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PP RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHPF #1199/01 1791330
ZNY CCCCC ZZH
P 281330Z JUN 06
FM AMEMBASSY PHNOM PENH
TO RUEHC/SECSTATE WASHDC PRIORITY 6957
INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY
RUEHXI/LABOR COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHC/DEPT OF LABOR WASHDC PRIORITY
RUEHGV/USMISSION GENEVA PRIORITY 1501

C O N F I D E N T I A L SECTION 01 OF 02 PHNOM PENH 001199 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EAP, EAP/MLS, DRL/IL--MARK MITTELHAUSER, AND 
EAP/TPP/ABT THOMAS LERSTEN 
LABOR FOR ILAB--JIM SHEA AND JONA LAI 
GENEVA FOR RMA 
STATE PLEASE PASS TO USTR--BARBARA WEISEL AND DAVID BISBEE 
 
E.O. 12958: DECL: 06/28/2016 
TAGS: ELAB ECON KTEX PGOV CB
SUBJECT: CAMBODIA:  GENERAL STRIKE COULD PROVE POLITICAL, 
ECONOMIC FLASH POINT 
 
REF: PHNOM PENH 1185 AND PREVIOUS 
 
Classified By: Pol/Econ Officer Jennifer Spande for reason 1.4 (b). 
 
¶1.  (C) SUMMARY.   The July 3 general strike threatened by 
the Free Trade Union (FTU) and the Cambodian Independent 
Teachers Association (CITA) presents an already vulnerable 
Hun Sen with the conundrum of choosing between support for 
workers or the business elite.  Hun Sen realizes that only 
Cambodia's unions have the power to put tens of thousands of 
workers on the street on short notice.  FTU leader Chea Mony 
clearly sees the threatened strike as a test of his political 
strength which will help determine his role in the 2007 local 
elections and 2008 national elections.  Chea Mony may be more 
willing to take risks because he has been overshadowed by the 
high-profile assassination of his brother, union leader Chea 
Vichea, and the arrest of his friend and mentor, CITA union 
leader Rong Chhun.  A general strike has the potential to 
turn violent and precipitate a crackdown that could threaten 
the political openness of the last six months.  And if it 
lasts for more than a day or two, it may be the final push 
that convinces already jittery garment buyers to take their 
business elsewhere, shutting the doors on Cambodia's most 
important industry.  This could potentially lead to a 
backlash against the ruling CPP, if the CPP permits it to 
happen.  END SUMMARY. 
 
Hun Sen Feeling Vulnerable 
-------------------------- 
 
¶2.  (C) The threatened July 3 general strike comes at a time 
when Hun Sen is already feeling vulnerable.  The World Bank 
corruption scandal plays out daily in the nation's 
newspapers, and the circle of people implicated is ever 
expanding.  Hun Sen jokes about the scandal both to ridicule 
the World Bank, whom he accuses of not sharing sufficient 
evidence, and to make light of the charges against his 
administration.  It also reflects push-back from ministers 
who are being implicated against their will.  At the same 
time, on-going land disputes both in Phnom Penh and in the 
provinces are pitting the well-connected against poor 
farmers, and are creating increased discontent among Hun 
Sen's strongest supporters--poor rural Cambodians. 
 
¶3.  (C) The current labor impasse presents Hun Sen with an 
impossible choice:  workers versus the business elite.  In 
contrast to the many human rights, health, environmental, and 
educational NGOs which are largely reliant on external donors 
for funding and direction, unions represent the largest and 
least foreign-influenced part of civil society in the 
country.  Unions alone have the ability to put tens of 
thousands of protesters in the street on short notice, and 
Hun Sen knows this.  On the other hand, Hun Sen is loath to 
alienate garment factory owners and managers, who form the 
backbone of the country's formal economy and are often 
politically well-connected.  Hun Sen's studied inattention to 
the threatened general strike is the result of his calculated 
desire to avoid offending either group.  Hun Sen advisor Om 
Yentieng told us today, perhaps disingenuously, that while 
the Prime Minister hopes for a peaceful resolution to the 
strike, he is not unduly concerned. 
 
¶4.  (C) Labor unrest in Cambodia often results in violence, 
and this general strike would prove no exception.  This is 
even more likely if the strike progresses past the initial 
sit-in phase to the street demonstrations FTU leader Chea 
Mony has said could take place July 6 or 7. 
 
