VZCZCXRO6862
RR RUEHHM
DE RUEHHI #1061/01 1571018
ZNR UUUUU ZZH
R 061018Z JUN 07
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 5568
INFO RUEHHM/AMCONSUL HO CHI MINH 3181
RUEHC/DEPT OF LABOR WASHINGTON DC

UNCLAS SECTION 01 OF 04 HANOI 001061 
 
SIPDIS 
 
DEPT FOR EAP/MLS AND DRL 
DEPT PASS USTR FOR DAVID BISBEE 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ELAB ECON ETRD VM
SUBJECT:  DRL DAS KRILLA VISIT TO VIETNAM 
 
 
¶1.  (SBU) Summary: DRL Deputy Assistant Secretary Jeffrey Krilla and 
Mark Mittelhauser, Deputy Director of the Office of International 
Labor and Corporate Social Responsibility, visited Ho Chi Minh City 
and Hanoi May 20-23.  This cable provides a current overview of the 
labor situation in Vietnam and key institutions.  The DRL visitors 
met key officials in government and in the labor movement to discuss 
current developments, strikes, corporate social responsibility and 
assistance needs.  They also heard about the challenges Vietnam's 
labor institutions and businesses face as Vietnam integrates into 
the global economy.  The many actors involved in labor here 
understand the issues, and are serious about working with each other 
to address problems.  Still, while experts acknowledged some 
progress to date, there remain questions about the pace.  Freedom of 
association continues to be sensitive.  End Summary. 
 
¶2.  (U) State Department Democracy, Human Rights and Labor (DRL) 
Deputy Assistant Secretary Jeffrey Krilla and Mark Mittelhauser, 
Deputy Director of the Office of International Labor and Corporate 
Social Responsibility, visited Ho Chi Minh City May 20-21 and Hanoi 
May 22-23 to meet with various government officials and labor 
representatives to discuss labor issues.  They met or visited: 
 
* Ministry of Labor, Invalids and Social Affairs (MOLISA): Vice 
Minister Nguyen Thanh Hoa; National Labor Relations Research Board 
Director Nguyen Manh Cuong and Legal Department Director Dinh Van 
Son. 
 
* International Labor Organization (ILO): Country Director Rose 
Marie Greve and Technical Advisor Jan Sunoo. 
 
* Vietnam Chamber of Commerce and Industry (VCCI): First Vice 
Executive President Hoang Van Dzung. 
 
* Vietnam General Confederation of Labor (VGCL): Vice President 
Nguyen Hoa Binh and Deputy Director of the International Department 
Chau Nhat Binh. 
 
* Committee for Social Affairs, National Assembly: Committee Vice 
Chairman Dang Nhu Loi. 
 
* Ministry of Foreign Affairs (MFA): Deputy Director General Duong 
Chi Dzung. 
 
* Ho Chi Minh City Department of Labor, Invalids and Social Affairs 
 
 
* Ho Chi Minh City Vietnam General Confederation of Labor (VGCL) 
 
* Two factories in Ho Chi Minh City: Freetrend Limited and Sadeco 
Furniture 
 
¶I. General Overview of Labor Situation 
-------------------------------------- 
 
¶3.  (SBU) The labor sector in Vietnam is undergoing a period of deep 
and systemic change.  In the wake of a wave of labor unrest in 2006 
and continuing unrest thereafter, the Government of Vietnam (GVN) 
passed a new amendment to the Labor Code on strikes aimed at 
streamlining the procedures by which strikes can occur.  The strikes 
are symptomatic of increasing worker discontent due to poor 
conditions and wage pressures as well as a systemic lack of capacity 
within the industrial relations apparatus to manage labor relations. 
 Vietnam has a single overarching labor union, with many affiliated 
subordinate unions, and the capacity of these bodies to negotiate 
for workers is weak.  This is primarily the result of the fact that 
Vietnam's labor union, the Vietnam General Confederation of Labor 
(VGCL), is funded by the state and is therefore not directly 
accountable to workers.  Technically speaking, freedom of 
association does not exist in Vietnam because all unions have to be 
affiliated with VGCL. 
 
¶4. (SBU) An important part of the U.S.-Vietnam labor relationship 
takes place under the aegis of the 2006 U.S.-Vietnam Letter of 
Understanding, a follow-on to an earlier Memorandum of Understanding 
that concluded in 2005 and under which the U.S. Department of Labor 
(DOL) implemented six labor-related projects.  There are no funds to 
support this LOU and no attached projects.  Still, the annual Labor 
Dialogue has continued, and both parties will be meeting in Hanoi 
this year for the meeting, tentatively scheduled for September 24. 
 
