CAMBODIA: GARMENT MANUFACTURERS BLAME UNIONS FOR

UNCLAS SECTION 01 OF 03 PHNOM PENH 001176

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/MLS, EB/TPP/ABT--THOMAS LERSTEN, DRL/IL--MARK
MITTELHAUSER
GENEVA FOR RMA
LABOR FOR ILAB--JIM SHEA, JONA LAI
COMMERCE FOR ITA/OTEXA MARIA D'ANDREA

E.O. 12958: N/A
TAGS: ELAB KTEX ECON CB
SUBJECT: CAMBODIA: GARMENT MANUFACTURERS BLAME UNIONS FOR
LABOR PROBLEMS; EMBASSY URGES COMPROMISE

REF: PHNOM PENH 1174


1. (SBU) SUMMARY. During a June 23 meeting, Garment
Manufacturers Association of Cambodia (GMAC) leaders
acknowledged that garment factories sometimes fail to comply
with the Labor Law, but blamed unions' rush to strike for
much of the labor unrest in Cambodia's garment sector. This
increased unrest is causing garment buyers to reduce orders
even at factories without labor disputes. GMAC leaders
revealed that on June 16 they spoke directly with Chea Mony,
one of the union leaders behind the threatened July 3 general
strike, and made some progress in reaching a compromise on a
minimum wage increase. However, given that political as well
as labor motivations seem to be at play in the general strike
threat, it is unclear how Chea Mony and his partner Rong
Chhun would react to a minimum wage deal with GMAC that does
not include some sort of concession from the government. The
Ambassador has advised both manufacturers and union leaders
that a general strike is in no one's interest and urged a
resolution of differences. END SUMMARY.


2. (U) Cambodia's garment sector is facing two labor crises:
a dramatic increase in individual strikes at garment
factories and a threatened general strike to start on July 3.
Powerful pro-opposition unions Free Trade Union (FTU),led
by Chea Mony, and Cambodian Independent Teachers Association
(CITA),led by Rong Chhun, are threatening to lead a general
strike unless their demands for increased wages for garment
sector workers and teachers, shorter workweeks, and reduced
gasoline prices are met. As part of the embassy's continuing
efforts to encourage dialogue on both the individual strikes
and the threatened general strike, the Ambassador hosted a
roundtable discussion with union leaders on June 22 (Reftel)
and a meeting with GMAC leadership on June 23.

Ambassador: Unions United in Frustration, Divided about Next
Steps
-------------- --------------


3. (SBU) Describing his June 22 meeting with union leaders,
the Ambassador told manufacturers that there was not total
agreement among the unions about how to proceed, but that the
group as a whole was extremely frustrated and had a long list
of grievances with the government and with garment factories.
He had told union leaders that a general strike would hurt
everyone from workers to factory owners, and that American
buyers would go elsewhere if such a strike were to take
place. Some of the union leaders agreed, others continued to
support the idea of a strike.


4. (SBU) The Ambassador told GMAC that the embassy supports
efforts by the International Labor Organization (ILO) and the
American Center for International Labor Solidarity (ACILS) to
facilitate a negotiated agreement and urged GMAC to make a
good-faith effort in these negotiations.

GMAC: Unions' Rush to Strike Hurting Orders
--------------


5. (SBU) GMAC Chairman Van Sou Ieng noted that Cambodia's
labor movement was still quite young and remarked that unions
take years to mature. He acknowledged that there have been
some problems with GMAC members not complying with the labor
law. However, these issues should be addressed via the
Arbitration Council, not by strikes, he said.


6. (SBU) While GMAC has several concerns about Cambodia's
labor movement, the immediate concern is the increased daily
strikes at garment factories and the threat of a general
strike, GMAC leaders said. Garment factory owner Roger Tan
said that he wakes up every morning worried about the
possibility of a strike at his well-regarded factory. The
increased labor unrest has led garment buyers to lower orders
even at factories without labor disputes, hoping that if the
labor unrest spreads to that factory, the factory will still
be able to produce the reduced order on time, Roger Tan and
Van Sou Ieng explained. Because many strikes are unannounced
(in contravention of the seven day notice required under
Cambodia's Labor Law),factories are not able to sub-contract
their work in time and must instead use overtime after a
strike to catch up to production deadlines, Van Sou Ieng said.

