The Evolution of a New Pattern of Strikes in Vietnam

There have been almost 1,500 strikes in Vietnam since the introduction of the Labour Code in 1995 but labour disputes and industrial relations in general have just become a topic of research for the last four or five

years. From 2004 to early 2006, MOLISA, VCCI and VGCL – the tripartite constituents in Vietnam – each carried out their first research on labour disputes and strikes. Despite their difference in focus and coverage, the three researches share a common view of the picture of strikes in Vietnam, that is: strikes mostly occur in FDI sector in the South of Vietnam with strong concentration in labour-intensive industries such as textile, garment and footwear and strikes are spontaneous reaction of workers to violations of workers’ rights by employers rather than organized industrial actions.

The 2004 paper on “Strikes and Industrial Relations in Vietnam” by Dr. Chang Hee Lee (ILO expert) and Prof. Simon Clarke (Warwick University) for the first time pointed to the evolution of a new pattern of strikes and labour disputes in Vietnam, which is the shift from rights-based disputes to interest-based disputes. In other words, rather than walking out to claim their rights in law, workers now go on strike to demand for better meals, higher salaries, less overtime – working conditions that are higher than what is stipulated in law or labour contracts.

The unprecedented wave of strikes in 2006 and the most recent spurry of strikes in March 2007 reaffirmed the above new pattern of labour disputes and unveiled other changes in the nature of strikes in Vietnam and in the psychology of workers. For instance: strikes now are more about demands for better interests of workers; they are organized by hidden leaders who, no matter for good or bad reasons, have managed to mobilize hundreds, even thousands of workers to strike.

This paper attempts to sketch a picture of new patterns of strikes in Vietnam on the basis of review of previous research, strike statistics available and observation and interviews during several field visits both the North and South of Vietnam.

Availability of Statistics

The ambition to provide a comprehensive analysis of strikes in Vietnam has been hindered by shortage of strike statistics and information. It is important, therefore, for readers to be fully aware of the availability of statistics to have a fair understanding of the analysis in this paper.
There are two channels of strike reporting in Vietnam: one is through the union system and the other through the labour administration reporting system. The unions at district level used to report monthly to the provincial VGCL which, then, reports back to the legal department of central VGCL. The Legal Dept. of VGCL would prepare a synthesis report every quarter which is published in the Lao Dong daily and other related press. Since 2007, however, due to the surge of strikes in the South, the VGCL requires provincial unions to report every week. In MOLISA, there is no single focal point for strike-related issues. DOLISAs used to report on labour disputes, strikes, labour standards to the Legal Department and collective agreements to the Employment and Labour Policy Department. However, after the issuance of Decree 03 on 6 January 2006, the Wage and Salary Department was appointed the focal point in the implementation of the Decree and automatically, they also received quarterly strike reports from provincial labour administration. It is expected that with the coming foundation of the National Labour Relations Council (NLRC), these overlappings will be removed and the strike reporting task will be handed over to the Secretariat of NLRC which bases in MOLISA.

There is a significant difference between the strike statistics of MOLISA and VGCL. Normally, that of the latter is 10% -15% higher than MOLISA’s figures. The following analysis is based on the synthesis reports from 1995 to 2006 and quarterly reports of both VGCL and MOLISA for the first three months of 2007. The synthesis reports provide the total number of strikes every year by ownership (SOEs, FDI, Vietnamese private), by nationality (Korea, Taiwan, Hong Kong and others) and by location (HCMC, Binh Duong, Dong Nai and other locations). The report for the first three months of 2007 is more detailed with names of companies, date of strike, location, sector, number of workers involved and causes of strikes as reported by strike taskforces. Due to the availability of information, the analysis will be split into two parts: a general observation of trends of strikes from 1995 to 2006 and a more detailed analysis of new features of strikes which emerged in the late 2006 and early 2007.