Key Institutions 
---------------- 
 
¶5. (SBU) The Ministry of Labor, Invalids, and Social Affairs 
(MOLISA) is central to Vietnam's progress on legal reform, progress 
with labor conditions, government initiatives to improve 
worker-enterprise relations and ratification of ILO core 
conventions.  MOLISA also has the new National Industrial Relations 
 
HANOI 00001061  002 OF 004 
 
 
Research Board.  The National Industrial Relations Research Board 
will be engaged in a pilot project to develop collective bargaining 
agreements in several key provinces in southern Vietnam. It may also 
have a task force to negotiate in industrial disputes and aims to 
develop other initiatives to develop a more modern labor system 
generally. 
 
¶6. (SBU) The National Assembly's Social Affairs Committee is 
responsible for drafting laws and oversight for labor and many other 
social issues, e.g., health care, the socially disadvantaged, the 
elderly, and the homeless.  The Social Affairs Committee was 
responsible for drafting Chapter 14 of the Labor Code on strikes, 
the new export labor law, and will be in charge of the redrafting of 
the Labor Code.  The Chapter 14 amendment was controversial and 
vigorously opposed by VGCL. 
 
¶7. (SBU) The Vietnam Chamber of Commerce and Industry (VCCI) is a 
national organization that represents the business community, 
employers and business associations in all economic sectors in 
Vietnam.  VCCI is an independent, non-governmental, non-profit 
organization having the status of a legal entity and operating with 
financial autonomy.  The function of VCCI is to represent the 
Vietnamese business community for the promotion and protection of 
the lawful, legitimate interests of the business community and 
employers in Vietnam in domestic and international relations. 
Recently, VCCI has been working with the Vietnam General 
Confederation of Labor (VGCL) to improve understanding of the labor 
law nationwide in order to help promote sound industrial relations. 
 
¶8. (SBU) The Communist Party of Vietnam controls the single trade 
union, VGCL, an umbrella organization that approves and manages a 
range of subsidiary labor unions organized according to location and 
industry.  According to December 2005 data, the VGCL claimed 5.4 
million members of the approximately 11.1 million wage earners in 
Vietnam.  There is, however, a large disparity in terms of 
unionization rates in different economic sectors.  Observers have 
harshly criticized VGCL for its failure to represent workers 
adequately.  In many firms, the union representative is actually 
appointed from the firm's human resources office and is not active. 
In some cases in 2006, the union representative did not even know 
about an erupting labor dispute until workers were already outside 
striking. 
 
¶9. (SBU) VGCL has an influence on many key labor decisions, such as 
amending labor legislation, developing social safety nets, and 
setting health, safety, and minimum wage standards.  VGCL vigorously 
opposed the National Assembly's insertion of the provision in the 
strikes law allowing un-unionized workers to represent themselves. 
 
¶10. (SBU) The International Labor Organization (ILO) is engaged in a 
range of projects to assist with Vietnam's development of a labor 
sector more in keeping with an industrialized market economy.  The 
most high profile of these is the second phase of the ILO/Vietnam 
Industrial Relations Project.  This project seeks to improve working 
conditions by boosting collective bargaining capacity and improving 
worker-employer cooperation.  The U.S. Department of Labor (USDOL) 
funded the project from September 2002 through mid-2006 (one of the 
six DOL projects in the U.S.-Vietnam MOU).  Thereafter, the 
Norwegian Government took over support for the project.  The project 
set up seven government offices that serve as one-stop industrial 
relations resource centers.  The project also works to build 
industrial relations skills among workers and managers in 70 target 
enterprises.  ILO is also providing, through this project, technical 
assistance with Vietnam's efforts to re-draft completely its labor 
law.  ILO is also considering a new project, based on the Better 
Factories Corporate Social Responsibility project in Cambodia, for 
Vietnam.  The IFC is a donor and the ILO is looking for further 
funding. 
 
II. DRL Visit: Recent and Upcoming Developments 
--------------------------------------------- -- 
 
¶11. (SBU) National Industrial Relations Committee: In a brief 
courtesy call, MOLISA Vice Minister Hoa cited the Prime Minister's 
recent approval of the Committee, which MOLISA will chair.  MOLISA 
explained the genesis of the Committee in an ILO industrial 
relations project first funded by USDOL and now receiving Norwegian 
support.  MOLISA views the Committee as further promoting collective 
bargaining and strengthening industrial relations in a tripartite 
framework of government, workers, and employers.  At all of the 
calls in Hanoi and Ho Chi Minh City, this development came up as a 
means of addressing several current nagging issues in the labor 
sector: strikes, local-level dialogue, training.  DOLISA (the "D" 
stands for Department) representatives in Ho Chi Minh City further 
stressed coordination between employers, the VGCL, and workers was 
critical to defuse labor tensions early. 
 
¶12. (SBU) U.S.-Vietnam Labor Dialogue: MOLISA and the Ministry of 
 
HANOI 00001061  003 OF 004 
 
 
Foreign Affairs (MFA) officials confirmed the September Labor 
Dialogue and are preparing for it.  They indicated they will likely 
provide detailed updates on new labor-related legislation and 
implementing decrees since the previous dialogue.  Without 
elaborating, MOLISA also indicated they will want to discuss 
opportunities for temporary Vietnamese workers in the United States. 
 
