operations. Moreover, for the most part the consumers of the products produced by Chinese workers are not the Chinese workers but still mainly American or European consumers.

Yet the global supply chain is not limited to engaging production in these factories; actually large numbers of people in other parts of the world including Africa and Latin America, as well as Asia, are engaged in producing raw materials of various kinds for the final production of the world’s consumer goods, and home-based workers across the globe doing outsourced jobs are also integrated in the global supply chains. These in turn are subsidized by the natural resources (water, land) from which the workers and communities draw, in order to produce for the supply chains. Thus the division of labour as enforced by this global supply chain ends up having disastrous impacts on the environment and the society of third world countries in various ways, and the worst affected are the labour force.

The Impact on Labour 

Although one main rationale for developing countries to accept foreign investment is the increased employment opportunities it brings, it should be noted that much of the FDI in developing countries is ‘brownfield’ investment, i.e., acquisition and mergers, rather than new investment, which is also reflected in the jobless growth in these countries. Since the 1990s, the overall ‘brownfield’ investment in the third world accounted for almost half of total global FDI, even reaching 80 per cent in 2001 at the height of the international mergers and acquisition boom.2 Mergers and acquisitions are also accompanied by large scale retrenchments of workers and informalization of jobs as part of the rationalization process; this often takes the form of privatization of state-owned enterprises. Box1(see next page) gives an example from Indonesia, of outsourcing and labour abuses at a former state-owned logistics enterprise which had been privatized through a process of acquisition by foreign capital.

A recent (2010) ILO Report has pointed out that workers who lost their jobs are increasingly working as contract workers or in the informal sector with little or no protection. In the ASEAN (Association of Southeast Asian Nations) region, the report says, the number of working poor (earning less than US$2 per day) is believed to have risen in the past two years, from 140 million to 158 million people, or from 51 per cent to 57 per cent of the region’s workers.3  On the other hand, in trying to preserve or create attractive investment climates, states increasingly maneuver to either erode the labour law or find ways to allow non-enforcement of the labour law. To facilitate the capital, states in collusion with business are indulged in looting people’s rights by seizure of land, industrialization of agriculture and commoditization of natural resources and public goods. Thus, the institutions of grassroots democracy – e.g. local elected authorities – which are supposed to serve the basic needs of the people, instead are being used for serving capital. People lose their sovereignty over their own living environment as well as their labour, and get deprived of basic human and labour rights. The deeper the integration of these supply chains into society, the more the downward pressures on wages and working conditions, and the greater the suffering of the people



Box 1. The Voices of Workers in the Global Supply Chain:
Allianceof Outsourced Workers at JakartaInternationalContainer Terminal (APOJICT), Jakarta, Indonesia

"The privatization of Jakarta International Container Terminal through the process of acquisition by global capital in international logistic andsupply management has resulted in the workers’ suffering, rather than bringing any benefit to them."

In a meeting in early May 2011 with several unionists from an alliance of outsourced logistics workers’ unions at Indonesia’s largest container port, Jakarta International Container Terminal, I asked the unionists about their stories of working at the ‘bottom’ of the global supply chain – in this case providing logistics services for a global multinational – which happens to be based in Hong Kong. The unionists related that they have been suffering from the unjust decision taken by the company last year, as most of the outsourced workers were unlawfully dismissed from the company after joining a protest. The national Labour Courtlegitimized the company’s wrongful decision, demanding only that the dismissed workers be paid their due severance payments, rather than challenging the dismissals themselves. However most of the dismissed workers have decided to appeal this Labour Courtruling and demand reinstatement.

Jakarta International Container Terminal used to be a state-owned enterprise, but the privatization of the company through the process of acquisition by global capital in international logistic and supply management - Hutchison Port Holdings/Hutchinson Whampoa Limited - has resulted in the workers’ suffering, rather than bringing any benefit to them by this ‘brownfield’ investment. The capital controls 75 percent of the container market in Jakarta’s TanjungPriokPortthrough its cross-shareholding. Below is the workers’ story:

‘We worked as outsourced workers for a logistics company at Jakarta International Container Terminal since 1991, but now we have been unlawfully dismissed from our jobs. Our situation got worse when Jakarta International Container Terminal, formerly a state-owned company named PT PELINDO II, was privatized in 1999 and a Singapore-based company Grosbeak Pte Ltd gained 51 per cent of the company’s shares. Grosbeak Pte Ltd is a subsidiary of Hutchinson Port Holding Ltd, which is one of the business units of Hutchinson Whampoa Ltd based in Hong Kong.

