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The Fair Wear Foundation

Background Study on Laos

Basic Information on Labour Conditions and Social Auditing in the Lao Garment Industry Submitted by Philip S. Robertson Jr. email: [email protected]

The Fair Wear Foundation P.O. Box 69265

1060 CH Amsterdam The Netherlands

Tel: +31 - (0)20 - 408 42 55 Fax: +31 - (0)20 - 408 42 54

e-mail: [email protected] www.fairwear.nl

Version: January 2007

Lao Background Study – January 2007- produced with a financial contribution of the ETI-Norway

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Contents 1. Introduction...........................................................................................3 2. The Lao garment industry ....................................................................3

2.1. Areas where garments are produced............................................................... 3 2.2. Statistical data on garment production ............................................................. 4 2.3. Raw material .................................................................................................... 5 2.4. Description of types of garment production...................................................... 5 2.5. Description of the supply chain/production network ......................................... 6

3. Industrial relations and labor conditions ...............................................8 3.1. General background......................................................................................... 8 3.2. What do the unions do in this region/industry? .............................................. 11 3.3. Other groups to defend the interest of (women) workers ............................... 12 3.4. Employers ...................................................................................................... 13 3.5. Other .............................................................................................................. 13

4. The labor standards ...........................................................................15 4.1. Employment is freely chosen ......................................................................... 17 4.2. Discrimination in employment ........................................................................ 18 4.3. No Exploitation of Child Labor........................................................................ 19 4.4. Freedom of Association and the Right to Collective Bargaining..................... 21 4.5. Payment of a Living Wage ............................................................................. 23 4.6. No Excessive Working Hours......................................................................... 26 4.7. Health and Safety .......................................................................................... 27 4.8. Legally Binding Employment Relationship ..................................................... 31

5. Partner Network .................................................................................33 5.1. Lao Handicraft Group (LHG) .......................................................................... 33 5.2. Lao Women’s Union (LWU) ........................................................................... 34 5.3. Lao Federation of Trade Unions (LFTU) ........................................................ 34 5.4. Lao National Chamber of Commerce and Industry (LNCCI) .......................... 35 5.5. Lao Textile and Garment Industry Group (LTGG).......................................... 36 5.6. National University of Laos (NUOL) ............................................................... 37 5.7. International Partners..................................................................................... 37

List of Acronyms.....................................................................................38 Bibliography............................................................................................38 End Notes...............................................................................................39


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Background Study – Lao People’s Democratic Republic – January 2007 1. Introduction The Fair Wear Foundation verifies that companies that are "member of the Fair Wear Foun-dation" monitor and if necessary improve the labor conditions at the garment factories where they source garments. To be able to verify the implementation of the Code of Labor Practices, the Fair Wear Foun-dation operates in various countries where garments are being produced. In these countries, a network of partner organizations is set up. For a more detailed description of FWF's method of working, please refer to the FWF policy document "Principles and Policies", May 2002, which is posted on the FWF web site, www.fairwear.nl. This study has four different parts serving four different purposes:

-1 To give an overall context to assess the limits and possibilities to improve labor stan-dards in the companies involved. -2 To facilitate the verification process by FWF and the monitoring task of member com-panies by giving an overview of current legislation, and relevant court cases regarding the labor standards and other types of regulation concerning the labor standards. -3 Similar to 3 but then focusing on H&S laws and regulations. -4 The background study contains an inventory of the stakeholder organizations that could be asked to participate in the partner network.

This study is a working document, and parts of the background study may be updated at any time. 2. The Lao garment industry 2.1. Areas where garments are produced The primary areas of garment production in Lao PDR are based in the capital city area of Vientiane, and the major southern Lao city of Savannakhet, which is Lao PDR’s second larg-est city. Among 55 garment factories listed in one list, 6 were clearly located in Savannakhet, 1 in the northern province of Luang Namtha, and the rest in areas surrounding Vientiane, or on the major roads heading north and south out of Vientiane. This Vientiane-centric focus of the garment industry has been a historic trend, dating back at least as far as 1996, when research conducted by the Asian-American Free Labor Institute (AAFLI), AFL-CIO, found the overwhelming preponderance of Lao garment factories in the Vientiane area. This is not surprising given some of the best transport, utilities (water, electricity) and com-munication infrastructure is located in Vientiane. Moreover, Vientiane is a target area for rural to urban migrants from all over Northern Laos, ensuring consistent supplies of young, low-wage, low-cost workers seeking employment. However, with the opening of the 2nd Mekong Bridge on December 20, 2006, linking Mukdahan province in Thailand with Savannakhet province in Lao PDR, it is likely that there will be an increase in garment manufacturing in Savannakhet. Support has been provided by the ADB for creation of a Savan-Seno Special Economic Zone (SEZ), jointly developed by the Industrial Estate Authority of Thailand (IEAT) and a new Savan-Seno SEZ Authority set up by the Lao PDR. Plans focus on creation of light manufacturing in the SEZ, including


