September 2014
Trade Unions in Transition – Changing industrial relations in Vietnam
By Erwin Schweisshelm1
Introduction
Trade unions in Vietnam are closely tied to the Communist Party of Vietnam and have yet to
find their role as autonomous representatives of the genuine interests of workers. Formally,
they do, but in fact they are still a “transmission belt” of the Communist Party and trade union
officials are the equivalent of civil servants. However, the ever growing influence of foreign
investors and the increase in wild cat strikes put pressure on the Vietnam General
Confederation of Labour (VGCL), the only legally registered trade union in Vietnam. This
pressure has an impact on both the ideological self-perception of the VGCL as well as its
organisational behaviour. It faces a difficult political dilemma: if the situation remains
unchanged and VGCL does not face the challenges of changing labour relations, workers
will nevertheless fight for better working conditions and render the official trade unions
obsolete. While if VGCL starts to perform its role of a genuine representative of the interests
of workers in Vietnam it must become more independent from the party and state in
Vietnam. This paper gives some background on the labour movement in Vietnam and its
political and economic context and an assessment of current trends in labour relations and
the strategies pursued by the players involved with a focus on bargaining and industrial
action.
1
Erwin Schweisshelm, Head of Office, Friedrich-Ebert-Stiftung, Vietnam Office
2
Organisational information
The history of trade unions in Vietnam dates back to the year 1929 when some local unions
formed the first trade union federation, about a year before the Communist Party of
Indochina was established in 1930 which later became the Communist Party of Vietnam.
Trade unions from their beginning were part of the independence struggle against the
French colonial rulers and therefore remained illegal and working in underground until
President Ho Chi Minh declared the independence of Vietnam in Hanoi on the 2nd of
September 1945. In 1946, the Communist Party established the General Confederation of
Labour which remains since then the sole authorized trade union in North Vietnam and after
the liberation and unification in 1975 in the whole of Vietnam.2
Under the political conditions of a Leninist one-party state, the trade unions are a “mass
organisation” under the leadership of the CPV and part of the “Fatherland Front”, in which all
“mass organisations” are grouped and coordinated. However, unlike the Vietnam Women’s
Union or the Vietnam Student’s Union and others, the trade unions have a special position in
the political system since their role and task is enshrined in a sole article of the Constitution
of Vietnam, Art. No.10.3 As such, the Vietnam General Confederation of Labour is the only
trade union organisation in Vietnam and represents the whole working class in Vietnam, not
only members of the VGCL. The President of the union4 is usually member of the Central
Committee of the Communist Party of Vietnam and has the right to attend cabinet meetings
on economic or social issues.
According to figures provided by the VGCL in 20135 the total membership was 7.9 Mio. in
about 113.000 “grassroot” trade unions, the larger majority of which are in government
institutions and state-owned enterprises. Trade unions in private enterprises or foreign
companies (FDIs) are still limited in number, but the figure is growing. Since the Vietnamese
government is gradually “equitizing” state-owned enterprises, pressure on VGCL is growing
to learn how to organise in non-state enterprises.
2
Dan Gallin, The Labour Movement, Global Labour Institute, Geneva 2005, accessed on 28.07.2014 at
http://www.globallabour.info/en/2007/09/the_labor_movement_dan_gallin.html
3
Article 10: “The Trade Union of Vietnam is a socio-political organization of the working class and laborers
voluntarily established to represent laborers, care for and protect the rights and lawful and legitimate interests
of laborers; participate in the state management and socio-economic management; participate in the
examination, inspection and supervision of the operations of state agencies, organizations, units and
enterprises regarding issues related to the rights and obligations of laborers; and mobilize laborers to learn to
improve their professional qualifications and skills, abide by law, and build and defend the Fatherland.”
4
th
At present Dr. Dang Ngoc Tung, re-elected in the 11 VGCL congress in July 2013 for a second consecutive
term.
5
Report by VCGCL to foreign guests of the 11th VGCL Congress, Hanoi, 28th July 2013
3
Information about the financial situation of the VGCL is difficult to obtain. Besides the 1%
membership fee which is often not collected in order to make membership more “attractive”,
the enterprises have to submit an additional 2% of the total wage-bill of the enterprise to the
VGCL unit in the enterprise in accordance with the current law.6 Half of the contributions
usually remain with the grassroot trade union in the company, the rest is being forward to the
different levels of the VGCL structure. In addition the VGCL holds a considerable amount of
property, owns a publishing house and a couple of newspapers and magazines and receives
state subsidies especially for staff. About 8.000 full-time staff are working for the VGCL,
besides 300.000 voluntary cadres mainly on the grassroot level.
