STRIKE REVEALS PRESSURES AND CHANGES IN SOUTHERN VIETNAM'S

UNCLAS SECTION 01 OF 03 HO CHI MINH CITY 001196

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E.O. 12958: N/A
TAGS: ECON EIND ELAB KTEX ETRD VM
SUBJECT: STRIKE REVEALS PRESSURES AND CHANGES IN SOUTHERN VIETNAM'S
LABOR MARKET


HO CHI MIN 00001196 001.2 OF 003



1. (SBU) The labor situation in Vietnam is changing. With 400
strikes in 2006 and roughly 300 so far this year, previously
banned (and still almost always technically illegal) work
stoppages appear to be becoming a routine aspect of labor
relations. The recent strike at a large (14,000 employee),
Korean-owned shoe factory in Dong Nai province stands out as
particularly good example of what drives workers to strike in
Vietnam and how these technically illegal labor actions are
resolved via a deliberate, consultative process that brings
together workers, employers, government officials and other
stakeholders. The causes of the strike, including poor
management-worker communications and the impact of increasing
inflation on wages, are typical in strikes around the world.
Inflationary pressures, in particular, mean more strikes are
likely in store in the lead up to the early February 2008 Tet
(Vietnamese New Year) holiday. End Summary.

14,000 Workers Demanding Increased Benefits
--------------

2. (SBU) Workers at the 100-percent Korean owned Tae Kwang Vina
factory in the Bien Hoa Industrial Park of Dong Nai province
went on strike from November 27 to December 3, 2007. Vu Thi
Thanh Thuy, Nike Vietnam's External Affairs Manager, told the
Consulate that Tae Kwang Vina is one of their 40 sub-contactors
in Vietnam and was established in 1994 to manufacture Nike shoes
for export. At present, this factory (a US$65 million
investment) employs about 14,000 workers, the majority of whom
are women aged 18-38. Lam Duy Tinh, the Deputy Director in
Charge of Investigation and Labor at Dong Nai province's
Department of Labor, War Invalids and Social Affairs (DoLISA)
told the Consulate that almost all of the factory's workers were
involved in the strike. Their primary demands were an increased
Tet holiday bonus of one-half month's salary (on top of the
current bonus of one-month's salary),seniority pay, an
increased April 30 "Victory Day" holiday bonus, social
insurance, annual leave, transportation and "full attendance"
allowances.


3. (SBU) The Manager of the Employers' Office of the HCMC branch
of the Vietnam Chamber of Commerce and Industry (VCCI),Nguyen
Hong Ha, noted that the average salary of Tae Kwang Vina workers
of 1 million Vietnamese Dong (VND) per month (roughly US$62.50)
is 20 percent higher than the minimum wage and that working
conditions at this factory exceed local standards. Despite
these pluses, workers told factory managers that the nearly 10
percent annual inflation rate means that the price of
commodities, food and other necessities have risen faster than
the buying power of their wages. Recent news that the
government will increase the minimum wage effective January 1,
2008 also created workers expectations that employers would
increase salaries commensurately.

Resolving Worker Issues
--------------

4. (SBU) Observers, including he factory's buyer, Nike, agree
that the root causes of the strike included a combination of
poor worker-management communication and typical requests for
increased wages and allowances. In an example of
miscommunication, workers were traditionally given a bonus
equivalent to half-a-month's salary on the April 30 holiday
every year. This year, however, instead of providing such a
bonus package as a lump-sum payment, the factory paid the bonus
in 12 equal monthly installments without explanation. When the
traditional bonus time came, workers thought that the factory
had cut their bonus. This was clearly the easiest aspect of the
dispute to resolve; next year the workers will again be given
the April 30th holiday bonus as a lump sum. Annual leave was
another sore point. Factory management sometimes requested that
workers to take annual leave when production is down, but poor
communication made the workers believe that they are forced to
take leave at times when they do not want to. Clearer
guidelines will be issued to interpret the factory's annual
leave policy.


