VZCZCXRO1250
PP RUEHHM
DE RUEHHM #0582/01 2251016
ZNR UUUUU ZZH
P 131016Z AUG 09
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC PRIORITY 5997
INFO RUEHHI/AMEMBASSY HANOI PRIORITY 3897
RUEHHM/AMCONSUL HO CHI MINH CITY PRIORITY 6233
RUEHC/DEPT OF LABOR WASHINGTON DC

UNCLAS SECTION 01 OF 04 HO CHI MINH CITY 000582 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS AND DRL 
 
E.O. 12958: N/A 
TAGS: ELAB EIND ECON ETRD VM
SUBJECT: UNIONS IN THE SOUTH: BETWEEN IDEOLOGY AND MODERNITY 
 
¶1. (SBU) SUMMARY: The formal legal and regulatory structure of 
labor markets in HCMC and surrounding provinces has not changed 
to keep pace with the fundamental changes that have taken place 
in the economy as whole.  There is still one state-created and 
CPV-controlled national union, the Vietnam General Confederation 
of Labor (VGCL) to which private sector employers must pay a 
mandatory 1% of their payroll.  The VGCL's primary 
responsibilities are to provide for worker protection and 
services and education to workers consistent with the ideology 
of the Communist Party of Vietnam (CPV), while serving as a 
recruiting and training system for new CPV members.  The reality 
on the ground varies drastically province to province and even 
company to company, with some labor leaders playing an 
increasingly productive role in building communication between 
workers and management and serving as mediators during work 
stoppages.  A "pilot" single-sector union for textile workers 
established in 2006 is increasingly popular with workers and 
employers alike but ultimately still reports to the VGCL and, 
through it, to the CPV.  End Summary. 
 
 
 
PART ONE IN A SERIES 
 
-------------------- 
 
¶2. (SBU) This is the first in what is planned as a series of 
cables covering the complex situation facing labor markets, 
union and employers in southern Vietnam.  This part focuses 
primarily on the overall structure as viewed from the provincial 
level in Vietnam's most industrialized provinces -- primarily Ho 
Chi Minh City, Binh Duong and Dong Nai.  Future installments 
will report on the experiences of specific companies and unions 
as they attempt to develop workable solutions to protecting 
workers' rights while maintaining conditions for economic 
growth. 
 
 
 
SOUTHERN LABOR MARKETS: WHERE THEORY AND REALITY DO NOT MEET 
 
--------------------------------------------- --------------- 
 
¶3. (SBU) The provinces that make up the "Southern Key Economic 
Zone" centered on HCMC produce a sizable majority of all 
manufactured goods in Vietnam under conditions that, at first 
glance, strike observers as typical of any developing market 
economy.  Despite the persistence of some state-owned enterprise 
(SOE) behemoths, most production occurs in either locally- or 
foreign-owned private factories. There is a functioning 
"natural" (as opposed to government-created) labor market which 
is generally unregulated and often chaotic.  Particularly at the 
private firms that dominate in the south, labor is purely 
voluntary since workers are not dependent upon their employer 
for permission to occupy housing, obtain health care, etc.  Much 
of the labor is the result of internal migration from less 
economically developed regions and workers frequently exercise 
their right to change employers.  Strikes are frequent, chaotic 
and generally unplanned.  It is not uncommon for managers to 
arrive in the morning to find all their workers sitting outside 
the factory gates despite having received no previous hint of 
dissatisfaction.  Because virtually 100% of strikes are illegal, 
as the procedures for strikes is long and complicated, strike 
leaders -- if there are any -- blend in with the crowd rather 
than step forward. 
 
 
 
¶4. (SBU) The official trade unions are remarkably regimented 
according to strict ideological principles. Officials explain 
that, as a socialist country, the entire government and legal 
system of Vietnam are all built around the interests of workers. 
 Provincial Departments of Labor, Invalids and Social Affairs 
(DoLISAs), the Vietnam General Confederation of Labor (VGCL), 
and Vietnam Chamber of Commerce and Industry (VCCI) all exist, 
at least in part, to support local unions' efforts to ensure the 
wellbeing and development of the working class through 
(primarily ideological) education and social activities.  Even 
the (100% government-controlled) media plays an important role 
via newspapers like Lao Dong ("Labor") and Nguoi Lao Dong 
("Worker").  When explaining the role of unions in Vietnam's 
socialist system, labor officials at DoLISA, VGCL, VCCI and 
labor newspapers stressed that labor unions in Vietnam are 
"social/political organizations," that they represent workers' 
rights beyond just wage concerns and operate within the 
socialist ideology.  They also added that local unions play a 
fundamental role in recruiting and developing both Communist 
Party members and "higher-level labor union" staff and 
leadership. 
 