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garments and apparel. This is a core element of the ADB’s East-West Develop-ment Corridor, linking the economies of Thailand, Lao PDR, and Vietnam. 2.2. Statistical data on garment production Lao garments have been and continue to be one of the top export sectors of the economy, according to Ministry of Commerce statistics. While there are few statistics on internal con-sumption in LPDR, the relatively small population and low level of annual per capita income indicate that it can be safely surmised that the importance of the internal market for Lao gar-ments is negligible. According to statistics from the Lao Government, garment products accounted for 23.61% of Lao national exports in fiscal year 2004/2005, making them the leading export sector for the country. Total value of garment exports were $US 107.5 million. The garment sector is virtu-ally the only significant industrial manufacturing sector in the economy, and hence, one of the few sources of industrial jobs. Other major export sectors are all concerned with resource extraction including electricity generation ($US 94.6 million), gold mining ($US 83 million) and production of wood and wood products ($US 72.1 million). An undefined catch-all category of ‘other industrial goods’ accounted for $US 11.3 million in exports, mean-ing that all other industrial production combined only equaled 10% of the value of garments. The dependency of the Lao economy on garment manufacture is demonstrated by the rela-tive weakness of the export sector for agricultural goods despite the fact that the LPDR is an overwhelmingly rural, agricultural country. Exports of general ‘agricultural goods’ accounted for a total of $US 19.6 million for 2004/2005. The only other significant agricultural export sector worth noting is production of coffee, which accounted for an additional $US 9.5 million in export-earnings. In terms of garment exports broken out by region and by country, the EU market is by far the largest market for Laos, receiving a total of $US 99.74 million in this year. Netherlands was the fourth largest recipient of Lao garments in the EU, and in the world, receiving $US 8.32 million worth. In the EU, the top markets for 2004/2005 were France ($US 32.1 million), fol-lowed by England (27.1 million), Germany (17.6 million), Netherlands (8.32 million), Italy (5.06 million), Ireland (3.53 million) and Sweden (3.23 million), Spain (889,000) and Belgium (824,000). Outside the EU, the only other major market of significance was Canada, which received $US 5.14 million in garments from Laos. Since Normal Trade Relations status for the LPDR was not granted by the US until November 2004, the US remained an insignificant part of Lao garment exports, receiving only $US 505,000 worth of garments. The overwhelm-ing dependence of Laos on the EU market is further illustrated by its overall weak perform-ance in sending garments to other, more developed countries in Asia. Japan ($US 529,000) was a medium-sized market for Laos, followed by Viet Nam (206,000), but other countries where one expects low cost Lao garments might do well are barely visible in the export sta-tistics – such as Thailand (95,000), South Korea (37,000), Taiwan (22,000), and Hong Kong (65,000). The trends continued in fiscal year 2005/2006, where an examination of the latest statistics (2nd quarter 2005/2006) shows the domination of the EU as the major market for Lao gar-ments. During that quarter, the EU received $US 31.72 million worth of garments, with the leading importers being France ($US 5.8 million), Germany (3.76 million), Netherlands (3.64 million), England (1.53 million), Spain (891,000), Belgium (579,000) and Sweden (540,783). Not surprisingly, given its major position as a garment importer, the US decision to grant NTR status to Laos is already showing results, and in this quarter the US imported more garments ($US 2.46 million) than it did in the entire previous fiscal year. Canada (965,000) and Russia (520,000) are important markets in this quarter as well, while Asia remains a negligible part of Lao garment exports.


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However, interestingly, in terms of total value of exports, the garment sector was overtaken by the mineral extraction sector. During this quarter, Laos exported $US 47.28 million worth of minerals, while garments accounted for 38.79 million. This corresponds with the findings of the World Bank in its Lao Economic Monitor April 2006 issue, which finds that there was a serious rise in gold and mineral exports (esp. from first-ever exports of copper), while garment exports remained at basically the same level in years 2004 and 2005. Compared to its neighbors, the LPDR is still a very small player in global garment exports. For example, the IFC-Mekong Private Sector Development Facility estimates that the annual export of garment and textiles from Vietnam in 2005 was worth $US 5.5 billion. 2.3. Raw material There is no significant textile production industry in the LPDR, and virtually all raw materials for garments (fiber, yarn, and dyed/finished fabrics) are imported. In fiscal year 2004/2005, raw materials for garment production accounted for 10.53% of the country’s overall imports, the second largest import sector, worth slightly over $US 72 million. While the neighbors of the LPDR take few of that country’s finished garment exports, it is clear that they are the major source of raw materials for garment production in Laos. Not surprisingly, given its proximity and excellent road links to Laos, it is Thailand that provided the most raw materials in the 2nd quarter of fiscal year 2005/2006 – with a total of $US 8.57 million going cross the border. The next biggest suppliers of raw materials for garment pro-duction were Vietnam (3.0 million), People’s Republic of China (1.91 million), Taiwan (1.77 million), Hong Kong SAR (1.49 million), South Korea (1.27 million), and Malaysia (1.16 mil-lion). Other Asian countries, which sent raw materials to Laos for garment production, were (in order of size of amount sent) Indonesia, India, Japan, and Singapore. Lao Ministry of Commerce officials maintain that strict local content requirements contained in European GSP means that Lao PDR’s dependence on imported materials causes the country to lose out on some trade benefits they would otherwise receive if they produced their own raw materials.1 Officials from the Lao Ministry of Industry and Handicrafts (MIH) are active in seeking support for upgrading production of traditional loom-woven textiles and silks, which are overwhelm-ing, produced by women. These traditional materials are primarily done in micro-factories or home/village based cooperatives and producers groups. 2.4. Description of types of garment production Information on main types of garments, described by product, is difficult to obtain without a first hand-look at the factories. What is clear is that factories are divided into three general categories –foreign direct investment (FDI), joint venture, and entirely Lao owned. FDI and joint venture factories have more ready access to investment and working capital, and hence, more modern machinery. Lao owned factories, on the other hand, are order and price takers, and are more likely to have older, less sophisticated machinery. In MOLSW 1995 report, 95% of the 54 factories visited were found to be using “JUKI” brand sewing machines from Japan, and workers were responsible for making minor repairs on their machines. Without the benefit of a trip to Vientiane, the researcher was only able to uncover limited information on the types of technology and machines used in the garment production. But given the general lack of experience and skills of the Lao workforce, the re-searcher hypothesizes that the technology level would be fairly low. More research will need


