VZCZCXRO5203
RR RUEHHM
DE RUEHHI #3081/01 3620927
ZNR UUUUU ZZH
R 280927Z DEC 06
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 4216
INFO RUEHHM/AMCONSUL HO CHI MINH 2295
RUEHC/DEPT OF LABOR WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RHEHNSC/NATIONAL SECURITY COUNCIL WASHINGTON DC

UNCLAS SECTION 01 OF 02 HANOI 003081 
 
SIPDIS 
 
STATE FOR EAP/MLS AND DRL MITTELHOUSER 
COMMERCE FOR 4431/MAC/AP/OPB/VLC/HPPHO 
LABOR FOR LI 
 
SENSITIVE BUT UNCLASSIFIED 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ELAB PGOV ETRD EIND EINV VM
SUBJECT: YEAR-END LABOR STRIFE SEEN LESS LIKELY IN VIETNAM 
 
 
SENSITIVE - DO NOT POST ON INTERNET 
 
REF: A) HANOI 3019 B) HCMC 1368 
 
¶1. (SBU) Summary: One year after a wave of labor unrest hit 
lower-paying foreign-owned factories in Vietnam, workers, businesses 
and government officials say that similar labor strife is less 
likely now.  Labor experts state that tensions are lower because of 
last year's government-mandated wage increases, a better 
understanding of the labor law and enhanced efforts by the 
Government of Vietnam (GVN) to educate workers and address labor 
concerns ahead of the New Year (Tet) holiday when workers need cash 
and often strike.  These intensified efforts are part of a general 
movement within the GVN to focus more intently upon industrial 
relations in the understanding that labor tensions are harming the 
country's image.  Foremost among these efforts is a new National 
Labor Relations Board at the Ministry of Labor, Invalids and Social 
Affairs (MOLISA), which will serve as the government focal point for 
industrial relations and labor disputes.  The International Labor 
Organization applauded the move.  End Summary. 
 
¶2. (SBU) One year after a wave of labor unrest hit lower-paying 
foreign-owned firms in Vietnam, workers, businesses and government 
officials say labor relations have improved significantly in recent 
months.  While they note there is always the potential that 
cash-strapped workers will strike in the run-up to the lunar New 
Year, or Tet, holiday in February, they say increased domestic media 
attention to labor issues and a range of government, non-government 
and private sector efforts in the wake of strikes have served to 
reduce labor tensions, particularly at the most strike-sensitive 
Taiwanese and Korean companies where the majority of strikes 
occurred.  "The situation is nothing like it was last year," said Le 
Thi Nu, a seamstress for Senso Company, a Japanese-owned kimono 
maker in Binh Duong province. "I think a lot of companies have 
learned their lessons from last year." 
 
¶3. (SBU) The strikes drew international attention to Vietnam's labor 
tensions in early 2006, leading some to speculate about Vietnam's 
stability as a manufacturing base for its growing apparel and 
footwear industries, accounting for more than 23 percent of 
Vietnam's exports in 2006.  While many firms attributed the strikes 
to a combination of confusion and heightened expectations amid a 
long-rumored wage increase (the Prime Minister decreed a 40-percent 
minimum wage hike at foreign-owned firms in January), labor experts 
also argued that increasing wage pressures, a lack of capacity at 
the Communist Party-linked national labor union and labor laws 
designed for a non-market economy also contributed. 
 
¶4. (SBU) Included in the government efforts are a newly revamped 
strikes law (reftel) and pre-Tet campaign by MOLISA to address any 
incipient labor conflict.  As part of this campaign, MOLISA 
officials visited Ho Chi Minh City in November to gauge the level of 
worker discontent and encourage firms and labor organizations to 
address worker concerns proactively, said Nguyen Manh Cuong, the 
director of a new National Labor Relations Board to handle 
industrial relations at MOLISA.  MOLISA is encouraging firms to 
reach out to workers and pay early on their traditional 13th month 
bonuses for Tet, which takes place in February.  Other organizations 
involved in the preventive measures include the Vietnam General 
Confederation of Labor (VGCL), the Vietnam Chamber of Commerce and 
Industry (VCCI) and local Departments of Labor, Invalids and Social 
Affairs (DOLISAs).  Phung Quang Huy, General Director of the 
Employer Activities Bureau at VCCI, said he spent the greater part 
of November in southern Vietnam meeting with enterprises and 
officials, and holding a conference for hundreds of company 
representatives from the heavily industrialized Bin Duong and Dong 
Nai provinces. "Workers already have much better knowledge," he 
said. 
 
