By Keith B. Richburg and Anne Swardson
Washington Post Foreign Service
Sunday, July 28 1996; Page A01
The Washington Post
The young women are the daughters of rural farmers, village schoolteachers or shop clerks. Now they live together in the Indonesian factory town of Serang, a dozen to a dormitory room, sleeping on bunk beds. They spend most of their time in a nearby Taiwanese-owned factory, where they are paid $2.28 a day to cut the soles, sew the seams and run the machines that make the most popular -- and controversial -- athletic shoe in the world: Nike.
And most of them say they like it.
Factories such as the one in Serang, which employs 18,000 Indonesians, in recent months have come to symbolize the role of American companies in the developing world. A number of critics, some funded by organized labor in the United States and others not, have spotlighted what they say are abuses of local pay and labor standards, and much press attention has followed.
The critics have singled out Nike, with its long history of manufacturing in Asia, its $140 shoes and its stable of such athletic superstars as Michael Jordan on the payroll.
Some in the United States deem Nike factories in Indonesia "sweatshops," cheap labor mills where American companies can exploit underpaid workers to maximize profits back home. But Nike, and at least some of the overseas workers who make its shoes, say American investment in such countries as Indonesia has placed those countries on the road to prosperity.
It is one of those yes-you-do, no-I-don't-debates where the truth is difficult to ascertain not only in the United States but in Serang, a gritty industrial center 50 miles west of Indonesia's capital, Jakarta. What is clear is that Indonesia is booming and poverty is falling, relative to its impoverished past, and much of the boom has come since American and other companies began investing there a decade or so ago. Many of the 120,000 Indonesian workers who produce Nike shoes, most of whom come from impoverished rural backgrounds, say factories like Serang's provide a chance not only to earn but to save money and to send the extra cash back to families.
"Thanks to God, it's enough money for me," said one young woman, a teacher's daughter, who has been working for three years. She is 23 now, comes from central Java and helps care for her two siblings. She said she is able to save about three-quarters of her income, which she sends back to the family.
"I came here one year ago from central Java," said a girl who at 17 was the youngest interviewed. "I'm making more money than my father makes." She also said she saves about 75 percent of what she makes and sends the savings back to her family on the farm, to help care for 5- and 10-year-old brothers. The women, who spoke to a reporter in the presence of factory managers, did not give their names.
Ninety percent of the workers in Serang are women, most about 19 or 20 years old. At least 10,000 live at the factory compound, where they are given three meals each day in a huge hangar-like cafeteria. There is a television set inside, and a stage is set up outside for parties and sing-alongs. There is a mosque, a chapel and a convenience store.
But not all the workers who make Nike shoes in Indonesia are happy. An Indonesian woman named Sadi Sah who said she and 23 other workers had been fired from a Nike-producing factory for asking to be paid the minimum wage toured the United States this summer under the auspices of anti-Nike groups, holding news conferences and leading demonstrations. Nike says she and others were fired after they went on strike over wages and damaged the factory so extensively that three days of production were lost. The factory then was owned by South Koreans. Now it is in local hands and the case is before Indonesia's supreme court.
Indonesia, for a variety of reasons, has generated more controversy for Nike than have other foreign producers. Jeff Ballinger, essentially a one-man organization called Press for Change, has dogged Nike's performance in Indonesia for eight years and probably is the leading critic of the shoe giant's overseas operations. He issues fat reports that say Nike-producing Asian factories fail to pay the Indonesian minimum wage and improperly dismiss or harass workers, even slap them.
"I'm not saying [American investment] won't in the long run lead to better conditions for some workers, but why does the process have to be so brutal?" asked Ballinger, who formerly worked for the AFL-CIO in Indonesia and says his group now receives no union funding. "Why should people making expensive shoes for Nike remain in poverty in Indonesia?"
At the corporate headquarters of Nike Inc. in the Portland, Ore., suburb of Beaverton, where running shoes and blue jeans are the executive wardrobe of choice, Chairman Philip H. Knight could not be more sure that Nike is a force for positive change in Asia.
"Whether you like Nike or don't like Nike, good corporations are the ones that lead these countries out of poverty," he said in an interview. "When we started in Japan, factory labor there was making $4 a day, which is basically what is being paid in Indonesia and being so strongly criticized today. Nobody today is saying, `The poor old Japanese.' We watched it happen all over again in Taiwan and Korea, and now it's going on in Southeast Asia."
Nike shoes and their forerunners have been manufactured in Asia since the company's beginnings in 1964, when Knight, a Stanford Business School graduate who had written a paper on the potential for making low-cost track shoes in Japan, visited the country and returned home with a suitcase full of footwear. From Japan, where the exchange rate of the yen drove out foreign investment in 1971, Nike extended its presence to Taiwan and South Korea in the early 1980s and, more recently, to Thailand, Vietnam, China and Indonesia. Nike does not own these factories; it works in partnership with local owners or with Taiwanese or Korean owners.