 
Strikes, Local-Level Unions 
--------------------------- 
 
¶13. (SBU) The DRL meetings at VCCI, VGCL, and the Social Affairs 
Committee all touched on strikes.  VCCI's Dzung, asserting that 90 
percent of strikes in Vietnam are illegal, said Vietnam's 
integration into the global economy underscored the importance of 
institutions such as the National Industrial Relations Committee. 
 
¶14. (SBU) VGCL blamed both employers and unions for the recent wave 
of strikes.  VGCL's Binh said employers often do not follow the law 
or fail to fulfill their obligations. For example, Binh said 
employers often fail to sign contracts with workers and fail to pay 
social insurance, and they abuse overtime rules.  Binh admitted, 
however, that trade union leadership at the local and factory level 
is weak.  Besides more training, he sees a need for collective 
bargaining and an organized, local-level dialogue between workers 
and business as means of countering strikes. 
 
¶15. (SBU) Loi of the National Assembly Social Affairs Committee also 
faulted local-level union leaders for strike activity, saying they 
were "incapable of leading a strike.  No one wants to be a trade 
union officer; they don't get paid and they are not trained." 
Finally, Loi said that many provinces, in their rush to attract and 
retain FDI, simply ignore the application of labor laws. 
 
¶16. (SBU) ILO commented that the trade unions are weak and do not 
know how to empower their members.  VGCL is the political link to 
the ruling Communist Party.  Therefore, even if VGCL is incapable, 
no one dares ask for organizational change.  In the ILO's view, the 
best way to improve trade union capacity is for the workers 
themselves requiring their representatives to play a more active 
role.  As such, the ILO is trying to develop model labor relations 
projects at the local level to create a demand among other workers 
for good representation.  ILO commented that local unions need to 
build their capacity or face becoming increasingly irrelevant in the 
face of wildcat strikes. 
 
Corporate Social Responsibility 
------------------------------- 
 
¶17. (SBU) Corporate social responsibility (CSR) is clearly an 
evolving topic for Vietnam.  MOLISA explained that the term in the 
Vietnamese language more or less translates as "charity."  With 
increasing foreign investment and significant output from local 
factories going to overseas markets, however, there is a parallel 
awareness that corporate social responsibility involves compliance 
with corporate codes of conduct and monitoring of supply chains. 
Thus, while older domestic companies are more likely to undertake a 
range of charitable acts, a few newer firms engage in actions that 
might have a more enduring impact on the well-being of the workforce 
and the broader community. 
 
¶18. (SBU) DRL's official calls indicated little effort on behalf of 
labor officials to promote corporate social responsibility.  Ho Chi 
Minh City DOLISA officials commented that CSR programs were only one 
way businesses can work to address employee concerns.  VCCI noted 
that 96 per cent of enterprises in Vietnam are small and medium 
sized enterprises (SMEs) and rarely have the means and will to put 
in place comprehensive CSR programs.  Nevertheless, VCCI formally 
recognizes exemplary employers with an award each year in October. 
Foreign firms, particularly in Ho Chi Minh City, are often the only 
enterprises to initiate comprehensive CSR policies for their 
workers.  ILO indicated that local CSR auditors in Vietnam typically 
do a good job of identifying compliance problems and insisting that 
companies remedy shortcomings on labor law or code implementation. 
 
Discussion of Assistance Needs 
------------------------------ 
 
¶19. (SBU) MOLISA echoed a theme post has heard in other dialogues 
with the government: Vietnam's WTO accession in January 2007 
represents new opportunities but also new challenges.  Helping 
Vietnam confront these new challenges in terms of labor law and 
regulations is an opportunity for technical assistance.  MOLISA also 
predicted the number of enterprises would quadruple by 2010-2015. 
 
¶20. (SBU) Turning to specifics, MOLISA indicated assistance would be 
welcome in helping establish an unemployment insurance fund 
(required to be set up by 2009) and an occupational safety and 
 
HANOI 00001061  004 OF 004 
 
 
health fund.  They also pointed for the need for greater awareness 
among employers and unions regarding the law and their respective 
roles.  In a lunch hosted by the U.S. Chamber of Commerce in Ho Chi 
Minh City, Amanda Tucker, outgoing country director for Nike, 
commented that more training for labor inspectors could assist in 
the creation of a comprehensive labor condition monitoring program, 
thus relieving the "audit fatigue" that several FDI factories suffer 
from. 
 
¶21. (SBU) Building on an initial comment that VGCL's experience in a 
market economy was very limited, Binh said VGCL needed training in 
negotiating techniques.  VGCL also wants to learn more about 
industrial relations as practiced in other countries in the region. 
Binh did acknowledge the positive results to date from the ILO 
industrial relations project, and several contacts indicated that 
additional projects to promote greater harmony in industrial 
relations and more effective mediation would be well-received.  In 
fact, the DRL team heard good words for the ILO project at nearly 
every call. 
 
¶22. (U) DRL cleared this cable. 
 
MARINE