V I E T N A M  U P D A T E


 April 15, 2002                                                       2002, Vol. 1



National Assembly Passes Revised Labor Code


After much debate, Vietnam’s National Assembly approved amendments to the country’s Labor Code on April 1, 2002. 


The Assembly made changes and revisions to 56 articles of the Labor Code, updating and amending existing law and clarifying points, which had been unclear in the previous regulations.


In a major shift, foreign enterprises will be allowed to directly recruit and hire staff without going through employment agencies and middlemen.


The new code also clarifies regulations on wage and salary scales, which had been the subject of some dispute under existing Circular 11. 


Private and foreign-invested enterprises are not required to follow State Enterprise wage scale systems under the new Code.  However they are required to establish and make public a salary scale system, which must be registered with the Labor Department.


Other significant amendments include the following:


·         Article 17.  Severance allowance will now be extended to employees who have worked at the company for less than 12 months.  Maximum severance will also be capped at 10 months salary.


·         Article 27.  Temporary labor contracts will become permanent upon expiration if no new contract is signed.  Also a given employee can be signed on a maximum of two temporary contracts before being signed to a permanent contract. 


·         Article 41.  An employer who illegally terminates an employee under labor contract shall be required to pay compensation of at least two months salary, in addition to accepting the worker back with pay for time lost.


·         Article 69.  Annual overtime limit of 200 hours remains in force.  However total overtime may be allowed to reach 300 hours in certain “special cases.”  (These remain to be defined, but are understood to apply to the garment and footwear industries.)


·         Article 85.  Employers shall be allowed to dismiss any employee who is absent without reason for five days in a month.


·         Article 140.  A national unemployment insurance system to be administered by the government under a forthcoming Social Insurance Law is outlined.


·         Article 166.  More disputes are allowed to proceed directly to Court for expedited settlement; this includes disputes involving labor contracts and collective labor agreements, which the Court is now empowered to rule on.


Note:  The new Labor Code will require additional implementing regulations to take effect and none of the new amendments will come into force until January 1, 2003.



Report on Child Labor in Vietnam


The World Bank recently published a new report on Child Labor in Vietnam.


Two researchers, one from Dartmouth and one from the World Bank, conducted research in the Mekong Delta and other rural provinces and found that the use of child labor had declined in Vietnam through the 1990s. 


Their findings suggest that higher standards of living allow parents of children in rural areas to send them to school, rather than keeping them home to work on the farm or in the family business.


For more details, please see Child Labor in Transition in Vietnam by Eric Edmunds and Carrie Turk. [http://www.worldbank.org.vn/data_pub/reports/report002.htm#r33]


The full report is available through the following link:  Full report PDF. [http://www.worldbank.org.vn/data_pub/reports/report002.htm]


These and other reports and resources are available from the Global Standards web site at http://www.global-standards.com/Links.htm.



US-VN Garment and Textile Agreement to be Negotiated


Special Textile Negotiator David Spooner led a delegation from the Office of the US Trade Representative (USTR), who visited Vietnam in late February to open talks with Vietnamese officials about drafting a Garment and Textile Agreement.  


Garments and textiles were specifically excluded from the Bilateral Trade Agreement between the US and Vietnam, making them subject to quotas, which are to be negotiated in a separate Agreement. 


During their visit, negotiators from USTR stressed the importance of getting talks underway to forestall the possibility of the US could put garment categories on "call" or impose unilateral restrictions on Vietnamese exports to the US. 


They also raised the prospect that labor conditions could be attached as a benchmark for granting increased quotas.  Such a system was incorporated into Cambodia's Garment and Textile Agreement with the US, granting an increase in quota, subject to an annual review by the ILO certifying the country had made progress on labor standards.  However the agreement has been the subject of controversy, with the Cambodian government claiming it earned extra quota allocation by meeting this goal, but the US rejecting this claim. 


The looming importance of labor issues was further highlighted by the visit of Congressman George Miller (Democrat-- California) to Vietnam and Cambodia in March.  The congressman spent several days in Phnom Penh and Hanoi meeting with the Ministry of Labor, the ILO and local business and labor groups to discuss labor standards and "parallel issues" between the two countries.


Some analysts had expected the Bush administration to distance itself from the linkage of trade and labor issues advocated by Democrats under Clinton, but this conventional wisdom now appears in doubt.  With domestic producers facing growing pressure from NAFTA, WTO and various free-trade initiatives, as well as new quota concessions recently awarded to Pakistan in return for its assistance in the war against terror, Republican lawmakers have already begun lobbying to limit Vietnamese garment exports.


Vietnam could be particularly vulnerable to premature quota limits, since these quotas are normally based on historic performance.  With the prohibitively high tariffs applied to Vietnam prior to this year, such historic comparisons would neither be fair nor realistic and could stunt development of the local garment industry. 


Overall garment exports from Vietnam to the US in January 2002 rose approximately 27% from a year ago.  However, USTR will likely focus on particular categories where the percentage increase, starting from a very low base, may appear especially high.


While both the timetable and results of the talks between Vietnam and USTR remain clouded, it looks as if, once again, domestic political considerations could weigh heavily on the outcome.



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