JAKARTA – A riot at a Central Sulawesi nickel processing complex in which two people were killed and buildings and equipment destroyed has raised questions about the management practices of Chinese companies and what procedures they follow to deal with labor disputes and other Indonesia-specific issues. .
Seventy Indonesian workers were arrested following the January 14 violence at a smelter owned by PT Gunbuster Nickel Industry (GNI), one of 18 companies now operating in the sprawling US$10 billion Indonesia Morawali Industrial Park (IMIP).
Hundreds of police were called in after union workers went on strike as talks broke down over pay and safety concerns and strikers allegedly became angry after some of the workforce chose to stay on the job.
It is not clear how the two employees, a Chinese and an Indonesian, died during the night of violence, but a 100-room dormitory, two dump trucks, a loader and other heavy equipment were destroyed.
Although Chinese companies are often accused of accelerating environmental damage, deepening host country debt and promoting corruption, less attention has been paid to how they treat their workers, including their own nationals.
Government critics believe that officials are trying to treat large Chinese investors with kid gloves because of their contribution to Indonesia’s economic development over the past decade. Chinese investment in 2022 was estimated at $7 billion.
In previous years, unions have complained of violence against large numbers of Chinese workers, often on tourist visas, to do even a little work that could be done by unskilled Indonesians.
Safety rules and supervision in Indonesia’s mining industry are considered strict, but the Ministry of Industry is only establishing guidelines for mineral-based industries to regulate incentives, obligations and rights.
Under current mining regulations, accidents and other incidents must be reported immediately and a mining inspector must be on site within 48 hours in serious cases.
Industry Minister Agus Kartasasmita said that nickel smelters play an important role in the downstream industry and that it was in Indonesia’s interest to create what he called “a conducive business climate”.
Reuters news agency quoted Chinese Foreign Ministry spokesman Wang Wenbin as saying that the Chinese embassy in Jakarta was in contact with Indonesian authorities to seek a “lawful and appropriate resolution.”
There are about 1,000 Chinese companies operating in Indonesia, about half of them on the main island of Java, according to the Chinese Chamber of Commerce.
GNI was in the spotlight last December after an electrical short circuit triggered an early morning explosion at the furnace, killing 20-year-old Tik Tok celebrity Nirwana Selle, a GNI crane operator and her male assistant.
Covering 3,200 hectares and relying on 2,000 megawatts of coal-fired power, the coastal park was established in 2013 as a joint venture between Chinese steel giant Tsingshan Group and PT Bintang Delepan, a local mining and investment company.
It employs about 56,000 workers, including 5,000 mainland Chinese, and produces about half of Indonesia’s nickel products, underscoring Indonesia’s move into value-added mineral manufacturing and the electric battery industry.
Driven by a ban on shipments of nickel ore, the total nickel export volume reached 7o6,000 tons last year, worth about US$6 billion. Most of it is produced in Morawali and similar plants in Southeast Sulawesi and Maluku’s Weda Bay.
Owned by Jiangsu Delong Nickel Industry, one of China’s two largest nickel producers, GNI is a sister company of PT Virtue Dragon Nickel Industry (VDNI), which operates a separate smelter in Konawe District of Southeast Sulawesi.
In December 2020, protesting VDNI workers set fire to parts of the plant after the company rejected their demands to put employees who had been there for more than three years on permanent pay and to give a pay rise to those who were there for a year.
While the workers’ demands were in line with two government regulations, one contained in the 2003 Manpower Law, both were removed in the Omnibus Law on Job Creation, which was passed a month earlier but which has not yet come into effect.
Some of the strongest opposition to the controversial omnibus legislation has come from environmental and labor organizations, which say they are most affected by the Joko Widodo government’s efforts to attract foreign investment.
Months earlier, when the Covid-19 pandemic took hold, workers affiliated with the National Federation of Trade Unions (KSPN) demonstrated against Virtue Dragon importing additional workers from China, the source of the global outbreak.
GNI’s $2.8 billion smelter was opened by President Widodo in 2021 with an annual production capacity of 1.8 million tons of ferronickel, a key ingredient in stainless steel manufacturing. About 1,300 of the 11,000 workers are Chinese, according to local officials.
Jakarta-based businessmen who have worked with Chinese companies in Indonesia say they make little effort to understand local conditions, apparently relying on local authorities to deal with social and political issues as they arise.
“Many in-country staff seem very ill-informed about their host country risks or how they are perceived and rely heavily on directions and input from their management (in China),” one said. “It’s amazingly hierarchical, beyond what you might imagine.”
It is also mysterious. Journalists who comment or seek confirmation of simple facts are met with a wall of silence, as was the case when Tsingshan was initially proposed as the site of a smelter for Freeport Indonesia’s copper concentrate.
That is because the Chinese executives who lead the companies in Indonesia are only at the junior management level and take directives from a headquarters, thousands of kilometers away, a situation that does not lend itself to quick decision making.
“Those who are aware and knowledgeable are totally bound by the management structures and the decisions of higher-ups who know little,” said a foreign consultant who had first-hand experience of the Chinese way of doing business.
An Indonesian executive also noted that few, if any, of the Chinese employees speak basic English. “They don’t understand, and they don’t want to understand,” he said. “Potential investors from Australia and other countries at least make the effort.”