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to be conducted in this area. Vision Manufacturing Company (registered in 1995 with $US 800,000 in invest-ment and located in Sisattanak district in Vientiane, employing a total of 600 per-sons of which 320 are sewers) states on its website that it produces jackets, out-wear, and a variety of pants including slack pants, cargo pants, 5 pocket pants, Bermuda shorts, and short pants. It lists among its clients the following: Celio, Diesel, Lulu Castag-nette, Sergent Major, Go Sport, Creeks, Oxbow, Caterpillar, Galerie Lafayette, and Super Sport. 2 A medium-sized factory, Vision Manufacturing Co. states on its website that its sew-ing facilities consist of 200 single needle machines, 42 double needle machines, 32 overlook machines (3/5 threads), 12 bar tacking machines, 6 waistband sewing machines, 2 eyelet button hole machines, and 8 snap button attaching machines. Cutting machines consist of Eastman Cutting Knives on 2 cutting tables, each measuring 25 m in length by 1.85 m width. The factory also boasts 12 washing machines and 4 water extractor machines. All these ma-chines are sufficient to enable the factory to produce between 100,000 and 120,000 pieces of final garments per month. This company appears to be a joint-venture company. Another factory in Vientiane, PV Garment Company, stated that it primarily exports shorts and pants, track suits, and jackets for the summer season, and ski jackets, pants, and over-alls for the winter season – primarily for markets in France, Norway, Switzerland, and Italy. The company’s website states it has 650 sewing machines and 100 special machines (no further detail provided), and a work force of 900 to 1000 persons. Output is quoted at 40,000 to 50,000 tracksuit pieces per month. All raw materials are purportedly brought in from ASEAN countries.3 The factory appears to be a 100% Lao owned factory. Trio (Laos) Export Company, a Thai-owned FDI factory, operating in Vientiane, is an excel-lent example of a FDI invested factory focusing on production of complicated, labor-intensive garments such as tracksuits. Selling to brands like Champion, Intersport, Odlo, Sport 2000, Puma, and Spyder, the Trio (Laos) factory’s website can be viewed at www.firsttrader.co.th/triolaos Lao Fashion Garment, a 230-worker factory with 141 sewing machines, produces a mix of products –polo shirts, T-shirts, jackets, and knitted items– for export to Europe. It has a total production capacity of 720,000 pieces per year, and receives its orders from overseas part-ners in Hong Kong and Thailand. All its raw materials are imported from China or Taiwan, and accounts for approximately 70% of total production costs. Given its competitive advantage is low-cost labor, UNIDO has strongly recommended that Lao PDR garment manufacturers should focus on products with high labor contents, such as complex outfits (like ski wear) and products requiring more labor intensive operations –such as knitted products, and fashion garments. 2.5. Description of the supply chain/production network Officials of the Ministry of Commerce state that there are 96 garment factories, accounting for approximately 25,000 workers, and note that Lao garment manufacturers are “progres-sively highly concentrated on low-value-added products.”4 More detailed information on own-ership was found in an analysis of the 54 members of the LTGG, foreign ownership (100% FDI) accounted for the most factories with 25 factories; locally owned (Lao ownership) facto-ries totaled 18, and joint ownership (foreign and Lao partnership) described the remaining 11 factories. The FDI factories are primarily connected to larger parent companies that own a number of different factories in different countries, and rely on their parent companies for orders, and for input materials and design to complete those orders. For the joint-venture factories, it is pri-


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http://www.firsttrader.co.th/triolaos

