Letter, re: minimum wage, and illegal strikes involving violence, 11 Jan 2006

January 11, 2006

Respectfully to:
Chairman, People’s Committee of Ho Chi Minh City
Chairman, People’s Committee of Binh Duong
Chairman, People’s Committee of Dong Nai

Based on Decree No. 08/1998/ND-CP of the Government dated 22 January 1998, promulgating the Regulations on the Establishment of Foreign Business Associations in Vietnam;

Based on Article 4.5 of the Regulations that provides for the Leadership Board to represent the Association in putting forth proposals and measures to Vietnamese state management authorities for the purpose of protecting the lawful rights and interests of member businesses and contributing to the creation of a healthy business environment.

We are writing to seek your urgent attention to help resolve a critical issue, one that we believe is vital to Vietnam’s continued economic and social development. As you know, one of the major attractions for manufacturing industry to come to Vietnam is the labor force. This is both the quality of the labor force, which is well educated and hard working; and importantly, in the past, the discipline of the labor force, which rarely had taken any illegal industrial actions; However, recent mob actions in the core of the Southern Focal Economic Zone have quickly shattered this perspective. We would like to seek your immediate assistance to restore quickly the law-abiding quality of Vietnam labor force, so we can continue to cooperate with you in attracting more manufacturing foreign direct investors to Vietnam.

Recently there has been a number of illegal strikes involving violence, destruction of property, and bodily harm in dozens of large foreign-invested factories in the Southern Focal Economic Zone. The disturbances are spreading and we are concerned that if the authorities cannot take clear and decisive action to correct this situation immediately, then this will eventually spread not only to other foreign direct invested factories, but also to private and to state-owned factories as well. Already, Vietnam’s good reputation as an investment and sourcing destination for export products has been seriously damaged. Unless the situation is resolved quickly and satisfactorily, the damage may be hard to repair.

Dozens of foreign direct invested companies have reported the same series of events, starting on December 28th and continuing today in different places. Namely, a handful of strange men appear at factory gates early in the morning. When workers start to arrive, they are incited or coerced into joining an illegal strike that turns into throwing rocks at windows and destroying company property. In some cases, union representatives that have tried to resolve the situation peacefully have been beaten to the point of hospitalization. In some cases, hundreds of thousands of dollars worth of manufacturing equipment has been destroyed by the mindless mobs. The same scenario has played itself out in one industrial zone after another, always targeting bigger investors with comprehensive labor compensation programs.

The cause of these disturbances is not clear to us, but what is clear is that, if left unchecked, this situation will destroy Vietnam’s prospects for harmonious and rapid social and economic development. We have no idea why these particular factories have been targeted, when, by law, they are already required to pay more than twice the compensation paid by private Vietnamese and State-owned factories. We wonder how long this can continue and not spread to these other employers.

We believe that one cause of these disturbances is the sudden and confusing manner in which the authorities have introduced proposed changes to the minimum wage rules. None of our member companies were consulted before announcements started appearing in the press that workers were entitled to a 40 percent increase in the minimum wage. The date of entry into effect of the increase was changed, causing further confusion. Some irresponsible newspapers reported inaccurately that the change was already in effect or retroactive. All of this created fertile soil for instigators to deceive the workers into believing that they had been cheated out of the increase, resulting in predictable anger and protest.

The responses of the local authorities, especially the police, were too slow to provide confidence to foreign investors that their lawful rights and interests are safe in Vietnam. While factories were being destroyed day after day, authorities failed to react, or reacted with inadequate manpower and equipment. This gave the instigators further confidence.

A chain reaction started when some employers had no choice but to surrender to this violent extortion. This seems to have emboldened the instigators, who have been moving on from one factory to another. If this trend is not stopped, we are deeply concerned about the implications for all manufacturing activities in Vietnam, as well as for the jobs that these activities create, both directly and indirectly.

