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Cablegate: Cambodia: Proposed Night Shift Wage Decrease

VZCZCXRO2184
PP RUEHCHI RUEHDT RUEHHM RUEHJO RUEHNH RUEHPOD
DE RUEHPF #0662/01 1310928
ZNR UUUUU ZZH
P 110928Z MAY 07
FM AMEMBASSY PHNOM PENH
TO RUEHC/SECSTATE WASHDC PRIORITY 8417
INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY
RUEHXI/LABOR COLLECTIVE PRIORITY
RUEHC/DEPT OF LABOR WASHINGTON DC PRIORITY

UNCLAS SECTION 01 OF 02 PHNOM PENH 000662

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/MLS, DRL/ILCSR--MARK MITTELHAUSER
LABOR FOR ILAB--BILL BRUMFIELD, CHRIS WATSON, JIM SHEA,
ZHAO LI, AND JONA LAI
STATE PLEASE PASS TO USTR--DAVID BISBEE

E.O. 12958: N/A
TAGS: ELAB ECON PGOV PHUM CB
SUBJECT: CAMBODIA: PROPOSED NIGHT SHIFT WAGE DECREASE
RANKLES UNION


1. (SBU) Summary. Prime Minister Hun Sen has asked the
National Assembly to lower night shift wages from 200% of
daytime pay to 130%. A vote is expected on May 17, and the
Free Trade Union (FTU), a large and vocal group loosely
allied with the opposition Sam Rainsy Party, has vowed to
launch a general strike if the measure passes. The Prime
Minister's decision comes after several failed attempts to
negotiate a lower night shift wage. The FTU appears to have
little support for their general strike threat, but may still
attempt some sort of protest on their own. Garment factory
owners strongly support the measure, which they believe could
create 50,000 to 60,000 jobs in Cambodia's largest industry.
End Summary.

Prime Minister Proposes Lower Night Shift Wage
--------------------------------------------- -

2. (U) Prime Minister Hun Sen recently asked the National
Assembly to amend the Labor Law to set the rate for work
performed between the hours of 10 p.m. and 5 a.m. at 130% of
normal wages. The current Labor Law, adopted in 1997, is
unclear on the issue of a night shift wage, specifying only
that overtime work performed at night should be paid at 200%
of the regular wage. The law does not specify what wages
should be paid for regularly scheduled work at night, but in
the wake of confusion about the issue, the Ministry of Labor
issued a sub-decree (prakas) in 1999 declaring that all
nightwork should be paid at double the usual rate. (Note:
The International Labor Organization has told us that typical
night shift rates in the region are 130 to 150% of daytime
wages. End Note.)

3. (SBU) In practice, most industries ignore the night shift
subdecree and pay workers the same or slightly elevated
rates. In the garment sector, where foreign buyers force
strict observance of labor standards, only a few garment
factories currently operate a night shift due to the high
labor cost. The Garment Manufacturers Association of
Cambodia (GMAC) estimates that only 10,000 of Cambodia's
330,000 garment workers are night shift workers. One of the
few factories to operate a night shift, Bright Sky, closed
its night shift in October 2006 after repeated violence and
labor unrest among night shift workers.

Night Shift Wages Long Contentious
----------------------------------

4. (SBU) The Prime Minister's action comes after several
unsuccessful attempts to negotiate a night shift wage. In
2003, the Labor Advisory Committee, a tripartite body, agreed
to a 130% rate. However, the contradictory sub-decree was
never revoked, and when one factory attempted to institute a
130% rate, garment buyers insisted that the 200% rate
specified in the sub-decree be followed. Starting in 2004,
the ILO facilitated negotiations between unions and employers
on night shift wages, and all parties accepted 130% as the
new rate. However, final negotiations were conducted during
Cambodia's clamp down on civil society leaders in late 2005,
and FTU president Chea Mony was in Europe avoiding an arrest
warrant at home. Chea Mony reversed his Vice President's
decision and pulled the FTU out of the agreement upon his
return to Cambodia in early 2006. The issue remained
moribund until February 2007, when a proposal by employers
was brought before the Eighth Private Sector Working Group,
an ostensibly tripartite body charged with labor issues. The
government co-chair of the group reportedly entertained the
employer-sponsored proposal but refused to consider union
demands related to health insurance, transportation and meal
allowance.

