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Jem Bendell
Adjunct Associate Professor,
Griffith Business School, Australia

Founder, Lifeworth, Switzerland

Lala Rimando
Business Editor, Newsbreak, Philippines

Tipping Frames: The Lifeworth Review of 2006
[ PDF: 2585kb | 54 pages ]

Appendices available in all PDF versions.

Competitive Openness?

As far as low-cost and low-value labour is concerned, studies have shown that Vietnam is better at attracting socially conscious investments than China because of the latter's reported frequent violations of labour standards. This is a risk that footwear industry experts have cited in explaining why international footwear companies operating in China would look for alternative production sites. 11 Vietnam's apparently stronger labour rights regime - born of its union independence and assertiveness - positions it well in this contest. 12

With six percent the population of China's, Vietnam is more dependent on the outside world, both politically and economically. Therefore, Vietnamese leaders are more likely to be sensitive to prevailing international labour rights norms than the Chinese. Worker's rights issues were one of the contentious items on Vietnam's quest for a WTO membership. But, with the issue cleared, Vietnam's accession to the trade body is expected by some to facilitate trade and capital flows, further pushing its competitiveness.

According to a US Congress-commissioned 2002 report, the strong anti-sweatshop movement, plus Vietnam's quest to clinch the good graces of the US as it was working for WTO accreditation, pushed the government and the trade unions to engage in dialogues on meeting international norms for labour. 13 In the process, Vietnam's labour standards were upgraded, an unusual example of a potential contradiction to the tendency of developing countries to participate in a race to the bottom of social and environmental standards.

In fact, according to the report, the Vietnamese government and trade union openly urged their factories to apply for SA8000, a certification of labour standards recognized by Western clients. The Chinese Government, on the other hand, has always considered any reference to its labour standards as outside intervention in its internal affairs. Since criticisms of labour standards are subsumed under criticisms of human rights violations, the Chinese Government has been sensitive to and adamant against any mention of this issue. 14

For a variety of structural and historical reasons, the Vietnamese Communist Party has not taken on the authoritarian shape of its Chinese counterpart. China's leaders are more sensitive to permitting union independence since it had to deal with the socially challenging and regime-threatening experiences like the Tiananmen protest movement in 1989. Assertiveness among China's union groups has been squelched as part of the government's crackdown against the protests. 15

However, although Vietnamese unions and labourers possess greater freedoms to advocate for workers and express grievances than their Chinese counterparts, still like in China, most rights and freedoms stem not from the law, but from the discretion of the Communist Party. In other words, labour freedoms and rights in Vietnam are still vulnerable to changes in state policy.

That is not lost to the likes of US electronics giant, Intel, which still was not deterred from taking the plunge. In fact, in November, as the US House of Representatives prepared to vote on granting Vietnam permanent normal trade relations, the final step in normalizing relations between the two countries, Intel seemingly made a statement in support of Vietnam by announcing it would increase its investments in the building of a chip assembly and testing plant in Ho Chi Minh City from US$300 million to more than US$1 billion. The deal, which will employ some 4,000 workers, represents the biggest ever US-led project,16 and was a huge and timely vote of confidence for Vietnam's long-term potential. A little more than a month later, Vietnam finally clinched its WTO membership in January 2007, the culmination of a 12-year process.

Having conducted business in such Asian countries as Malaysia and the Philippines, Intel hired a Vietnamese country manager, Phu Than, to assist in dealing with the government. In an interview with Fortune Magazine, Than shared the strategy on how Intel won over the officials by offering scholarships, training 30,000 public school teachers, and worked in close coordination with the Communist Party in testing software for its e-governance program. "It made coordination easier," Than told Fortune.17 While these are charged against budgets for the company's philanthropic projects, Intel is not reinventing the wheel. Microsoft made similar efforts when it was making inroads in China in the early 1990s, long before other multinationals were able to set up shop in the mainland.18

While it can be argued that these are mutually beneficial-the government gets the free training, software, other freebies; Intel gets the tax incentives, the permits, easy access to the bureaucrats-these highlight the fact that transnational companies, with all their resources and experiences, will also help train Vietnam's bureaucracy, which is still adjusting to the rhythm and discipline of a market-based economy. Whether the policies that emerge from this close engagement, on issues such as intellectual property protection, taxation, regulation, and development priorities, are in the citizens' longer term interests is open to debate. Weaknesses in civil society, political parties and other aspects of governance mean that that this debate may not be as open and balanced as one might hope for, especially in light of environmental concerns, which we return to below.

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11 Corporate Social Responsibility in Vietnam: The athletic shoe industry and labor issues, a proposed project in 2003 to be administered by a World Bank team, which includes Nigel Twose, Amy Luinstra,, Ziba Cranmer

12 Mark Manyin, Vietnam's Labor Rights Regime: An Assessment, for the US Congress, updated March 14, 2002,

13 Ibid

14 Ibid

15 Ibid

16 Amy Kazmin, Vietnam boosted by Intel's $1bn plan for plant, Financial Times, Nov 13, 2006

17 Clay Chandler, How Intel got Inside Vietnam, Fortune Magazine, Nov 13, 2006

18 Robert Buderi and Gregory Huang, Guanxi, the art of relationships, (Microsoft, China, and Bill Gates's Plan to Win the Road Ahead), Simon & Schuster, 2006

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