E.g., 06/20/2024
E.g., 06/20/2024
Indonesia's Labor Looks Abroad

Indonesia's Labor Looks Abroad

Indonesia, the fourth most populous nation in the world, is highly diverse in terms of both terrain and culture. Muslims, Christians, and Hindus, along with followers of other faiths, share this enormous archipelago in the waters between the Indian and Pacific oceans.

With a GNP per capita in 2005 of $1,280 according to the World Bank, it remains one of the poorer nations of Southeast Asia. Economic conditions vary; both poverty and wealth can be found in the capital, Jakarta, and the villages beyond.

This nation of over 225.5 million people has completed its recovery from the Asian financial crisis of the late-1990s but continues to grapple with a range of challenging issues. These include the December 2004 tsunami, which took 220,000 lives and devastated the coastal area of northern Sumatra, as well as substantial political upheaval, separatist movements, ethno-religious clashes, and a disruptive transition from a highly centralized system to a more decentralized and democratic system.

Indonesia is a quintessential labor-surplus nation. At the end of 2006, an estimated 11 percent of Indonesian workers (11.6 million) were unemployed, and underemployment was over 20 percent (45 million workers).

Not surprisingly, the two types of migration that most affect Indonesia involve emigration. First is an increasing level of migration to more developed nations, particularly those belonging to the Organization for Economic Cooperation and Development (OECD); here the flow is predominantly permanent and consists mainly of skilled migrants.

Second is the better-known, temporary movement of largely unskilled workers to the Middle East and elsewhere in Asia. Many of these migrants are women who work as domestics and are vulnerable to exploitation.

Quantifying the scale of the movement, however, is rendered difficult by the limited collection of stock and flow information on movements to and from the nation, and the fact that there are substantial undocumented flows out of Indonesia.

South-North Migration

Unlike several other large Asian countries, Indonesia has not been a major source of permanent settlers to OECD nations.

The largest community of expatriate Indonesia-born people is in the Netherlands, the country's former colonial ruler (see Table 1). An important component is the aging "Moluccan" group that opted to move to the Netherlands when the Dutch recognized Indonesian independence after 1949.


Table 1. Number of Indonesian Born in Selected Developed Nations
Country Year Number Source
Australia 2005 65,914 Australia Bureau of Statistics
United States 2005 75,370 U.S. Census Bureau
Canada 2005 10,660 Statistics Canada
New Zealand 2006 4,614 New Zealand Census of 2006
Netherlands 2002 137,485 Netherlands Central Bureau of Statistics
Japan 1999 16,400 OECD, 2001
Korea 1999 13,600 OECD, 2001

In 2002, an estimated 137,485 individuals born in Indonesia were living in the Netherlands. There were 264,100 second-generation Indonesians in the Netherlands in 1998, the most recent year for which estimates are available.

The fastest growing Indonesian communities are in the "new" migration countries, led by the United States and followed by Australia, Canada, and New Zealand (see Table 1).

In Australia, the number of foreign born from Indonesia increased 40 percent between 2001 and 2005. An important component in this movement has been the number of Indonesian-born students (mainly university level) studying in Australia as well as in other OECD nations. Although the student flow peaked in the year of the financial crisis, the number of students has held steady at around 20,000 per year (see Figure 2).


Figure 2. Indonesian-Born Student Arrivals in Australia, 1991-1992 to 2004-2005
Source: DIMIA Immigration Update, various issues and DIMIA unpublished data.

There is an increasing pattern of Indonesians on temporary residence visas (especially students) applying for permanent residence. This pattern is also evident in the United States, Canada, and New Zealand.

Indonesia has made headlines as a major country of transit for asylum seekers trying to reach Australia. In particular, groups fleeing from Iraq and Afghanistan have traveled to Malaysia or Thailand and have then entered Indonesia, from there traveling by boat to Australia.

Permanent Settlement in Asia

Although most Asian nations oppose permanent settlement of foreigners, more Indonesians are settling in other Asian countries. Among these Indonesians are the highly skilled and those who marry natives of other Asian countries. In Taiwan, for example, a number of Indonesian women have married Taiwanese men, forming the nucleus of a small, permanent Indonesian community.

