TNCs, Labour, Environment and Human Rights in Indonesia

This article was first published in The Jakarta Post on the 4th July 2013, here>>>.

The business operations of transnational corporations (TNCs) have long been labelled as one of the main contributor of human rights violations, environment degradation, social conflicts and deteriorating labour conditions. As TNCs can easily relocate their capital to different countries whenever their business interest is at risk, they tend to put little respect to non-business issues.

Though that situation is correct to some extent, TNCs on the other hand, has a huge potential to endorse better condition of human rights in country where their business operation is located. One of the main reasons for this argument is that with its financial power, TNCs are capable to play significant role in promoting better respect for human rights, sustaining environment, help to improve social live through the fulfillment of access to health and education services, and establishing proper labour conditions.

The most recent haze crisis is one of examples where the operations of TNCs have brought negative impacts to the environment and posing risk to the health of not just the local populations, but also to the people across the region. Likewise, not so long ago, the collapse of underground tunnel incident in one of the largest mining site in Papua had resulted to the lost of several lives. This incident shows that mining operation poses a high risk to workers’ live and to the environment.

So far, the government has taken action in both the haze and the underground tunnel case by conducting investigations. However, this action seems to be insufficient to prevent similar incidents to reoccur in the future. The government should begin to think of alternative measures to ensure that TNCs observe human rights, environment protection, health and safety, and respecting the social lives of local population in conducting their business operation.

To date, there are a number of non-binding instrument at international level. Likewise, many TNCs have publicly announced their own standard of conduct in relation to labour, environment, social and human rights issues. However, what makes violations of these issues by TNCs continue to occur? There are at least two answers for this question.

First, it is argued that TNCs are profit-maximization entities. Therefore, they will only consider non-business issues if this conduct would increase their profitability. Unfortunately, many TNCs think that respecting human rights, protecting labour and environment would only put additional cost to their production line. This is exactly what happened in the haze incident. Fire is the cheapest method in carrying out land clearance in the expansion of palm oil plantation.

Second, TNCs adopt a self-making human rights, labour and environment standard as part of their marketing strategy. They use this self-making standard merely as a lip service to show that they have put effort to implement the standard. In fact, many of these self-making standards are lack of regular examination mechanism by an independent auditor. Therefore, the implementation of these self-making standards cannot be clarified.

The international human rights regime put the government as the main duty bearer to ensure the protection, respect and fulfilment of human rights. It is the duty of government to ensure that TNCs, operating within its jurisdiction, do not perform any harm to the labour, environment, and human rights. In order to fulfill its duty, the Indonesian government need to implement an instrument on these issues for TNCs to observe. Among a wide range of standards for TNCs available at international level, the government should seriously consider to adopt the ‘OECD Guidelines on Multinational Enterprises’.

There are a number of advantages in adopting this standard. This guideline set a number of conducts to be carried out by TNCs in wide area of issues, including human rights, labour, and environment. Further, this guideline provides a mechanism for examination and dispute settlement by the National Contact Point for any allegation to the violation of rights by TNCs. In addition, it has been implemented since 1974, and has been lastly up-dated in 2011 to adjust with the recent development in the way TNCs conduct their business operation. Most importantly, this guideline is endorsed and implemented by all 34 governments of OECD member countries, the home countries of worlds’ largest TNCs.

Unfortunately, adopting and enforcing an international instrument, especially a non-binding instrument like the OECD Guideline is not an easy task. This effort may also invite strong resistance from the TNCs. However, there are a number of alternative ways which may be considered by the Indonesian government.

First, the adoption of OECD Guideline may be done through inserting the guideline into bilateral investment treaty or other international investment treaties which is signed by Indonesian government and the other foreign country governments, especially the OECD member countries. Inserting a non-binding instrument into a legally binding instrument such as treaty would strengthen the regulatory character of the non-binding instrument.

Second, the Indonesian government has recently been conducting a renegotiation of mining contract with a number of TNCs that holding mining concessions or permits. This would be a good momentum for the government to include the implementation of the guideline by TNCs on the negotiation table. The government should grab the opportunity to ensure the commitment of TNCs operating in mining sector to observe the guideline. A similar procedure may be followed to other sectors that pose high risk to labour, environment and human rights.

Third, this alternative might be the most contentious, nevertheless, worth it is considered. The Indonesian government may consider of becoming an adherence country to the ‘OECD Guidelines on Multinational Enterprises’. Adherence to the guideline shows that the government is not being discriminative to TNCs operating in Indonesia. This is because every Indonesian company operating overseas will also committing to observe the guideline. Thus, adherence to the guideline will create a ‘level playing field’ and minimise resistance from the TNCs operating in Indonesia to implement the guideline.


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