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The Vietnam case: workers versus the Global supply chain.
Subject:
Employment services (Management)
Logistics (Analysis)
Logistics (Management)
Author:
Ngoctran, Angie
Pub Date:
06/22/2011
Publication:
Name: Harvard International Review Publisher: Harvard International Relations Council, Inc. Audience: Academic Format: Magazine/Journal Subject: Business; Economics; Law; Political science Copyright: COPYRIGHT 2011 Harvard International Relations Council, Inc. ISSN: 0739-1854
Issue:
Date: Summer, 2011 Source Volume: 33 Source Issue: 2
Topic:
Event Code: 200 Management dynamics Computer Subject: Company business management
Product:
Product Code: 7360000 Personnel Supply Services; 7361000 Employment Agencies NAICS Code: 5613 Employment Services; 56131 Employment Placement Agencies SIC Code: 7361 Employment agencies
Geographic:
Geographic Scope: Vietnam Geographic Code: 9VIET Vietnam

Accession Number:
261641040
Full Text:
Vietnam--a socialist country integrating into the global capitalist system--can serve as a useful case study on labor and globalization because it reflects larger global trends. These include domestic and international labor migration with the increased mobility of capital, and the complex role of the government and recruitment companies in all types of migration. Workers--both inside and outside of Vietnam--have used their agency to fight for their rights and human dignity in this environment. Human rights advocates have forced open a small space in the multi-level global supply chain for the establishment of codes of conduct toward workers, and ethical consumers and investors try to speak and act on behalf of migrant workers worldwide. This article will discuss the causes and implications of these changes in Vietnam, as well as how they relate to a broader global framework of labor.

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Domestic Migration and Workers' Agency

Domestic labor migration is no longer a one-way workers' movement from rural to urban areas to work in manufacturing hubs. It also includes workers who return to their hometowns, villages, or provinces, as mobile global capital expands and sets up factories in poor provinces to take advantage of even lower wages. This circular rural-urban-rural labor migration has occurred in Vietnam, China, and other countries.

In Vietnam, as of 2009, about 47.7 million people worked in all economic sectors, while 6.85 million worked in manufacturing, second only to agriculture and forestry Most manufacturing workers were in textile/apparel and leather shoe factories in export processing zones (EPZs) and industrial zones (IZs); they earned very low wages, on average less than US$100 per month. Over 60 percent of the workforce in 140 EPZs and IZs nationwide are young females, around 20-35 years old, from poor provinces in the northern and central regions of Vietnam. Most domestic migrants found work through both informal channels (families and friends) and a formal recruitment process in which they had to pay (mostly state-owned) recruitment companies around US$50 to secure their jobs. Most foreign-owned suppliers are from Taiwan, Japan, South Korea, and Hong Kong. Recent trends show that many suppliers have established factories in rural areas to get access to even cheaper labor in provinces such as Tra Vinh, Long An, Thanh Hoa, and Quang Ngai, far from the global cities such as Ho Chi Minh City and Hanoi, which now have developed labor shortages.

However, workers are not victims: they have agency and have been rising up against both management and governments to fight for their rights and human dignity. This is not exclusive to Vietnam: there have been protests in China, Bangladesh, Cambodia, Thailand, and Mexico. In each country, workers develop strategies and tactics to fight for their rights and dignity that reflect the political and economic conditions of the factories' locations. In Vietnam, workers have developed strategies and tactics that reflect Vietnam's socialist past and market-oriented present.

The common reasons for strikes in those countries have concerned labor rights (pay, work hours, working conditions, labor contracts, overtime compensation, daily productivity targets, meals, fines as disciplinary action, apprenticeship period) and non-wage benefits (social security, health and unemployment insurance, paid leaves, meals at work). The Vietnamese workers invoked the bonus and benefits they used to receive under the socialist system, such as the 13 th month pay (usually given around the Vietnamese Lunar New Year), and demanded to be treated with dignity and respect. They have also exposed physical and verbal abuses by foreign experts, managers, and owners.

The minimum wage strike waves that started in the middle of the past decade galvanized the collective action of hundreds of thousands of workers in EPZs and IZs in Ho Chi Minh City In 2006, workers in three foreign-owned shoe factories in a Ho Chi Minh City export processing zone sparked a series of minimum wage strikes. Up until then, the minimum wage in the foreign direct investment (FDI) sector had been frozen for seven years (1999-2005) at less than US$40 per month. While on the surface these strikes were staged against FDI owners, in reality, by demanding higher minimum wages, these strikes were actually against the state policy. In 2007, workers demanded raises in wages to compensate for spiralling inflation, which led to the Prime Minister's decision to adjust wages for inflation, effective in January 2008. Again, in 2008, workers went on strike to expose FDI factories that refused to implement the inflation-adjustment decision or did not implement the adjustment properly.