The largest numbers are in neighboring Malaysia, which has a similar language, culture, and religion. Permanent settlement of Indonesians dates back five centuries, but migration was especially significant during colonial times. According to the 2001 Malaysian census, there were 1.38 million foreign born in the country, more than half of them from Indonesia.

However, the scale of recent permanent settlement of Indonesians in Malaysia is not known. Significant numbers of unskilled labor migrants settle permanently in Malaysia, but many do not become legal residents as permanent settlement of unskilled Indonesians is opposed.

The tendency for migrant workers to become permanent or long-term residents has been particularly marked in East Malaysia. The population of the state of Sabah has soared from 697,000 in 1979 to almost 3 million in 2004, and migration from Indonesia and the Philippines) has played a major role in this growth. There are an estimated 100,000 irregular migrants in Sabah and 138,000 in the West Malaysia state of Selangor, the majority of whom are Indonesians.

The expense and danger of detection at the border has encouraged some migrant workers from eastern Indonesia to settle permanently, or on a long-term basis, in Sabah rather than regularly return to their nearby Indonesian homes. One consequence has been an increase in the number of "stateless" Indonesians who have no status in Malaysia and whose Indonesian passports have expired. Some 35,000 Indonesian passports were issued to such "paperless" citizens in Malaysia in the first four months of 2006.

In Singapore, there is also a tradition of Indonesian immigration and large-scale labor migration. More recently, Singaporean men have brought over Indonesian wives. The number of Indonesian-born residents (excluding contract workers) in Singapore in 2000 was 32,785.

Labor Migration

Like several other Asian nations with a surplus of labor, Indonesia has become a major global source of contract migrant workers who secure jobs in another country for a limited period, usually around two years. Most legal international labor migration in Indonesia occurs through agents who are heavily involved in recruiting, placing workers in overseas jobs, and arranging the travel.

As elsewhere in Asia, there is substantial movement through official processes. However, an even larger number leave the nation legally but do not register as overseas contract workers (OCWs) with the Ministry of Labor, or depart from Indonesia without going through any official process. Also, since most workers are on two-year or longer contracts, the actual number of official OCWs abroad in any one year is greater than the numbers deployed in an individual year.

In mid-2006, the minister of labor reported there were 2.7 million Indonesians working overseas with official permission. This represents 2.8 percent of the total national workforce.

Until the 1990s, legal labor migration out of Indonesia was predominantly to the Middle East, but increasingly significant numbers have since moved to other Asian nations such as Singapore and Taiwan. The latter countries have been through a demographic transition and are experiencing shortages of workers.

Since 2001, the Middle East has once again become the top destination, with the number peaking at over 226,000 in 2004 (see Table 2).


Table 2. Number of Indonesian Overseas Workers Processed by the Ministry of Manpower, 2001 to 2005
(Single Year)
Middle East Malaysia/Singapore Other Total No. Percent Change
Over Previous Year
Sex Ratio
(Males/100 Females)
No. % No. % No. %
2005* 50,535 33 88,750 58 13,654 9 152,939 na 59
2004 226,688 59 131,141 34 24,685 7 382,514 +30 28
2003 183,770 63 95,542 33 14,382 4 293,694 -39 37
2002 241,961 50 168,751 35 69,681 14 480,393 +42 32
2001** 121,180 36 144,785 43 73,027 21 338,992 -22 80
Source: Indonesia Department of Labor, unpublished data; Departemen Tengara Kerja, Republic of Indonesia, 1998:14; Soeprobo, 2003 and 2006.
* Until June 2005.
** From 2001 the Ministry of Manpower was decentralized and there was less compulsion for regional offices to report to the central office the numbers of overseas contract workers deployed.

Most legal labor migrants are unskilled, and the majority of the migrants are women. These women are predominantly employed as domestic workers, particularly in Saudi Arabia, Malaysia, Brunei, Singapore, and Hong Kong. In fact, Indonesia is one of the largest countries of origin of female migrant workers who are employed in domestic situations as household help and caretakers.

According to research published in 2005, more than a million Indonesian female migrant domestic workers are employed in the Middle East and Asia. By tabulating reports from recent years, the largest numbers are in Saudi Arabia and Malaysia.

