Labor exploitation lies downstream of Indonesia’s nickel boom

Indonesia’s ambitious nickel downstreaming program has sparked considerable interest due to its economic significance and strategic implications. But despite its touted benefits, the program overlooks critical aspects of occupational safety and health. It also neglects employment protection and industrial relations, particularly concerning foreign workers’ rights and access to labor dispute resolution mechanisms.

It is unlikely that Indonesian labor law governs those employed under this program. Rather, these downstreaming projects operate as zones of geographical and jurisdictional exceptions within Indonesia’s borders, leaving the Indonesian legal rights of workers there insufficiently protected.

Research has shown that a significant issue arises from the inadequate integration of Indonesian employment and migration laws, particularly in safeguarding the rights of foreign workers. The influx of Chinese workers, employed predominantly by major Chinese-owned nickel processing facilities in Indonesia — such as Tsingshan Holding Group and Zhejiang Huayou Cobalt — makes this a problem in Indonesia’s downstreaming program. At these sites too, Indonesia’s laws and institutions fail to adequately protect the welfare of workers (both foreign and local), resulting in frequent workplace accidents and even fatalities.

Chinese foreign workers operate under especially precarious conditions, often without the protection of Indonesian employment laws. Under migration law, employers can shorten foreign workers’ residence permits through the Directorate-General of Immigration, forcing workers to leave the country within a week — even if they have been unfairly dismissed. This leaves the services of private lawyers in Indonesia as their only way to fight back. In 2019, only six workers pursued such a route when their employer exercised this power. But these cases were in the West Java area near Indonesia’s capital city, Jakarta. Foreign workers on the downstreaming projects in Indonesia’s east have not done so when this has happened.

Foreign workers entering Indonesia on short-term visitor visas — a substantial number, according to news reports — do not even have access to this system. They are effectively excluded from the protection of local labor laws, leaving them vulnerable to exploitation and without recourse in the event of disputes. Economically, this practice also denies the state potential revenue from levies (currently US$100 per worker per month).

In 2023, the Indonesian government issued work permits for 168,068 foreign workers, with nearly half given to Chinese nationals (82,623 permits). Most of these permits were issued for the first time and covered one year.

Ten provinces hosted more than 5,000 foreign workers. Seven of these provinces are located in West Indonesia and three are in East Indonesia, which emerged as a major host for foreign workers following the implementation of the country’s downstreaming program in the aftermath of the 2020 ban on the export of raw nickel.

Navigating Indonesia’s labor dispute settlement system poses challenges for foreign workers. These challenges are further complicated by the remote locations of mining and processing sites, as well as complex legal procedures involving foreign workers. Of the 9,829 labor disputes that the government handled in 2023, only one settlement involved a foreign worker from the United States, a group which tends to be more aware of their labor rights.

Not only are Chinese foreign workers primarily located in East Indonesia, where the governmental presence is weaker compared to the west, but the system presents hurdles for them to assert their rights. Their employment is often situated far from local government offices, which process the second stage of labor disputes, and further still from the provincial capitals where the Industrial Relations Court is located.

Further complicating the poor implementation of legal processes in the country’s east is the corruption that pervades the rights protection systems at all levels. Reports suggest that labor inspectors, occupational safety and health inspectors, labor mediators and judges are being encouraged by employers to ignore workers’ issues.

The roots of the problem for foreign Chinese workers also lie in the fact that their employers are often companies originating in China and that the relationship between these companies and their workers is complex. There is also no strong culture of workers organizing or involving the government in workplace disputes.

By ensuring Indonesian labor laws are effectively implemented across the country and in these spaces, all workers would benefit significantly. But for the rights and protections that are available to Indonesian workers to be extended to foreign workers, amendments to the immigration law are necessary. These changes would allow foreign workers to challenge their employers and access the labor dispute settlement system.

Wayne Palmer is Senior Research Fellow at Bielefeld University, Germany. He is also Honorary Research Fellow at the University of Sydney, Australia.

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