POST-SOCIALIST TRADE UNIONS, LOW PAY AND DECENT WORK
VIETNAM RESEARCH TEAM
FIRST REPORT
THE POLICY AND PRACTICE OF THE VIETNAMESE GOVERNMENT AND TRADE UNIONS IN RELATION TO LOW WAGES AND POOR WORKING CONDITIONS
Research Team:
Do Quynh Chi
Tran Tuan Doanh
Nguyen Ngoc Thuy
Dang thi Hai Ha
Hanoi, March 2006
Methodology
From late December 2005 to February 2006, the research team was divided into three groups, each focused on one part of the Report. Group 1 worked on the Government policy regarding low wages and poor working conditions or urban workers; Group 2 collected materials on VGCL policy discussion at national level and it coordination with the provincial and industrial unions; Group 3 specialised in the new initiatives and best practices of unions at provincial and enterprise level.
A large number of materials have been gathered by the three groups including legal documents (laws, policy papers, guidelines, directives etc.), publications (seminar papers, articles) and unpublished documents (internal discussion notes, internal-circulated memos). After a series of strikes on higher wages happened in the South (starting in the late December 2005 and still going on), the team leader (Ms. Do Quynh Chi) conducted a mission to Ho Chi Minh city to interview relevant people including the DOLISA officials, provincial VGCL officers, employers and unions of industrial and processing zones (the mission report is put in the Annex) on strike causes, their reactions to the problem, especially the roles of the union in these strikes and VGCL’s perspectives for future path.
After the first draft was developed in early March, the researchers found it necessary to make further interviews with officers from provincial and industrial organisations to study the coordination and links between the central and provincial/industrial unions as there is a loophole of this part in the published documents available to us. So two interviews were made with an offcial from HCMC VGCL and one from VGCL central. Most interviewees preferred not to be mentioned by name in the report. Researchers took note of the interviews rather than recording at the request of interviewees.
The final draft was sent around to all researchers for comments before it was submitted by e-mail to Mr. Tim Pringle and Prof. Simon Clarke.
1. Government policy regarding low wages and poor working conditions of urban workers
Overview of the government’s strategy
Much have been written about the remarkable achievements that Vietnam gained after 20 years of Doimoi (reform): the annual GDP growth rate has been maintained constantly at 7% (8.4% in 2005) and the country is accelerating its integration into the world economy by acceding to the WTO. These progresses give hope for a second wave of reform that is stronger and more in-depth. However, the success of reform, the first and second wave alike, depends heavily on Vietnam’s competitiveness in the world and the improvement of people’s, particularly workers’ lives at home.
From a bird view, the growth of the economy, especially the booming-up of the non-public sector since Doimoi has strongly boosted the average income of urban workers. A recent report by the Ministry of Labour, Invalids and Social Affairs (MOLISA) showed that the per capita income of workers in the FDI (foreign-invested) sector in 2005 was 2,180,000VND/month (approx. $140), that in the private sector was 1,400,000 VND/month (or $90), and in the State-owned enterprise sector, it was 2,400,000VND/month (or $152). Though still low by regional standards, these figures are encouraging taking into account the current national minimum wage of 350,000VND/month ($22).
Certain progresses have also been made in the wage determination structure of Vietnam. Even though the Soviet-model wage table system still lingers to the public service and SOEs, the non-public enterprises are free to determine wages based on market principles. Still, they have to comply with two MWs: one for FDI sector and the other for all remaining enterprises. Though limited, this reflects an on-going effort to lessen the government’s intervention in wage determination. In the non-public sector, theoretically, wages should be set in consultation with local unions. As CBAs are negotiated, unions can request for annual wage increase for workers. In reality, however, since collective bargaining has not become a common practice in Vietnam and local unions remain too weak to negotiate CBAs of added value for workers[1], wages, especially those of workers in labour-intensive industries such as textile and garment, footwear and wood processing, are determined only by employers at very low rates. Unskilled, new recruits often receive 400,000-500,000VND/month in a Vietnamese private company and 630,000-700,000VND/month in a FDI enterprise (prior to 1 February 2006). As reported by the HCMC VGCL, a number of workers have received the same pay of 630,000VND/month for the last 10 years[2]. Also, with industrial unions established only among state-owned companies, no CBA has ever been signed at industrial level. Therefore, the VGCL can only somehow affect the wages of their members by lobbying for higher minimum wages at the policy level. In fact, by either participating in the drafting committee for new wage policies (for instance, the drafting committee of the proposal on wage reform lead by MOLISA) or consulting on wage-related under law documents (decrees on adjustment of MWs), VGCL central has been a strong voice advocating for setting up a separate MW system for FDI sector and for raising the national MW.
With a socialistic tradition of sympathy for workers and attention to social values, Vietnamese government declared their pursuit of the twin goals of economic growth and social development. Despite the fact that cheap labour remains one of the major comparative advantages of the country, there have been good signs of efforts to improve working conditions. At the governmental level, MOLISA, Ministry of Home Affairs and Ministry of Finance are working on a 5-year plan (from 2003 to 2007) to raise the national MWfrom 290,000VND/month to 400,000VND/month.