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marily the foreign partner that seeks and secures the orders for the factory, while the fully owned Lao factories tend to receive their orders through buyer’s agents (usually based either in Hong Kong or Bangkok), or receive sub-contract orders that overflow from the FDI factories in Lao PDR. Most of the Lao owned factories are operating on a CMT (cut, make, and trim) basis. FDI and joint venture facilities tend to have higher levels of technical and personnel re-sources, more stability resulting from greater access to dependable sources of orders, and greater ability to diversify the products they manufacture. These FDI and joint venture com-panies are more likely to be directly involved with brands that have codes of conduct that must be implemented at the factory. Lao owned factories, on the other hand, are more likely to be “order and price takers”, with less flexibility and ability to negotiate with middle-man partners/agents who broker orders and distribute them to factories to Lao PDR and its neighbors. FDI investment is led by Thai companies, which comprise 9 of the FDI enterprises. This is not surprising, because the Lao garment industry was originally established with significant Thai investment seeking to avoid Multi Fiber Agreement quotas and later, to take advantage of benefits provided by the European Union (EU) to the LPDR through the EU Generalized System of Preferences (GSP) program. From other parts of Asia, Hong Kong accounts for 4 factories, India and Japan each have 2 factories, and South Korea and Taiwan both have 1 factory. Looking at Europe, France accounts for 2 factories, and Italy, Austria (with Thai), and Germany each account for 1 factory. Finally, there is one factory that originates from the US. Joint venture factories are all either Lao-Thai, or Lao-France, and majority share-holders are the foreign partners in all but 3 of those factories. There is a sole national employer congress, the Lao National Chamber of Commerce and Industry (LNCCI), and within that organization, a garment and textile industry group, the Lao Textile and Garment Industry Group (LTGG), operates. Laos remains a small player in the global garment industry, with a garment sector that is sig-nificantly smaller than its neighbors in Thailand, Cambodia, and Vietnam. In part this is a connected to Lao PDR’s historic problem of being excluded by high tariff barriers to the US market because it did not have Normal Trading Relations (NTR) with the US. However, the US Congress passed and the President signed NTR for Laos in November 2004, which had the immediate effect of significant reducing, tariffs on Lao garment exports to the US.5 While Lao garments certainly received a boost when the USA extended Normal Trade Relations (NTR) status to the LPDR, there is no indication that the Lao garment industry is growing in importance. Furthermore, being located in a land-locked country, Lao garment manufacturers suffer from high transportation costs to move their products out to their final overseas destinations, and this contributes to competitive difficulties they face vis-à-vis their neighbors. Most Lao gar-ments are sent from either the port of Danang (Vietnam) or Bangkok (Thailand).6 The time involved in transporting garments overland to these ports also means Lao PDR requires more lead time to supply orders, hence reducing the competitiveness of Lao garment ex-ports. Statements by One-sy Boutsivongsakd, Vice-President of the LTGG, indicate that Lao PDR’s garment industry may be facing deleterious effects as a result of the phase-out of the MFA, which has eliminated quota as an issue in sourcing. In an interview with Voice of America Lao service, Vice-President One-sy stated that pre-NTR exports to the US for year 2004 ac-counted for $US 2.6 million. After NTR was granted by the US in February 2005, Lao gar-ment exports to the US increased by only $1.2 million, totaling $3.6 million. He added that Lao PDR has difficulty competing with PR China, Cambodia and Vietnam, whose garment


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export industries are more established in the US market, and whose productivity levels are higher. Vice-President One-sy called for extension of General System of Preferences (GSP) benefits by the US to Lao PDR to assist the garment sec-tor.7 In terms of social responsibility, there still appears to be significant room for more activity. In 2001, SA-8000 listed only one factory in the Lao PDR as having fulfilled its standard and successfully becoming certified –Endeavour Embroidery.8 However, one area of potential interest that could make Lao PDR an important niche market is its strong traditional handicraft sector, with high-end silk production and ornate and de-tailed stitching. However, much of the production of these textiles, and domestic production of silks and cottons that are used as raw materials, is still based in the informal or home-based sector. Research by UNIDO (cited by ILO, 2003) estimates that the handicraft sector creates employment for between 30,000 to 40,000 persons, with traditional textile weaving and production of clothes from those textiles comprising about 50% of that total. There are three primary types of companies in the handicraft textile/clothing sector identified by UNIDO and the Ministry of Industry and Handicrafts (MIH). At the top end are several silk companies producing specialty clothes (like silk wedding dresses) for export to North America, Europe and Thailand. In the mid-range, another 20 or so factories were identified producing high quality silks for sale in Vientiane, and into SE and East Asia. Finally, at the lower end, the MIH identified over 24,000 small and medium sized production units making handicrafts, and estimated approximately 83,000 workers in this sector. There are no indications that the local garment industry sub-contracts production to any other countries. If anything, Lao PDR could be expected to benefit from efforts in Thailand to lower garment-manufacturing costs through sub-contracting. However, more research will have to be done to determine whether Thai sub-contracting of production from Bangkok and its in-dustrial suburbs to lower-cost, rural NE Thai factories has created cross-border subcontract-ing links as well. 3. Industrial relations and labor conditions 3.1. General background Numerous organizations, ranging from the LTGG to UNIDO, have found that the core com-petitive advantage of Lao PDR is low labor costs. UNIDO noted that nominal wage costs are “among the lowest in the region, and in the world.”9 LPDR Ministry of Commerce officials state: “wages are relatively low” because “workers’ productivity is also low, due to a lack of proper skills training and development.”10 As noted by the MOC, questions of productivity plague the Lao PDR garment sector, especially in comparison to more productive neighbor-ing countries like PR China, Vietnam, and Thailand. UNIDO unequivocally recommends that successfully rectifying this low productivity problem is the key to medium-term success for the Lao garment industry. They state “An appropriate strategy for the Lao PDR…is based on its comparative advantage of lower costs of la-bor…This comparative advantage has to be translated into a competitive advantage by high productivity leading to lowered costs per produced unit.”11 Given the low skills base of work-ers, limited investment funds of the factories, and general lack of budget and capacity among Lao Government authorities to upgrade skills, it is hard to see how such a productivity in-crease can be achieved. Therefore, it is likely that a concerted low-wage, low-cost strategy will continue to be Lao PDR’s sole strength – with predictable deleterious effects for greater empowerment of workers, and payment of a something approximating a living wage.


