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Vietnam: Workers Strike at Nike, Adidas Footwear Factory

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In an unusual public display of displeasure, thousands of workers at a shoe factory in Vietnam’s Ho Chi Minh City are on strike for the sixth day over a social insurance law slated to kick in next year.

Though anti-government protests are rare in the country, thousands of workers gathered peacefully inside and outside of the Pou Yuen Vietnam factory, which produces footwear for Nike, Adidas, Lacoste, Converse and Reebok, Reuters reported.

Pou Yuen, employs roughly 80,000 workers and is managed by Chinese shoemaker Yue Yuen Industrial Holdings Ltd. Last April, workers at Yue Yuen in China went on strike for two weeks upon discovering the company had been underpaying its social security contribution. The work stoppage during the strike reportedly cost Yue Yuen as much as $27 million.

Under the current social insurance scheme at Vietnam’s Pou Yuen, workers receive lump-sum payments when they leave a company and the new law would mean their social insurance doesn’t get paid until retirement.

According to Firat Unlu, Asia Analyst at Verisk Maplecroft, workers prefer the current payment plan as they believe they can get a better return on investment by using the money to start a business or build a house, and some are concerned that because of corruption and mismanagement in the government, they won’t get the right payment when retirement rolls around.

“While the government has been quick to react to the strike in an attempt to control damage and minimize disruption, there are still a lack of institutional mechanisms for workers to air their grievances, such as independent trade unions,” Unlu said. “As a result, ‘wildcat’ industrial actions will continue to expose Vietnam’s important manufacturing sector to the risk of disruption to business operations and supply chains.”

The country’s Vice Minister for Labor Doan Mau Diep met with the unhappy workers on Tuesday, and the government has since said it would reconsider the proposal and address at least some of the workers’ grievances, Unlu explained.

“Any impact of the strike in Ho Chi Minh City on business supply chains is expected to be short-term as the government has already displayed a strong commitment in maintaining a stable investment and operating environment,” Unlu said.

Vietnam has always done well to quell kindling unrest under its communist government, bringing brands to bank on sourcing there as a safe bet, but the strike comes just as the country is working to position itself as Asia’s major manufacturer and entice big brands with its low-cost labor and the pending Trans-Pacific Partnership trade agreement.

But, “As the ruling Communist Party of Vietnam prepares for a leadership transition in 2016, maintaining social stability and avoiding labor unrest is more pertinent than ever,” Unlu said.

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