5. (SBU) On May 5, the FTU announced plans to call a general
strike if the proposed amendment passes. In a meeting with
Poleconoff and Labor Assistant days before their
announcement, current FTU President Chea Mony said that the
reduction in night shift wages was a "bad omen" for unions
and that the union movement would die if night shifts were
widely introduced. Chea Mony stated frankly that while he
was publicly pressing for night shift wages to be 140% or
150% with compensations for lodging and transportation, his
real goal was to prevent the establishment of more night
shifts. He worried that at a 130% wage, factories would
switch large numbers of their workers to night work to take
advantage of cheaper and more reliable electricity. He
believes that night shift workers are more often the targets

PHNOM PENH 00000662 002 OF 002


of violence -- both robberies on the way home and labor
violence at factories -- and fears that labor disputes that
occur on the night shift will be unaddressed by the Ministry
of Labor's labor conciliators, who do not want to work at
night. In contrast, at the same meeting, Rong Chhun, Chea
Mony's close ally and the head of the Cambodian Confederation
of Unions--an alliance of FTU and the teachers' union CITA --
told Emboffs that the CCU did not object to adjusting the
night shift rate, but wanted a higher wage and provisions to
provide for the safe transport of workers.

Reduced Night Shift Wage Likely to Create Jobs
--------------------------------------------- -

6. (SBU) Responding to the threatened general strike, the
Prime Minister used a May 8 graduation speech to caution
against any attempts to block the legislation, claiming that
the new rate would boost employment by 200,000 and increase
garment factory orders by USD 2.6 billion per year. GMAC
Secretary-General Ken Loo offered more conservative numbers,

SIPDIS
predicting the creation of 50,000-60,000 more garment factory
jobs over the next six months. Loo explained that this
increase would not come from factories introducing a third
shift, but rather from factories starting a second shift.
Cambodian labor law allows up to two hours of overtime per
day, effectively creating a standard 10-hour workday in
garment factories. Most factories have avoided creating a
second shift because both shifts could not have regularly
scheduled overtime without incurring the steep night shift
pay requirements. Loo predicts that under a lowered night
shift rate, many factories will add a 7 p.m. to 3 a.m. shift,
with two hours of regularly scheduled overtime lasting until
5 a.m. -- a relatively safe time in early-rising Cambodia for
young, female factory workers to be returning home.

Little Support for General Strike Threat
----------------------------------------

7. (SBU) While pro-government unions and garment factories
have predictably endorsed the night shift proposal, it is
noteworthy that FTU's typical allies are distancing
themselves from the union's stance. Politically independent
trade union Coalition of Cambodian Apparel Workers Democratic
Union (CCAWDU) also opposes the reduction in night shift
wages and spoke out against the measure at the Eighth Private
Sector Working Group, but has said that they will not join
the general strike. CCAWDU President Ath Thorn has said that
the group may issue a statement condemning the measure if it
is passed. Mu Sochua, the Secretary-General of the
opposition Sam Rainsy Party, who is normally outspoken in
favor of workers' concerns, was quoted in the press as saying
that she recognizes that 200% is an "undue burden" for
employers, and committed only to presenting workers' views
during the National Assembly debate.

Comment
-------

8. (SBU) The FTU seems to be picking a fight it has little
chance of winning. In May 2006, the FTU threatened to hold a
general strike over the minimum wage--a more meritorious
issue given that the rate had not changed in five years
despite significant inflation. After achieving moderate
success in raising the minimum wage rate by 11%, the FTU
would now be hard pressed to find many workers willing to
demonstrate on behalf of their few overly compensated sisters
working at night. By threatening a general strike now,
particularly after backing off of a similar threat last year,
FTU president Chea Mony has pushed himself into a corner and
risks being seen as a paper tiger if he does not follow
through with the strike. In reality, Chea Mony is
increasingly frustrated with labor politics and has told us
several times that he wants to leave his post as FTU leader
but is constrained by the lack of a successor.
MUSSOMELI

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