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In 2003, the ILO estimated there were approximately 7059 union members in enterprise level unions in garment factories out of a total of 22,000 workers. The vast majority of the work force is from rural areas, and many are first-generation migrants to the cities, with no prior experience working in factories. Rural to urban migration continues to increase in Lao PDR, especially among youth, reflecting the lack of cash employment in rural areas and traditional cultural practices of children seeking income to support elderly parents and younger siblings. The ILO found that approximately 87% of the garment workers are women, and many live in dormitory facili-ties provided by garment companies. The World Bank, working with the Lao Women’s Union, confirms similar figures, noting that 85% of workers in formal garment and textile sector em-ployment are women. Researchers have consistently found that workers in the garment fac-tories are largely ignorant of their rights contained in the Labor Law. Formal sector, low-skilled yet salaried employment remains difficult to find in Lao PDR. Part of this reflects the competition for such positions. Most employment remains in the agricul-tural sector, is seasonal, and offers limited cash earnings, especially for youth. The ILO found unemployment rates of 4.6% for men and 5.6% for women, but more tellingly, notes that “Most people of working age in the Lao PDR cannot afford the luxury of looking for work…those without employment are often under pressure to accept whatever job is avail-able in order to eke out a living…Many workers are underemployed…there are indications that unemployment rates are still highest among…youth in urban areas…”12 The Lao Federation of Trade Unions (LFTU) is the only recognized trade union body in the country. Organizing trade union bodies outside the umbrella of the LFTU is illegal. There is no specific union federation or body for garment workers. The LFTU does not hide its status as part of the ruling party system. At a regional meeting on OSH issues held by the Asia Monitor Resource Centre (AMRC) in November 2000, the LFTU representative said that the LFTU is “a mass organization of the Lao People’s Democratic system” and that it “has the duty to monitor and promote the implementation of the policies of the party as well as the constitution and laws…”13 The LFTU President has publicly said the organization is “under the Party’s leadership” and operates according to LPRP policy.14 The President and two Vice-Presidents are accorded status equal to a government Minister and Vice-Minister, respectively, and the government pays the LFTU Presidium and top officers of the union.

The role of the LFTU is actually mandated in the Constitution. In Article 7, the Constitution sets forth that: “…the Lao Federation of Trade Unions….and other social organizations are the organs to unite and mobilize all strata of the multi-ethnic people for taking part in the tasks of national defense and construction; develop the rights to mastership of the people and protect the legitimate rights and interests of members of their respective organizations.” Yet in a pattern, which also appears in the labor law, rights, which are extended in one Con-stitutional article, are quickly restricted by other sections of the document. Constitution Arti-cle 10, which asserts that all organizations and citizens “must function within the bounds of the Constitution and laws.” On the face of it, this is not a surprising statement – until one realizes that nowhere in the Constitution is the superiority of the Constitution over laws as-serted. Without a mechanism (other than the 99 member National Assembly, which remains a rubber stamp body controlled by the LPRP), which could rule on the constitutionality of laws, the government is free to implement restrictive laws, as it likes. A survey by the ILO found that among 53 member factories of the LTGG, a total of 22 facto-ries had a functioning trade union15 chapter of the LFTU, while 16 factories had a lesser level presence of a LFTU representative, and 15 factories had no union whatsoever. Having a lesser level presence of a LFTU representative means that there is someone who the LFTU had designated as the equivalent of a contact person at the factory, but there is no function-


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ing union committee and really no union activities. Basically it is a precursor situation to organizing a full LFTU unit. Analyzed by type of ownership of the fac-tory, the ILO researchers found that unions existed in 41.7% of the foreign owned (foreign direct investment) factories, 63.6% of the joint venture (foreign-Lao own-ership) factories, and 27.8% of the Lao owned factories. Local LFTU units in fac-tories that actually collect union dues usually collect 500 Kip per month. The relative weak-ness in the LFTU’s presence in factories occurs despite the fact that the law is clearly on the side of the workers to organize a union if they so desire (see information about Article 11 of the Labor Law in the next section of the report.) The ILO indicated that there were two primary methods that appeared to be used by the LFTU to establish union presence. In the first method, LFTU district staff organized workers by encouraging them to support the establishment of a union in the enterprise where they worked, and then employer agreed to recognize the union. The second method involved the LFTU engaging with the employer directly – and persuading the employer that complying with labor law meant a union needed to be established. There may be some connection be-tween the willingness of garment factories (particularly larger ones, producing for brands with codes of conduct) to agree to a union because the factory wishes to comply with Article 11 of the Labor Law because most codes of conduct demand the factory must follow all aspects of the labor law. More research needs to be done to assess whether this linkage effectively exists. In the first method, leaders of the newly established union were more likely to be elected by the workers, whereas the second method often resulted in new leaders being ap-pointed by factory management and/or the LFTU district office.

