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Cablegate: Cambodia's Strikes Wane, but Contentious Labor

VZCZCXRO0917
PP RUEHCHI RUEHDT RUEHHM RUEHJO RUEHNH RUEHPOD
DE RUEHPF #0788/01 1620138
ZNR UUUUU ZZH
P 110138Z JUN 07
FM AMEMBASSY PHNOM PENH
TO RUEHC/SECSTATE WASHDC PRIORITY 8541
INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY
RUEHXI/LABOR COLLECTIVE PRIORITY
RUEHBY/AMEMBASSY CANBERRA PRIORITY 2284
RUEHGV/USMISSION GENEVA PRIORITY 1605

UNCLAS SECTION 01 OF 03 PHNOM PENH 000788

SIPDIS

SENSITIVE
SIPDIS

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

E.O. 12958: N/A
TAGS: ELAB ECON PGOV CB
SUBJECT: CAMBODIA'S STRIKES WANE, BUT CONTENTIOUS LABOR
ISSUES LOOM

REF: A. 06 PHNOM PENH 1124
B. PHNOM PENH 662

1. (SBU) Summary. Cambodia's often tumultuous labor sector
has been notably calm so far in 2007, with working days lost
to strikes down 50% from 2006 levels. A crackdown on a
particularly notorious union, a recent minimum wage increase,
embassy efforts to discourage illegal strikes, and slowly
increasing sophistication among union members have all helped
to contribute to the decline in labor unrest. But, there are
signs of potential trouble ahead. Controversial issues of
night shift wages, employmentcontracts, and union rights and
responsibilities which have languished for years are finally
being discussed, but these conversations are taking place in
the pro-business Eighth Private Sector Working Group. Unions
have little effective say in the decisionmaking there--both
due to the structure of the group and to their internal
weaknesses--and as a result, worker's interests are not being
adequately represented. Minister of Labor Vong Sauth, who
has now been in the job for one year, shows few signs of
bringing effective leadership to this or any other issue.
End Summary.

Labor Unrest Subsides in Early 2007...
---------------------------------------

2. (U) Working days lost to strikes in Cambodia's garment
industry have declined dramatically from record-setting
levels in 2006: in the first five months of 2007, only half
as many days were lost to strikes as in the same period in
2007. Several factors contribute to the drop in labor
unrest. Last year's FTU-led effort to increase the minimum
wage fueled unrest, labor observers say, while workers who
now have an 11% increase in the minimum wage are reluctant to
strike. Embassy outreach to union leaders last year helped
explain that strikes should only be pursued as a last resort,
and emphasized that excessive strikes could lead buyers to
pull out of the country due to fears about production delays.
Free Trade Union (FTU) President Chea Mony reported that
some workers are becoming more aware that some unscrupulous
union leaders are manipulating workers to be able to extort
factory owners and are refusing to participate in illegal
strikes.

3. (SBU) Government pressure against one notorious union,
the CPP-affiliated Khmer Youth Free Trade Union (KYFTU), has
also played a significant role in keeping labor unrest to
reasonable levels. The Garment Manufacturers Association of
Cambodia (GMAC) lodged complaints against the union in
November 2005 and September 2006 and post raised concerns
about the union during meetings with senior Ministry of Labor
officials in September 2006 and during the Trade and
Investment Framework Agreement Joint Council in February
2007. KYFTU leader Yun Rithy was reportedly detained and
questioned for three hours in September 2006. Seng Sekada,
Director General of the Labor Department, tells us that the
union has taken a lower profile after committing the "serious
offense" of implying the Prime Minister endorsed a thinly
veiled bribe request letter sent to garment factories.

..but Big Issues Loom on the Horizon
------------------------------------

4. (U) The FTU's threat to hold a general strike in response
to the National Assembly's expected passage of a lower night
shift wage (ref B) seems to be fizzling. The National
Assembly has not taken up the issue as quickly as expected
and the presidents of the FTU and its partner, teacher's
union CITA, are leaving June 9 for three weeks of Sam Rainsy
Party political and fundraising events in Long Beach,
California; Lowell, Massachusetts; and Houston, Texas.

5. (U) In contrast to the deflating night shift wage issue,
several labor observers have warned that two pending labor
issues have the potential to seriously erode worker's rights
and to create significant unrest: fixed duration contracts
and efforts to revise legislation about union rights and
responsibilities. Cambodian labor law distinguishes between
two types of employment contracts: fixed duration contracts
(FDCs), which must be written, last for not more than 2
years, and have a precise starting and end date; and
undetermined duration contracts (UDCs), which are essentially

PHNOM PENH 00000788 002 OF 003


everything else. Labor observers believe that fixed duration
contracts can be easily abused, with working periods as short
as 3 months before renewal creating perpetual job insecurity,
particularly for union leaders and pregnant women who would
be entitled to paid maternity leave. Employers would like to
negate an Arbitration Council decision that ruled that FDCs
can be renewed only up to a total period of two years, at
which point they automatically become UDCs. Employers argue
publicly that they need more flexibility in their workforces,
and explain privately that firing unproductive or troublesome
employees is much more likely to lead to strikes than simply
failing to renew the short-term contracts of those workers.