The centralised structure of the VGCL is rather complicated, with branches in all 63
provinces, in districts, larger cities etc. In addition there are sectoral trade unions in 22
branches subordinated to the VGCL, enterprise unions in huge state conglomerates directly
under the VGCL in Hanoi, Federations of Labour in industrial zones etc. All this makes
industrial action and representation of unions in important industries quite difficult. There is
for instance a Vietnam National Union of Textile and Garment Workers (VNUTG) under the
VGCL, operating as a sectoral trade union. As such, the organisation was only established in
2007 since it was part of a larger general union before. Its membership comprises of about
130.000 members. However, about 80% of its memberships stems from the state-owned
VINATEX conglomerate and only the remaining 20% in private Vietnamese companies,
nearly none in FDIs. However there are thousands of other textile and garments enterprises
that are not in the constituency of the VNUTG but affiliated directly through district or
provincial chapters to the VGCL, if they are organised at all. This makes trade union
representation in the textile and garment sector, one of the most important industries in
Vietnam, quite ineffective.
Trade Unions in Transition – from harmony to conflict
Industrial relations in Vietnam are undergoing substantial changes as a consequence of the
Đổi mới7 economic opening process and the concomitant restructuring of the Vietnamese
economy towards a global market economy “of socialist orientation”8. These relations were
relatively harmonious up until the year 2004, but since 2005 a dramatic increase in the
number of strikes has been observed. 978 work stoppages were counted between 1995 and
6
Mainly collected in state-owned enterprises and FDI, private enterprises often refuse to submit this fee.
Vietnamese for renewal
8
According to the official narrative.
7
4
2005.9 In the following decade, the number has grown to 4,299 strikes. The leadership of the
Communist Party of Vietnam (CPV) and the government noted this trend with concern since
economic and social unrest always bear the potential of political change. Yet so far they
have only reacted hesitantly. And also the General Confederation of Labour itself is still
looking for suitable solutions.
The right to strike was only granted to Vietnamese workers when the Labour Code came into
force in 1995. In subsequent years, however, there were only isolated cases of strikes (see
Table 1). Yet this relatively uniform trend was interrupted in 2005 by a steep increase. The
wave of strikes reached its first peak in 2008 with 762 strikes. After a short-lived decline, the
number of strikes reached a new record value of 981 in 2011. Since then, some calm has
returned with 539 strikes in 2012 and 355 in 2013.10 Nonetheless, there is evidence that also
in Vietnam labour relations are reflecting the different interests of workers and capital.
Table 1: number of strikes in Vietnam
981
number of strikes
1000
762
800
600
541
387
400
200
139125147
60 59 59 62 67 71 89 100
539
424
355
216
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
0
Source: Various figures given by VGCL, Ministry of Labour and local newspapers
A closer look at the strike data reveals several trends. Strikes mainly occur in the private
sector; almost 80% in foreign direct investment (FDI) companies alone.11 The textile sector is
most affected with 30% of strikes. Consequentially, work stoppages especially occur in the
strongly industrialised provinces of southern Vietnam.
Moreover, strikes in Vietnam see several defining characteristics. They are almost
exclusively peaceful strikes. This, supposedly, is one reason why most strikes are tolerated
9
Cf. VAN GRAMBERG/TEICHER/NGUYEN (2013): Industrial disputes in Vietnam: The Tale of the Wildcat, in: Asia
Pacific Journal of Human Resources, 51(2), p. 249.
Hereinafter: VAN GRAMBERG/TEICHER/NGUYEN (2013)
10
The figures are based on VGCL data. Primarily Korean, Taiwanese or Japanese owners are involved; strikes in
German companies, for instance, are unheard of.
11
Cf. CHI/VAN DEN BROEK (2013): Wildcat strikes: A catalyst for union reform in Vietnam?, in: Journal of
Industrial Relations, 55(5), p. 786. Hereinafter: CHI/VAN DEN BROEK (2013).
