An Alternative Strategy Fighting Electricity Privatisation: A Case of PLN Union in Indonesia

Electricity privatization has gone hand in hand with corruption…Boys, 2004

Perusahan Listrik Negara (PLN) is state-owned electricity company that was established in 1945 when the Indonesian government nationalized its electricity power sector. PLN is vertical integrated electricity utility in Indonesia which is operator for transmission and distribution network of 32,000 km and 580,000 km respectively. It is country’s largest electricity producer with a generation capacity of over 22,000 megawatt, accounting for 85% of the market (PLN, 2009). Politically and economically, PLN plays an important role for of the electricity sector as reflected by the government’s heavy involvement in its operations and funding, including the provision of subsidies, as the operational coverage of PLN encompasses almost the entire Indonesia territories that consist of more than 13,000 islands . However, most of the market is situated in Java and Bali (western part of Indonesia), where population and industries are concentrated. Therefore, the tendencies to build the infrastructure are heavily concentrated in these two islands, and as a result the middle and eastern parts of Indonesia are lag behind and incapable of generate electricity sufficient for all inhabitants occupies that parts of Indonesia; and this is also reason behind frequent black-out they are suffered of. It might be to overcome electricity shortage suffered by its middle and eastern parts that made Indonesia government under Soeharto in 1992 issuing a decree allows private parties to participate in electricity sector. And with the encouragement from the World Bank the decree had been developed into the introduction of International Power Producers (IPPs) and plan for unbundling and introducing further liberatisation (Thomas, Hall and Corral, 2009).

In this paper I try to make a flashback on how the union to challenge privatization and defending the right of public services. The PLN Union is fully aware of the privatization plan which would have directly and indirectly impacts on workers and the consumers. Despite the fact that the union was just established in 1999 but it has successfully campaigned against privatization of the electricity sector in 2004.

Trade Union: Changes, New Roles and Challenges

Almost immediately, the new union of PLN (or popularly known as SP. PLN-Persero) was faced with various workplace issues, particularly when the government introduced a new legislation, Law No. 20/2002, to liberalize electricity market in 2002, and thereby make it open for foreign investments. The law would have unbundled and privatized the country’s electricity system. The law allegedly was part of an agreement between Indonesia government and the World Bank in its October 2003 US $242.6 million loan package (PSI, 2004).

The PLN Union was established in 1999 after a long period of being obligated member of KORPRI, Indonesia Civil Servants Corps , and is now affiliated with Public Services International (PSI). The union has an estimated of 45,000 memberships all over Indonesia. The political change in 1997 and ratification of ILO Convention No. 87/1948 in 1998 have been interrelated in term of respect for workers rights to freedom of association (ILO, 1999). These two coincident processes opened the door, particularly, for public sector workers which was previously restricted to organize and to collective bargaining. As a result many unions have emerged in state owned enterprises, including the PLN Union.

Changes in this organization have led itself to transform and challenge a greater role as public sector union and its agenda. As public sector union, they have two options as their world and their workplaces are reorganized around them: they can either sit tight or try to defend the status quo or they can seize the initiative and try to influence the shape and those change (PSI, 1999). PLN Union chose the second option bearing in mind that as a new established union it must tackle many works especially one related to revitalize its memberships. This task was very important for further campaign mobilization and increasing the union resources. More than thirty year experience of being obligated member of KORPRI has made PLN Union to take priority in engaging member consciousness on the changing attitude and the expectation put on its shoulders related to its new roles as union organization, particularly role in labour-management partnership related to economic power resources of collective bargaining.

During the past time of being KORPRI member there was no “fight against management” phenomenon carried out by employees of PLN, but the situation has dramatically changed as they play their roles as union. Trade union is a collective organization, and the strategic capacity in trade union is a product of leadership and internal democracy (Hyman, 2007).

Union should not keep silent especially as the government wanted to implement power sector “reform” by issuing Law No 20/2002 on Electricity. The law mandates an “unbundling” of the state-owned electricity, PLN, and imposes competitive nature upon the electricity national market. To the PLN Union, however, the law illustrated “the dogmatic thinking on privatization and competitive market approach” (ICFTU, 2006). The union firmly resisted against the bill considering that electricity is according to Constitution 1945 Article 32 (2) “production lines important to State and containing livelihoods of people shall be controlled by State”. The union also believed that electricity is a tool of development and not commodity for profits.

Trade Union Fighting against Privatization

The union was ready to fight against privatization over the company but it had had internal challenges in preparing the members to such campaign against market fundamentalism and against the employer/government. The union needed a broaden influence particularly from their own members in order to organize collective mobilization through a series of actions and activities.

