Actors, institutional change and stability in the Indonesian industrial relations system

This paper aims to analyse institutional changes in the Indonesian industrial relations system. Although mainly focuses on the labour reforms in the Post-Soeharto era, this paper extends the time line to incorporate changes in the Old and New Order periods in analysing change and stability. In addition to the portrait of the institutional changes, this paper also analyses the roles of different actors in the periods of change. While acknowledging some significant changes in the institutional logics, the paper also discovers the evidence of institutional stability across times and periods of Indonesian government. It concludes the current changes in the Indonesian IR context has resulted in some unexpected results. This case demonstrates that there is a mismatch of different institutional elements within the Indonesian IR system that impedes successful changes. INTRODUCTION Institutional change is ubiquitous in the history of industrial relations (IR). At any given time the institutions regulating IR may be conceptualised as structural representations of the ongoing pow er relations betw een various interest groups and attempts by governments to balance such interests in accordance with their own goals. Different forms of institutions have emerged representing changed logics and temporary accommodations between interest groups throughout different times. Formal industrial relations (IR) machinery w hich is situated at the intersection of social, political, economic and legal domains also changes across time at either the global level and/or in different national settings. The Indonesian IR system, w hich is the focus of this paper, has changed dramatically over recent times as a representation of w ider social and economic upheaval that has been in evidence. Different institutional logics have prevailed in the Indonesian IR system at different times as various governments have sought to shape IR processes to reflect their own agendas and those of their key allies. Leaving aside the era of Dutch colonialism, major epochs of IR in Indonesia can be categorised into at least three phases, namely the Old Order (1945 – 1965), the New Order (1965 – 1998), and post-New Order (1998 – present). Some authors have referred to the latter period as Post-Soeharto or Era Reformasi (Reformation Era). Each era has its different characteristics. The Old Order, under former President Soekarno, can be sub-divided into two periods, represented by different types of governance: liberal and guided democracy. The post-Soeharto Era can also be divided, at least into two. Ford (2000a) for instance, mentions a short period of Habibie administration, w hich she called the Habibie interregnum, can be distinguished from the following periods under the administration of Wahid and Megawati. Various authors have documented developments in Indonesian IR field (e.g. Gall, 1998; Hadiz, 1997; Hess, 1997; La Botz, 2001; Ford, 2000a; b; 2003; Caraway, 2004). How ever, only some (e.g. Caraway, 2004; Ford, 2000a; 2003) have analysed aspects of institutional change in such developments. This is most likely because of the different perspectives used by different authors. This paper employs sociological institutional theory to analyse change (and stability) w ithin the broad institutions of IR in Indonesia, an approach w hich has been little used to date. We contend that the utilisation of the institutional theory enriches existing perspectives in analysing the Indonesian IR system and how it has developed in different eras. Institutional theory suggests that institutions give order to social life and influence the sensemaking and actions of social actors (Campbell, 2004; Weick, 1995). Formal and informal rules, norms and cognitive schemas function through normative, cognitive, and regulative institutional mechanisms to shape the social order (Scott, 2008). The stronger the institutions, the more stable the social realm w hich in turn more strongly determines individual or group norms and actions. As an institutional environment becomes increasingly complex, however, more institutional logics exist and compete each other and thus leave greater space for ambiguity to develop and the possibility for actors to initiate change. Institutional logics refers to ‘the socially constructed, historical patterns of material practices, assumptions, values, beliefs, and rules by w hich individuals produce and reproduce their material subsistence, organize time and space, and provide meaning to their social reality (Thornton and Ocasio, 2008). ’ The competition among of institutional logics may lead to the replacement of inappropriate or illegitimate logics with emerging ones or the recombination of those logics that result in a new hybrid idea. Institutional theory thus is concerned w ith explaining institutional change, especially in its later variants, as well as institutional and social stability. In this respect, recent developments in Institutional theory have sought to overcome earlier criticism that it overemphasized stability at the expense of properly explaining change (c.f. Greenw ood & Hinings, 1996) Institutionalists discuss tw o types of institutional change, namely continuous, evolutionary, path dependent change versus discontinuous, radical, punctuated equilibrium change. In the first case, a path-dependent change is likely to happen due to the overall force exerted by institutions against pressures for change in maintaining social order. This may come from the recombination of existing institutional elements or the infusion of new ideas into the existing logics. In the second case, an institution may change more radically w hen it becomes incompatible w ith other institutions that it is located alongside. This is usually initiated by the emergence of crisis. A change that looks radical may, however, actually be path dependent when it is analysed in a longer time frame. Thus the time frame is a critical element in analysing institutional change (see e.g. Campbell, 2004). For this reason, current developments in the Indonesian IR system are discussed in the context of developments over a time period of around fifty years. In analysing institutional change and stability in Indonesian IR context, this paper takes also into account the increased emphasis on the role of actors in more recent explanations of institutional theory (e.g. Sahlin & Wedlin, 2008). The amount of agency able to be exerted by different actors may vary according to the degree to which they have they have pow er and also to the extent to w hich different contexts presents opportunities to act. This w e argue strengthens the discussion of the interplay between micro and macro perspectives in institutional analysis. Early works w ithin the field of new institutionalism focused more on the determinacy of macro-structures upon individual behaviour and thus tended to disregard the role of actors in reconstructing or change institutions. More attention is now paid to the analysis of how institutional mechanisms, such as diffusion and isomorphism, shape or constraint the choices actors take. In particular recent w orks in institutional theory have paid increasing attention to the analysis of the ‘agentic’ behaviour of actors, as they exert power to influence existing social structures. Nonetheless it should be noted that in institutional theory this behaviour is always put w ithin the context social embededness. This study considers the roles taken by relevant IR actors in Indonesia, how they have mobilised power and the influences they have had on institutional change in the Indonesian IR system, although these action are understood w ithin the broader influence of institutional logics. As noted, the main focus of this paper is to portray and analyse changes in post Soeharto Indonesian IR but w ith reference to earlier eras. This provides us w ith a representation of the trajectory of change from one regime to the other. Putting all changes across the timelines helps us to see forms of stability, notw ithstanding the intended and implemented changes enacted in each era as well as the characteristic of institutions in preserving continuity and simultaneously opening up opportunities for groups of actors to stimulate changes. It also allows consideration of the existence of multiple institutional logics, some of w hich are from the past, w ithin the complex environment of a large and extremely diverse country. In order to portray the historical dynamics of institutional change and stability in Indonesian IR system, w e draw on previous studies but contribute further insights from our own perspective. The data w hich we present on current developments has been collected through in depth interviews with relevant actors in the field and supported by secondary sources. In addition, observations from a number of mailing lists, new spapers, and personal or organisational blogs, which monitor the circulation of ideas around HR/IR issues at company level, have formed part of the data on which we base our analysis. The paper is organised into four main parts. The first part presents the state of IR during the two former eras, the Old and New Order. This part shows how significantly different the IR systems were under the two governments. The second part concentrates on analysing changes in post-Soeharto era. The third section captures and analyses the role of actors involved in the post 1998 changes. A fourth section discusses issues of continuity and change w ithin Indonesian IR institutions. IR IN THE OLD AND NEW ORDER: DIFFERENT INSTITUTIONAL LOGICS Based upon widely accepted labour standards, it is fair to say that the Old Order regime gave a relative degree of freedom to the labour movement, at least during the period 1945-1957. Multiple labour organisations existed during this period. As noted by King (King 1982, quoted also in Hadiz 1997), a report listed that there w ere 1501 national, regional,