5
by the local authorities and police. Strikers often consider the presence of the police as
protection against violent backlashes perpetrated by the private security forces of the
companies. Another distinctive feature of strikes in Vietnam is their lack of leadership. In the
event of a work stoppage, strikers mostly gather spontaneously in front of the factory
premises and wait for representatives of the local authorities or trade unions, who will then
communicate their demands to the business management, and negotiate a compromise. But
even without any apparent leadership, the mobilisation capacity of the workers is quite
distinct. The cramped living conditions of workers and communication via text messages
facilitate coordination. Whilst opinion leaders play an important role in planning strikes, they
remain somewhat in the background given possible legal consequences and sanctions by
employers.12 This fear is not unwarranted since almost all strikes over the last years were
indeed wildcat, i.e. illegal strikes. Vietnamese Labour Law provides for the possibility of work
stoppages under certain conditions but these conditions are so unrealistic that workers
actually only call wildcat strikes as a last resort.13
In addition to these constraints, a qualitative change has been observed over the years. This
regards the causes of the strike action. During the 1990s and at the beginning of the 2000s,
the predominant reasons for work stoppages were infringements of applicable labour laws
(e.g. the non-payment of wages, withholding of social security contributions, excessive
overtime or exaggerated, sometimes violent punishment imposed by the employers)
perpetrated by employers. Whilst these rights-based strike causes are still relevant,
interests-based causes are gaining in importance.14 Due in particular to spiralling inflation
resulting from the world economic crisis, there has been a growing demand for an increase
in wages. For the most part, this has been enforced by means of strikes.15 At the same time
at the culminating points of the strike wave in 2008 and 2011, the consumer price index for
foodstuffs reached peaks of 32.7% and 24.4% on the previous years’ figures.16 The high
number of illegal strikes shows that the existing methods of dispute resolution are not
working, and that the legal conditions do not do justice to the problem area.
12
Cf. CHI (2012): Informal Labour Activism and the Prospects for Industrial Relations Reform in Vietnam, in:
Industrial Democracy in China (ed.): TRAUB-MERZ/NGOK, p. 158.
13
Cf. VAN GRAMBERG/TEICHER/NGUYEN (2013): p. 256.
14
Clarke, S., & Lee, C. H. (2007). From rights to interests: the challenge of industrial relations in Vietnam, in:
Journal of industrial relations, 49(4), p. 564.
15
Cf. CHI/VAN DEN BROEK (2013): p. 786f.
16
The price of foodstuffs in urbanised areas is the most relevant inflation index for factory workers.
6
The role of the VGCL in industrial relations in Vietnam
Dispute settlement mechanisms are regulated by Vietnamese labour law, yet they do not
seem to be effective, given the high number of illegal strikes. Only two cases were settled
successfully by the Labour Arbitration Council in Hanoi – one of several dispute settlement
bodies – between 1997 and 2007; the corresponding counterpart in Ho Chi Minh City only
solved one case.17 Most experts ascribe a large part of the responsibility for this failure to the
Vietnam General Confederation of Labour, which is strongly interlinked with the state and
the party, and groups enterprise unions and industry unions together under one umbrella
organisation. Trade unions that are not organised under the VGCL are banned in Vietnam.18
The VGCL plays a vital role in industrial relations insofar as it acts as the “natural”
representative of workers’ interests. Other models of representation, such as works councils
along the lines of the German model for instance, do not exist in Vietnam. Workers are
therefore fully dependent on the VGCL when it comes to enforcing their interests. This is
problematic for several reasons. Firstly, trade union officials, especially on the enterprise
level, until recently hardly had any competencies in collective bargaining or representation of
interests. Secondly, trade union officials simultaneously hold senior posts in the
management or the personnel department of companies.19 Moreover, they continue to
receive their salaries from the companies, i.e. they depend on the goodwill of their superiors.
Thirdly, the VGCL has to manage a difficult balancing act between being an organisation of
civil society and a state institution. The CPV, which is concerned about losing its legitimacy
within the workforce, increasingly uses the VGCL as a vehicle in order to gain influence
among workers. At the same time, the VGCL is attempting to strengthen ties with the party
at national level in order to maintain its present weight in decision-making processes. Given
the entanglement with party interests, the VGCL compromises its legitimacy within the
workforce, and often appears to be an instrument of the party.20 The party leaders in public
repeatedly state that the trade unions should protect the genuine and legitimate interests of
the workers. However this excludes a political role of trade unions since that would be in
contradiction with the monopoly on politics hold by the Communist Party of Vietnam.
As a consequence, on the one hand trade union representatives do not want to, or indeed
cannot, represent workers’ interests whilst on the other hand, the VGCL is in any case not
involved by the employers in case of a conflict. The workforce only calls illegal strikes as a
17
Cf. VAN GRAMBERG/TEICHER/NGUYEN (2013): p. 258
Vietnam has not ratified the ILO core labour standards 87 and 98.
19
Cf. VAN GRAMBERG/TEICHER/NGUYEN (2013): p. 265
20
Cf. CHI/VAN DEN BROEK (2013): 793
However, this is seen as a big problem by many, especially younger trade union officials.