The establishment of Judicial Court (Mahkamah Konstitusi—MK) on 2001 (MK, 2009) had become “golden opportunity” for PLN Union to take legal challenge over the law. With its slogan “Institution for Overseeing Constitution” MK has been “the enforcer” and the power to review constitutionality of laws (Wrighter, 2005).

The PLN Union had set out strategic campaign and developed union resistance campaign: building alliance of coalition nationally and internationally, organizing and mobilizing members and local actors for advocacy, raising campaign fund, filing judicial review of the law, staging mass rallies, publishing campaign materials, and threatening to switch off the electricity power.

Politically, the action of filing judicial review of Law No 20/2002 the union took was strategic. After two month extensive discussions within the coalition, the Union and WGPSR (Working Group on Power Sector Restructuring) “concluded that the power sector restructuring programme that reflected in the law has conflicted with the Indonesia Constitution”, as promulgated in Constitution 1945, and set out to seek a judicial challenge through the constitutional courts (ICFTU, 2006).

But there was a challenge during the campaign itself as some members and union officers were not fully aware of the reasons behind the action and for against government. Most people themselves indirectly supported governments’ plan for privatization because they thought the state company was run ineffectively and hoped for a better service brought about of the privatization. Faced with this challenge, therefore, the union carefully selected campaign message to counter-ideology of privatization.

As stated by Daryoko, President of PLN Union at the time, during some public debates it was revealed that PLN and Government had to pay above market price the supplies they bought from private sector through the introduction of International Power Producers (IPPs) since 1992. “The IPPs were negotiated with cronies of the Suharto government, and as a result of the non-transparent and, according to many sources, corrupt, way in which the agreements were reached, provided for 50% more capacity than Indonesia actually needed. The IPPs were supported by a total of 27 PPAs, under which PLN undertook to purchase 80 per cent of plant capacity for a minimum of thirty years, at prices well in excess of PLN’s selling price. The currency collapse of 1998 made these prices utterly unaffordable for PLN, which was faced with bankruptcy unless it could cancel or renegotiate the agreements to reduce the cost of electricity”(Hall, 2009). Keep PLN to be state-owned enterprise with improved service, better performance and more effective and professional management was the theme for the Union’s campaign disseminated among communities.

Some strikes was held by PLN Union to push Government to review its plan; for example, national strike and threat to cut electricity during hari Idul Fitri (Islamic Festive day following a month-long Ramadhan fasting) in November 2003 (Tempointeraktif, 2003). The government insisted at the time to implement program of electricity unbundling by issuing a letter of General Directorate of Electricity and Energy Utilization and this situation had been forced PLN Union into no choice situation but staging national strike.

To pool support from international solidarity, PLN Union asked PSI to spread the campaign message internationally and provide an expert witness for Constitutional Court hearing. David Hall, Director of Public Services International, came to Indonesia during the legal hearing. He testified before the Court about the failure of power privatization in the UK. Finally, in December 2004, the Union won a landmark decision in the Constitutional Court, which cancelled the Law No. 20/2002 on Electricity. Significantly, the Court affirmed that electricity must be controlled by the state and that the provision of electricity by the state is a constitutional mandate (ICFTU, 2006)

Conclusion and Lesson Learned

I tried to catch up a bigger picture on how union would be able to contest globalization by reflecting on anti-privatization campaign held by the union. Globalization adversely affects workers; hence union has to campaigns to challenge against privatization and has the responsibility to defend workers rights and quality public services as well, particularly for the public sector unions.

Lopez said for labor the very real pressure of globalization demanded not only a new set of tactic but also new imagination with which to challenge the assumptions of the neo-liberal ideology (Burawoy, 2000).

Despite the successful outcome in the Court, the annulment of the law has not ended the privatization over energy services, and the government has since then introduced a programme of decentralization of electricity. And, sadly, in September 2009 Government has launched a new Law on Electricity which substantively is not different from the old one and been nullified by Judicial Court (Detikfinance, 2009).

The threats of privatization require public sector unions to simultaneously protecting the rights of public sector workers and to construct a progressive platform as a coherent response to globalization. Nevertheless, the campaigns in some ways have brought about advantages in increasing activism of union members. And this can be said a good progress for further development of awareness among workers for better future and stronger labor movement in near future.


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One thought on “An Alternative Strategy Fighting Electricity Privatisation: A Case of PLN Union in Indonesia

  1. Pingback: PLN Union Opposes Privatization « Working Indonesia

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