VZCZCXRO1843
PP RUEHCHI RUEHDT RUEHHM RUEHJO RUEHNH
DE RUEHPF #1185/01 1781247
ZNR UUUUU ZZH
P 271247Z JUN 06
FM AMEMBASSY PHNOM PENH
TO RUEHC/SECSTATE WASHDC PRIORITY 6927
INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY
RUEHXI/LABOR COLLECTIVE PRIORITY
RUEHGV/USMISSION GENEVA PRIORITY 1499
RUEHC/DEPT OF LABOR WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

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