We have been through unfair treatment: our employment status never changed, even though we worked there for two decades. Outsourced workers like us comprised 60 per cent of the total workers but all of us had the same tasks as all the permanent workers. As outsourced workers we could not join the JICT union which exclusively organized only the 40 per cent of workers who had permanent status. We were employed by three different labour agencies and we signed our contracts from time to time with those agencies. That was certainly not fair and, in fact, was against the labour law. Such a situation made us become organized and we began to establish a coalition of outsourced workers to fight for our rights. The coalition is called the Alliance of Outsourced Workers at Jakarta International Container Terminal (Aliansi Pekerja Outsourcing - Jakarta International Container Terminal - APOJICT).

 APOJICT had begun raising its grievances in 2009, to no avail. We consolidated our efforts and, together with a national coalition of unions, the Committee for National Solidarity or KSN (Komite Solidaritas Nasional), have been actively taking up a nation-wide campaign against union-busting, privatization, and labour market flexibility. On 1 February 2010, more than 500 outsourced workers participated in a two-hour lock-out which caused an enormous loss for the company; this has proven that we, outsourced workers, actually played a vital and strategic role in the company’s overall performance. The management came to appease us and promised to enter into negotiation. However, the permanent workers’ union (which had been fighting for only their own union members’ rights) had impeded the settlement.

In the following days we were intimidated, our families got a lot of threats, and some of us were forced to leave our jobs. We reported the case to the Labour Department, House of Representatives, and Ministry of State-owned Enterprises. However, the company only neglected our demands, and systematically intimidated and unlawfully dismissed most of us, even though we got the recommendation from the Labour Office to grant permanent status to us.. The Labour Courthad further endorsed the dismissals and required the company to provide severance pay. Due to the economic hardship, a few of us took the severance payment while most of the others of us have gone for appeal to the Supreme Court. We need decent work and we have the right to employment.

Through all this, we realized that privatization had been worsening our working environment and people’s livelihoods. We came to know that the giant multinational corporations such as Hutchinsonhave been playing a pivotal role in dragging workers into the “race to the bottom”.’


The Impact on Society and Environment

Environmental catastrophes and other social costs (for example, increased migration, separated families, loss of subsidized healthcare, loss of land and livelihood rights) are among other impacts arising from this undemocratic insertion of the global supply chains into society. Companies keep extracting maximum profits whereas the risks have been externalized to the society and environment. These costs that are borne by society and environment remain invisible to consumers.

Therefore, the things that made it possible for Asian-based supply chains to come up with considerably cheaper products (such as US$3,000 cars, US$300 computers and US$30 mobile phones that offer a nationwide service for just two cents a minute) are in fact invisible but enormous costs borne by society and environment. In addition, global supply chains reflect a social relation that permits not only exploitation of capital over labour and environment, but also allows capital to penetrate all aspects of social life.

Possibility of Reforming the Supply Chain 

Efforts have been made by various groups to reform or ‘clean up’ the global supply chains, mainly by intensifying existing mechanisms of Codes of Conduct and Corporate Social Responsibility (CSR). However, these could not bring any significant change. The inbuilt nature of the supply chain makes it impossible to reform it by adopting tricky Codes of Conduct or by implementing deceptive CSR.
The global supply chain, in fact, is built to systematically exploit the vulnerability of labour and the environments of developing countries to drive private profits upwards, which automatically leads to the expansion of the gap between the few rich and the majority of the poor. In such situations, reforming the supply chain in a real sense means actually challenging this system and the division of labour in global supply chains, which can never be done by Codes of Conduct or CSR in general.

Ways Forward 

What implications does our understanding of global supply chains hold for the Asian labour movement?

The rise of the global production and supply system has hurt working people both in its core and its peripheries. In the core, like the USand Japan, economies get less investment and employment and their wages are also being driven down through globalized competition. In the peripheries the competition between countries for FDI and export markets is leading to systematic establishment of anti-labour regimes to lock in comparative advantages from cheaper, more controllable labour. The three large emerging economies in Asian region – China, Indiaand Indonesia– have grown at the expense of the impoverishment of the great majority of the people.