According to LFTU representatives speaking to international forums and in discussions with international labor organizations, the LFTU’s membership is between 77,000 and 80,000 workers.16 Yet the LFTU President stated to the 7th LPRP Congress that the country has 41,000 workers with regular salary, social security, and welfare. The annual 2003 report given to the ILO by the LFTU states the membership as 91,386 (see section 3.4 for details). The fact that there are such wide discrepancies in quoting membership numbers raises sus-picions about the reliability of the LFTU’s membership numbers. Most observers believe that the majority of LFTU membership is composed of civil servants (who ironically are not cov-ered by the 1994 labor law) and state enterprise employees, with some representation at private sector factories. The LFTU consistently maintains that dues collection does take place, supplementing government funding. At this time, the LFTU is still not able to effectively initiate and sustain efforts to reach collec-tive bargaining agreement with employers, leaving workers as ‘wage-takers’ and employers as unilateral ‘wage-makers.’ The LFTU does not have specific activities related to wage ne-gotiations at the factory level, reflecting its weakness in collective bargaining. This weakness is a natural result of the LFTU’s legacy as a Government controlled union in a top-down Government dictated labor relations system. The result is high-levels of worker turnover at factories as workers constantly seek better wages and working conditions. Rather than fight for better wages and conditions at the fac-tory where they work, the workers seek positions at other factories that provide better salary and benefits. In terms of local union leadership of the LFTU, research by the ILO found that many local LFTU leaders in the factories were persons occupying either supervisory or management level positions. Each of these local LFTU leaders is elected for a period of five years, though some were selected and appointed to the position. These campaigns for local union position are often non-competitive, since leaders receive support from the LPRP and/or LPRP cad-res. An example of union leadership found at Lao Garment factory was composed of the personnel manager, the QC supervisor, the nurse in the factory, the supervisor of the pack-


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ing section, and the head of the janitorial section. This may help explain the ob-servation the LFTU made to the ILO that the leaders of the enterprise unions in big foreign-owned garment factories (where management was more involved in setting up the union) did not want the LFTU’s help –presumably because the management did not want them communicating too closely with the wider union movement. In the course of an audit, serious assessment will have to be undertaken on the extent to which such local unions, when they have leadership that is clearly beholden to management, are truly representative of workers’ interests. The ILO also found that there is little or no communication between the various enterprise level unions in the garment sector – meaning communications are not occurring horizontally, among enterprise union members and leaders from different factories. Rather the communi-cations, which do take place, appears to be more vertical in nature, i.e. the enterprise union discussing matters with LFTU district level staff. The efficacy of the LFTU in representing workers has been recently publicly questioned in an exchange among Parliamentarians in the National Assembly. MP Singkham Khongsavan raised the case of a woman terminated from her job without compensation soon after giving birth. This is a clear violation of Labor Law article 17, which prohibits termination of a woman employee “having given birth to a child within the last 9 months.”17 MP Singkham reported that the LFTU told the woman they could do nothing to help her case, and continued her criticism by stating she believes that labor representatives in many companies are under the control of employers.18 However, the LFTU reported in its 2003 annual report that the organization had played a role in settling a total of 70 industrial disputes which were brought to its attention, resulting in a total of 2,030,245,596 kip in fines against employers and compensation to workers.19 There-fore, in some cases, it appears that the Labor Protection Department of the LFTU is able to raise and resolve individual and joint cases of grievances brought by workers. In research done by the consultant in the past that involved conversations with LFTU representatives, the effort to represent workers in resolving grievances was given prominence. The LFTU con-tinually raised its role as an organization to build understanding between workers and em-ployers, and mediate when conflicts arise. LFTU official Outhay Inthathirath of the Interna-tional Relationship Department explained that the LFTU “looks at both the employees and the employers and stands in between them so it can mediate between them” and in this way acts as an “umpire” in the Lao PDR industrial relations system. This reflects the LFTU’s dual role in the labor system – on one hand, serving as the representative and agent of the work-ers, and on the other hand, as the representative of the Government and the LPRP in moni-toring and controlling workers.20 If the LFTU is present in the factory, it is usually involved in encouraging consultation and conciliation between the worker(s) and employer. However, if conciliation is not successful, and LFTU efforts to mediate do not succeed, then ultimately the LFTU must forward the dis-pute to the MOLSW for further efforts to seek a resolution. 3.2. What do the unions do in this region/industry? According to article 11 of the Labor Law, “A trade union should be established in all labor units in accordance with specific regulations of the sectors concerned. Where there is no trade union, workers’ representatives shall be established.” While the actual language of the law makes establishment of unions in enterprises voluntary, this provision is interpreted by representatives of the LFTU and MOLSW as a requirement, albeit one that they cannot ef-fectively enforce. Specifically, in the National Assembly debate reported in the Vientiane Times on December 27, 2006, the MOLSW authorities decried the fact that there were no penalties provided in the Labor Law for establishments, which obstruct the establishment of a