18
7
last resort for achieving their demands since, according to the law, workers must always be
represented by the VGCL, and strikes must be called by the association, during collective
bargaining and in dispute settlement mechanisms.
So far, the VGCL has reacted only cautiously to the strike wave. The main strategy consists
of enhancing the rate of unionisation, especially in private companies. At first glance, this
approach cannot be dismissed out of hand as most strikes take place in the private sector.
By contrast, strikes at state-owned enterprises, in which a large part of the workers are
organised in trade unions, are very few. This line of argument can be countered, however, if
we consider that there are also strikes in private companies which have company unions. In
fact, a further reason for the high number of strikes in the private sector is that FDI
companies are primarily located in the low-pay sector. Furthermore, the VGCL has initiated
several programmes for building up the capacities of trade union officials on collective
bargaining in recent years. As shown above, this measure is indeed necessary, but the main
problem – the lack of a genuine representation of workers’ interests – remains untouched.
Official reactions: Amending the legal framework and increasing the minimum wage
The CPV and the government have now recognised the problem as well and have
developed a number of approaches geared towards reaching a solution. Consequently, the
legal framework was reformed in 2002, 2006 and 2007. After the strike wave increased even
further in the years that followed, new bills for trade union and labour law were tabled in
2012. These bills came into force at the beginning of 2013 and in May 2013. Dispute
settlement mechanisms were streamlined by one judicial body, the Enterprise Conciliation
Council. Mandatory quarterly meetings between employers and employees are now
expected to improve mutual understanding.21 Moreover, the staff of companies without a
trade union must now be represented by the next higher trade union level. Up until a short
time before their adoption, a model similar to the German works councils was contained in
the draft legislation. The passage was modified though under pressure from the VGCL which
feared for its monopoly stronghold. Even so, progress was made in the field of collective
bargaining policy with the Labour and Trade Union Act. These improvements constitute the
legal opening for industry-wide collective agreements. In fact, in its 11th Congress in July
2013 the VGCL decided to significantly step up the campaign to conclude more and better
collective bargaining agreements, also beyond the single enterprise level, and has also
made progress since then. But as strikes are not foreseen in the negotiations strategy of the
21
http://www.infoclient.gide.com/newsletters/en/vietnam/index.php?option=com_content&view=article&id=
188:gide-loyrette-nouel-client-alert-vietnam-legal-update-new-labour-code&catid=1:latest-news
8
VGCL as a means of last resort, the power and impact of collective bargaining will always be
limited.
Other important issues, however, have not been addressed at all or only addressed
insufficiently. The sanctions regime in cases of violations of the law is criticised by many
experts as a gross misconstruction. Violations of the labour law by employers are only
subject to minor penalties, if they are uncovered at all.22 This is now reaching perverse
proportions so that it is sometimes cheaper for companies to withhold social security
contributions and risk a penalty payment instead of taking out a bank loan.23 The dispute
resolution system continues to be excessively tedious and complicated, meaning that
communication between employers and employees is thus impeded. Not only are further
strikes virtually being provoked, but they will also remain illegal. The basic problem remains,
i.e. the lack of representation of workers by the VGCL. It is a debatable point whether it will
be possible to solve this problem by legal provisions. Chi and van den Broek came to a
similar conclusion: “Industrial relations change will rest largely on the ability of the VGCL to
redefine its role to represent workers, and only partially on the development of a new
legislative framework”.24 The country Director of the ILO, Gyorgy Sziraczki, also declared
that the implementation and enforcement of the law are “a bigger challenge than law
making”.25
Another strategy of the government involves gradually raising the minimum wage. The last
increase of the minimum wage (15%) took place per 1.1.2014 for four regions in Vietnam. It
is now about USD 128.- in the big cities like Hanoi or Ho Chi Minh City (Region I) and USD
90.- in the very rural areas (Region IV). After the focus of Vietnamese economic policies was
fixed on increasing attractiveness for FDIs for many years, there is now greater willingness
to allow ordinary people to participate more in growth. Although the minimum wage was
raised several times during the last two decades, it only covered approximately 60-70% of
the cost of living in 2011.26 According to the government plan, the minimum wage was
supposed tol be raised to a level that covers 100% of the cost of living by 2015.27 It remains
to be seen whether this promise will be kept28, and all too often pay rises have been directly
swallowed up by inflation. As a further measure, a National Wage Council was set up by the
22
Cf. VAN GRAMBERG/TEICHER/NGUYEN (2013): p. 251.