These women can be vulnerable to exploitation not only by virtue of being a migrant (often undocumented) and a woman, but also because local protection agencies do not view households as workplaces that can be regulated.

In contrast, males dominate the flows to South Korea, Taiwan, and Japan. So-called trainee programs have become more important in those areas.

Unauthorized Labor Migration

Perhaps the world's second-largest, long-term undocumented migration flow, overshadowed only by the traffic between Mexico and the United States, is that between Indonesia and Malaysia. It is a movement whose history goes back to precolonial times, and one that has reached very substantial levels in the last two decades.

The Indonesian director-general of Labor Placement Overseas estimated that, in August 2005, there were more than a million Indonesians abroad illegally. Of those, he estimated there were 400,000 in Malaysia, 400,000 in Saudi Arabia (illegally overstaying three-month pilgrimage visas), 20,000 in South Korea, and 8,000 in Japan.

The Malaysian home minister estimated that in late 2006 there were around 600,000 unauthorized migrant workers in Malaysia (most of them Indonesians) despite periodic sweeps, deportations, and amnesties.

An August 2006 article in the Jakarta Post explained how prospective labor migrants enter Malaysia via ferries leaving Batam in the Riau archipelago. They gain entry as tourists through Plunggur in the southwest of the Malay Peninsula by showing they have MS1000 (US$320). There are other points of entry in West and East Malaysia where a similar process applies.

Males, who dominate the flow, are concentrated in the plantation, timber, manufacturing, and construction sectors. Malaysians generally shun these low-skilled, poorly paid and low-status jobs.

Malaysia has conducted numerous legalization campaigns in the last 15 years. An amnesty in peninsular Malaysia in 1993 saw some half a million Indonesian undocumented migrants come forward. Of these, 180,000 worked in construction, 170,000 on plantations, 40,000 in manufacturing, 40,000 in services, 60,000 in hotels, and 50,000 as household domestics. In 1996, some 300,000 more workers were legalized.

Deportation from Malaysia

There have been a number of crackdowns on unauthorized Indonesian workers in Malaysia, especially since 2002, when Malaysia passed a law that introduced a range of new, harsher penalties for migrant workers and their employers.

After riots involving Indonesian migrant workers at a Malaysian textile factory and construction workers in other regions in 2002, Malaysian Prime Minister Mahathir Mohamad said the government would tighten conditions for recruiting foreign workers and give priority to non-Indonesians. At the same time, the Malaysian government stepped up its efforts to detect, arrest, and deport undocumented Indonesian workers.

But some of those returning home were held up at transit points in Indonesia and had to temporarily stay in camps. In a camp on the small island of Nunakan, 70 people died because of the crowded and unsanitary conditions.

In mid-2004, Malaysia announced plans to send back 600,000 illegal migrant workers by the end of that year. In a different type of amnesty, Malaysia offered to allow those who left voluntarily to return once they were registered and their paperwork had been processed. The deadline for leaving was pushed back to February 28, 2005, in response to the tsunami devastation in Indonesia, and what many called a violent crackdown began March 1.

Around 400,000 left in the next nine months. Again there were reports of thousands of Indonesians stranded in camps.

These deportations have upset Malaysian employers, including multinational companies from countries like Taiwan, because they deplete the labor supply. Although deportations have continued, there is increasing evidence that Malaysia recognizes migrant workers are a necessary, long-term, structural requirement for the economy.


The amount of money Indonesian workers send home each year has grown rapidly in recent years, reaching $3 billion in 2005 (see Figure 3).


Figure 3. Remittances to Indonesia, 1983 to 2005
Source: IMF Balance of Payments Statistics Yearbooks, Soeprobo 2006, p.8; Asian Migration News, 15-31 January 2006; Migration News, July 2006.

However, official remittances probably represent less than a half of the total, with large amounts sent through unofficial channels and brought back in cash and gifts. Also, measuring the flows is problematic as Indonesian data are particularly poor.

The Indonesia case demonstrates that examining remittances at a national level doesn't always reflect their true impact because most migrants come from particular regions and localities within those regions. In Indonesia, the main sending areas are rural Java and eastern Indonesia, areas where it has become customary for some groups to seek work overseas.