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labor union. Moreover, when questioned what they were prepared to do to rem-edy this situation, the MOLSW representative shied away from amending the law, insisting that such an action might scare off foreign investors. Instead the MOLSW representative stated an intention to apply an unspecified promotional approach to try and convince employers about the benefits of having a labor un-ion in the factory. Specific duties of the union established under article 11 which fall under the responsibility of the trade unions including the following: “Trade unions or workers’ representatives shall be responsible within their labor unit for promoting solidarity, training and mobilization of workers with regard to labor discipline; work performance according to production plans established by the labor unit; presentation of any claims regarding compliance with labor regulations and contracts of employment by the employer; participation in the settlement of labor disputes; and negotiations with the employer on matters relating to salaries, hours of work, rest peri-ods, working conditions, and the social security system provided for under laws and regula-tions.” No further clarification on what is involved in these duties, such as “mobilization…with regard to labor discipline” is provided. The LFTU unions primarily serve to receive complaints from workers, and taking action to correct them. To the extent that the LFTU is involved in checking compliance with the law, it is driven by complaints received from members. No information could be found that indicates that collective bargaining agreements have been concluded in LPDR, reflecting the fact that there is no legal basis to compel bargaining, workers remain uneducated about their rights and the role of trade unions, and garment jobs are scarce and quite prized, causing many to be frightened of getting too close to the union. Information from the ILO indicated that sev-eral FDI factories were meeting with their LFTU units in the factory on a monthly or bi-monthly basis, but indicated that wages were not on the table in those discussions. Each factory situation differs, and there does not appear to be any pattern on frequency and level of meetings between LFTU representatives at the factory level and management. No information could be found that indicates that the LFTU has conducted any sort of indus-trial action or campaigns in the garment factories. 3.3. Other groups to defend the interest of (women) workers There are no other trade union federation or organizations allowed to exist outside the LFTU. National NGOs (operated by Lao citizens) continue to be restricted, and no information was found to indicate national NGOs are working with industrial workers. The establishment and operation of international NGOs in Lao PDR is governed by the regu-lations contained in Decree 71 of the Prime Minister’s Office, issued in 1999. Under Article 15 of that Decree, operations of NGOs must be consistent with the “Lao Government’s policy guidelines in respect with the laws, regulations and fine traditions of the Lao PDR” and “op-erated within the scope and nature of activities provided by permits, agreements, memoran-dums of understanding and/or assistance projects signed by the relevant authorities of the Lao PDR.” All international NGOs must receive a permit from the Ministry of Foreign Affairs to open an office and operate. The Lao PDR government closely monitors the activities of international NGOs, and effectively uses agreements and permissions to ensure that projects conducted fit with Government policies. No information could be found that the Lao PDR Government is prepared to countenance international NGOs operating in Laos to actively defend the interests of workers. The International Labor Organization (ILO) has conducted various capacity-building pro-grams for employer organizations and trade unions using staff traveling from Bangkok to conduct these programs. The ILO currently has two ongoing projects based in Lao PDR –


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one, which focuses on human trafficking of women and children, and the other, which builds the capacity of the Lao PDR to implement a system of social secu-rity. 3.4. Employers The ILO found that the sole official employer organization for garment and textile in Laos is the Lao Textile and Garment Industry Group (LTGG), which were established in 1995. In 2003, when the ILO did their research, there were 55 members of this group of garment fac-tories, although they noted one factory had just been shuttered. Other factory lists found on the Internet indicated a similar number. The LTGG has four staff persons, and reportedly plays a role in overseeing consultations among its members on setting a sectoral minimum wage for garments and textiles. The LTGG organizes seminars, educational events, and training for its members. Funding for the LTGG is provided by a $US 1.00 levy per sewing machine on member factories, and by provision of 70% of the proceeds from issuance GSP Certificates of Origin (remitted by the Ministry of Commerce to the LTGG). The LTGG is part of the larger Lao National Chamber of Commerce and Industry (LNCCI), which is the sole national employer organization that is officially permitted by the Govern-ment. The ILO reports that approximately 50% of the LNCCI staff are seconded civil ser-vants, and that organization remains “heavily dependent upon the government organization-ally.” The ILO further noted that the “government intervened into the activities of the LNCCI through both formal and informal channels.” The LNCCI’s sources of income come primarily from Government provenance, including money provided directly by the Governments, fees collected from its organizational responsibility as the entity which issues business licenses, and finally from its receipt of 30% of the proceeds for issuance of GSP certificates of origin (issued by the Ministry of Commerce). Clearly, both the LTGG and the LNCCI are heavily dependent on the Government, and both have dual responsibilities as both a representative of employers and a quasi-government regulator with power (in the case of the LNCCI) to issue (or withhold) licenses. In this man-ner, its structure and role resembles that of the LFTU on the workers’ side, with representa-tional responsibilities to both constituents (employers) and the Government. This structure also provides the Government with a guarantee that no policies or activities shall proceed without the knowledge and at least tacit approval of the Government. According to the information found, most of the garment companies have a full administrative staff, including a human resources/personnel manager. 3.5. Other There is no formal tripartite mechanism set up through the authority of the Labor Law. Vocational training institutes have been developed in Vientiane, but there is no indication that there is any formal role of the garment industry in those vocational institutions. More re-search will have to be done on the ground in Vientiane to learn what vocational programs exist, and how these could serve Fair Wear Foundation’s interests. There is a tripartite mechanism established to oversee social security for workers in the pri-vate sector, set out in Article 8 of the Decree on Social Security System for Enterprise Work-ers (established in 1999 and implemented in 2000). It is stipulated there must be estab-lished a tripartite body to serve in directing the Social Security Organization. This tripartite body is composed of three government members (usually from the Department of Social Se-


