VZCZCXRO4010
OO RUEHDT RUEHPB
DE RUEHHM #1196/01 3391036
ZNR UUUUU ZZH
O P 051036Z DEC 07
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3394
RUCPDOC/USDOC WASHDC IMMEDIATE 0050
RUEHC/DEPT OF LABOR WASHINGTON DC
INFO RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE
RUEHHI/AMEMBASSY HANOI PRIORITY 2327
RUEHHM/AMCONSUL HO CHI MINH CITY 3611

UNCLAS SECTION 01 OF 03 HO CHI MINH CITY 001196 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS AND DRL/IL MITTELHAUSER 
COMMERCE FOR 4431/MAC/AP/OPB/VLC/HPPHO 
STATE PASS USDOL ILAB ZLI 
STATE PASS USTR FOR DBISBEE 
 
E.O. 12958: N/A 
TAGS: ECON EIND ELAB KTEX ETRD VM
SUBJECT: STRIKE REVEALS PRESSURES AND CHANGES IN SOUTHERN VIETNAM'S 
LABOR MARKET 
 
 
HO CHI MIN 00001196  001.2 OF 003 
 
 
¶1. (SBU) The labor situation in Vietnam is changing.  With 400 
strikes in 2006 and roughly 300 so far this year, previously 
banned (and still almost always technically illegal) work 
stoppages appear to be becoming a routine aspect of labor 
relations.  The recent strike at a large (14,000 employee), 
Korean-owned shoe factory in Dong Nai province stands out as 
particularly good example of what drives workers to strike in 
Vietnam and how these technically illegal labor actions are 
resolved via a deliberate, consultative process that brings 
together workers, employers, government officials and other 
stakeholders.  The causes of the strike, including poor 
management-worker communications and the impact of increasing 
inflation on wages, are typical in strikes around the world. 
Inflationary pressures, in particular, mean more strikes are 
likely in store in the lead up to the early February 2008 Tet 
(Vietnamese New Year) holiday.  End Summary. 
 
14,000 Workers Demanding Increased Benefits 
------------------------------------------- 
¶2. (SBU) Workers at the 100-percent Korean owned Tae Kwang Vina 
factory in the Bien Hoa Industrial Park of Dong Nai province 
went on strike from November 27 to December 3, 2007.  Vu Thi 
Thanh Thuy, Nike Vietnam's External Affairs Manager, told the 
Consulate that Tae Kwang Vina is one of their 40 sub-contactors 
in Vietnam and was established in 1994 to manufacture Nike shoes 
for export.  At present, this factory (a US$65 million 
investment) employs about 14,000 workers, the majority of whom 
are women aged 18-38.  Lam Duy Tinh, the Deputy Director in 
Charge of Investigation and Labor at Dong Nai province's 
Department of Labor, War Invalids and Social Affairs (DoLISA) 
told the Consulate that almost all of the factory's workers were 
involved in the strike.  Their primary demands were an increased 
Tet holiday bonus of one-half month's salary (on top of the 
current bonus of one-month's salary), seniority pay, an 
increased April 30 "Victory Day" holiday bonus, social 
insurance, annual leave, transportation and "full attendance" 
allowances. 
 
¶3. (SBU) The Manager of the Employers' Office of the HCMC branch 
of the Vietnam Chamber of Commerce and Industry (VCCI), Nguyen 
Hong Ha, noted that the average salary of Tae Kwang Vina workers 
of 1 million Vietnamese Dong (VND) per month (roughly US$62.50) 
is 20 percent higher than the minimum wage and that working 
conditions at this factory exceed local standards.  Despite 
these pluses, workers told factory managers that the nearly 10 
percent annual inflation rate means that the price of 
commodities, food and other necessities have risen faster than 
the buying power of their wages.  Recent news that the 
government will increase the minimum wage effective January 1, 
2008 also created workers expectations that employers would 
increase salaries commensurately. 
 
Resolving Worker Issues 
----------------------- 
¶4. (SBU) Observers, including he factory's buyer, Nike, agree 
that the root causes of the strike included a combination of 
poor worker-management communication and typical requests for 
increased wages and allowances.  In an example of 
miscommunication, workers were traditionally given a bonus 
equivalent to half-a-month's salary on the April 30 holiday 
every year.  This year, however, instead of providing such a 
bonus package as a lump-sum payment, the factory paid the bonus 
in 12 equal monthly installments without explanation.  When the 
traditional bonus time came, workers thought that the factory 
had cut their bonus.  This was clearly the easiest aspect of the 
dispute to resolve; next year the workers will again be given 
the April 30th holiday bonus as a lump sum.  Annual leave was 
another sore point.  Factory management sometimes requested that 
workers to take annual leave when production is down, but poor 
communication made the workers believe that they are forced to 
take leave at times when they do not want to.  Clearer 
guidelines will be issued to interpret the factory's annual 
leave policy. 
 
