Cablegate: Drl Das Krilla Visit to Vietnam

DE RUEHHI #1061/01 1571018
R 061018Z JUN 07





E.O. 12958: N/A

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

* 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

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

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

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

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

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.


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