The politics of corporate social responsibility in Indonesia

Abstract

In July 2007, Indonesia became the first country to introduce mandatory legal requirements for corporate social responsibility when the Indonesian parliament passed Law 40/2007 on Limited Liability Companies. This paper examines the political dynamics that shaped this and subsequent regulatory developments related to corporate social responsibility and assesses the likely future direction of Indonesia's corporate social responsibility policies. We argue that policy debates over corporate social responsibility in Indonesia have reflected a struggle between the dominant sections of Indonesia's capitalist class, local communities that have been negatively affected by corporate activity and their allies in the non-governmental organization movement, and predatory elements in the political parties and bureaucracy for control over the economic resources generated by the activities of major corporations in that country. We argue that the dominant sections of Indonesia's capitalist class have so far won this struggle in large part because of their instrumental connections to senior Golkar figures within the government. With respect to the future direction of corporate social responsibility policy, we argue that much will depend on the outcome of future presidential elections. If these elections produce a political leadership that supports a mandatory approach to corporate social responsibility, there is some chance that mandatory requirements for corporate social responsibility in Law 40/2007 will be implemented. If they result in the election of a leadership that does not support a mandatory approach to corporate social responsibility, by contrast, such a change is unlikely.