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The Southern India Mills’ Association

Committed to Foster the Growth of the Textile Industry

The dark side of FDI in Vietnam

Cheating and overexploitation of workers are among the myriad of negative impacts FDI has had on Vietnam.
Large corrugated metal roofs, small corrugated metal roofs and farmland.
Satellite images of Tan Vinh Hiep Commune in the southern province of Binh Duong don’t show much more, but on the earth, these pictures are worth more than the proverbial thousand words – they tell a thousand stories, and counting.
The commune stands just an hour’s drive north of Ho Chi Minh City in Tan Uyen Town, and the satellite images are typical of Vietnam’s economy in the 21st century.
The large corrugated metal roofs are those that cover factories spanning thousands of square meters. Such factories have been the core economic component of both Tan Uyen and the whole Binh Duong Province for decades. And most of these factories belong to foreign direct investment (FDI) companies.
Surrounding the factories are the small corrugated metal roofs, just over 2 meters wide, dozens of meters long, branching out from the roads and alleyways around the factories. These are the roofs of dormitories for migrant workers – the main workforce component in industrial parks across the country.
The large and the small roofs are set against the background of patches of farmland – reminders of a not-too-distant rural, agricultural past.
Huge swathes of farmland across rural Vietnam have been sacrificed to set up hundreds of industrial parks, attracting massive investments looking to exploit cheap labor made available by such sacrifices.
Oppressed workers
Truong T.A, a 22-year-old man from a coastal district in the Mekong Delta’s Soc Trang Province, is one such rural worker.
In the recruitment announcement of the South Korean garment firm that T.A had applied for, which can still be found online, the promises are alluring: Dynamic, professional working environment; Promotion opportunities for dedicated, long-term committed employees; and most importantly, full entitlement to laborer’s benefits and rights in accordance with the Labor Code.”
These were the promises with which T.A. started working for the ironing unit of E.V, a South Korean-invested garment firm in Vietnam, on April 24, 2017.
He received a monthly salary of VND4.4 million ($190) and got to sign an official one-year employment contract on July 1, 2017. However, just six months later, he was dismissed for “repeated violations over many days of failing to meet ironing productivity during pay-rise period.”
T.A was not alone. On January 22 this year, the E.V company dismissed several workers of the ironing unit, citing the same reason.
However, the workers did not accept these dismissals, arguing that they couldn’t have committed “repeated violations” since they’d never received any disciplinary notice prior to being fired.
They sued the company.
In the lawsuit filed by the workers against the company at the Tan Uyen People’s Court, all plaintiffs are migrant workers from the Mekong Delta provinces of Long An, Bac Lieu, Soc Trang and An Giang. All of them received monthly salaries of around VND4 million ($171) and lived in dormitories near the company before being fired for “repeated violation over many days of failing to meet ironing productivity.”
The workers demanded that they be paid their salaries for the remaining months of their contracts, which they argued was illegally terminated without justification.
Lee Sang S., director of the company with the self-proclaimed “professional working environment” and his legal representatives did not attend any court hearing and the company did not reply to any of the court’s summons.
In the absence of the defendant – a multinational company just 20 minutes from the courthouse, the Tan Uyen People’s Court in May and June this year ruled that E.V.’s dismissals were illegal and ordered the company to compensate the workers.
Whether the workers will get their compensation or not remains to be seen. It depends on how the judgment is executed, and whether a lengthy battle with foreign employers ensues.
The series of lawsuits against E.V are not the only ones on illegal dismissal of workers that the Tan Uyen court has received this year.
Tan Uyen, with a population of just under 200,000, has repeatedly made headlines for workers being fired illegally, the spread of illegal gambling games, a food poisoning case in a local factory with 300 victims and several cases of company owners disappearing without paying workers.
While the flow of FDI has brought to Vietnam in general and Binh Duong in particular undeniable achievements, they are accompanied by problems that have become inherent.
Conflicts, contradictions
The story of “old” workers at industrial parks being fired, a common occurrence among FDI companies, was a topic hotly debated in National Assembly meetings and in media accounts throughout July 2017.
While the labor ministry suspected that the companies “intentionally dismissed old workers,” the Dong Nai Province People’s Committee reported that “the businesses and workers agreed on the dismissals in the spirit of mutual agreement” and the Vietnam General Confederation of Labor said workers were “forced to quit their jobs due to productivity pressure and high labor standards.”
The workers, of course, have seen it differently, as oppression that ignores their legitimate right to reasonable pay and good working conditions.
In another case handled by the Tan Uyen court earlier this year, the workers claimed that their South Korean employer had demanded that they sign resignation letters instead of firing them. They refused, and took the employer to court.
However, most workers of companies in industrial zones do not have the “luxury” of taking their employers to court, steeped as they are in poverty and dependent on their salaries to feed their families. They quietly endure their employers’ unfair conditions and treatment.
Footwear firms – who foots the bill?
The last few decades of the 20th century saw state-owned companies and family businesses dominate Vietnam’s textile and footwear sectors.
However, as the 21st century dawned, the proportion of FDI companies in these sectors began skyrocketing. It was the first significant sign of the coming flow of FDI and of a new era as Vietnam opened up its economy to the world.
The turn of the century was also when Hoa, then just a 17-year-old girl, packed up her belongings and left her home in central Nghe An Province to work for a Taiwanese factory in Saigon.
Nearly two decades have passed, enough time for Hoa’s company to grow into the world’s largest footwear manufacturer, but she has never changed her job.
Having witnessed the risks in the life of a worker, she believes that only staying with a big company would keep her safe.
“As long as the factory and machinery are still here, the owner wouldn’t dare to run away; and seeing that there are lots of workers, they wouldn’t dare to play dirty,” she explained.
In just the Tan Tao Industrial Park, where Hoa works, the number of workers employed by her company has already crossed 90,000 people.