Vietnam’s workers finally lose their chains

Vietnam will soon allow for the formation of independent trade unions for the first time under Communist Party rule, a move required for its participation in newly signed free trade agreements (FTAs), but one that may give investors pause if it fuels already percolating labor unrest.

The communist country’s National Assembly voted last month to accept revisions to the national Labor Code, amendments which nominally allow for workers to form unions, strike and pursue collective bargaining, including for higher wages and improved working conditions.

Currently, all trade unions must be approved by and affiliated with the Vietnam General Confederation of Labor (VGCL), a state-run federation that is part of the Party’s Fatherland Front, which manages all of the nation’s so-called “mass organizations.” Revisions to the Labor Code, however, suggest that unions may form outside of the VGCL’s – and hence the Party’s – control.

The reforms were effectively forced upon the Party after Vietnam ratified several trade pacts which include requirements on labor rights, including the multi-country Comprehensive and Progressive Agreement for Trans-Pacific Partnership and a European Union pact known as the EUVFTA, which still must be voted on by the European Parliament.

In June, Vietnam’s National Assembly also ratified the UN-affiliated International Labor Organization’s Convention 98, which guarantees the rights of workers to organize and collectively bargain in signatory states.

The moves come while labor unrest is already intensifying. The number of “wildcat” strikes – strikes not recognized by the VGCL and therefore technically illegal – has been rising for years, with more than 310 taking place in 2017, according to local media reports.

Thousands of mainly female manufacturing workers “illegally” protested outside a Taiwanese-owned factory and blockaded national highways for days in Dong Nai province last year.

Experts say the rising unrest is being fueled by an explosion of new foreign-owned or run factories, many of which have failed to work with local authorities to effectively respond to workers’ complaints and grievances.

According to VGCL, the national minimum wage in 2019 meets on average 95% of a worker’s living costs – which may or may not be true. The Consumer Price Index (CPI) was up 3.5% year on year in November while wage rises were mostly stagnant.

Vietnam’s minimum wages are specific to regions: Workers in Hanoi and Ho Chi Minh City will earn US$190 per month in 2020, while those in rural areas will receive $132. The highest end of that wage spectrum is now less than the minimum wage in Cambodia, by comparison a much poorer nation.

Many Vietnamese workers, articles and studies show, feel that state-run unions do not genuinely represent their best interests. The VGCL has backed certain strikes in recent years, though it tends to spend much of its energy on raising money for pregnant workers and retirees.

The VGCL is also tightly controlled by the Party, which rarely supports strikes or other acts of labor unrest as it bids to lure more foreign investment into the country to boost flagging productivity growth rates and spark more export-driven economic growth.

Some analysts already wonder if the formation of independent unions will deter foreign investment, crucially at a time foreign manufacturers look to shift their supply chains out of neighboring China in response to the US-China trade war.

While the revised Labor Code won’t take effect until January 2021, it is expected that changes to labor representation will begin to be implemented in 2020. The new code will also raise the legal retirement age and include new national holidays.

Some in the international community have been quick to applaud the changes. “These new provisions demonstrate a significant commitment to advancing the protection of labor rights,” the US embassy in Hanoi said in a statement in November. The EU has also praised the move towards stronger labor rights.

Local opinion-makers are less sanguine, however. Pham Chi Dung, a prominent independent journalist who was arrested in November on charges of “conducting anti-state propaganda,” had called on the European Parliament not to ratify the EUVFTA because, he says, Hanoi has already failed to meet most of its human rights pledges under the trade pact and will likely flout its new vows on labor rights, too.

Dung, who formed a prominent association of independent journalists, said that Hanoi has long considered independent unions as “reactionary” due to fears that they could play a similar role to the Polish “Solidarity” trade union that helped to bring down that country’s communist system in the 1980s.

Indeed, the long-ruling Party has battled for decades to prevent civil society organizations from growing and providing alternative avenues for popular participation to its tightly controlled “mass organizations.”

If the Party actually allows independent trade unions to form and operate, there could be a coincident surge in demands for independent newspapers and civil society groups, and perhaps even eventually for independent political parties.

Hanoi has clamped down previously. 2006 was a veritable political spring for Vietnamese activists, when several independent and “illegal” political parties sprung up alongside national pro-democracy organizations, such as the popular Bloc 8406.
That year also saw the formation of the country’s first independent – and therefore illegal – trade unions.

The United Worker-Farmers Organization of Vietnam (UWFO) was formed in September 2006, and a month later the Independent Worker’s Union of Vietnam (IWUV) was opened by the well-known dissident and labor organizer Nguyen Khac Toan.

But within two months of the UWFO’s formation, all of its founders were arrested, many on anti-state charges of “abusing democratic freedoms to infringe upon the interests of the state”, a criminal offense under local law. Authorities detained or persecuted all of the IWUV’s leaders by the end of 2006.

The Party will want to pacify a potentially active trade union movement for economic reasons, too. The Minister of Labor, Invalids and Social Affairs, Dao Ngoc Dung, has made clear that working-hour limits would be kept the same and retirement ages raised under the revised Labor Code, because the economy cannot sustain any fall in productivity.

Hanoi is desperate not to slip into a so-called “middle-income trap”, a theoretical economic construct in which developing countries get stuck at a lower than optimal earnings level.

Ministers are aware that with a working-age population set to slip into decline at the same time GDP per capita remains relatively low (less than India and Uzbekistan) Vietnam risks “growing old before it grows rich,” as the International Monetary Fund said in a 2017 report.

Detained journalist Dung stressed that “there is no detailed timeline for ratification or any guarantee that Hanoi will meet their commitments” in regard to promised labor reforms, a fact also noted by the Australian Chamber of Commerce in a statement last month.

“Until the issuance of further implementing guidance by relevant agencies, the practical exercise of” the new freedom of association rights “is still pending,” the chamber’s statement said.

Labor-related reforms certainly look good on paper, but so too do many progressive and liberal policies that have been officially adopted by Vietnam but rarely put into practice, including in regard to the rule of law and freedom of speech.

Labor organizers and human rights activists, who requested anonymity, said they are taking a wait-and-see approach, though most are skeptical that the Party will ever allow unions to operate independently and freely.

Many even doubt that the EU and foreign partners will remain interested in the nitty-gritty details as they are decided next year, so long as Hanoi puts in writing the broader promise of improved freedom of association.

For starters, independent trade unions will still need to receive permission from local authorities or a ministry to operate; some, observers say, might be simply rejected if they are perceived as too unruly.

Or, as practiced in other undemocratic countries where independent unions are allowed to organize, the Party could create even more of its own unions to outcompete those not aligned with the Party.

Technical restrictions could also be applied. The government could, for instance, legislate that a high percentage of union members must agree to a strike to make it legal. The percentage bar might be set so high that it becomes virtually impossible to organize industrial action.

It could also rule that independent trade unions aren’t allowed to petition ministers and ensure they are denied a seat at the National Wage Council, a yearly gathering of government officials, employers and VGCL representatives that decides on minimum wage increases.

Moreover, the government could deem that an energetic independent union leader is in violation of the Criminal Code, including vague provisions that bar “conducting anti-state propaganda” or “abusing freedom and democracy to infringe upon the interests of the state”, and simply arrest them.

So far, the Party has merely given its word to allow for more labor rights but, as past broken promises show, that doesn’t necessarily mean they will come to genuine fruition.