Regulatory framework for industrial actions in Vietnam

The 1994 Labour Code together with the Amendment in 2002 lay out a lenghthy and complicated procedure for industrial action and settlement of labour disputes. In theory, a dispute has to go through the company conciliation council, arbitration council and the court before workers are allowed to go on strike – a process that takes weeks to complete. Also, there are a number of conditions to be satisfied if a strike is to be considered a ‘legal’ action, such as: strike decision has to be made by the company union, all conciliation and arbitration measures have been exhausted, and the strike is endorsed by a majority of employees. None of over 1,000 strikes so far has gone through all the above steps and neither were they organized by the union.
As a result, in 2006, Chapter 14 of the Labour Code which regulates strike settlement procedures was revised. Now labour disputes are distinguished into two types: right-based and interest-based, each of which will go through different procedures of settlement. Another major change is that in ununionised enterprises, workers’ representatives are allowed to organize strikes and negotiate with the employer.

However, as a common practice in Vietnam, the revised Chapter 14 will not be implemented until a government decree and ministerial circulars that provide detailed instructions on stipulations of the legislation are promulgated. This process is expected to last for around one year after the new Chapter 14 was approved. In the mean time, strikes are still settled in an informal way which actually has been adopted so far by local authorities – that is by the intervention of adhoc strike taskforce. The strike taskforce, set up by provincial local authority, consists of representatives from the labour administration (DOLISA) and union (provincial VGCL). Unfortunately, VCCI and other employers’ organisation are rarely a part of the taskforce. When a strike happens, the taskforce would visit the enterprise, gathering workers’ demands, negotiating with the employer and persuading workers to get back to work . This approach, to some extents, has been successful in recovering social peace and stability. Nonetheless, as explained later, the approach is being challenged.

Strikes in Vietnam from 1995 to 2006

Strikes are most pervasive in the foreign-invested sector. In eleven consecutive years from 1996 to 2006, strikes in this sector account for over 50% of the total number in the country. There is no sign that this trend is diminishing as in 2006, the number of strikes triples that of 2005 and accounts for 74.2% of the total figure of strikes in the country. Together with the equitization process, the SOE is shrinking rapidly and strikes in this sector has decreased significantly from 18.3% in 1995 to 1.0% in 2006. No strike has been recorded in the SOE sector in early 2007. Encouraging trend can be observed in the private sector which includes both the equitized SOEs (commonly referred to as stock companies) and private businesses owned by Vietnamese despite the fact that the percentage of strikes in the private sector over the total number fluctuates around 25%-30%. The reason is that the private sector has been booming at a much higher rate than its labour relations problem. A brief review of strikes in Ho Chi Minh city in the late 2005 and early 2006 shows that the Tet wave of strikes in this sector started at companies in industrial-processing zones then spread to companies in the same area/district.

Taiwanese companies seem to have more strikes than any other investors (see table 2), including Korea and Hongkong and this trend is getting worse, especially in 2006 when the number of strikes in Taiwanese enterprises doubles that in Korean ones and accounts for 44.6% of the total number of strikes in the whole country. However, it does not mean that the problem in Korean companies is decreasing as the number of strikes here keeps rising every year from 12 cases in 1995 to 76 in 2006.

By location, Ho Chi Minh city has always been facing with more strikes than any other province in Vietnam. Since 2004, it appears that Dong Nai and Binh Duong have been catching up. This trend will become more visible in the later analysis of the first three months of 2007. Though the data available from 1995-2006 does not elaborate the number of strikes in IPZs and outside but according to unofficial sources of information, a wave of strikes often is initiated in IPZs, normally in FDI companies, then spread to companies outside the zones. This was also the case of the wave of strike during Tet of 2006.

It is difficult to define causes of strikes as workers’ demands as reports by the union and labour administration may only reflect the tip of the iceberg. Yet, according to the VGCL, over 90 percent of strikes in the last 12 years is employers’ violation of labour legislation/workers’ legitimate rights. Common types of violation include: exceeding overtime limit, delayed payment of wages and salaries, paying less than the minimum wage, among others. Members of provincial strike taskforces, particularly those in the South, however, point out the increasingly common mixture of right and interest demands or in other words, claim of legal rights and higher-than-law benefits. For example, workers walked out not only because of delayed payment, excessive overtime hours, but also due to the quality of food provided by the company, low bonus, or unsatisfactory wage increase rate. This new feature was captured and analysed further in the mentioned paper on “Strikes and Industrial Relations in Vietnam” by Chang Hee Lee and Simon Clarke.