HO CHI MIN 00000582  002 OF 004 
 
 
 
 
 
TOP-DOWN POLITICS: THE FORMAL STRUCTURE OF LABOR 
 
--------------------------------------------- --- 
 
¶5. (SBU) In each province, the primary organizations charged 
with regulating labor markets and supporting the development of 
workers themselves are the Provincial Department of Labor, 
Invalids and Social Affairs (DoLISA), the provincial branch of 
the Vietnam General Confederation of Labor (VCGL) and provincial 
chapter of the Vietnam Chamber of Commerce and Industry (VCCI). 
Each organization is officially charged with a different aspect 
of ensuring the development of workers.  DoLISA looks after 
their physical needs; VCGL ensures that they are organized and 
understand their role in a socialist society; VCCI creates 
employment opportunities by promoting business and exports. 
 
 
 
¶6. (SBU) In reality, the role of the provincial DoLISA, 
particularly in economically successful provinces such as those 
around HCMC, is increasingly that of a government regulatory 
body.  This transition is far from complete.  While provincial 
DoLISA officials told EconOff they are responsible for enforcing 
the Labor Code of Vietnam, for example, DoLISA officers are far 
too understaffed to effectively guarantee compliance.  The HCMC 
DoLISA Director told EconOff the Department has 20 inspectors 
who collectively conduct about 100 inspections a year among the 
roughly 250,000 firms and sole proprietorships that fall under 
their jurisdiction.  Dong Nai and Binh Duong, two of Vietnam's 
most industrialized provinces, reported similarly dire 
understaffing.  In an attempt to compensate for their 
inabilities to conduct in-person inspections, provincial DOLISAs 
send annual self-inspection forms to each registered business. 
No one with whom we spoke, including both government officials 
and business owners, placed much confidence in the accuracy of 
self-reported inspections.  Another important role of the 
provincial DoLISA is to represent the GVN during labor disputes 
by facilitating negotiations and offering legal advice to any 
and all involved parties.  While various DoLISAs have made 
strides in this area over the past few years, neither employers 
nor workers are satisfied with the situation as it exists today. 
 Nonetheless, they do appear to appreciate the movement of some 
provincial DoLISAs away from simply ignoring illegal work 
stoppages to attempting to play the role of an independent 
interlocutor. 
 
 
 
¶7. (SBU) The role of the provincial branch of VCCI has changed 
even more drastically in the most economically advanced 
provinces.  While provincial VCCIs still must belong to the 
Fatherland Front, in provinces where private enterprise has 
flourished the most, VCCI operates much like a Chamber of 
Commerce, representing the interests of factory owners and 
managers to the GVN and others.  Like far-sighted business 
organizations around the world, the better provincial VCCIs 
understand the importance of developing good, workable channels 
for worker-employer communication and devote considerable 
energies to ensuring that members maintain sound, legal business 
and labor practices. 
 
 
 
¶8. (SBU) Unfortunately, provincial official government labor 
unions in the south have not, on the whole, made the transition 
to a modern market economy as successfully as have the 
provincial DoLISAs and VCCIs. Instead, they continue to try to 
fulfill an ideologically defined role that is increasingly 
irrelevant to the majority of private sector wage earners.  A 
common grumble among workers is that the primary role of the 
official union is to provide employment for young members of the 
communist party. 
 
 
 
¶9. (SBU) The Vietnam General Confederation of Labor (VGCL), is 
the official government-sanctioned union.  As the VGCL chief in 
Binh Duong -- arguably Vietnam's most economically progressive 
province-- stated all labor unions must join the GVCL within six 
months of formation.  In other provinces, labor unions at 
individual factories are often directly created by the 
provincial VGCL.  VGCL leaders explain that in each province, 
the VGCL is a constituent organization of the provincial 
Fatherland Front and the VGCL's primary purpose is to provide 
services to unions in a manner consistent with party ideology. 
It facilitates union formation, and distributes information to 
 
HO CHI MIN 00000582  003 OF 004 
 
 
unions.  In theory, the VGCL should represent the union in any 
labor dispute or strike.  In practice, this virtually never 
happens since, as even the Binh Duong VGCL chairman lamented, 
when strikes happen they are almost always without any 
consultation with the VGCL. 
 