¶5. (SBU) The International Labor Organization (ILO), which runs a 
program to improve industrial relations in Vietnam, is also working 
to prevent worker unrest by holding a series of trainings at the 
most strike-sensitive companies in the week of December 25-29. 
These companies include a range of Taiwanese and Korean garment and 
footwear manufacturers in and around Ho Chi Minh City and Binh Duong 
and Dong Nai provinces.  The potential for strikes "is hard to 
predict, but it is not going to be anything like last year," said 
Jan Sunoo, Chief Technical Advisor of the ILO Industrial Relations 
Project. 
 
NEW GVN INDUSTRIAL RELATIONS FOCUS 
---------------------------------- 
 
HANOI 00003081  002 OF 002 
 
 
 
¶6. (SBU) The intensified efforts are part of a general effort within 
the Government of Vietnam (GVN) to focus more intently upon labor 
relations, with the understanding that continued labor strife could 
harm the country's image and undercut economic growth.  Foremost 
among these efforts is the creation at MOLISA of a new National 
Labor Relations Board, which will serve as a focal point for all GVN 
industrial relations and labor disputes.  The ILO's Sunoo has called 
the creation of the department "from all perspectives a good move" 
and "very much an acknowledgement by (the GVN) that it has to take 
industrial relations more seriously." 
 
¶7. (SBU) The director of the unit will be Nguyen Manh Cuong, Deputy 
Director of the International Cooperation Department (quoted above), 
who has a reputation as the ministry's most progressive and 
strategic thinker, although reportedly some hardliners distrust his 
U.S. education.  Cuong is a Fulbright Scholar who received a 
master's degree at Princeton's Woodrow Wilson School, where he 
focused on labor relations. 
 
¶8. (SBU) Cuong told Econoff that the board will be in charge of 
spearheading GVN policy on industrial relations, focus on improving 
the quantity and quality of collective bargaining agreements at 
foreign and domestic firms and act as the government's point of 
contact in labor disputes.  The unit will begin by drafting new 
collective bargaining agreements at 20 willing firms, an initiative 
seen as crucial because collective bargaining agreements in Vietnam 
are usually not negotiated with workers and often only repeat the 
labor law's vague language on conditions and wages. 
 
COMMENT 
------- 
 
¶9. (SBU) The 2006-2007 New Year strikes season will provide a key 
test of the GVN's efforts to deal more systematically with labor 
relations.  So far this fall, only one strike has been reported in 
southern Vietnam, the cause of which was not labor conditions, but a 
company's decision to relocate its production factory outside of 
HCMC.  We are encouraged by the steps we have seen taken, though 
more efforts need to be made.  We must necessarily take a 
wait-and-see attitude toward the National Labor Relations Board.  It 
is discouraging, meanwhile, that one HCMC government official was 
demoted recently (ref B) at the urging of HCMC trade union 
representatives because she spoke candidly about weaknesses in 
Vietnam's labor system during an American Chamber of 
Commerce-sponsored seminar (Note: We understand the official will 
likely leave DOLISA to work at a new organization in the near 
future. End note.) 
 
¶10. (SBU) Thus, even though labor tensions appear to have waned for 
the moment, Vietnam is facing a moment of labor transition. 
Decisions made during this time will impact the labor market for 
years to come.  As noted in reftel A, the GVN is currently writing 
implementing decrees for its strike law and the USG has the chance 
to weigh in on these.  For this reason, post recommends holding a 
U.S.-Vietnam Labor Dialogue meeting in the first half of 2006, 
perhaps focusing on the theme of collective bargaining agreements to 
assist the GVN and to support the freedom of association in Vietnam. 
 
 
ALOISI