Uganda Makes Progress on GSP/AGOA Labor Complaint

UNCLAS NAIROBI 002419

SIPDIS

SENSITIVE

DEPT FOR AF/E, AF/RSA, EB/TPP/MTA, AND DRL/IL
DEPT ALSO PASS TO USTR FOR BILL JACKSON
DEPT ALSO PASS TO LABOR FOR PATRICK WHITE AND JIM SHEA

SIPDIS

E.O. 12958: N/A
TAGS: ELAB AGOA ECON ETRD PHUM PGOV UG
SUBJECT: Uganda Makes Progress on GSP/AGOA Labor Complaint
Issues

REF: 05 Nairobi 5184

SENSITIVE BUT UNCLASSIFIED


1. (U) Summary: Regional Labor Attache's second visit to
Kampala found encouraging progress on addressing the worker
rights issues described in the AFL/CIO petition seeking to
revoke Uganda's trade privileges under the General System of
Preferences (GSP). Uganda has passed four significant labor
reform laws and negotiations are underway over union access
in the textile industry. The International Labor
Organization (ILO),which helped draft the new labor laws,
considers the final version of the laws passed by Parliament
to be compliant with international labor standards. Unions
are more free to organize and operate; labor inspectors will
more than double in number; and the Industrial Court has
more power and independence. In the historically anti-union
textile industry, the textile union has been meeting
regularly with manufacturers to finalize a union recognition
procedural agreement that will pave the way for a collective
bargaining agreement. LabAtt and Embassy Kampala will
continue to use opportunities with senior GOU officials to
advocate continued attention to implementing the labor laws
and resolving the labor issues, and hope that Washington
agencies will do the same. End summary.

Labor Reform Laws' Status
--------------


2. (U) Regional Labor Attache (LabAtt) Randy Fleitman
visited Kampala May 8-11 to follow up on progress on the
worker rights issues identified in the GSP petition filed by
the AFL-CIO against Uganda. He met with textile union
leaders, the Labor Commissioner, employers, the ILO, and
President Yoweri Museveni's AGOA advisor. All agreed
Parliament's March passage of the labor reform laws was a
significant achievement and demonstrated political will to
protect Uganda's African Growth and Opportunity Act (AGOA)
trade benefits included under the GSP. The president signed
the new laws on May 31, 2006.


3. Parliament passed the four labor laws March 29, 2006.
David Ogaram, Commissioner of Labor at the Ministry of
Gender, Labor, and Social Development (MGLSD),explained
that Parliament made only two minor changes to the draft
bills principally drafted by the ILO and previously sent to
Washington agencies: maternity leave was extended from 6
weeks to 60 working days, and four days of paternity leave
was added. LabAtt will forward the changes or the texts of
the laws to Dept. of Labor for its review. According to
sources in Parliament and the Labor Ministry, the reform
bills provide that:

- No minimum number of members is required to establish a
union and register it with the government.
- The Registrar must make its decision on a union
registration application within 90 days.
- Unions are not required to represent a minimum percentage
of workers in order to be recognized by an employer.
- Every District will be required to have a labor officer.
- The Industrial Court will be funded directly by the
national budget (not through the Labor Ministry) and become
functional.
- The Industrial Court is elevated to the status of a High
Court, giving it the power to enforce its decisions by
imposing fines.
- The Industrial Court has the power to re-instate employees
it finds were improperly dismissed.
- Aggrieved parties (workers or employers) can petition the
Industrial Court directly, rather than having to file
petitions through the Labor Ministry.
- The time line and requirements for going on strike are
shorter and simpler.

Implementing the New Labor Laws: Show Me the Money
-------------- --------------


4. (SBU) Labor Commissioner Ogaram told LabAtt the budget
allocation for the Industrial Court received a four-fold
increase, and he anticipated cases would be filed there
soon. (Note: Ogaram said no cases are currently pending,
which Labatt interpreted as an indication that workers and
employers recognized the Court's dysfunctional status. End
note.) Ogaram admitted that further budget increases may be
needed, noting the Court Clerk does not even have a
motorcycle on which to deliver summonses to employers.