5. (SBU) Officials from the Dong Nai provincial DoLISA office
agreed that poor communication contributed to the strike,
pointing to inaccurate press information on Vietnam's minimum
wage system and workers' misunderstanding of the system as
additional reasons for the strike. Specifically, Vietnam's
Labor Law provides different rates of minimum wages for cities
of different sizes -- 1,000,000 dong/month for workers in "type
1" (very large) urban cities such as HCMC, 900,000 dong/month in
"type 2" (mid-sized) cities such as Bien Hoa and Binh Duong, and

HO CHI MIN 00001196 002.2 OF 003


800,000 dong/month for "type 3" (smaller) cities and urban
areas. DoLISA's Deputy Director said that many workers in Dong
Nai (which is adjacent to HCMC) thought that they were eligible
for the top minimum wage of 1,000,000 dong/month.


6. (SBU) Other worker demands centered on pay and benefits.
Vietnam's new Law on Social Insurance governing maternity leave
and social insurance, for example, was amended effective January
1, 2007, but the factory had not yet changed its labor policies
to reflect increased benefits available to workers. As part of
the negotiations to end the strike, it has now agreed to do so.
When workers who take motorbikes or bicycles to work demanded
the same transportation allowance that the factory gives to
those who take the factory bus, the factory agreed. Lastly, the
factory agreed to make the definition of "full attendance" less
strict so that it will be easier for workers to qualify for this
allowance. The factory did not agree to workers' requests for
an increased Tet bonus or seniority pay, but a Nike
representative confirmed that that the Tae Kwang Vina workers
went back to work on Monday, December 3.


7. (SBU) When asked about the strike by EconCouns in Hanoi on
Dec 4, Nike's General Manager said that the strike had started
when two employees raised a grievance but then quickly escalated
as others joined in to make the wage and other demands as noted
above. She also characterized the labor action as a "wildcat"
strike because it was illegal, but explained there is still a
communications problem with the workers in understanding labor
law and procedures.

Dispute Resolution Mechanisms at Work
--------------

8. (SBU) One of the most interesting aspects of this technically
illegal strike was the rational governmental response to it.
Responding to the strike, the provincial government set up an
interagency working group which consists of officials from Bien
Hoa City People's Committee, the provincial DoLISA, the
provincial Labor Federation and Dong Nai Industrial Zone
Authority. The interagency working group explained to the
workers that their requests should be made in accordance with
the law and the company's conditions. Local authorities,
including provincial Police, DoLISA, Labor Federation and the
Management Board of Bien Hoa Industrial Park, stepped in to
facilitate dialogue between factory owners and workers. Nike
representatives told us Nike put itself in a neutral position to
encourage both employers and workers to calm down and negotiate
to reach satisfactory solutions. Nike is not involved in
monitoring the implementation of the newly reached agreement;
this will be monitored by DoLISA. The local police were involved
only to the extent that workers caused minor damage to the
factory.

Comment:
--------------

9. (SBU) The first conclusion to be drawn from the Tae Kwang
Vina strike is that the GVN is becoming more relaxed regarding
labor disputes, which had traditionally been considered almost
as acts of economic sabotage and thus too sensitive to discuss.
In contrast, officials from the Dong Nai provincial DoLISA were
surprisingly open and forthcoming when we contacted them. Our
Nike contacts also assessed DoLISA's actions in this strike as
competent and responsive. This new attitude can be seen in
legislation as well, particularly the revisions to Chapter 14 of
the National Labor Code implemented this year with the intent of
making it easier to hold legal strikes. The old rules were so
restrictive that virtually none of the roughly 1,000 strikes
that have taken place over the past decade were legal. Despite
these advances -- and despite a two percent payroll levy (one
percent on foreign-invested firms) imposed to support Vietnam's
national labor union -- labor representation at the local level
remains very weak. As the Tae Kwang Vina strike suggests,
however, even though unions remain fairly weak, Vietnamese
workers see collective action, including technically illegal
strikes, as an effective way to promote their interests.


10. (SBU) The second conclusion is that strikes are likely to
become more common in the coming months. The industrial zone
manager in the Tae Kwang Vina case as well as Nike and other
foreign investors in Vietnam remain concerned that that wage
pressure resulting from inflation means that labor unrest is
likely to get worse toward Tet -- the biggest holiday of the
year and the time when Vietnamese need extra money for family
gatherings. End comment.

HO CHI MIN 00001196 003.2 OF 003




11. (U) This cable was coordinated with Embassy Hanoi.
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