CAMBODIA: PROMISING LABOR NEGOTIATIONS FALTER,

UNCLAS SECTION 01 OF 02 PHNOM PENH 001185

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: PROMISING LABOR NEGOTIATIONS FALTER,
BUT MAY BE RESTARTED

REF: PHNOM PENH 1176 AND PREVIOUS


1. (SBU) SUMMARY: Promising negotiations between the
Garment Manufacturers Association of Cambodia (GMAC) and the
Free Trade Union (FTU) over FTU demands for a minimum wage
increase faltered when FTU factory-level union leaders
rejected the proposed deal on June 25. During a meeting with
Poleconoff on June 26, FTU leader Chea Mony sent conflicting
signals. He said that the labor dispute was a "test of
strength" between FTU and GMAC and hinted that a large strike
could be helpful in setting the stage for a political change,
but then indicated that he was willing to continue
negotiating and that an immediate minimum wage increase of
USD 7 to 9 per month would likely be acceptable. Thinking
that a favorable agreement, a large strike, or even his own
arrest will only increase his political stature, Chea Mony
has little to lose in this high stakes labor game and will
drive a hard bargain with GMAC, if indeed any agreement can
be reached before the July 3 general strike deadline. END
SUMMARY.


Potential Labor Agreement Falls Apart
--------------


2. (SBU) June 23 negotiations held by the Garment
Manufacturers Association of Cambodia (GMAC) and Chea Mony of
the Free Trade Union (FTU) were very productive, according to
Ken Loo of GMAC. According to Loo, the two sides had agreed
on a USD 7 per month increase in the minimum wage, but
differed on how to phase in the increase over a three year
period. GMAC and FTU did not discuss binding arbitration--an
important component of a framework proposal suggested by the
International Labor Organization (ILO) and the American
Center for International Labor Solidarity (ACILS)--but had
come close to an understanding that FTU would exercise
restraint in holding strikes over the next three years and
would always seek to negotiate before striking.


3. (SBU) FTU-GMAC progress was so good that that rumors of a
labor breakthrough prompted ILO and ACILS to alert Poleconoff
to their worries that GMAC and FTU would conclude a deal over
the weekend, leaving other unions in the cold. Poleconoff
called Ken Loo the evening of June 23 to urge GMAC to wait to
conclude a deal until other unions could be included in
negotiations as well. Loo responded that negotiations had
gone well, but that there would be plenty of time the
following week to hold multi-union negotiations.


4. (U) In contrast to this promising start, FTU factory
level union leaders voted June 25 to reject the proposed deal
with GMAC, and newspaper articles quoted union leaders as
saying that their July 3 strike would start unless a solution
could be found before then.
Chea Mony: Labor Dispute is a "Test of Strength"
-------------- --------------


5. (SBU) During a June 26 meeting with Poleconoff, FTU
President Chea Mony dodged questions about why the proposal
that had seemed mutually acceptable on June 23 was
unexpectedly voted down on June 25. He indicated that the
factory-level union leaders who discussed the proposal on
Sunday defeated the proposal, and said that he was not
surprised by this outcome.


6. (SBU) Chea Mony stated that the current stand off between
GMAC and the FTU was a "test of strength" to see which
organization would give in first. He then detailed what he
described as typical expenses for a garment factory worker to
support his claim that the current USD 45 per month was not a
living wage and that a USD 15 per month increase was
necessary. Poleconoff then explained that pressing for a 33%
increase in minimum wage was simply not realistic. GMAC is
using inflation--which they estimate at 15% since the minimum
wage was set in 2000--as their starting point for a minimum
wage increase, Poleconoff explained.


7. (SBU) Comparing the current GMAC-FTU negotiations to a
game of chicken, Poleconoff then warned that if both GMAC and
FTU and CITA see these negotiations as a "test of strength"
and refuse to make sufficient compromises, the resulting

PHNOM PENH 00001185 002 OF 002


labor unrest would lead buyers to produce their garments
elsewhere. Many garment factories would close, and workers,
unions, and factory owners would all lose. Chea Mony
rebutted that many garment factory workers are fed up with
the tiring work on the production line and would happily
return to their villages if the factories closed.


8. (SBU) Chea Mony then told Poleconoff that he and Rong
Chhun had been asked to come to the Phnom Penh City Hall at 5
p.m. that afternoon (June 26). However, he said, he wasn't
worried. The city can't arrest him, he claimed, implying
that his arrest would cause too much of an uproar. Change is
constant, he noted, and sometimes things have to get worse
before they can improve. Many Cambodians now are very
unhappy because of the spate of land disputes, he said,
implying that labor unrest could add fuel to a fire that
would challenge the current government.

FTU and CITA Open to Further Negotiations
--------------


9. (SBU) Before departing for their appointment at City
Hall, Chea Mony and Rong Chhun indicated that they would be
willing to continue negotiating with GMAC and that if the
issue of a minimum wage for the garment sector could be
resolved, they would set aside their other demands (higher
wages for teachers, shorter workweek, reduced gasoline
taxes). They also indicated that a minimum wage increase of
USD 7 to 9 per month, if it were to take effect immediately
rather than phased in over three years, would likely be
acceptable.

Phnom Penh Municipality Asks for Strike Delay
--------------


10. (SBU) FSN Labor Assistant called Rong Chhun the evening
of June 26 to learn about the meeting with the Phnom Penh
Municipality and ensure that Rong Chhun and Chea Mony had not
been arrested. Rong Chhun reported that Suon Rindy, deputy
cabinet director of the Phnom Penh Municipality, asked Rong
Chhun and Chea Mony to delay the strike, but they refused.
They then discussed FTU and CITA's demands for a minimum wage
increase, and may meet again in the coming few days.


11. (SBU) COMMENT. Chea Mony believes he is holding all the
cards and is in a situation where he can't lose. Either he
wins significant minimum wage gains for workers, or he
demonstrates his power by idling tens of thousands of factory
workers, or he is arrested--regardless, his political power
is increased. Arrest doesn't appear to frighten him, and in
fact, he may consciously or unconsciously be seeking it as a
way to increase his stature. He may have in mind the
martyrdom of his brother, FTU leader Chea Vichea, who was
assassinated in January 2004, and the high-profile arrest of
his friend and mentor CITA President Rong Chhun in October

2005.


12. (SBU) The rejection of the proposed deal with GMAC on
June 25 is worrying because it is not clear if it was truly a
rejection by factory level leaders or if it is rather a way
for Chea Mony to re-visit negotiations with a higher minimum
wage starting point. If it is the latter, there is certainly
the potential for Chea Mony to use this ruse again as a way
to extract even more concessions from GMAC. Because he feels
that he will come out ahead whether there is a strike or not,
there is little to encourage him to make substantial
compromises. END COMMENT.
MUSSOMELI