Both reports of MOLISA and VGCL do not include information about the industries where strikes happened. A recent survey on strikes and labour disputes carried out by MOLISA in the framework of ILO/Vietnam Industrial Relations Project in 2005 showed that strikes are most pervasive in labour-intensive, export-oriented industries such as textile and garment, footwear, engineering, wood processing, and electronics. As most companies in these sectors are small suppliers of bigger brand names, exporting to the lower-end markets, they are exposed to market fluctuation and the pressure to keep production cost, including labour cost, at the lowest level possible. Also, it is not by chance that these sectors concentrate in certain provinces/cities, particularly Ho Chi Minh city, Binh Duong and Dong Nai in the South. After exhausting the local labour force, now most of these companies rely on migrant workers who struggle with lack of decent accommodation, high living cost, and poor spiritual life . All these factors exacerbate the conflict of interests between labour and management, making the possibility of strike more visible than any where else.

No strike since 1995 was organized, initiated or led by the official union cell in the company. As mentioned in the introduction, strikes are described by the labour authority and VGCL as spontaneous reactions of workers against the violation of employers over their rights, implying that there is no organizing force behind these industrial actions. In other cases, they blamed on ‘bad elements’ (bad workers who have personal conflict with the company and wish to retaliate by inciting other workers to stop working) or ‘gangster-like workers’ for inciting others to walk out. However, a recent research on “Preliminary Portrait of Informal union leaders in Vietnam” shows that most strikes were organized, not by the formal union but the informal union leaders. These people can be relatively divided into two types: (i) bad workers who incite others to strike for retaliation or for other personal purposes and (ii) workers who have influence over others and wish to protect the interests of themselves and other workers. Some of the latter have managed to set up their own networks of informal union in the company. They are protected by other workers and enjoy sympathy and support of formal union and white-collar workers who actually benefit from their protest.

The first three months of 2007 – A New Pattern of Strikes

The first quarter of this year observed the emergence of a new pattern of strikes which actually might have been found here and there in the picture of labour disputes in Vietnam but had never become prominent as such. First, it is the rise of wildcat strikes in Japanese companies which, so far, have been famous for good compliance of the labour legislation. Out of nearly twenty strikes in Japanese companies in 2007, mostly in the late Februrary and March, ten disputes happened in engineering companies situated in Dong Nai IPZs. The biggest strike was in Mabuchi Motor, a unionized Japanese engineering company in a Dong Nai IPZ with the participation of 6,500 workers. Workers in Mabuchi Motor complained about the low salary increase rate, unsatisfactory bonus, and bad meals.

Settling these interest-based strikes requires a different approach. After the wave of strikes in 2006, Ho Chi Minh city, Dong Nai and Binh Duong have set up their provincial strike taskforces consisting of representatives of the union and labour administration. When informed of a strike, the taskforce would visit the company, trying to settle the case. However, more than an intermediary, the taskforce, in many cases, act on behalf of strikers in negotiating with the employer. They also distinguish demands of workers into legitimate (legal) and illegitimate (higher-than-legal standards) and pick only the former for negotiation with employers as “there is no ground for workers to force employers to respond to demands that are higher than the legal provision” . This approach of dispute settlement, unfortunately, did not work in Japanese companies recently as some employers, for example the owner of Harada Vietnam – a Japanese engineering company in Dong Nai IPZ, wished to resolve the strike bilaterally between management and workers, refusing a visit of the strike taskforce. “We [the company] do not violate the law so this is just the problem between us and workers. Let us solve it ourselves”, the director of Harada said.