The 1994 Labour Code and its amendment in 2002 have apparently revealed inappropriateness, especially in terms of collective bargaining, labour dispute settlement, and social insurance. After 4 years since 2002, according to MOLISA strike research (2006), only 20% of enterprises have got CBAs but over 90% of these are simple replication of the labour law regulations rather than the outcome of real negotiations between workers and employers. In terms of dispute resolution, from 1995 to 2005, there were as many as 1,056 strikes in Vietnam, all of which were wildcat strikes. No strike has followed the legal dispute settlement procedures and only few disputes (about 10 cases in the last 10 years in Vietnam) were referred to the Conciliation Council and Arbitration Council – the two official bodies established in accordance with to Labour Code to settle disputes. The legal procedures, clearly, have not been functioning at all.
Also, upon perception of the aging trend of the population, the government needs to reform the social insurance system. Its plan now is to develop a Social Insurance Law which mergesthe Social Insurance and Health Insurance schemes into one and add a voluntary social insurance scheme for agricultural and self-employed workers in the informal economy. The whole Social Insurance Scheme, then, will be administered by MOLISA in coordination with Vietnam Social Insurance (VSI). As the Social Insurance Law is to be approved by the National Assembly by the end of 2006, the Labour Code Chapter on Social Insurance will be amended accordingly[3].
Recently, the legal framework for occupational safety and health (OSH) has been improved with Decree 109 (December 2002) providing regulations in terms of working hours and rest for workers; Decree 110 (December 2002) providing instructions on some OSH-related articles in the Labour Code (OSH measures, quality OSH equipments, medical checks for workers exposed to hazardous conditions, training etc.); Decree 113 (April 2004) on administrative sanctions on violations of the labour law (including violations of OSH-related regulations); and Circular 20 (June 2004) enhancing the implementation of OSH in agricultural sector.
After the Hygiene Inspectorate which used to be affliated to the Ministry of Health was merged into the Labour Inspectorate (Policy and OSH Inspectin) under MOLISA 3 years ago, MOLISA now is principally in charge of the enforcement of the Labour Code. The trade union, in principle, has the mandate to support and coordinate with MOLISA to enforce the labour legislation by reporting, training OSH officers in enterprises and informing the inspectors of wrong-doings but in fact, this can only be practised in the state-owned sector.
As admitted by a number of VGCL officials, there exists no working mechanism to enforce the Trade Union Law. And despite the planned revision of the Labour Code by 2008, VGCL has no intention to amend the union legislation yet.
At the enterprise level, the government seems to encourage the corporate social responsibility (CSR) movement among the export-oriented industries. With strong CSR initiatives from influential MNEs such as Nike, Gap, Adidas, among others, Vietnamese suppliers now have to adopt a number of codes of conduct (for example: WRAP, SA8000, Nike code of conduct etc.) focusing on higher-than-minimum-standard labour and environmental requirements such as no child labour, no forced labour, improved occupational safety and health system, remuneration etc. As long as the initiatives enhance enterprises’ competitiveness and improve working conditions, they receive ‘green signals’ from the government. The VGCL, however, remains silent on the issue.
New Directions
As the date of WTO accession comes closer[4], the pressure of reform is pushing Vietnam to a historical turning-point. The challenges of WTO accession plus recent strikes on wages and working conditions are accelerating the government’s search for new directions.
As mentioned earlier, there exist two MWs in Vietnam: the FDI’s and the national minimum wage. The national MW (currently 350,000VND/month) not only serves as minimum rate to protect workers, but it is also linked to public wages and social benefits. So according to a report by the Wage Reform SteeringBoard of MOLISA in 2004, in order to raise 1VND for a worker in the public sector, the government has to pay 6VND to cover also rise in pension, social benefits, allowances for veterans etc[5]. Therefore, it is extremely difficult for the government to raise the national MW. Though the MW was increased to 350,000VND/month from 290,000 VND/month in October 2005, the salaries of public workers, especially those working in public hospitals, training institutions, government offices remain extremely low. In Vietnamese private enterprises, due to weak unions, absence of real collective bargaining practice and insufficient labour inspection, wages of workers, especially newly-recruited, low-skilled ones, are just slightly higher than the MW level (approx. 400,000VND-500,000VND).
Almost seven years after the issuance of Decree 53 on minimum wages for the FDI sector which were significantly higher than the national one[6], workers started walking out for higher MWs (see Annex 1 for further details).And the government did respond to their appeal. After the wave of strikes in early 2006 which involved over 140,000 workers in 150 strikes, the government issued Decree 03 on 6 January 2006 (effective on 1 February 2006) to raise the FDI MWs to 870,000VND ($55), 790,000VND ($50) and 710,000VND ($45) while keeping the national MW the same. As anticipated, this move soon lead to a second wave of strikes of workers in the non-FDI sector (which are still going on) demanding for raising the national MW to the FDI MW level. Nonetheless, as the Minister of Labour explained in a press conference in January 2006, merging two MWs into one is a long-term goal, probably accomplished in 2015 rather than now. The government has been confronted with budget constraints, pressure from foreign investors and the need to maintain Vietnam’s competitiveness.