¶5. (SBU) Officials from the Dong Nai provincial DoLISA office 
agreed that poor communication contributed to the strike, 
pointing to inaccurate press information on Vietnam's minimum 
wage system and workers' misunderstanding of the system as 
additional reasons for the strike.  Specifically, Vietnam's 
Labor Law provides different rates of minimum wages for cities 
of different sizes -- 1,000,000 dong/month for workers in "type 
1" (very large) urban cities such as HCMC, 900,000 dong/month in 
"type 2" (mid-sized) cities such as Bien Hoa and Binh Duong, and 
 
HO CHI MIN 00001196  002.2 OF 003 
 
 
800,000 dong/month for "type 3" (smaller) cities and urban 
areas.  DoLISA's Deputy Director said that many workers in Dong 
Nai (which is adjacent to HCMC) thought that they were eligible 
for the top minimum wage of 1,000,000 dong/month. 
 
¶6. (SBU) Other worker demands centered on pay and benefits. 
Vietnam's new Law on Social Insurance governing maternity leave 
and social insurance, for example, was amended effective January 
1, 2007, but the factory had not yet changed its labor policies 
to reflect increased benefits available to workers.  As part of 
the negotiations to end the strike, it has now agreed to do so. 
When workers who take motorbikes or bicycles to work demanded 
the same transportation allowance that the factory gives to 
those who take the factory bus, the factory agreed.  Lastly, the 
factory agreed to make the definition of "full attendance" less 
strict so that it will be easier for workers to qualify for this 
allowance.  The factory did not agree to workers' requests for 
an increased Tet bonus or seniority pay, but a Nike 
representative confirmed that that the Tae Kwang Vina workers 
went back to work on Monday, December 3. 
 
¶7. (SBU)  When asked about the strike by EconCouns in Hanoi on 
Dec 4, Nike's General Manager said that the strike had started 
when two employees raised a grievance but then quickly escalated 
as others joined in to make the wage and other demands as noted 
above.  She also characterized the labor action as a "wildcat" 
strike because it was illegal, but explained there is still a 
communications problem with the workers in understanding labor 
law and procedures. 
 
Dispute Resolution Mechanisms at Work 
------------------------------------- 
¶8. (SBU) One of the most interesting aspects of this technically 
illegal strike was the rational governmental response to it. 
Responding to the strike, the provincial government set up an 
interagency working group which consists of officials from Bien 
Hoa City People's Committee, the provincial DoLISA, the 
provincial Labor Federation and Dong Nai Industrial Zone 
Authority.  The interagency working group explained to the 
workers that their requests should be made in accordance with 
the law and the company's conditions.  Local authorities, 
including provincial Police, DoLISA, Labor Federation and the 
Management Board of Bien Hoa Industrial Park, stepped in to 
facilitate dialogue between factory owners and workers.  Nike 
representatives told us Nike put itself in a neutral position to 
encourage both employers and workers to calm down and negotiate 
to reach satisfactory solutions.  Nike is not involved in 
monitoring the implementation of the newly reached agreement; 
this will be monitored by DoLISA. The local police were involved 
only to the extent that workers caused minor damage to the 
factory. 
 
Comment: 
-------- 
¶9. (SBU) The first conclusion to be drawn from the Tae Kwang 
Vina strike is that the GVN is becoming more relaxed regarding 
labor disputes, which had traditionally been considered almost 
as acts of economic sabotage and thus too sensitive to discuss. 
In contrast, officials from the Dong Nai provincial DoLISA were 
surprisingly open and forthcoming when we contacted them.  Our 
Nike contacts also assessed DoLISA's actions in this strike as 
competent and responsive.  This new attitude can be seen in 
legislation as well, particularly the revisions to Chapter 14 of 
the National Labor Code implemented this year with the intent of 
making it easier to hold legal strikes.  The old rules were so 
restrictive that virtually none of the roughly 1,000 strikes 
that have taken place over the past decade were legal.  Despite 
these advances -- and despite a two percent payroll levy (one 
percent on foreign-invested firms) imposed to support Vietnam's 
national labor union -- labor representation at the local level 
remains very weak.  As the Tae Kwang Vina strike suggests, 
however, even though unions remain fairly weak, Vietnamese 
workers see collective action, including technically illegal 
strikes, as an effective way to promote their interests. 
 
¶10. (SBU) The second conclusion is that strikes are likely to 
become more common in the coming months.  The industrial zone 
manager in the Tae Kwang Vina case as well as Nike and other 
foreign investors in Vietnam remain concerned that that wage 
pressure resulting from inflation means that labor unrest is 
likely to get worse toward Tet -- the biggest holiday of the 
year and the time when Vietnamese need extra money for family 
gatherings.  End comment. 
 
HO CHI MIN 00001196  003.2 OF 003 
 
 
 
¶11. (U) This cable was coordinated with Embassy Hanoi. 
FAIRFAX