The first quarter of 2007 observed the second contagion of strikes. The first one happened right before and during Tet of 2006 revolving around misunderstanding of the MW policy and adjustment of MW in the FDI sector. It started first in Freetrend – a Korean footwear company in Linh Trung 1 IPZ, Ho Chi Minh city – then spread to the whole zone and other zones in the city and Dong Nai and Binh Duong. Unlike the contagion in 2006, the second wave of strikes happened one month after Tet, in the late February and March of 2007, when labour shortage becomes a severe problem, especially for companies that rely on migrant labour force because migrant workers often quit or change their jobs after Tet. The recent surge of foreign investment after Vietnam’s accession to the WTO has also created more employment opportunities for workers. While companies face with tougher competition, workers enjoy higher bargaining power and this situation encourages workers to demand for higher salaries and better working conditions, which may turn into either the exit decision by workers (especially in case of individual disputes) or industrial actions if demands are not satisfied by the employer. A new feature of the second wave of strikes is that it first emerged in Dong Nai and spread to Binh Duong while it remained calm in Ho Chi Minh city.

Before 2007, strikes normally lasted for one or two days and even in serious cases, workers would get back to work on the fifth day in fear of being dismissed by employers (the labour code allows the employer to lay off workers that take more than 4 days off in one month without reporting legitimate reasons). Strikes in the early 2007, however, lasted longer, from three to five days, some even seven or eight days despite support of strike taskforces in settling disputes . They were also better-organized. Apart from scattering leaflets, sticking appeals for strike in toilets, strike organizers sent demands to the employer in advance and managed to control strike within the company campus and ensured that strikers take no violent actions so that they do not have to confront the police. In the case of Pouchen – a Taiwanese footwear company in Dong Nai – organizers of strike required workers (7,000 workers took part in the strike) to contribute VND1,000 each to support the strike .

Response of the Government, VGCL and employers’ organisation

Since the first wave of strikes in 2006, the government and the Party have been alerted of potential threats of instability embedded in wildcat strikes. As an immediate response, the Government issued Decree 03 on 6 January 2006 to raise minimum wages in the FDI sector. Then, Labour Code Chapter 14 on dispute settlement was revised and approved by the National Assembly in November 2006. It is planned that the whole Labour Code will be amended by 2009. A tripartite National Labour Relations Council which advises the Prime Minister on industrial relations and provides a forum for tripartite consultation will soon be established.

With influence from the Politburo, the VGCL has undergone significant reshuffle of personnel and organisation since 2006. A new leadership was installed at both the central and provincial level, particularly in Ho Chi Minh city, Dong Nai and Binh Duong. Capable union officers are seconded to industrial, processing zones where strikes happen most often. In the last annual meeting with the Prime Minister in March 2007, the VGCL proved to be more proactive in pushing for better accommodation for workers in IPZs and collective negotiation at sectoral level. However, the fragmented structure of VGCL at local level will be a big obstacle to any reform effort to strengthen its capacity at enterprise and local level by VGCL in the future .

A difficulty facing any tripartite initiative is the weakness of employers’ organisation. VCCI and VCA are the only two recognized employers’ representative organisations but they fail to cover the majority of companies in the country. Members of VCA are cooperatives and a small proportion of SMEs while VCCI membership includes only SOEs and big corporations in limited number of provinces. Major foreign investors’ associations (Japanese, Korean, Taiwanese) that prove to be influential over the local business community, local authority and central governmentare are not members of VCCI or have withdrawn from the organisation. At the provincial level, therefore, neither VCCI nor VCA is able to take up the task of coordinating employers’ associations to speak a single voice in tripartite fora. However, if other business associations continue to be marginalised in formal discussion, any tripartite or bipartite initiatives would not be as effective and feasible as they should be.

Summary of major findings

New features of strikes in Vietnam:
– Strikes last longer, from three to five days, even eight days in some cases;
– The number of interest-based strikes has increased rapidly in 2007
– Strikes are better organised
– There is an increase of strikes in Japanese companies
– Strikes now spread from textile, garment and footwear to electronics, engineering, wood processing
– Location of strikes moves to Dong Nai and Binh Duong rather than Ho Chi Minh city
– The adhoc strike taskforce is being challenged by employers who do not violate the law.

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