Researcher Titu Eki found that the estimated remittance income in East Flores kabupaten (regency) in 1997 was four times greater than the budget of the entire provincial government, although East Flores had only 5.2 percent of the province's population. Remittances received in a kabupaten in East Java province in 1995 amounted to about US$7.2 million, several times greater than the entire government budget of the kabupaten.

Yet the development potential of remittances in poor, peripheral areas is largely not being realized. This is partly due to the lack of opportunities for local investment and partly due to a lack of government involvement.

Skilled Labor Migration Inflows

In contrast with outflows, one characteristic of recent international migration into Indonesia was an influx of skilled expatriates due to the inability of Indonesian training institutions to supply enough professionals (especially engineers, scientists, managers, accountants, etc.) to cope with the structural change and economic growth of the early 1990s. As a result, experts came from Australia and other more developed countries, as well as the Philippines and India.

Table 3 indicates the official numbers of foreigners in Indonesia prior to the onset of the financial crisis of 1997; this is the most recent data available. While undoubtedly underestimating the numbers involved, it indicates that there were about 100,000 official temporary residents in Indonesia in 1995, more than half of them in Jakarta, the focus of most foreign investment activity.


Table 3. Indonesia: Number of Foreigners, 1995
Region of Origin Permanent Residents Temporary Residents Total
Jakarta Total Jakarta Total
Asia 23,329 217,595 34,779 58,185 275,780
Africa 28 33 194 321 354
Europe 436 1073 11,787 18,090 19,163
Australia 54 141 3731 5984 6,125
North America 137 309 7,579 13,060 13,369
Total 27,984 219,151 58,070 95,640 314,791
Source: Indonesian Yearbook 1995, 45-46.

Significantly, the largest contributor of these migrants was Asia. This was associated with high levels of investment in Indonesia by companies from Taiwan, Japan, South Korea, and Hong Kong prior to the crisis. Although it is likely that the number of skilled professionals in Indonesia decreased as a result of the crisis, it is not known if the number has rebounded.

Government Policy

Indonesia remains less affected by brain drain than many nations, not only because it is the world's fourth-largest nation but also because the outflow to developed countries is still small in absolute terms. Hence, most of the policy concern focuses on unskilled labor emigration.

Indonesia has been slower than the Philippines and other migrant-source countries to develop effective policies and programs to protect labor migrants. However, this attitude is changing with both government and nongovernment organizations (NGOs) taking more action. In particular, NGOs are organizing migrant workers, providing information and training, raising public awareness of issues concerning migrants, and documenting the migration experience.

One example is the signing of a memorandum of understanding with Malaysia to increase protection of Indonesian workers, especially domestics, in mid-2006 in Bali. Employers are now required to sign contracts that specify the rights and obligations of both parties, and they may no longer withhold workers' wages. In addition, workers have the right to practice their religion, vote in the general election at the Indonesian embassy, and have disputes settled in Malaysian courts.

The Indonesian government also has set up a directorate to improve the welfare of migrant workers and established regular inspection visits by Indonesian officials of workplaces abroad. A presidential decree put the maximum processing time of migrant workers at 24 days instead of up to six months.

The Indonesian government has also occasionally halted deployment of workers to individual countries. For example, according to Asian Migration News, it briefly banned sending domestic workers to Bahrain in 2005 because manpower agencies refused to accept new regulations regarding a minimum salary and sick and annual leave entitlements.

A similar ban was imposed on the United Arab Emirates in 2005 in response to human rights, but, as with other such bans, it had little impact on the outflow of Indonesian migrant workers.


Emigration has not affected Indonesia as greatly as some other Southeast Asian nations, such as the Philippines. Moreover, in such a large nation, its impact has been limited.

Yet the effects have been significant particularly in some regions of the country, and they have been increasing. The Indonesian government has been slower than the Philippines and other labor-migrant source countries to develop effective policies and programs to maximize the benefits of labor migration to migrants and the nation.

However, both government and nongovernmental organizations (NGOs) have significantly increased their activity in migration-related issues, particularly in the protection of migrant workers. The Indonesian government has been justly criticized in the past for failing to actively protect its migrant workers, especially domestic workers, from routine abuse. Although NGOs are still somewhat critical, the Indonesian government is moving in the right direction.


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