Indonesia Grapples with Evolving Forms of Modern Slavery and Increasing Scrutiny

JAKARTA – When most Indonesians hear the term “modern slavery,” they think of perbudakan in its historical sense – people in chains, legally owned by others, with no freedom at all. In reality, modern slavery goes far beyond this. It is about an absence of choice: situations where workers lack the real freedom to stop working as of threats, coercion, deception, or debt .

The Expanding Scope of Modern Slavery

In recent years, the scope of modern slavery has been increasingly expanded to include abusive labor practices and the worst forms of child labor. Vulnerability to modern slavery in Indonesia is primarily driven by discrimination against minority groups, including its more than 2,300 indigenous groups, only around 1,300 of which are formally recognized by the government . Without legal recognition, these communities are deprived of collective land rights, increasing their susceptibility to exploitation.

International Pressure and Legal Consequences

As more countries adopt laws to combat modern slavery, Indonesian companies face growing scrutiny. Labor practices that might once have passed as “business as usual” can now trigger legal and reputational consequences abroad, including lost contracts, blocked exports, market exclusion, and even civil or criminal liability.

The UK Modern Slavery Act

The UK was an early mover with its Modern Slavery Act of 2015. The law requires large companies that do business in the UK, including foreign companies, to publish an annual statement explaining how they address modern slavery risks in their operations and supply chains. A company does not need to be based in the UK to be caught by the law. For Indonesian businesses, this creates two main risks: reporting requirements for those operating in the UK and increased scrutiny for those supplying UK customers. Even as the act does not impose automatic fines, failures can lead to public naming, court orders, lost contracts, and serious reputational damage. The recent case involving allegations against Dyson, where Nepali and Bangladeshi migrant workers claimed forced labor and abusive practices at a Malaysian supplier, allowed the workers to bring civil damages claims directly against Dyson Group in the UK, illustrating the potential for legal action.

The EU Corporate Sustainability Due Diligence Directive

Under the European Union’s Corporate Sustainability Due Diligence Directive (2024), very large EU and non-EU multinational companies meeting certain thresholds are required to actively identify and address human-rights risks across their “chain of activities,” including foreign subsidiaries and suppliers. Failure to comply can lead to investigations and financial penalties imposed by national regulators. The directive also provides a basis for civil claims in national courts, allowing affected individuals and NGOs to seek compensation, potentially exposing Indonesian operations to direct legal action in European courts. Companies caught by the directive are legally required to scrutinize labor practices throughout their global supply chains, including in Indonesia.

US Trade Enforcement

The United States takes a different approach through trade enforcement. Goods suspected of being linked to forced labor can be detained or seized at the US border, shifting the burden to the importer to prove the absence of forced labor at any stage of production. For Indonesian exporters, this means a single problematic component or supplier could result in delayed shipments, canceled contracts, and exclusion from the US market.

Beyond Traditional Sectors: The Risk of Extreme Price Competition

While modern-slavery risks in labor-intensive sectors are well-documented, the impact of extreme price competition, particularly in outsourcing and subcontracting, is often overlooked. When labor is priced at levels that cannot realistically support legal wages, insurance, and statutory protections, the pressure inevitably falls on workers. This can lead to perpetual “temporary” contracts, discouragement of asserting rights, and economic dependence on intermediaries.

Indonesia’s Strengthening Safeguards

Indonesia is strengthening its human rights and manpower safeguards through both executive and legislative initiatives. The government has approved the drafting of a recent presidential regulation on business and human rights, expected to set out more detailed expectations for businesses to respect and protect human rights, including through due diligence processes. This development builds on the existing National Strategy on Business and Human Rights and reflects broad engagement with ministries, industry, and civil society. Discussions are also underway in the House of Representatives about revising the current Human Rights Law to modernize its framework and potentially include corporate human rights compliance.

The Rise of Cyber Scams and Human Trafficking

Thousands of Indonesians have been lured abroad with promises of well-paying jobs, only to turn into victims of transnational scam operators. Between 2020 and 2024, Jakarta repatriated over 4,700 Indonesians entangled in online scam operations . These individuals are often detained in heavily guarded compounds and forced to carry out online scams under threat of violence and coercion, receiving minimal compensation for their work.

Looking Ahead

Even the appearance of forced labor or the erosion of basic worker protections can now carry serious commercial consequences. Modern slavery is no longer limited to trafficking or extreme abuse; it can also arise from child labor, debt-based recruitment, punitive treatment of workers, or work arrangements that leave people with no real choice. For both foreign companies with suppliers or operations in Indonesia and Indonesian companies with global ambitions, managing these risks requires more than formal policies. Companies are increasingly expected to set clear labor standards, apply them across suppliers and subsidiaries, and actively check that they are followed. In today’s regulatory environment, “not knowing” what happens in the supply chain is no longer an acceptable excuse.