5. (SBU) Ogaram said the Ministry of Labor had already
started restructuring to facilitate its implementation of
the new laws. The Ministry plans to divide into two
sections: Industrial Relations and Inspections, and
Employment Policy and Statistics. The Ministry for Public
Service must review the Ministry's restructuring proposal
and forward it to the Cabinet for approval.


6. (SBU) Ogaram said the new laws would require a large
increase in the Ministry's staff, including statisticians,
macro-economists and safety and health officers. The number
of labor inspectors based in the Ministry in Kampala would
rise from four to 12. The new law also mandates a labor
officer for all 69 Districts. District labor officers were
optional under the old law, and only 28 districts had one.
Ogaram stated the Ministry would have to convene a
tripartite group (government, labor and employers) to draft
implementing regulations for the new laws. Although some
areas in the laws were specific enough for immediate
enforcement, Ogaram believed very detailed regulations were
needed in some areas, including safety and health medical
exams and strike action procedures.


7. (SBU) Ogaram acknowledged that increased GOU resources
would not be available until a national budget supplemental
was considered by Parliament, or the 2007 budget. In the
meantime, he planned to draft a detailed request for
assistance to give to the ILO at the June meeting in Geneva,
the World Bank, the Scandinavians and other potential
donors. He hoped Denmark would help fund inspector
training. LabAtt noted the USG had no resources for funding
these processes, but offered to try to arrange a digital
video conference with the U.S. Department of Labor to
discuss inspector training curriculum and procedures.


8. (SBU) Ogaram said he is working closely with the textiles
union in its negotiations with manufacturers. He agreed
with the union that the proposed text from the Textile
Manufacturer's Association of Uganda (TEMAU) was too
restrictive in who was eligible to join the union. However,
he noted that none of the manufacturers or union leaders had
experience negotiating union agreements. Although one of
the textile manufacturers, Apparels Tri-Star Ltd., had long
resisted unionization, Ogaram applauded its recent decision
to finally join the Federation of Ugandan Employers (FUE),
which has the capacity and experience to improve the
company's labor relations. He also supported LabAtt's
suggestion that TEMAU fund a training seminar on ADR and
negotiating procedures for its members and the union.

Union Excited but Wary
--------------


9. (SBU) LabAtt met with Uganda Textiles, Garments, Leather,
and Allied Workers' Union General Secretary Catherine Aneno
and Chairman Eileu Cosmas, together with the leader of the
break-away Confederation of Free Trade Unions (COFTU) and
other COFTU member unions. They welcomed the new reform
laws and President Museveni's implied promise in his May Day
speech to provide more resources for the Industrial Court.
They argued that donors should focus their resources on
supporting unions for organization and recruitment, rather
than support strengthening labor dispute resolution
mechanisms. They claimed that if a union could organize an
overwhelming percentage of the workers at a factory, the
employer would recognize the union, even without an
Industrial Court Ruling. The union leaders welcomed
LabAtt's suggestion that it participate in an employer-
funded joint training seminar on ADR and negotiating
procedures.


10. (SBU) Aneno confirmed the union had delayed responding
to TEMAU's draft recognition procedural agreement in order
to solicit advice from the International Textile, Garment
and Leather Workers Federation (ITGLWF) and the Solidarity
Center. Aneno confirmed she had recently received the
solicited input and would send the union's response to
TEMAU that week. She explained that Section 2 of the
proposed agreement, "Scope of Unionized Employees," was too
restrictive, leaving few if any employees eligible for union
membership. Aneno argued that this issue and the Dispute
Settlement procedures detailed in Section 3 of the proposal
belonged in the CBA instead, where they could be negotiated
and revised when necessary.


11. (SBU) Aneno also warned that the union strongly opposed
TEMAU's proposal to reclassify many of their workers as
contractors in a piece rate system, which would render them
ineligible for union membership. She claimed that no other
Ugandan manufacturer uses a piece rate system, and neither
do any textile or garment producers in the Organization for
Economic Cooperation and Development (OECD) countries. She
noted that many of the sewing machines were old and broke
down frequently, which would make it difficult for workers
to meet production targets. She also believed a piece rate
system would set workers against each other and make it
easier for employers to dismiss workers.