The young women at the Serang plant, called the Nikomas Gemilang factory and owned by the Taiwanese firm Pou Chen, earn a base pay of 5,200 Indonesian rupiahs each day, which is the legal minimum wage. That comes to about $2.28 a day. In Indonesia, less than half of the working population earns the minimum wage, since about half of all adults here are in farming, and the typical farmer would make only about 2,000 rupiahs each day. So receiving the minimum wage automatically puts these workers among higher-paid Indonesians.
Last week, former presidential candidate Jesse L. Jackson was in Indonesia and visited a factory similar to the Nike plant. That one produces Reebok shoes. He decried corporations that make huge profits on products that rely on cheap labor, saying "exorbitant profits are coming at the expense of overworked and underpaid workers." Jackson suggested that Indonesian workers should receive at least half what their U.S. counterparts earn.
Nike subcontracts with a dozen Indonesian factories. Some are owned by South Korean firms, some by Taiwanese, and others are fully Indonesian-owned. Nike officials are on the premises almost full time, mainly looking at quality control of the shoes. As the labor complaints have arisen over the years, the company has enacted a code of conduct for its foreign contractors and says it monitors compliance.
The dormitory rooms at the Serang factory are small, but also airy. No one is forced to live in them; most choose to do so to save money. The factories are relatively clean, the ceilings are high, and open side windows in most of them provide ventilation. In areas where there is more dust or odors, surgical masks are provided. Many of the women prefer to work barefoot or in sandals, because that is the Indonesian custom in the tropically hot country -- not because they are forced to go barefoot or have no shoes to wear. Normal working hours are 40 hours each week, seven hours Monday through Friday and a half-day on Saturday. Lunchtime is one hour.
Nike officials say not only that the company has improved working conditions in Indonesia, as was done earlier in Japan and Taiwan, but that the country is on a road traveled by Britain and the United States in the last century.
"We've all studied it in economics. This is how industrial revolutions start and sustain themselves," said Charlie Brown, Nike's director of Asia liaison and a former supervisor in China and Indonesia. "If light industry didn't go into developing countries, people would still be trying to scratch a living off the land."
Per capita income in Indonesia has more than tripled in the last 20 years. The decline in poverty has been one of the most dramatic in recent years; according to the World Bank, 15 percent of the population lived at the lowest level of poverty early this decade, down from 29 percent 10 years before.
Critics are unimpressed. "It's not possible to see how these workers feel just looking at the numbers," Ballinger said. "It's a bigger picture than `Is the economy getting better?' and `Are rural people climbing out of poverty?' "
In 1994, Nike hired the Indonesian office of the international accounting firm Ernst and Young to monitor the plants for worker pay, safety conditions and attitudes toward the job. The auditors were to pull workers off the assembly line at random and ask them questions that the workers would answer anonymously.
The survey of 25 random workers at the Serang plant found that 23 thought the hours and overtime worked were fair, and two thought the overtime hours too high. The sample reported no discrimination; 13 said the working environment was the key reason they worked here, and eight cited salary and benefits.
Nike officials said that through the Ernst and Young audits, they were able to identify several problems in the past with Korean and Taiwanese plant managers whom the workers considered too strict, or even abusive, and those managers have been transferred or removed. "Some of the management is Taiwanese or Korean, and that has been a problem," said one Nike official. He said factories owned by Taiwanese or South Koreans "generally are more productive" than the locally owned factories, but they also produce more complaints. Those complaints involve managers shouting at or even striking workers, or issuing punishments considered excessive for bad work or tardiness.
The Serang factory closes for about 10 days each year for Muslim holidays, and most of the workers return to their villages to see family, drop off the money they have collected and, for some of the young women, to find husbands. Traditionally, some women never return from the holidays. At that plant, Nike officials and the plant's Taiwanese owners say 94 percent of the workers came back after the most recent break. "If it were that bad, they wouldn't come back," said a Nike official. "They vote with their feet."
Swardson reported from Beaverton, Ore., and Richburg from Serang, Indonesia.
NIKE JUST DOES IT
Nike produces all its athletic shoes in Asia, with Indonesian factories taking the biggest share. The Oregon-based company has posted a healthy increase in profits in the fiscal year that ended May 31.
REVENUE: $4.76 billion $6.47 billion
PROFITS: $339.7 million $553.2 million
Production country 1989 1995 1996
INDONESIA -- 31% 36%
CHINA 4 31 34
KOREA 60 16 12
THAILAND 18 14 10
TAIWAN 17 8 5
VIETNAM -- -- 2
Indonesia at a glance
Population (1996 estimates)
Men 61; Women 66
Per capita GNP
Population living in poverty
Share of top fifth of households: 52%
Share of bottom fifth of households: 7%
Sources: Population Reference Bureau, World Bank: Social Indicators of Development, 1996.
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