PHNOM PENH 00001176 002 OF 003




7. (SBU) Van Sou Ieng asserted that more than 50% of the
strikes that have occurred recently could have been resolved
through the legally mandated negotiation, conciliation, and
arbitration process, but that many unions are illegally
skipping some or all of these steps in the rush to strike.
Wages are the main motivating factor for strikes, he said,
though Roger Tan asserted that behind the wage demands were
union leaders' interests in gaining power and popularity
among workers.

GMAC: Labor Issues Sap Factory Efficiency
--------------


8. (SBU) In response to union complaints about corruption,
Van Sou Ieng acknowledged that corruption was a persistent
problem within the industry and described GMAC's success in
reducing the size of bribes required to export goods.
However, he said that the unions' allegations that the
minimum wage could be USD 100 per month without corruption
was just a pretext to support their unreasonable wage
demands. GMAC Secretary General Ken Loo asserted that it is
the labor disputes themselves which are keeping down wages.
Management spends half its time dealing with labor issues
rather than maximizing efficiency, and must pay penalties and
overtime to make up for delays caused by strikes.


9. (SBU) GMAC members described other ways in which labor
issues hurt their factories. Cambodia's loose definition of
a union and protection for the top three factory-level union
leaders meant that garment factories have trouble
disciplining some unproductive or troublemaking workers.
Roger Tan described two workers at his Thai-Pore factory who
produce almost nothing and collect very little in piece rate
wages, but still receive USD 45 per month in minimum wage.
Van Sou Ieng told us about three "drunkards" whom he cannot
fire because they are union leaders representing a union with
only five members. While there is a legal avenue for firing
these people, it is slow and bureaucratic, and even a legal
dismissal may lead to a strike, they noted. Similarly, the
government's failure to enforce the "most representative
union" part of Cambodian Labor Law means that there are
multiple unions at many factories. These unions compete for
worker loyalty and often refuse to participate in multi-union
negotiations.

Prospects for a Avoiding a General Strike
--------------


10. (SBU) GMAC leaders were uncertain whether an agreement
with FTU and CITA could be reached before the July 3 strike
date. Van Sou Ieng opined that the Prime Minister has
refused to get involved in the issue because he doesn't want
to alienate either workers or business leaders. The GMAC
Chairman criticized Chea Mony for not coming directly to GMAC
earlier, and instead sending letters only to the government.
Van Sou Ieng and Ken Loo revealed that they had talked
privately with FTU leader Chea Mony on June 16, and that he
had agreed that a minimum wage increase from the current USD
45 per month to USD 60 per month might be acceptable, a far
more realistic figure than the USD 80 per month that Chea
Mony is publicly demanding.


11. (SBU) COMMENT: Garment manufacturers and unions tell
remarkably different stories about the causes of garment
sector disputes and who is to blame. GMAC board members are
generally thought to represent the "cream of the crop" in
terms of ethical corporate behavior, and their statements
about what happens at their own factories are probably
accurate. However, in reality, both unions and GMAC have
unsavory members who take illegal actions and fuel mutual
distrust. While the progress made in direct talks between
FTU and GMAC is encouraging, it underscores the government's
absence from this process. FTU leader Chea Mony continues to
direct his demands to the government, and seems to want the
political victory that would come with a
government-negotiated compromise or a large strike. It is
unclear how he would react to an agreement on a garment
sector wage increase reached directly with GMAC or under the
auspices of the ILO and ACILS that did not address the
demands about teachers' wages, shorter workweek, and reduced

PHNOM PENH 00001176 003 OF 003


gasoline prices and could not be touted as a victory over the
government. END COMMENT.
MUSSOMELI