ILO Awareness Raising Project Ready to Publicize New Laws
-------------- --------------


12. (U) The ILO Awareness Raising Project Office in Kampala
is still surviving on the remnants of Department of Labor
funding, using radio programs and documentaries to increase
general understanding of Ugandan labor laws and worker
rights. Project Coordinator Jackie Banya Adongakulu and her
assistant Beat Mutyaba told LabAtt they had already
developed plans to publicize the labor reform laws. They
believed that, as people came to understand the new laws,
they would press the GOU and Parliament to devote more
resources for implementation.

Phenix and Nytil's Industrial Position
--------------


13. (SBU) A representative of Apparels Tri-Star Ltd. said
Manager Kananathan was out of the country, so LabAtt visited
the other two TEMAU members to discuss labor conditions and
their competitive interests. Phenix specializes in
exporting 100% organic cotton yarn to Kenya, Tanzania,
Mauritius, Ethiopia, Egypt, and now, Europe. Managing
Director Yuichi Kashiwada explained that Phenix produces
about 600 tons of yarn per year, and plans to expand into
knitting organic cotton fabric and then garment production
with financing from a Japanese bank. Phenix is seeking
certification from Germany's BioEquitable Forum for its 100%
organic label, Environment ISO-14,000, and Fair Trade
practices, which require producers to meet certain labor
standards. EcoSat is the inspecting organization.


14. (SBU) Phenix understands that organic cotton would
receive AGOA benefits, and is interested in the U.S. market.
Kashiwada sent a representative to the Magic tradeshow in
Las Vegas, and accompanied President Museveni to Washington
and New York. Unfortunately, a U.S. buyer's request for
10,000 lbs of organic cotton products was beyond Phenix's
capacity, so Kashiwada will focus on European buyers while
trying to boost production capacity.


15. (SBU) Nytil Picfare (formerly known as Southern Range
Nyanza) Chairman Kishor Jobanputra said a trial AGOA export
two years ago demonstrated that high transportation costs
for inputs and outputs made their products too expensive to
compete in the U.S., or with China and India in export
markets. Nytil produces its own fabric, linens and clothing
for East and Central Africa, and has developed its own brand
for marketing. Jobanputra recommended the EAC countries
build up a regional market for cotton, yarn, fabric, and
products and protect it from imports with higher tariffs to
encourage growth in the textile industry and job creation.
Uganda and Tanzania produce 180,000 tons of medium quality
cotton per year. Nytil could boost its fabric production
from 1 million meters per month to achieve competitive
economies of scale if Uganda and the EAC had an industrial
policy protecting Nytil from Chinese firms with access to
low-interest financing. He argued that more government
support would compensate for the costs of recognizing the
union.


16. (SBU) Besides competition from cheap, low-quality
Chinese and Pakistani products, Jobanputra complained that
Chinese firms have pirated his trademark with counterfeit
products smuggled in without paying the tariff or value
added tax. He said the Bureau of Standards had done nothing
about his complaint. Nytil subsequently sent samples of
counterfeit linens to the Embassy to demonstrate his point.


17. (SBU) Both Jobanputra and Kashiwada discussed bad
experiences with militant workers and claimed the AFL-CIO
petition's allegations were inaccurate. Both acknowledged
the new union leaders were an improvement, but said tensions

remain and workers still do not understand the pressures
globalization puts on manufacturers. They supported
LabAtt's proposal for TEMAU to fund a training session on
ADR and negotiating procedures that would help illustrate
the need for partnership. Both welcomed the new labor laws
for providing a more predictable regime. TEMAU hired the
Federation of Ugandan Employers to develop standardized
terms and conditions of employment as a basis for
negotiating a CBA, and it would like to see Uganda's smaller
producers raise their standards to TEMAU's. Kashiwada
defended TEMAU's proposal to put workers on a piece rate
system with a fixed monthly salary and bonuses for more
productive workers. He noted that China and Indonesia used
the system to achieve both high quality and quantity. TEMAU
would try to convince the union to accept the proposal by
stressing that experienced, productive workers could earn
much more under the piece rate system. LabAtt pointed out
that neither China nor Indonesia are admired for their
respect for worker rights, and predicted it would be very
difficult to sell the proposal to the union.

