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.