Although the demand for higher MW by non-FDI workers may not be satisfied now, the last waves of strikes posed an unprecedented upward influence for better wages[7]. The government, as a result, is looking for other measures to improve wages and working conditions while delaying the adjustment of MWs.
First, the government attempts to strengthen its cooperation with the union and employers’ organisations to develop channels for tripartite negotiations. Decree 145 issued in 2004 formalized the tripartite consultation mechanism at national level. Decree 145 allows the nationally-recognized social partners (the Vietnam General Confederation of Labour (VGCL), Vietnam Chamber of Commerce and Industry (VCCI) and Vietnam Cooperative Alliances (VCA)) to be consulted by the Government on formulation of labour-related policies and laws. Until now, however, this Decree has yielded few meaningful impacts on Vietnam’s industrial relations system. No permanent tripartite body has been set up and most of the time, the social partners are consulted on case-by-case basis only. At provincial level, as VCCI has only 17 branches with limited capacity and VCA represents only the cooperatives rather than companies, tripartism remains infeasible. In bigger provincies and cities where VCCI and VCA set up permanent branches, although they participate in provincial tripartite labour arbitration councils together with VGCL and the local labour administration, this mechanism has been largely ineffective.
However, the provincial labour authority and the local VGCL have been working closely with each other to fire-fight wildcat strikes. Normally, when a strike happens, the DOLISA together with the provincial VGCL will form an adhocstrike taskforce to visit the strike-affected enterprise in an effort to settle the conflict. Recently, in order to find a solution to the spate of strikes, Ho Chi Minh city, Binh Duong and Dong Nai people’s committees have formalized regular strike taskforces comprising of DOLISA, VGCL and VCCI staff. Though still controversial, this initiative has provided these provinces with a working substitute to the ineffective legal strike-settlement procedures.
Second, as discussed earlier, facing with severe criticisms over the ineffective legal dispute settlement procedures from both workers and employers, the government is going to revise the Labour Code, starting with Chapter 14 on dispute settlement procedures. MOLISA plans to submit the draft revision of chapter 14 to the National Assembly by June 2006 and it may be approved by October 2006. The first draft of Chapter 14 revision (Annex 5) has been sent around social partners for comments since January 2006. As usual, both VGCL and VCCI have organised a number of internal discussions on the Draft both at provincial and national level to prepare formal comments to send to MOLISA (please refer to Annex 2 for the initial draft of VGCL’s comments on Chapter 14 revision).
In parallel with Chapter 14 revision, an inter-ministerial action plan on developing sound industrial relations (see Annex 6) will soon be promulgated by MOLISA, VCCI, VCA and VGCL. The latest draft of this action plan shows an encouraging shift of attention from fire-fighting strikes to prevention of disputes by promoting the practice of collective bargaining and social dialogue at the workplace. There have been also proposals within the VGCL and governmental circles about setting up a collective bargaining department in the union system and an industrial relations unit in MOLISA. If approved, these two units will serve as specialized focal points that coordinate efforts to improve industrial relations in the country.
In comparison with China or Vietnam itself ten years ago, the Vietnamese political regime now seems to be much more tolerant of wildcat strikes and open debate on such ‘sensitive issues’ as the effectiveness of VGCL, government’s intervention, workers’ rights etc. This tolerance, hopefully, will help stir up healthy debates among social partners and other stakeholders and lead to progressive changes in the government’ policy on wages and working conditions.
- VGCL strategy and policy discussion at the national level
Analyzing the causes of recent strikes, experts often point to the ineffectiveness of enterprise unions in representing and organizing workers. Though local union’s weakness is no longer a secret, this time, the strikes have shaken the whole VGCL system from local to central level, posing critical questions about the meaning and goals of the union.
If it were not because of wildcat strikes, on surface, it seems there would have been no change in VGCL. Assuming the dual roles of upholding the labour legislation and protecting workers’ interests in theory, VGCL has been taking part in policy consultations, governmental meetings, and organizing social events for its members as it has always been doing since its foundation. However, the fact that none of the 1,056 strikes from 1995 to 2005[8] was organized by the union and the increasing trend of workers in the non-public sector refusing to join union have made it visible that VGCL has not been doing enough to protect workers’ interests. At the same time, VGCL’s inability to stabilize industrial relations at the local level has indirectly contributed to the destabilizing economic and investment environment of the country. VGCL, therefore, is under pressure from both the workers and the government to reform itself to respond to the new demands of a transitional economy. Unfortunately, at the moment, it appears that VGCL has not been able to clarify its way forward to overcome the conflict of its dual roles: serving as a semi-government agency or a protector of workers’ interests.