This record is a partial extract of the original cable. The full text of the original cable is not available.

271026Z Feb 06

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                  ------------------99B374  271129Z /38    
FM AMCONSUL HO CHI MINH CITY
TO SECSTATE WASHDC 0489
INFO AMEMBASSY HANOI 
ASSOCIATION OF SOUTHEAST ASIAN NATIONS
DEPT OF TREASURY WASHDC
DEPT OF TREASURY WASHDC
DEPT OF AGRICULTURE USD FAS WASHINGTON DC
USDOC WASHINGTON DC 0001
AMCONSUL HO CHI MINH CITY

UNCLAS  HO CHI MINH CITY 000218 
 
SIPDIS 
 
 
USDOC 
SENSITIVE 
 
DEPARTMENT PLEASE PASS USTR, ELENA BRYAN AND GREG HICKS 
DEPARTMENT PLEASE PASS TO DEPARTMENT OF LABOR 
DEPARTMENT FOR EAP/MLS, EB, DRL 
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO 
TREASURY FOR OASIA 
 
E.O. 12958: N/A 
TAGS: ELAB ECON PGOV ETRD VM
SUBJECT: UPDATE ON LABOR UNREST IN SOUTHERN VIETNAM 
 
REF: HCMC 0031 
 
¶1. (SBU) SUMMARY:  Ho Chi Minh City's business community reports 
that operations following the recent wildcat strikes in HCMC and 
Binh Duong and Dong Nai provinces have returned to normal. 
Wariness remains, however, as some strikes continued even after 
the January 6 GVN decree announcing a 40 percent increase in the 
minimum wage for workers employed at foreign invested 
enterprises (FIE).  Some strikes after the Lunar New Year (Tet) 
holiday involved workers already earning more than 40 percent 
above the old minimum wage who realized they would not get a 
raise or workers in Vietnamese-owned factories who do not 
benefit from the minimum wage increase.  All the post-Tet 
strikes appear to be isolated incidents and generally have been 
non-violent.  However, the strikes and their aftermath 
demonstrate the potentially fractious nature of labor relations 
in Vietnam and in particular the ineffectiveness of the GVN's 
sole labor union, the "Labor Federation."  Concerns originally 
raised by FIE owner/managers about the inherent violence of the 
strikes, the complacency of local authorities in protecting FIE 
property, and the lack of consultation between the GVN and 
foreign business community, have not been addressed adequately 
and continue to be source of concern and uncertainty.  END 
SUMMARY. 
 
Background 
---------- 
 
¶2. (SBU) December 28 - January 6 saw a rash of wildcat strikes 
in Binh Duong province, Ho Chi Minh City and Dong Nai province 
involving thousands of employees at as many as 16 
foreign-invested enterprises (FIEs).  The strikes began at shoe, 
textile and garment factories in Linh Trung Industrial Zone in 
Binh Duong and quickly spread to other companies outside the 
immediate area.  The number of demonstrators and some violence 
grew at a rate that alarmed the Ministry of Labor and Invalids 
and Social Affairs (MoLISA), which announced January 6 that it 
would raise the base salary, or minimum wage, at FIEs by 40 
percent to approximately 55 USD/month and stipulated that the 
base salary for skilled labor must be 7 percent above that.  The 
salary increase took effect February 1. 
 
After the Wage Increase 
----------------------- 
 
¶3. (SBU) Immediately following the government's January 6 
announcement, the strikes seemed to subside and production 
returned to normal.  For example, Scancom, a Danish-owned 
company that suffered damage in a strike on January 6 (reftel), 
was shut down for several days after the strike, but is now 
functioning at normal capacity.  In general, U.S. manufacturing 
interests in southern Vietnam have been less affected by the 
wage increase than their Taiwanese and South Korean counterparts 
because salaries at many U.S.-owned/managed companies were 
already above the new minimum wage level.  Following the Lunar 
New Year or Tet (January 29-February 2), there were reports of 
smaller strikes at Vietnamese-owned companies by workers who 
misunderstood the decree and thought they too would get salary 
increases.  (NOTE: There have been no reports of labor unrest at 
state-owned enterprises.  END NOTE.)  There were also some 
strikes by employees at FIEs who were upset when they realized 
that since their salaries already exceeded the new minimum wage 
level they would not benefit from the wage increase. 
 