Strike Tied to Union Leader's Political Ambitions 
--------------------------------------------- ---- 
 
¶5.  (C) For the first time in Cambodia's modern history, 
relative political stability has enabled politicians to start 
turning their attention early to local elections in 2007 and 
national elections in 2008.  Just as Hun Sen has pushed 
FUNCINPEC out of the way to make room for a cozier 
relationship with the SRP, other political players are 
already working to position themselves.  For pro-opposition 
union leaders Rong Chhun and Chea Mony, this means reaching 
for power in order to be a political force in the coming 
elections.  Chea Mony has told us that the threatened general 
strike is a test of his ability to command workers and will 
 
PHNOM PENH 00001199  002 OF 002 
 
 
play into his planning for the 2007 local elections. 
 
¶6.  (C) Chea Mony may also be looking to increase his 
personal political stature and may feel overshadowed by other 
union leaders.  Chea Mony's brother, FTU President Chea 
Vichea, was assassinated in January 2004, leaving former 
chemistry teacher Chea Mony to unexpectedly inherit Vichea's 
mantle.  Chea Vichea's assassination focused international 
attention on Cambodia and led to his being heralded as a 
worker's hero; his funeral attracted 5,000 workers.  Last 
fall's crackdown on union and civil society leaders who 
criticized the border treaty with Vietnam led to the arrest 
of Chea Mony's friend and mentor Rong Chhun.  Rong Chhun's 
case became an international cause celebre, and international 
pressure on the government increased further when an 
additional three leaders were arrested following a Human 
Rights Day celebration in December.  The release of Rong 
Chhun and the other detainees on January 17 gave them instant 
credibility and public recognition.  In contrast, Chea Mony 
was out of the country when his arrest warrant was issued, 
and spent several months in relative obscurity traveling in 
Ireland and France while trying to raise enough money to 
support his living expenses there.  When his arrest warrant 
was rescinded, he returned to the country with little fanfare. 
 
Cambodia's Biggest Industry Hangs in the Balance 
--------------------------------------------- --- 
 
¶7.  (C) In addition to the potential political implications 
of a general strike, such labor unrest would hit the garment 
industry--which accounts for nearly half of the country's GDP 
and more than 80% of its exports--at an extremely sensitive 
time.  The garment industry is continuing to consolidate its 
manufacturing process following the end of the Multifiber 
Agreement's quota system in January 2005.  Cambodian garment 
factories are already at a disadvantage due to longer 
transportation times, high cost of electricity and other 
overhead, and lack of vertical integration.  Moreover, 
Cambodia doesn't have the tariff-free garment entry to the US 
that many developing countries in Africa and the Caribbean 
enjoy thanks to the African Growth and Opportunity Act (AGOA) 
and the Caribbean Basin Initiative (CBI).  Cambodia's 
strongest selling point is its reputation for excellent 
workers' rights and the existing relationships the factories 
have established with buyers. 
 
¶8.  (C) However, strikes at garment factories have been up 
substantially over the past six months.  Strikes in May, for 
example, led to the loss of 87,000 working days--a figure 
four times what is typically seen dQng the May to September 
peak production season.  Garment buyers are already worried 
that the increase in labor unrest could lead to production 
delays and could tarnish their reputation for good working 
conditions and labor relations.  According to the Garment 
Manufacturer's Association of Cambodia (GMAC), Levi Strauss 
has already scaled back its planned orders in Cambodia from 
13 million to 8 million pairs of jeans for 2006.  Nike and 
Puma have reportedly shelved earlier decisions to expand 
purchases from Cambodia.  GMAC reports that many buyers are 
delaying confirming orders until after July 3 to see what 
happens with the general strike threat. 
 
¶9.  (C) The danger for Cambodia is two-fold.  First, a 
general strike--particularly one that lasts for more than a 
few days--could be the final push that chases garment buyers 
out of Cambodia and in to the waiting arms of China, Vietnam, 
Bangladesh, and other countries.  If this were to happen and 
the CPP were perceived as responsible for letting it occur, 
there could be a strong voter backlash against the CPP in the 
upcoming elections.  Second, if the strike were to take a 
violent turn, it would likely be met with a crackdown that 
could turn back the democratic gains made so far this year. 
MUSSOMELI