CAMBODIA: LABOR UNREST TOPS INDUSTRIAL RELATIONS

UNCLAS SECTION 01 OF 02 PHNOM PENH 002208

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/MLS, EB/TPP, AND DRL/IL
LABOR FOR ILAB--CHRIS WATSON AND JONA LAI

E.O. 12958: N/A
TAGS: ELAB ECON PGOV KTEX CB
SUBJECT: CAMBODIA: LABOR UNREST TOPS INDUSTRIAL RELATIONS
CONFERENCE AGENDA


1. (U) SUMMARY. Dramatic increases in labor unrest,
government interference in union affairs, labor violence, and
a nearly universal disregard for the labor law topped the
concerns raised at the Second National Industrial Relations
Conference on December 18. The Ambassador's keynote address
noted that economic success was attainable but not assured,
and that poor labor relations had the potential to derail
garment sector growth. Researchers contrasted the pro-active
approach hotel managers have successfully used to
dramatically reduce labor disputes with the "it can't happen
to me" attitude prevalent in the strike-prone garment sector.
Factory managers and workers alike revealed they have much
more confidence in the USG-funded Arbitration Council than in
the Cambodian government's conciliation team. END SUMMARY.

Ambassador, ILO Official Highlight Worrying Trends
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2. (U) Describing the year as a whole as "a disappointing
one for industrial relations" in his keynote address, the
Ambassador cited dramatic increases in garment sector strikes
(most of which were illegal),worker and employer attempts to
circumvent the arbitration process, labor-related violence,
and government intervention in garment sector-wide wage
negotiations. While the most unionized sectors of the
economy--the garment and tourism industries--played a large
role in Cambodia's spectacular 2005 economic growth, he
warned that Cambodia should not be complacent about its
economic future. The excellent working conditions in
Cambodia's garment factories were once unusual and a
competitive advantage, but now that many other countries
offer safe and fair factory conditions, Cambodia must improve
price, quality, and turnaround time to stay competitive.
Furthermore, labor unrest or labor scandals could frighten
buyers away from Cambodia.


3. (U) In a similarly frank speech, International Labor
Organization (ILO) Chief Technical Advisor John Ritchotte,
praised the "landmark progress in dialogue between employers
and workers...which would have been impossible just 18 months
ago." Ritchotte then stated that his general optimism about
Cambodia's labor relations was tempered by a number of
troubling trends: lack of union accountability and
transparency, outside interference in union affairs, illegal
strikes, the use of abusive contractual terms to reinforce
employment insecurity, and blacklisting union activists.

Unsophisticated Unions, Reactive Managers Feed Disputes
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4. (U) A revealing study by the local NGO Community Legal
Education Center explored the causes of labor disputes and
why they are more common in some industries, and in some
factories, than others. Among its findings:

--Labor disputes most often occur over discretionary or
confusing wage issues--such as piece rates, overtime, leave,
or seniority--or union-related issues such as the dismissal
of a union leader.

--Hotel managers in Cambodia recognize the cost associated
with strikes and often try to manage that risk with robust,
formal dispute resolution mechanisms within their human
resources department. In contrast, garment factory managers
often feel that labor disputes "shouldn't happen" or blame
unions or poorly educated workers for them. These differing
approaches help to explain why industrial relations in
Cambodia's hotel industry are far more stable and amicable
than in the garment sector.

--Union leaders are often young and don't understand how
labor disputes occur or could be pro-actively managed. They
often blame management for labor disputes.

--Unions are not able to communicate effectively with their
membership, and in some cases do not even know that their
workers are on strike.

--Companies with multiple unions often have considerable
inter-union conflict, which confuses workers and impedes
progress towards labor objectives.

More Confidence in Arbitrators than Government Conciliators
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5. (SBU) Khieu Savuth, Deputy Director of the Ministry of

PHNOM PENH 00002208 002 OF 002


Labor and Vocational Training's Labor Dispute Department,
stated that the department successfully resolved 65% of the
217 cases it has received so far this year. However,
factory, Garment Manufacturers Association of Cambodia
(GMAC),and union representatives privately took issue with
this claimed success, telling us that many conciliators
actually prolong or incite labor unrest in order to extract
bribes from factory management. (NOTE: Cambodian labor law
mandates that labor disputes be referred first to the Labor
Ministry for conciliation, and if they remain unresolved,
then to the Arbitration Council. END NOTE.)


6. (U) Union, factory and GMAC attendees had more positive
views of the Arbitration Council, although some parties from
each side stated that they disagreed with some of its
rulings. The Arbitration Council reported receiving an
average of 10 cases per month and estimates that since its
inception in 2003 it has heard cases affecting more than
270,000 workers. The percentage of cases in which one or
both parties object to the arbitral award has been decreasing
over the past three years, so that now approximately
one-third of cases are resolved by mutual agreement prior to
arbitration (though often in the hearing room with assistance
from the arbitrators),another one-third have awards which
are accepted by both parties, and the remainder have awards
to which at least one side objects.


7. (U) Arbitrators also outlined recent developments in
labor jurisprudence, including distinguishing between casual
and regular workers, illegal dismissals of union officials,
delineating between individual and collective disputes,
attendance bonuses, and maternity leave.


8. (U) COMMENT: This year's national industrial relations
conference came after a year full of both highs--like rival
unions negotiating together--and lows--government
interference in garment sector negotiations, an increase in
labor unrest, strike-related violence, and the first felony
conviction of a union activist. The conference has become a
rare and useful platform for internatinal labor observers to
call attention to troubling trends which Cambodian officials
consider too sensitive to discuss publicly. By highlighting
the economic consequences of labor unrest together with the
causes of disputes and different approaches to managing them,
the conference highlighted an important problem and suggested
first steps in addressing it. END COMMENT.
MUSSOMELI