¶4. (SBU) The primary causes of the second round of strikes seem 
to be misconceptions over the wage increase, and some companies 
that escaped labor unrest in December-January because workers 
were being compensated well above the base salary have faced 
disruptive labor action after Tet.  For example, on February 13, 
Theodore Alexander, a high-end furniture manufacturer that 
employs 6,000 people, was suddenly faced with workers demanding 
a 40% increase in salary because they saw workers at neighboring 
factories in Linh Trung Industrial Zone receiving an increase in 
salary.  In fact, Theodore Alexander had raised its average wage 
seven months before the strikes to USD 100/month, well above the 
new minimum wage. 
 
Strike Instigators? 
------------------- 
 
¶5. (SBU) While labor disputes are not uncommon in Vietnam in the 
month before Tet, the scope and volatility of this year's 
 
strikes were somewhat greater than normal.  Since then, there 
has been much speculation in the business community and even the 
foreign press (e.g. The Economist) as to the cause of these 
strikes.  EconOff has not found evidence to indicate that 
"instigators" from outside the factories were planted to foment 
unrest.  Factory managers have pointed to workers with 
reputations for being vocal or disgruntled as the leaders of 
strikes. 
 
¶6. (SBU) During the initial round of strikes, local authorities 
were slow to respond to the labor unrest, even in cases where 
striking workers were damaging property. Since Tet, police have 
responded more quickly to strikes, though the nature of some of 
the response has been troubling. For example, at Theodore 
Alexander, approximately 30 workers were identified as 
instigators who initiated the February 13 disturbance.  Local 
authorities helped halt the strike, and workers were informed of 
the circumstances regarding the salary increase at other 
factories and returned to work without incident the next day. 
However, authorities have also visited workers who participated 
in the strike in their homes to warn them against future 
activity and have even requested company t-shirts, so police 
could roam undercover amongst employees during lunch. 
 
¶7. (SBU) Reports of widespread arrests following the strikes 
appear to be inaccurate.  Vietnamese dissident Dr. Nguyen Dan 
Que, in an interview with Voice of America, alleged that 
authorities had arrested hundreds of strikers.  According to 
ConGen sources, the police temporarily detained some 
demonstrators, but there have been no reports of mass arrests. 
(NOTE:  Dr. Que told EconOff that he heard of the arrests from a 
relative, who read about it in a Taiwan online news source.  END 
NOTE.) 
 
Ineffective Communication 
------------------------- 
 
¶8. (SBU) Many businesses lay the blame for the second round of 
strikes on local and central authorities and the Labor 
Federation.  After announcing the wage increase January 6, there 
was no further effort made by the government to explain the 
decision and how it would affect workers, nor did the government 
reach out to business to ensure that information was 
disseminated clearly.  Members of the Human Resources Committee 
of the HCMC American Chamber of Commerce discussed the 
continuing confusion over the FIE base salary decree and 
concluded that in those instances where both management and 
Vietnamese authorities worked jointly to explain the decree, 
workers were far more receptive to and understanding of the 
decision.  Therefore, the committee suggested that interested 
parties lobby for more government involvement in raising worker 
awareness and understanding of labor legislation. 
 
¶9. (SBU) COMMENT:  The GVN wage increase served a purpose in 
that it quickly quelled a potentially explosive situation, and 
for the most part, order has been restored.   While some 
Vietnamese see these strikes as positive expressions of greater 
freedom by workers, these strikes demonstrate two fundamental 
problems in Vietnam that the wage increase does not resolve: 
 
- The only officially-sanctioned labor union, the Labor 
Federation, is ineffectual in dealing with labor concerns and 
labor disputes.  Until there is a more effective mechanism to 
manage labor relations, strikes such as these could become more 
frequent as continued economic growth tightens Vietnam's supply 
of skilled and experienced workers. 
 
- The government's capitulation to the demands of labor 
indicates that authorities either may not be able to control the 
population as tightly as they would like or chose not to do so 
in this case.  At the same time, it could show that the 
government is willing to buy off workers at the expense of 
foreign firms in order to keep order and, in a larger sense, to 
maintain power. 
WINNICK 
 
 
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