The supply chain has also divided the working class by scattering the assembly lines in different places and by causing informalization of labour. On the one hand, effective collective bargaining by workers and communities in the global supply chain needs broader working class solidarity which should come from a unified cross-sectoral alliance of the whole working people, yet on the other hand the supply chain leads to difficulty in organizing workers. Organizing at the shop floor level itself has become difficult, but even where shop floor unionism is strong, relying only on shop floor unions turns out to be ineffective for collective bargaining with multinational employers and state authorities on workers’ issues. Thus, workplace struggles need to be connected to and reinforce broader transformative national efforts to challenge the coordinated global production for capital accumulation.

It is indeed crucial to regularly campaign against certain corporations or brands (one section of the supply chains) when they violate labour rights, damage the environment, or grab people’s lands, as a way to challenge the system. However, the ‘naming and shaming’ campaign of a particular corporation should not be considered as an endpoint in itself since it would not change the whole system. Rather, it should go beyond such campaigns to the point where broader efforts of dismantling neoliberal capitalism can take place. The campaign is important and necessary, but it is obviously not sufficient; again, the global supply chain cannot be simply reformed.

The effort to challenge global supply chains needs a comprehensive strategy in addition to local level struggles. Given the deep divisions and competitions that easily arise among workers in global supply chains (of industry, employment status, race/class/gender), it is critical to articulate the commonalities for the working class as a whole, which mayformulate the basis for broader solidarity and formation of common strategies and goals for collective bargaining. For example, the process of capital accumulation by dispossession (not only in terms of land acquisitions and displacements, but also dispossession in terms of denying various rights of the people and reducing/slashing expenditures in public welfare, etc.) that is marginalizing most of the people could become one such common platform for the struggle. However, this also requires perhaps reclaiming the sphere of politics as a legitimate object of people’s struggle and above all, to reclaim people’s sovereignty.

In these situations, when actually the fate of working classes in both developed and developing countries are linked and both are facing victimization under the global supply chain, the solidarity of the working class across the supply chain makes them partners in each and every struggle against the global capital. Therefore it needs a most democratic structure of solidarity based on equality. The solidarity is to be built on the basis of a non-hierarchical, genuine cooperation among grassroot social movements in both capital-exporting and capital-importing countries in the region, considering both as partners, neither side patronizing the other.

As far as inter-Asia solidarity is concerned, its urgency has already been realized and efforts have started gradually to build the solidarity at various levels-across various supply chains, at the level of ASEAN (The Association of Southeast Asian Nations), SAARC (South Asian Association for Regional Cooperation) etc., and at the level of Asia. Mass strikes in Cambodia, Bangladeshand Vietnam, Chinaand solidarity extended to these struggles by the various organizations in different countries in Asia reflect on the realization and efforts for building broader solidarity at regional level.


ENDNOTES

1.  See Asian Labour Update, Issue No 54, January-March 2005.
2.  The largest net recipient of FDI has been Chinawhich has attracted 22 per cent of the developing country total since 1989. In Asia, India, Thailandand Malaysiaare the major FDI destinations. See Chang, Ha-Joon, and Grabel, Ilene, Reclaiming Development: An Alternative Economic Policy Manual, Londonand New York: Zed Books, 2004, p.108-9; Chang, Ha-Joon, 23 Things They Don’t Tell You about Capitalism, New York: Penguin Book, 2010; Ietto-Gillies, Grazia, Transnational Corporations and International Production: Concepts, Theories and Effects, Cheltenham: Edward Elgar Publishing Limited, 2005, p. 202.
3.  ILO, Labour and Social Trends in ASEAN 2010: Sustaining Recovery and Development through Decent Work, Bangkok: ILO Regional Office for Asiaand the Pacific, 2010. Available at: http://www.ilo.org/wcmsp5/groups/public/---asia/---ro-bangkok/documents/publication/wcms_127957.pdf
4.  Chang, Dae-oup, ‘The Strategy of Triangular Solidarity: What is International Solidarity for Asian Workers in the Global Factory’,Asian Labour Update, Issue 65, October-December 2007. Available at: http://amrc.org.hk/alu_article/labour_resurgence_under_globalization_ii/the_strategy_of_triangular_solidarity_what_is_i


Published on Asian labour Update Issue No 78: http://amrc.org.hk/node/1173
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