6. (U) It is still not entirely clear what specific issues
would be addressed in the discussion on union rights and
responsibilities, but the ILO's John Ritchotte believes that
illegal strikes, union registration requirements, and most
representative status will most likely be included.
Currently, the vast majority of garment sector strikes are
illegal, with unions failing to give seven days notice and
take a secret ballot vote as required. Lax laws surrounding
union registration and the government's failure to certify a
single union at each factory as most representative for the
purposes of collective bargaining have led to a situation
where there are more than 900 factory-level unions competing
for members in Cambodia's 300 garment factories. As a
result, factory-level union leaders compete with one another
for members, fueling excessive demands and illegal strikes,
and some unions harass and intimidate rival union members.

Eighth Working Group is Where the Action Is
-------------------------------------------

7. (SBU) There is substantial new energy and power in a
year-old group tackling labor issues, but labor observers and
unions complain that worker interests are often ignored in
the business-centered process. Like the other working groups
affiliated with the semi-annual government-business
conference called the Private Sector Forum, the group has
business and government co-chairs, but unions have no part in
the leadership structure. While the working group has met
three times, it has yet to consider any proposals submitted
by unions, focusing instead on issues raised by businesses
and at times frustrating even government participants with
its strident pro-business tone. Meanwhile, three out of the
four union seats on the working group have gone to
pro-government/pro-management unions, which are more numerous
but smaller than the pro-opposition and independent unions.
Unions are further disadvantaged by the poor organization of
the group, which tends to meet in a series of frenzied
discussions just weeks or days before they are called on to
announce their progress in the semi-annual Private Sector
Forum. (Note: The next Private Sector Forum is tentatively
scheduled for mid-July. End Note.) Well-prepared employers
come ready with proposals that they have already discussed
with government officials privately, while unions seem to
ignore rumors of what is likely to be discussed and only
start thinking about a response when the issue is all but
decided.

8. (SBU) The ILO is so disturbed by the lop-sided power
structure of the group and the lack of effective worker
representation that it has threatened to publicly resign from
the committee if the process is not made more democratic.
Employers are pleased that long-standing labor issues are
finally being addressed. Ken Loo of GMAC acknowledged that
workers have relatively little say in the group, but favored
reforming the group's functioning rather than scrapping the
group altogether.

The New Minister of Labor Unimpressive One Year On
--------------------------------------------- -----

9. (SBU) After a year in office, the Minister of Labor, Vong
Sauth, seems to many to be as invisible and powerless as his
ineffectual predecessor, Nhep Bunchin. The minister rarely
appears in public, has little apparent hands-on interaction
with labor issues, and has little influence over the Eighth
Working Group. Pro-CPP union leader Vong Sovann described
the new minister as ineffective, unresponsive, and lacking
the authority to solve labor problems. Men Nimmith, the
Executive Director of the USAID- and DOL-funded Arbitration

PHNOM PENH 00000788 003 OF 003


Council Foundation, traveled with Vong Sauth on a study tour
of labor relations in Australia and said that the minister
seemed to have little knowledge of current labor affairs. He
was vague and unimpressive in his meetings with Australian
officials, and refused to deliver a speech written at his
request, instead having his staff distribute copies to the
media and explaining to Men Nimmith that actually talking to
the media was too embarrassing as they were prone to ask
political questions.

10. (SBU) Employers have a slightly rosier picture of Vong
Sauth, noting that, as a CPP member and the son-in-law of
National Assembly President Heng Samrin, he has better
connections than Nhep Bunchin, who complained of not even
being able to control his CPP subordinates because he was a
FUNCINPEC minister. Nonetheless, even to employers, his role
seems to consist of forwarding business-initiated proposals
up the Cambodian leadership chain rather than pro-actively
finding solutions.

Comment
-------

11. (SBU) The current relative calm in Cambodia's labor
sector is a welcome change from the tumult experienced at
this time last year. Unions seem to be slowly maturing with
regards to the frequency with which they launch strikes. At
the same time, national level unions remain ineffective
representatives of their worker's interests, a critical
failing which becomes more and more damaging as the Eighth
Working Group manages to tackle long-simmering issues such as
night shift wages, employment contracts, and union rights and
responsibilities. If this imbalance remains and important
issues are decided without effective worker participation and
against their interests, labor unrest is likely to increase
once more. End Comment.
MUSSOMELI

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