Labor unrest might hit investment in Vietnam

Labor unrest might hit investment in Vietnam

By Hoang Ngoc Nguyen

An increasing number of strikes in Vietnam is causing the
government concern.

Vietnam's socialist regime is founded on the working class in
which the workers are supposed to be both employer and employees
of their factories. There was previously no problem with such a
scheme, that is until the country turned to a market-oriented
economy, in which many enterprises are now no longer owned by the
state but by private businessmen and foreign corporations.

Over the past few years, Vietnam, as a market economy, has
already had its share of labor strikes, as in capitalist
economies. Labor disputes have erupted in enterprises in all
sectors -- state-owned, private and foreign-owned -- although
there are more disputes in companies with foreign capital, where
the expectation of workers often runs high and cannot be met by
foreign factory owners who have come mostly with the intention of
exploiting the country's cheap labor.

But in a year which will witness the convening of the Eighth
Congress of the Communist Party, the situation has suddenly
become worse with a surge of labor disputes, raising fears that
they would affect the policy of the Vietnamese government vis-a-
vis foreign investment as well as the business environment of the
country which still badly needs to maintain its sole comparative
advantage of inexpensive labor.

In the first four months of this year, there were 15 labor
strikes, mostly in Ho Chi Minh City and the neighboring provinces
of Song Be, Dong Nai and Ba Ria-Vung Tau, where at least 50
percent of the country's foreign direct investment is
concentrated. Nine of these instances took place in foreign-
invested enterprises, while six where at local companies.

There is real cause for concern here. Some labor strikes in Cu
Chi and Song Be have involved hundreds of workers. In previous
years, strikers would stage a peaceful sit-in at their factories.
Now, they gather in front of offices of local governments or
headquarters of local labor federations. There have been
incidents of melees between foreign and Vietnamese workers at
construction and manufacturing companies. In one incident, angry
cab drivers even mounted a raid on the house on a South Korean
expatriate worker after he had beaten up one of their colleagues.
Some labor strikes are not lawful, breaking out before a process
of mediation, which is required by law.

There are two popular newspapers affiliated with the Vietnam
Confederation of Labor and Ho Chi Minh City's Federation of
Labor, which have often published stories that would dismay
foreign investors. These include rising discontent of workers in
many enterprises where employers have allegedly failed to enforce
the 1994 Labor Code with respect to labor contracts, collective
labor agreements, minimum wage rates, payment of overtime work,
maximum working hours and payment of labor insurance.

Apart from these, there has also been increasing indignation
about what some would call the "violation of the dignity" of
Vietnamese workers. In several Korean-owned companies, expatriate
technical supervisors have often been found physically abusing
their workers. The foreign employers' defense has been along the
lines of the need to enforce labor discipline and the issue of
"cultural differences".

Understandably, strikers have enlisted the support of both the
local media and labor unions at various levels. Some foreign
employers have insisted that the press should listen to both
sides rather than report these labor incidents in a skewed
fashion. They have also complained that some labor authorities
often point their fingers at the foreign employers only,
overlooking mistakes committed by workers. Responding to this, a
leader of the Vietnam Confederation of Labor said that "in 90
percent of the cases, the mistakes have been with the employers".

To strengthen its rule, the Vietnamese Communist Party has had
to be more sensitive to the labor cause. Reactions from the
Ministries of Planning and Investment and Labor are often in
favor of the workers. In a year when the political temperature is
simmering, most statements in the press have decried the state's
alleged deprivation of workers' rights in the new market economy.
In turn, labor leaders have had to respond more promptly to the
restiveness of workers who are finding that living under a market
economy provides them with more opportunities but also higher
unemployment risks.

Nguyen Van Tu, chairman of the Vietnam Confederation of Labor
(VCL), was reported to have told the Korean ambassador in Hanoi
that "not only labor unions but all Vietnamese citizens should
fight against any abuse of labor relations by foreign managers at
foreign-invested enterprises".

There has been a call for harsher measures against abuses by
foreign managers, including their deportation. It is also
proposed that any enterprise which has consistently ignored
labor regulations should be closed.

In April this year, under labor pressure, a Taiwanese manager
had to write a self-criticism statement and extend a formal
apology to workers after he had been found guilty of manhandling
two local employees.

The government has expressed its own concerns, vowing vaguely
that it would not tolerate abusive practices and the disregard of
the labor laws by foreign-owned enterprises. Under pressure from
the VCL, it has also decided to increase minimum wages from US$35
to $45 monthly, a significant rise but not to the extent demanded
by the VCL, although enough for it to please its labor
constituents.

A government official has argued that most strikes take place
in the south and only in Korean-owned enterprises. In these
enterprises, many workers are frustrated to work in conditions of
high-labor intensity under the belief that they are being
exploited by capitalist bosses, and the freedom they used to
enjoy in state-owned enterprises no longer exists. Some foreign
investors now realize that they should cooperate more closely
with labor unions if they want to get workers into the corporate
fold. There is also apprehension from some government circles
that any increases in wages and operation costs in Vietnam would
make the country less attractive to foreign investors.

Hoang Ngoc Nguyen is an analyst based in Ho Chi Minh City.