Vietnam

LABOR REFORM IN VIETNAM: IN LINE WITH THE MODERN MARKETPLACE?

By Hang Nguyen, Baker & McKenzie, Vietnam

Vietnam’s labor and employment laws continue to play a crucial role in the creation of a sound legal system intended to attract foreign direct investment (FDI) and contribute to the country’s economic development and social stability. However, there remains room for further improvement in light of mounting domestic challenges and external pressures to comply with international standards.

As features of a new industrial relations regime have emerged, lawmakers have publicly acknowledged the need to update labor and employment regulations from those in place since late 1980s when the economic renovation known as “doi moi” was kick-started. They have realized that conventional labor regulations once adopted to regulate labor relations in state-owned enterprises (SOEs) under a centralized economy are no longer sufficient to govern the modern workplace where workers face modern production line systems and a capitalist corporate culture brought in by foreign investors. Labor and management are no longer a one-way “collective”, instead, divergent material interests have made relations increasingly antagonistic. Demands for unionization and better employment conditions have surged and been met with work stoppages and strikes. It was in this environment that the Trade Union Law was adopted in 1990, followed by the Labor Code in 1994. These two laws aimed to bring rules and orders to a new working class operating in a modern, foreign influenced workplace.

The Trade Union Law and Labor Code have achieved some results in the nearly two decades they have been in existence, however, many challenges remain unresolved. For instance, over the past few years, outbursts of unlawful strikes have destabilized workplaces and threatened to deprive Vietnam of FDI; and loopholes and feeble enforcement of labor laws have forced workers to resort to informal ways of negotiating better terms and standards of employment. Vietnam’s central union, the Vietnam General Confederation of Labor (VGCL), has plans to increase its strength by expanding and enhancing its membership in workplaces all over the country. However, enterprise-level unions are failing to protect their members in day-to-day confrontations with management. Spontaneous industrial actions marked by “wildcat” strikes and sabotage have inflicted huge damage on employers. The government response to these outbursts has been slow and at times interpreted symbolically, thus failing to tame a fire blazing from a piece of smoldering charcoal.

In addition to concerns arising from the chaotic domestic labor front, Vietnam is facing external challenges as the country integrates into the global economy and adjusts itself in order to play by international rules. Accession to WTO in 2007 officially put Vietnam on a playing field where giants and dwarfs scramble for bites of a common pie. In order to be recognized as a market economy, Vietnam must accept and adopt the principles of a free market economy imposed on it by its large trading partners, such as the European Union and the United States. Of particular concern is whether wages and salaries are freely negotiated between workers and employers. Vietnam has also been negotiating trade agreements with various partners to create a more favorable environment for further economic development, including negotiations on the Generalized System of Preferences (GSP) with the US, Free Trade Agreement (FTA) with the EU and a recent effort on Trans-Pacific Strategic Economic Partnership Agreement with eight different countries, including the US. In all of these negotiations, Vietnam’s willingness to adopt internationally recognized labor standards and enable workers and employers to negotiate wages and employment through their own representative organizations has been a primary concern.

To date, there has been little legislative movement to formally bring international labor standards and the expectation of labor negotiations into the fold. If Vietnam accepts all workplace upheavals as a fait accompli and takes no further action, a vision of a chaotic industrial setting will set in and the image of Vietnam as a secure and lucrative place for investment will fade. Therefore, there needs to be a strident call for comprehensive reform of the labor and employment legal system and concrete action taken to influence the undergoing revision of the Labor Code and the Trade Union Law. All areas of labor and employment are under consideration, including collective bargaining, enterprise-level unionization, wage, working conditions, occupational health and safety, foreign workers etc. This is expected to be the most all-encompassing and substantive overhaul of labor relation laws and regulations in Vietnam. It is widely hoped that such an overhaul will remedy deeply rooted problems and reinvigorate Vietnam as a magnet for FDI inflows. The new Labor Code and Trade Union Law are scheduled to be adopted by the upcoming Legislature of the National Assembly starting in 2011.