Federation of Ugandan Employers (FUE); Moderating Influence
on TEMAU?
-------------- --------------


18. (SBU) Executive Director Rosemary Ssenabulya found it
encouraging that Tri-Star had finally decided to follow
Phenix and Nytil in joining the FUE. The textile producers
had little or no experience dealing with unions, and TEMAU
had contracted with FUE for advice on negotiations and to
prepare a consolidated human resource manual with policies,
terms and conditions of service. The manual has 12
extremely detailed chapters that include policies on issues
such as disciplinary procedures, sexual harassment,
discrimination and occupational safety, health and
environment. LabAtt suggested that, based on experiences
in Kenya, it would be useful to propose incorporating the
provisions on sexual harassment into the CBA. Ssenabulya
said FUE had suggested that TEMAU fund a training seminar
for management, unions and GOU on ADR and negotiating
procedures. She said FUE had previously organized a
successful seminar for the plantation workers union and
management. She believed the union would find such a
seminar a credible exercise, even if it was organized and
funded by employers.


19. (SBU) Ssenabulya stressed the GOU's responsibility for
providing the resources for hiring, training and equipping
new labor inspectors. Under the current decentralization
policy, District Labor Officers are recruited and paid by
District governments. It appeared the Labor Ministry
planned to re-centralize the labor inspectorate by making
all District Labor Officers employees of the Ministry. She
said FUE had submitted a proposal to create an autonomous
labor inspectorate under the Labor Ministry to handle
District-level inspection duties.

Child Labor Policy
--------------


20. (U) On a separate issue, Ssenabulya said the FUE has not
developed a policy for its members on combating child labor.
However, the tea, sugar and rice sectors have child labor
committees, some CBA's include child labor provisions, and
FUE has provided training on child labor for many employers.
Ssenabulya agreed to review the Federation of Kenyan
Employers' child labor policy drafted under the ILO-IPEC
program and to work on developing a similar policy in
Uganda.

President's AGOA Advisor on Implementing the New Laws
-------------- --------------


21. (SBU) Special Presidential Assistant on AGOA and Trade
Susan Muhwezi said she was not sure how the Labor Ministry
planned to incorporate the new inspectors. She believed
Parliament intended for the District Labor
Officers/inspectors to be GOU civil service employees hired,
trained, paid, and equipped by the Labor Ministry, but
housed in the District Government offices. She agreed to
check with the Labor Ministry on how it planned to proceed.


22. (SBU) Muhwezi said that TEMAU members had not seen any
advantage to accepting the union, but working together on
finalizing the reform laws had opened their eyes to the
potential benefits as well. She acknowledged the importance

of building both workers' and employers' awareness of the
new laws and said her office would work with the ILO project
office. LabAtt stressed the importance of GOU
implementation of the new laws through budget allocations to
the Labor Ministry and Industrial Court as a further
demonstration of continued political will to address the
issues raised in the GSP petition. She noted that, although
it was too late to incorporate increases in the budget
scheduled to be published in June 2006, the Labor Ministry
could apply for a budget supplemental.

Comment
--------------


23. The Parliament's passage of the labor reform package
made significant improvements for workers rights in Uganda,
but the practical effects of the new laws will only be felt
if the Labor Ministry implements and enforces the laws. The
Labor Ministry will need time to restructure and request a
larger share of the national budget. All interlocutors
shared concerns about the GOU's sustained political will and
financial ability to implement the new laws. Although
frustrated by the delays in negotiating the union
recognition procedural agreement, the Labor Commissioner and
the two parties to the negotiation accepted the inexperience
of both sides made such delays inevitable, both now and in
the future. The union is still wary of employers,
especially Tri-Star, interpreting their actions as being
aimed to weaken the union. While the progress to date is
encouraging, the workers' actual conditions have not changed
significantly, and LabAtt believes it is too soon to close
the petition review. LabAtt and Embassy Kampala will
continue to use opportunities with senior GOU officials to
advocate continued attention to implementing the labor laws
and resolving the labor issues, and hope that Washington
agencies will do the same.

Bellamy