But the minimum wage strike waves have had some larger implications for workers in all sectors in Vietnam. First, higher minimum wages are not only adjusted for inflation, but also tied to correspondingly higher social benefits, such as social insurance and health benefits. The 2006 minimum wage strike resulted in the establishment of an automatic annual increase in the minimum wage that adjusts for inflation: every November, the state announces the minimum wage increases (for both FDI and domestic sectors) to take effect in January of the following year. Second, the minimum wage strikes have forced the state to bridge the disparity between the minimum wage levels in the FDI sector and those in the state and domestic private sectors (which are lower than the FDI rates), which is expected to reach parity by 2012. Moreover, as foreign-invested factories expanded to poor provinces outside of big cities to take advantage of even lower minimum wage requirements, strikes spread beyond Ho Chi Minh City and Hanoi. In short, workers' agency in Vietnam shows that when workers took ownership of their rights and responsibilities, they effectively secured positive responses from the labor newspapers, the labor unions, and the Ministry of Labor.

Labor Migration, Newspapers, Brokerage States

International labor migration has become another option for workers, in which the nation states play a complex and active role. In socialist Vietnam, the state has become a "labor brokerage state," sending hundreds of thousands of workers overseas, and benefiting from these workers who must pay to work outside of Vietnam. This global practice of inter-governmental agreements to send and receive migrant workers is seen in many countries: Vietnam, the Philippines, Indonesia, and even the United States, such as the 1942-1964 Bracero Program that sent millions of Mexican men to the United States to work temporary jobs in agriculture. While the duration of the contracts varied in these cases, they shared some common features: management controlled and considered workers as disposable commodities and sent them home at the end of their contracts, paying no attention to their well-being and working conditions. Both home (labor sending) and host (labor receiving) governments have strong shared interests with management to sustain transnational labor migration. In Vietnam, the state meets host countries' demands for cheap, temporary, and compliant workers who will fulfill the terms of the contract and return to Vietnam at the end of their contracts. While some host countries do care for workers' well-being, overseas migrant workers do not have the right to organize and most are not represented by labor unions.

However, the Vietnamese case is different from others due to the socialist pro-labor legacy and the inherent contradictions in the state's self-proclaimed "market economy with socialist orientation.".The media, especially the labor newspapers, while well ensconced within the state and labor union structures, have used their connections and knowledge within this system to expose migrant labor violations perpetrated by capital (both foreign and domestic) and some state recruitment companies. As early as 2004, they alerted the public to fraudulent activities and irresponsible behavior of many state recruitment compa nies when state bureaucracies and people's committees had turned a blind eye. But the media also faces constraints because they are part of the state structure, which can compromise and censor journalists' reportage. At the same time, while the Vietnamese General Confederation of Labor (Vietnam's only legal labor union) has made considerable efforts to overcome their structural and capacity weaknesses to represent workers within Vietnam's borders, they have played no role in representing and protecting Vietnamese migrant workers overseas thus far.

Exporting labor is not new in Vietnam. Since 2000, the Vietnamese state has been brokering its workers through inter-governmental agreements: over 500,000 Vietnamese workers had paid to work in over 40 countries. When still a part of the former Soviet Bloc from 1980 until its disintegration in 1989, the Vietnamese state exported over 250,000 Vietnamese workers to Eastern Europe, primarily to the former Soviet Union, in order to repay the debts and also benefit from their remittances to relatives back home. After the fall of the former Soviet Bloc, the Vietnamese state redirected exports and monopolized the authority to control and regulate workers to work in other countries. In 2000, Prime Minister Phan Van Khai echoed support for this strategy, saying that, "Exporting labor is a very important and major strategy because it helps solve the unemployment problem, increase foreign exchange for the country We must consider labor export as an important and long-term strategy ..."

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Export labor has expanded tremendously since Vietnam joined the World Trade Organization in 2007. The state-sanctioned recruitment companies--most owned by state ministries, state corporations, local state governments, and social-political mass organizations, such as the labor unions--grew to 165 companies as of 2011. Vietnamese migrant workers had been sent to work in over 40 countries; topping the list are Taiwan, Japan, South Korea, and Malaysia. Nations of the Middle East, including United Arab Emirates, Saudi Arabia, Bahrain, and Qatar, follow, as well as some countries in the former Soviet Bloc.

Who Benefits from Export Labor?

