YEAR-END LABOR STRIFE SEEN LESS LIKELY IN VIETNAM

UNCLAS SECTION 01 OF 02 HANOI 003081

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TAGS: ECON ELAB PGOV ETRD EIND EINV VM
SUBJECT: YEAR-END LABOR STRIFE SEEN LESS LIKELY IN VIETNAM


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REF: A) HANOI 3019 B) HCMC 1368


1. (SBU) Summary: One year after a wave of labor unrest hit
lower-paying foreign-owned factories in Vietnam, workers, businesses
and government officials say that similar labor strife is less
likely now. Labor experts state that tensions are lower because of
last year's government-mandated wage increases, a better
understanding of the labor law and enhanced efforts by the
Government of Vietnam (GVN) to educate workers and address labor
concerns ahead of the New Year (Tet) holiday when workers need cash
and often strike. These intensified efforts are part of a general
movement within the GVN to focus more intently upon industrial
relations in the understanding that labor tensions are harming the
country's image. Foremost among these efforts is a new National
Labor Relations Board at the Ministry of Labor, Invalids and Social
Affairs (MOLISA),which will serve as the government focal point for
industrial relations and labor disputes. The International Labor
Organization applauded the move. End Summary.


2. (SBU) One year after a wave of labor unrest hit lower-paying
foreign-owned firms in Vietnam, workers, businesses and government
officials say labor relations have improved significantly in recent
months. While they note there is always the potential that
cash-strapped workers will strike in the run-up to the lunar New
Year, or Tet, holiday in February, they say increased domestic media
attention to labor issues and a range of government, non-government
and private sector efforts in the wake of strikes have served to
reduce labor tensions, particularly at the most strike-sensitive
Taiwanese and Korean companies where the majority of strikes
occurred. "The situation is nothing like it was last year," said Le
Thi Nu, a seamstress for Senso Company, a Japanese-owned kimono
maker in Binh Duong province. "I think a lot of companies have
learned their lessons from last year."


3. (SBU) The strikes drew international attention to Vietnam's labor
tensions in early 2006, leading some to speculate about Vietnam's
stability as a manufacturing base for its growing apparel and
footwear industries, accounting for more than 23 percent of
Vietnam's exports in 2006. While many firms attributed the strikes
to a combination of confusion and heightened expectations amid a
long-rumored wage increase (the Prime Minister decreed a 40-percent
minimum wage hike at foreign-owned firms in January),labor experts
also argued that increasing wage pressures, a lack of capacity at
the Communist Party-linked national labor union and labor laws
designed for a non-market economy also contributed.


4. (SBU) Included in the government efforts are a newly revamped
strikes law (reftel) and pre-Tet campaign by MOLISA to address any
incipient labor conflict. As part of this campaign, MOLISA
officials visited Ho Chi Minh City in November to gauge the level of
worker discontent and encourage firms and labor organizations to
address worker concerns proactively, said Nguyen Manh Cuong, the
director of a new National Labor Relations Board to handle
industrial relations at MOLISA. MOLISA is encouraging firms to
reach out to workers and pay early on their traditional 13th month
bonuses for Tet, which takes place in February. Other organizations
involved in the preventive measures include the Vietnam General
Confederation of Labor (VGCL),the Vietnam Chamber of Commerce and
Industry (VCCI) and local Departments of Labor, Invalids and Social
Affairs (DOLISAs). Phung Quang Huy, General Director of the
Employer Activities Bureau at VCCI, said he spent the greater part
of November in southern Vietnam meeting with enterprises and
officials, and holding a conference for hundreds of company
representatives from the heavily industrialized Bin Duong and Dong
Nai provinces. "Workers already have much better knowledge," he
said.


5. (SBU) The International Labor Organization (ILO),which runs a
program to improve industrial relations in Vietnam, is also working
to prevent worker unrest by holding a series of trainings at the
most strike-sensitive companies in the week of December 25-29.
These companies include a range of Taiwanese and Korean garment and
footwear manufacturers in and around Ho Chi Minh City and Binh Duong
and Dong Nai provinces. The potential for strikes "is hard to
predict, but it is not going to be anything like last year," said
Jan Sunoo, Chief Technical Advisor of the ILO Industrial Relations
Project.

NEW GVN INDUSTRIAL RELATIONS FOCUS
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HANOI 00003081 002 OF 002




6. (SBU) The intensified efforts are part of a general effort within
the Government of Vietnam (GVN) to focus more intently upon labor
relations, with the understanding that continued labor strife could
harm the country's image and undercut economic growth. Foremost
among these efforts is the creation at MOLISA of a new National
Labor Relations Board, which will serve as a focal point for all GVN
industrial relations and labor disputes. The ILO's Sunoo has called
the creation of the department "from all perspectives a good move"
and "very much an acknowledgement by (the GVN) that it has to take
industrial relations more seriously."


7. (SBU) The director of the unit will be Nguyen Manh Cuong, Deputy
Director of the International Cooperation Department (quoted above),
who has a reputation as the ministry's most progressive and
strategic thinker, although reportedly some hardliners distrust his
U.S. education. Cuong is a Fulbright Scholar who received a
master's degree at Princeton's Woodrow Wilson School, where he
focused on labor relations.


8. (SBU) Cuong told Econoff that the board will be in charge of
spearheading GVN policy on industrial relations, focus on improving
the quantity and quality of collective bargaining agreements at
foreign and domestic firms and act as the government's point of
contact in labor disputes. The unit will begin by drafting new
collective bargaining agreements at 20 willing firms, an initiative
seen as crucial because collective bargaining agreements in Vietnam
are usually not negotiated with workers and often only repeat the
labor law's vague language on conditions and wages.

COMMENT
--------------


9. (SBU) The 2006-2007 New Year strikes season will provide a key
test of the GVN's efforts to deal more systematically with labor
relations. So far this fall, only one strike has been reported in
southern Vietnam, the cause of which was not labor conditions, but a
company's decision to relocate its production factory outside of
HCMC. We are encouraged by the steps we have seen taken, though
more efforts need to be made. We must necessarily take a
wait-and-see attitude toward the National Labor Relations Board. It
is discouraging, meanwhile, that one HCMC government official was
demoted recently (ref B) at the urging of HCMC trade union
representatives because she spoke candidly about weaknesses in
Vietnam's labor system during an American Chamber of
Commerce-sponsored seminar (Note: We understand the official will
likely leave DOLISA to work at a new organization in the near
future. End note.)


10. (SBU) Thus, even though labor tensions appear to have waned for
the moment, Vietnam is facing a moment of labor transition.
Decisions made during this time will impact the labor market for
years to come. As noted in reftel A, the GVN is currently writing
implementing decrees for its strike law and the USG has the chance
to weigh in on these. For this reason, post recommends holding a
U.S.-Vietnam Labor Dialogue meeting in the first half of 2006,
perhaps focusing on the theme of collective bargaining agreements to
assist the GVN and to support the freedom of association in Vietnam.


ALOISI