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