The Vietnamese state and their recruitment companies have benefited most from Vietnamese labor migration: both domestic and international. Over 80% of total costs charged to Vietnamese migrants working overseas goes to processing fees accumulated by recruitment companies (in both home and host countries), interests on loans disbursed by state banks, and fees to send remittances home. The economy in general benefits from labor remittances to about US$1.7 billion (annual average between 2005 and 2008) from these fees and from money sent home.

The Vietnamese state has used labor export as a social policy to reduce poverty, but the results are mixed at best. In 2009, the government started a 12-year poverty reduction campaign (for the period between 2009 and 2020) in the 62 poorest rural districts in the northern and central regions by encouraging ethnic minorities (53 groups throughout Vietnam) to work abroad. They offered low-interest loans from the state-owned banks and other subsidies on vocational training, room and board while studying, free health check-ups, and passports. Since 2009, about 4,500 people of different ethnic minorities in these poor districts have left to work overseas; most can only afford to go to Malaysia for low-skilled and low-paid jobs (on average about less than US$300 per month), not Korea and Japan, which require higher fees, more education, and language skills, and in turn pay higher wages. A strategy many ethnic workers use is to pool their wages and take turns sending remittances home to repay the debts they incurred from borrowing to work in Malaysia. While this prompt repayment saves them some interest costs, long-term benefits for these workers and their families remain to be seen. In reality, parents of many ethnic workers are already in debt--mostly due to poor health, illnesses, and natural disasters--so as soon as they receive remittances from their sons and daughters, they must repay these existing debts, and have very little left to invest in any productive ventures. The vicious cycle of poverty and indebtedness thus continues for these people, who have very little financial cushion for any mishap. Preliminary evidence shows that this process exacerbates the gap between the rich and the poor in local communities and villages and provides no alternatives to escape poverty.

Moreover, there are a lot of uncertainties and unforeseen risks in host countries. In Malaysia, the most common destination for the poorest migrant workers, these adversities include not knowing where they are being sent to work, since they are vulnerable at the hands of Malaysian outsourcing companies. They have also included inadequate official response from Vietnamese recruitment companies and embassy officials to their concerns and passports being impounded by their bosses. And of course, there exist the constant fears of gang violence and robbery. Most rely on bonding and social networking with fellow Vietnamese migrants to support each other.

While both female and male Vietnamese workers have to pay the same fees to the recruitment and outsourcing companies, women face more demeaning entry regulations and fears while they work in Malaysia, consistent with other scholars' findings. Upon arrival in Malaysia, most women workers had to undergo blood and urine tests to determine whether they were pregnant. Moreover, there were cases of abortion in which these women workers went to back-alley doctors to abort their pregnancies with poor safety conditions.

Overall, the Vietnamese migrant workers in Malaysia have responded to those uncertainties and forms of exploitation on the factory floor in creative ways. They slowed down the speed-up process by saving the completed products for another day. They protested to demand safety in the hostels. They even reached out to religious support groups, Malaysian legal assistance, labor unions, and nongovernmental organizations for help. However, these types of assistance are not systemic, and therefore do not spread the benefits to all Vietnamese migrant workers there.

Global Supply Chain and Codes of Conduct

Workers in Vietnam and other countries that manufacture for the world operate in the multi-level global supply chain. Understanding how this global production works would reveal the responsibilities of all stakeholders and what we can do as ethical consumers and investors to ensure decent working and living conditions for workers worldwide.

As corporate social responsibility initiatives have spread globally the Vietnam case can shed light on its practices and the need to reclaim and restore the intent of the codes of conduct to protect all workers and the environment worldwide. Most corporate social responsibility studies, including International Labor Organization (ILO)-sponsored ones like Better Work Vietnam, do not analyze the multi-level subcontracting in the global supply chain, which is key to understanding the effects of uneven power relations in this chain. Multinationals (MNCs) or brands dictate all the terms of production and income distribution (including piece-rates to pay workers) and transfer labor responsibilities to their suppliers, who oversee manufacturing in developing countries like Vietnam. Most brands promise consumers that they will terminate contracts with suppliers who fail to enforce the codes of conduct (CoCs) which are developed from the core ILO conventions that the MNCs promise on their websites. But the brands' actions have never been transparent for public scrutiny: it is very difficult to monitor the relationships between the brands and their suppliers. Even when some suppliers in Vietnam are found to be non-compliant, there is no concrete action from the brands to uphold their social responsibilities to workers as promised to their consumers.

At the top of the chain are the corporate buyers/brands (MNCs) that place orders with their suppliers (mostly owned and managed by Taiwanese and South Koreans in Vietnam), who subcontract to small and medium-sized Vietnamese factories to meet just-in-time delivery schedules. These Vietnamese factories are legal in that they register with the Vietnamese government and pay taxes, but they may not be licensed directly by the foreign brands that produce for them (therefore brand-unlicensed). Their existence may be unknown to the MNCs, or the MNCs may prefer to close their eyes to their existence. As such, they are not subjected to codes of conduct scrutiny and are thus not monitored.

