VZCZCXRO9913
PP RUEHCHI RUEHDT RUEHHM RUEHJO RUEHNH
DE RUEHPF #2208/01 3541236
ZNR UUUUU ZZH
P 201236Z DEC 06
FM AMEMBASSY PHNOM PENH
TO RUEHC/SECSTATE WASHDC PRIORITY 7728
INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY
RUEHXI/LABOR COLLECTIVE PRIORITY
RUEHC/DEPT OF LABOR WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 PHNOM PENH 002208 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS, EB/TPP, AND DRL/IL 
LABOR FOR ILAB--CHRIS WATSON AND JONA LAI 
 
E.O. 12958: N/A 
TAGS: ELAB ECON PGOV KTEX CB
SUBJECT: CAMBODIA:  LABOR UNREST TOPS INDUSTRIAL RELATIONS 
CONFERENCE AGENDA 
 
¶1.  (U) SUMMARY.  Dramatic increases in labor unrest, 
government interference in union affairs, labor violence, and 
a nearly universal disregard for the labor law topped the 
concerns raised at the Second National Industrial Relations 
Conference on December 18.  The Ambassador's keynote address 
noted that economic success was attainable but not assured, 
and that poor labor relations had the potential to derail 
garment sector growth.  Researchers contrasted the pro-active 
approach hotel managers have successfully used to 
dramatically reduce labor disputes with the "it can't happen 
to me" attitude prevalent in the strike-prone garment sector. 
 Factory managers and workers alike revealed they have much 
more confidence in the USG-funded Arbitration Council than in 
the Cambodian government's conciliation team.  END SUMMARY. 
 
Ambassador, ILO Official Highlight Worrying Trends 
--------------------------------------------- ------ 
 
¶2.  (U) Describing the year as a whole as "a disappointing 
one for industrial relations" in his keynote address, the 
Ambassador cited dramatic increases in garment sector strikes 
(most of which were illegal), worker and employer attempts to 
circumvent the arbitration process, labor-related violence, 
and government intervention in garment sector-wide wage 
negotiations.  While the most unionized sectors of the 
economy--the garment and tourism industries--played a large 
role in Cambodia's spectacular 2005 economic growth, he 
warned that Cambodia should not be complacent about its 
economic future.  The excellent working conditions in 
Cambodia's garment factories were once unusual and a 
competitive advantage, but now that many other countries 
offer safe and fair factory conditions, Cambodia must improve 
price, quality, and turnaround time to stay competitive. 
Furthermore, labor unrest or labor scandals could frighten 
buyers away from Cambodia. 
 
¶3.  (U) In a similarly frank speech, International Labor 
Organization (ILO) Chief Technical Advisor John Ritchotte, 
praised the "landmark progress in dialogue between employers 
and workers...which would have been impossible just 18 months 
ago."  Ritchotte then stated that his general optimism about 
Cambodia's labor relations was tempered by a number of 
troubling trends:  lack of union accountability and 
transparency, outside interference in union affairs, illegal 
strikes, the use of abusive contractual terms to reinforce 
employment insecurity, and blacklisting union activists. 
 
Unsophisticated Unions, Reactive Managers Feed Disputes 
--------------------------------------------- ---------- 
 
¶4.  (U) A revealing study by the local NGO Community Legal 
Education Center explored the causes of labor disputes and 
why they are more common in some industries, and in some 
factories, than others.  Among its findings: 
 
--Labor disputes most often occur over discretionary or 
confusing wage issues--such as piece rates, overtime, leave, 
or seniority--or union-related issues such as the dismissal 
of a union leader. 
 
--Hotel managers in Cambodia recognize the cost associated 
with strikes and often try to manage that risk with robust, 
formal dispute resolution mechanisms within their human 
resources department.  In contrast, garment factory managers 
often feel that labor disputes "shouldn't happen" or blame 
unions or poorly educated workers for them.  These differing 
approaches help to explain why industrial relations in 
Cambodia's hotel industry are far more stable and amicable 
than in the garment sector. 
 
--Union leaders are often young and don't understand how 
labor disputes occur or could be pro-actively managed.  They 
often blame management for labor disputes. 
 
--Unions are not able to communicate effectively with their 
membership, and in some cases do not even know that their 
workers are on strike. 
 
--Companies with multiple unions often have considerable 
inter-union conflict, which confuses workers and impedes 
progress towards labor objectives. 
 
More Confidence in Arbitrators than Government Conciliators 
--------------------------------------------- -------------- 
 
¶5.  (SBU) Khieu Savuth, Deputy Director of the Ministry of 
 
PHNOM PENH 00002208  002 OF 002 
 
 
Labor and Vocational Training's Labor Dispute Department, 
stated that the department successfully resolved 65% of the 
217 cases it has received so far this year.  However, 
factory, Garment Manufacturers Association of Cambodia 
(GMAC), and union representatives privately took issue with 
this claimed success, telling us that many conciliators 
actually prolong or incite labor unrest in order to extract 
bribes from factory management.  (NOTE:  Cambodian labor law 
mandates that labor disputes be referred first to the Labor 
Ministry for conciliation, and if they remain unresolved, 
then to the Arbitration Council.  END NOTE.) 
 
¶6.  (U) Union, factory and GMAC attendees had more positive 
views of the Arbitration Council, although some parties from 
each side stated that they disagreed with some of its 
rulings.  The Arbitration Council reported receiving an 
average of 10 cases per month and estimates that since its 
inception in 2003 it has heard cases affecting more than 
270,000 workers.  The percentage of cases in which one or 
both parties object to the arbitral award has been decreasing 
over the past three years, so that now approximately 
one-third of cases are resolved by mutual agreement prior to 
arbitration (though often in the hearing room with assistance 
from the arbitrators), another one-third have awards which 
are accepted by both parties, and the remainder have awards 
to which at least one side objects. 
 
¶7.  (U) Arbitrators also outlined recent developments in 
labor jurisprudence, including distinguishing between casual 
and regular workers, illegal dismissals of union officials, 
delineating between individual and collective disputes, 
attendance bonuses, and maternity leave. 
 
¶8.  (U) COMMENT:  This year's national industrial relations 
conference came after a year full of both highs--like rival 
unions negotiating together--and lows--government 
interference in garment sector negotiations, an increase in 
labor unrest, strike-related violence, and the first felony 
conviction of a union activist.  The conference has become a 
rare and useful platform for internatinal labor observers to 
call attention to troubling trends which Cambodian officials 
consider too sensitive to discuss publicly.  By highlighting 
the economic consequences of labor unrest together with the 
causes of disputes and different approaches to managing them, 
the conference highlighted an important problem and suggested 
first steps in addressing it.  END COMMENT. 
MUSSOMELI