The issuance of the Decree No. 03/2006/ND-CP, Decree of the Government on Minimum Wages for Vietnamese working for Foreign Invested Enterprises, agencies, organizations, international organizations, and individual foreigners in Vietnam, dated 6 January 2006, has not helped either. It gives employers very little time to adjust to a 40% increase in the most important variable cost in our businesses – labor. It provides for a 7% increase for workers once they are “trained,” but does not define that that means. It does not clarify whether all wages at all levels are supposed to go up 40%, or just the minimum wage. It seems to violate the principle of non-discrimination embodied in the new Common Investment Law by allowing State-owned and private Vietnamese owned companies to continue paying half as much, or less, than what foreign direct invested companies must pay. Clear legal guidance is needed so that no one can take advantage of ambiguities to incite further dissent.

Foreign direct investors in Vietnam’s manufacturing sector want to comply with the law, and they exert great efforts to make sure that they do so. We leave it to the Government to determine the level of minimum wages and other benefits appropriate for Vietnam, in consultation with all of the relevant parties.

But we respectfully request three things:

1. Changes to compensation and other labor rules should be consulted(1) and notified(2) to all concerned before they are introduced; such changes should not be introduced by means of rumor or hints in the press.

2. Where disagreements between employees and employers arise, as they will naturally do so from time-to-time, then these should be handled in accordance with the rule of law, not the rule of the mob violence.

3. The Government Authorities should enforce the law where it is broken, and violence against persons and property should never be tolerated as a means to obtain an economic benefit.

We all share a common interest in preserving Vietnam’s good reputation for its hard-working, skilled workers. A few bad apples have hurt that reputation. We are willing to work together with the Government Authorities to do everything we can to restore that good reputation to h elp ensure that Vietnam will remain an attractive investment destination, so that job creation and economic and social development will follow.

To that end, we respectfully request that you or your designated representative meet with our representatives as soon as possible to discuss this urgent situation.

We await your kind consideration, with appreciation for your concern.

Respectfully yours,

/(signed and sealed)/

Walter A. Blocker
Chairman

Copies to:
The Office of Government
Ministry of Labor, Invalids, and Social Affairs
Ministry of Industry
Ministry of Trade
Ministry of Planning & Investment
Departments of Labor, Invalids and Social Affairs (HCMC, BD, DN)
Departments of Planning & Investment (HCMC, BD, DN)
Departments of Trade (HCMC, BD, DN)
Department of Public Security (HCMC, BD, DN)
Director, Foreign Investment Agency – Southern Foreign Investment Center
Chairman, HCM City Export Processing Zones Authority
Chairrman, Dong Nai Industrial Zones Authority
Chairman, Binh Duong Industrial Zones Authority
Ambassador of the United States of America
Consul General of the United States of America, Ho Chi Minh City

Note 1: Chapter VI, Article 3 of the Bilateral Trade Agreement between Vietnam and the United States provides that “Each Party shall allow … the other Party and its nationals the opportunity to comment on the formulation of laws, regulations, and administrative procedures of general application that may affect the conduct of business activities covered by this agreement.”

Note 2: Chapter VI, Article 1 of the Bilateral Trade Agreement between Vietnam and the United States provides that “Each Party shall publish on a regular and prompt basis all laws, regulations and administrative procedures … in a manner which enables governmental agencies, enterprises and persons engaged in commercial activity to become acquainted with them before they come into effect and to apply them in accordance with their terms.”

Additional Background Information

The Big Strikes: Did the Government “Cave In” to Workers, or Did It Lead Them?

“Alternatives to the ‘Race to the Bottom’ in Vietnam: Minimum Wage Strikes and Their Aftermath, Labor Studies Journal, Vol. 32, No. 4, 430-451 (2007). Angie Ngoc Tran, California State University at Monterey Bay.
This case study focuses on strategic mediating roles of labor newspapers. Concentrating on minimum wage strikes from 2005 to 2006, it shows the state’s pro-foreign direct investment policy, tensions between state bureaucracies and labor unions, and their debates. It demonstrates alternatives to the “race to the bottom” thesis. The larger implication is that labor organizing and spontaneous collective actions can be successful even within a one-party state. It remains to be seen how the new strike law ratified in 2006 addresses structural weaknesses of the labor unions and the state, and how it affects labor organizing for workers’ rights and interests.