With the MNCs dictating all the terms, their suppliers and domestic subcontractors compete fiercely to drive down the piece rates in order to win contracts in this race to the bottom. Ultimately, the brands win: they secure the lowest contract prices and fastest turnaround delivery time. The distribution of earnings is grossly unequal. On average, for a pair of shoes for which a consumer pays US$100, a multinational corporation would pay a supplier a freight-on-board price of US$16, out of which US$5 goes towards (mostly imported) raw materials, US$2 for local management (in a domestic subcontractor), and US$2 for local labor, leaving US$7 for the supplier's remaining expenses and profit. In 2008, the brand took a massive 84 percent of the sales price, while workers received only 2 percent. Statistics for 2010 show that workers received even less: only one percent.

Moreover, in Vietnam, the brands are very savvy. They basing their subcontracted prices on a firm legal ground: the government-set minimum wages, to which they add bonuses such as perfect attendance and bus fares to go home, are not tied to long-term benefits such as social security and health and unemployment insurance. Such is the collusion of capital and the state: the state encourages investment by keeping labor costs low, and capital points to state-mandated minimum wage laws as its defense for poor wages.

Global Leverage and Ethical Dimensions

What can be done to protect migrant workers both domestically and internationally, with a good knowledge of the global supply chain structure and the interests of key stakeholders? The general public should hold MNCs and their suppliers accountable, and not allow them to pay lip service to consumers and shirk their responsibilities.

First, exertion of some existing leverage could be used to protect migrant workers worldwide. Nation states need reminders to be held accountable to a declaration that they signed in 2007: the ASEAN Declaration on the Protection and Promotion of the Rights of Migrant Workers, signed by ten heads of state, including Vietnam and Malaysia, in Cebu, the Philippines, in January 2007. This document is based on the Universal Declaration of Human Rights adopted by the General Assembly in 1948, as well as other appropriate international instruments adopted by all the ASEAN member countries to safeguard the human rights and fundamental freedoms of individuals. It clearly stipulates obligations of both sending and receiving states to promote the full potential and dignity of migrant workers in a climate of freedom, equity, and stability in accordance with the laws and regulations of ASEAN countries. As one of the general principles, it further states that for humanitarian reasons, both sending and receiving states shall "cooperate to resolve the cases of migrant workers who, through no fault of their own, have subsequently become undocumented."

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Second, empowering global labor standards, articulated in most brands' codes of conduct, can be achieved by pressuring the brands to be transparent and have concrete actions to comply with their CoCs. Specifically, ethically conscious consumers can vote with their feet if the MNCs do not make transparent the vio lations of their suppliers or continue to subcontract with the violators. Also, consumers can pressure the brands to raise the contract prices the brands pay their suppliers in order to raise wages for workers, with an understanding that the brands would receive a small reduction in their lion's share of the profits. The brands should share the monitoring costs with their suppliers and subcontractors in Vietnam, as well as the costs to fix non-compliance issues, notably working hours, overtime compensation, and occupational safety and health.

Finally, as conscious consumers and investors, people can reclaim the real intent of CSR. Investors can influence the decisions of MNCs through stockholder meetings, or pressure their investment companies to uphold labor and environmental standards. With the increasingly aging population, we can put pressure on ways in which pension plans are invested by demanding that MNCs do ethical business and uphold their CoCs. In short, simple direct action can improve the circumstances of millions of workers globally, who deserve to live enriching and meaningful lives.

ANGIE NGOCTRAN serves as a professor in the Department of Social and Behavioral Sciences and Global Studies at California State University, Monterey Bay (CSUMB).
Employment in Vietnam
Average Employed Population in State Sector by kind of Economic Activity
2009

Social Services                               28.8
Party/Membership Organization Activities      115
Recreational, Cultural & Sporting Activities  48.2
Health & Social Work                          241.4
Education & Training                          1211.5
Public Administration & Defense               1491.1
Real Estate                                   55.5
Science & Technology                          27.3
Financial Intermediation                      72.8
Transport, Storage & Communications           215.7
Hotels & Food Service                         40
Wholesale & Retail Trade; Mechanics           94.7
Construction                                  407.7
Electricity, Gas & Water Supplies             119
Manufacturing                                 561.3
Mining                                        114.5
Fishing                                       2.4
Agriculture & Forestry                        184.2

General Statistics Office of Vietnam; 2009.

Note: Table made from bar graph
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