This is why the regime of sanctions is set to be toughened in the amended social security regulation to be
passed at the end of 2014. Social security fraud will remain an administrative offence though, and will not
become a criminal offence.
24
Cf. CHI/VAN DEN BROEK (2013): 789.
25
http://www.ilo.org/hanoi/Informationresources/Publicinformation/WCMS_218125/lang--en/index.htm
26
Cf. VAN GRAMBERG/TEICHER/NGUYEN (2013): p. 261.
27
http://www.amchamvietnam.com/5741/private-sector-minimum-wage-adjustment-for-2013/
28
Recent statements suggest yet again that this target will be postponed to 2017.
23
9
law amendment. This Council comprises employer’s representatives, the VGCL and the
Ministry of Labour (MOLISA)29. It is supposed to make sure that the minimum wage is tied to
inflation, and watch over implementation at company level. Just recently, the Council has
recommended an increase in minimum wage by 15% on January 1st, 2015.
Structural problems persist
Neither the VGCL nor the government are able to come up with convincing concepts to
counteract massive industrial action. So how can the drop in the number of strikes since
2011 be explained? There can be no doubt that the main reason is the macroeconomic
development of Vietnam. Inflation has been stabilised in the one-digit range, and was around
just 4% during the first months of 2014.30 Real pay increases were registered again for the
first time, along with an increase in the minimum wage, compared with the period between
2007 and 2011. At the same time, the economic situation has not yet recovered to the levels
before the world economic and financial crisis in 2008. There is a continuing trend of
especially local, private companies going bankrupt. This seems to be felt by employees, who
are exercising restraint when it comes to wage demands.31 It also remains to be seen to
what extent the “anti-Chinese” riots, which erupted in Vietnam in mid-May after a Chinese oil
rig was deployed in Vietnamese waters, and which led to death and casualties, will influence
investment patterns. These riots were not “wildcat” strikes, although foreign observers, too,
assume that it was also indignation flaring up during the riots about the sometimes terrible
working conditions, especially in Taiwanese and Korean companies.
Several observers see another cause for the decrease in the number of strikes in the
gradual improvement of collective bargaining agreements, which once barely went beyond
the legal requirements.32 Yet it is unclear whether this trend will be sustained. It is apparent,
however, that the fundamental shortcomings in the industrial relations of Vietnam have not
been remedied. The number of strikes consequently remains at medium-level. As long as
inflation can be maintained at a constantly low level and real wages manage not to fall, it can
be assumed that the conditions seen in 2011 will not materialise again, notwithstanding the
unresolved structural problems. If another economic slump were to hit again though, vast
numbers of illegal strikes might well become common once again in Vietnam. In this case,
29
Ministry of Labour, Invalids and Social Affairs
http://www.tradingeconomics.com/vietnam/inflation-cpi
31
http://monitorglobaloutlook.com/news-story/wildcat-strikes-ease-in-vietnam-as-wages-rise/
32
http://vietnamnews.vn/society/251704/sectoral-labour-pacts-ease-bouts-of-industrial-action.html
30
10
the question would be how long the strikes would remain apolitical, and for how long the
CPV can afford to treat the problem superficially.
Conclusion
25 years of transition from a planned economy to a market economy have definitely changed
the pattern of industrial relations in Vietnam. Formally, the state ideology still upholds the
perception of a socialist society in which no contradiction between workers and the owners
of capital exist and subsequently industrial relations are characterised by a harmonious
balance. In practice, the dynamic growth process, global integration and the rise of private
Vietnamese and foreign enterprises in the economy have put the workers in Vietnam under
the same pressures as elsewhere in the world: Low wage competition, growing forms of
precarious employment, low levels of social security protection etc. Since the economic
reform process was not accompanied by political reforms and the VGCL still perceives itself
as a transmission belt of the Communist Party of Vietnam, trade unions have not really been
able to establish themselves as an independent representation of workers. On the other
hand, in some fields the VGCL has made important steps to a more genuine trade union
organisation that protects its members in conflicts with employers through a countrywide
system of legal aid offices or is increasingly able to conclude collective agreements that are
significantly better than the provisions in the labour law. Since the political system is a given
fact, the efforts of the VGCL to improve legal protection and collective bargaining should be
supported. However, lawmakers should change the provisions in the law that prevent the
trade unions to use industrial actions and strikes as a legitimate means of last resort in
negotiations with the employers. Otherwise, the relations between employers and workers in
Vietnam will never reach a level playing field.
© Erwin Schweisshelm, Head of Office, Friedrich-Ebert-Stiftung, Vietnam Office, July 2014