 
 
¶10. (SBU) Formally part of the VGCL, but somewhat parallel in 
practice, is the sector trade union, the Vietnam Textile Workers 
Union (VinaText), which was founded as a pilot project in 2006 
with the approval of the VGCL.  It is novel in that it offers 
textile unions a choice:  they can opt for VinaText services 
targeted to the textile, garment and apparel industry, and/or of 
those of the provincial/municipal VGCL.  The theory behind the 
founding of VinaText is that a single-sector trade union should 
be able to provide more focused and specific advice and services 
than VGCL.  Thus far, this new arrangement is proving popular 
with both workers and employers in the textile industry, with 
roughly 80% of textile firms in the southern provinces 
channeling at least a portion of their mandatory contribution of 
1% of payroll to the union to VinaText. 
 
 
 
IN PRACTICE, MARKETS AND PERSONALITIES DRIVE LABOR DECISIONS 
 
--------------------------------------------- --------------- 
 
¶11. (SBU) In numerous discussions with Consulate officers, most 
labor officials began by reciting the laws and decrees that laid 
out their responsibilities but eventually conceded that economic 
realities and personalities ultimately drive labor action much 
more than the formal system governing organized labor.  The HCMC 
DoLISA chairman provided us with a succinct and accurate, 
market-based rationale for changes in the level of strike 
activity.  When exports were booming and domestic inflation 
spiraling in the first half of 2008, there were 198 strikes (all 
technically illegal) in HCMC alone.  In the first half of 2009, 
HCMC had only 48 strikes despite the fact that labor markets 
have clearly worsened and many firms have had to lay off 
workers.  Workers appear to intrinsically understand that 
companies that are struggling to stay afloat cannot offer higher 
wages. 
 
 
 
¶12. (SBU) The rules for legal strikes in Vietnam are so onerous 
as to make them difficult to hold.  The result of overly strict 
rules on strikes has been an explosion in "wildcat" strikes, 
particularly over the past few years.  Because they are illegal 
and occur outside the formal system, when strikes happen they 
generally come without warning to either management or the 
union, a fact openly acknowledged by provincial union leaders. 
In most cases, strike leaders did not identify themselves nor 
did they make any explicit demands, so it was impossible for the 
management to begin any constructive negotiations.  One manager 
described a typical strike action to us, saying that she arrived 
at work one morning to unexpectedly find that all the workers 
were outside the factory.  Despite the obvious work stoppage, no 
one could give any reason for the strike nor were any formal 
demands issued. 
 
 
 
¶13. (SBU) Every provincial-level organization we spoke with 
(VGCL, VCCI, DOLISA) described strike mediation as one of their 
primary responsibilities.  Unfortunately, in every instance we 
heard about, no agency was able to take a leading role and 
facilitate fast strike negotiations.  A Dong Nai company told us 
that when their workers went on strike by surprise, officials 
from the local government, local agencies, local unions, and the 
police all descended on the factory to attempt to get workers 
back to work.  Still, negotiations didn't proceed smoothly and 
the strike finally ended a few days later when the company 
offered the workers a small allowance.  In an unfortunate but 
typical scenario, however, the lack of communication caused by 
having an official but largely non-functioning union meant that 
workers had no way of making their grievances known. 
 
 
 
COMMENT 
 
------- 
 
¶14. (SBU) The formal system of CPV controlled official unions is 
not only incompatible with Vietnam's growing market-based 
economic system, it is often an impediment since the existence 
 
HO CHI MIN 00000582  004 OF 004 
 
 
of the official unions can act as a de facto impediment to 
genuine employee-management communication.  Despite this 
fundamental shortcoming, the reality on the ground is not nearly 
as bleak as one might expect.  Instead, some innovative firms 
that value long-term employee development are finding ways to 
work within the system to create genuinely responsive unions 
that effectively convey workers concerns to management.  Also, 
the entire VinaText union appears to be more responsive than its 
VGCL parent, most likely because it has been able to bring in 
younger, less ideologically-bound staff members who have a more 
realistic view of the union's role.  End Comment. 
 
 
 
¶15. (U) This cable was coordinated with Embassy Hanoi. 
FAIRFAX