VZCZCXRO0998
PP RUEHCHI RUEHDT RUEHHM RUEHJO RUEHNH
DE RUEHPF #1176/01 1780021
ZNR UUUUU ZZH
P 270021Z JUN 06
FM AMEMBASSY PHNOM PENH
TO RUEHC/SECSTATE WASHDC PRIORITY 6917
INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY
RUEHXI/LABOR COLLECTIVE PRIORITY
RUEHGV/USMISSION GENEVA PRIORITY 1494
RUEHC/DEPT OF LABOR WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

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