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curity, MOLSW), four employer representatives (provided by the LNCCI) and four worker representatives (provided by the LFTU). At this time, the labor relations machinery of Laos is still incomplete and there appears to be no timeline for the creation of legally mandated structures, which ostensibly should play a core role in resolution of labor disputes. Therefore, the Lao MOLSW plays the final arbiter role in deciding labor disputes. The ILO confirmed the existence of three disputes during their 2003 research, concerning Apilao Garment (requiring workers to pay penalties for mistakes in production), Export Garment (failure to pay wages on time), and Lao Euro Asia Garment (failure to make proper overtime payments). All three cases ulti-mately ended up in the hands of the MOLSW, which reportedly decided in favor of the em-ployer in all three cases.21 Legally, the labor dispute process is still convoluted and incomplete, but workers are to be protected for retaliation for raising complaints. Article 17 of the Labor Law protects employ-ees filing claims against employers from firing as retaliation, specifically outlawing the termi-nation of “a claimant or a complainant against the employer, cooperating with government officials in the application of labor legislation, or participating in a labor dispute within his or her labor unit.” No information could be developed indicating whether workers have been fired or retaliated against for bringing complaints against management. In Article 55 of the Labor Law, there are set out two different types of disputes. “Disputes over interests” is defined as a dispute caused by employees’ demands on the employer for “new benefits or rights”, i.e. benefits or rights not contained in the existing labor law and regulations, employment contract, or other work rules or regulations. “Disputes over rights” involve disputes raised by an employee in cases where s/he believes the employer has vio-lated a law, regulation, work rule, or other labor regulation – i.e. violated a ‘right’ that an em-ployee possesses according to law or regulation. If negotiations between employer and employee do not result in a full resolution of the mat-ter, or the employer refuses to bargain, Article 57 permits submission of the dispute for con-ciliation by a labor administrator (presumably from the MOLSW, though this is not specified). There is no guidance in law or regulation on how such conciliation efforts should proceed. Furthermore, at the MOLSW, there are 19 mediators in total -- with only one government mediator at the ministry level and one provincial level mediator for each province. Information received on their background indicates that most of them majored either in engineering sci-ences or foreign languages, and that most of them have no more than 2 years’ experience in industrial relations. Not surprisingly, it is reported that many of these mediators lack the nec-essary expertise to effectively mediate and resolve disputes in industrial relations. If after 15 days, the conciliation is not successful, then the dispute can be submitted to a People’s Court for final resolution, or alternatively according to Article 58 (if it is a “dispute over interests”) to a tri-partite Labor Dispute Arbitration Committee. The problem is that nei-ther the People’s Court overseeing labor issues (to be set up under Article 57) nor the Labor Dispute Arbitration Committee (to be set up under Article 58) exist. Recourse to strike is severely restricted by broad prohibitions on this right contained in Article 59 of the Labor Law. In practice, this Article is written in a way to clearly prevent a legal strike from ever taking place. No work stoppage is legal if it results from an Article 55 “dispute over rights”, if both sides agree to negotiate, or if the matter is before the People’s Court under Article 57, or before the Arbitration Committee under Article 58. Yet both procedures in Arti-cle 57 and 58 presumably result in a final, binding outcome, and the law provides (at least in theory) for speedy movement towards those binding procedures if negotiations are not pro-ceeding. However, as noted above, neither the Court nor the Committee has been estab-lished, effectively short-circuiting these dispute resolution systems.


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Tough penalties discourage would be strikers. The Penal Code prohibits in-volvement in an organization that promotes protest marches, demonstrations, and other actions that might be construed to cause “turmoil or social instability”, and can penalize violators with imprisonment between 1-5 years. If there have been strikes or other work stoppages have taken place in Laos, this news has not reached the outside world. Into the void of a workable dispute resolution system, the LFTU’s Labor Protection Depart-ment has taken a bigger role in settling disputes. How big, however, is hard to accurately assess and it appears that the LFTU may be exaggerating its role in dispute resolution, At the 7th LPRP Congress, held March 12-14, 2001, the LFTU President claimed that in "past years" the LFTU had received 400 complaints, and successfully resolved 136 of them, ac-counting for monetary settlements of more than 100 million Lao Kip. Yet in information pro-vided to the ILO, and written up on the ILO web-site, the LFTU claims to have "advocated" in more than 3000 cases against employers in 1994-96, with a recovery of 52 million Lao Kip. Observers in the NGO field have disputed these claims, noting that LFTU outreach to facto-ries is limited and adding that the LFTU must request and receive permission from factory owners to inspect a factory. 4. The labor standards The National Assembly passed the current labor law into law on March 14, 1994, supersed-ing an earlier labor code promulgated in December 1990. Almost all written law on labor topics is connected to, or derives authority, from this one labor law. Unfortunately, the Labor Law is sloppily drafted and contains numerous contradictory articles, and obvious loopholes, which could be easily exploited by an unscrupulous employer. There are no specialized La-bor Courts, and the expertise of the Lao judiciary in labor matters appears to be quite limited. The Labor Law clearly stipulates that employers have primary responsibility for the protection of workers. Article 9 notes that “Employers shall be directly responsible for the economic, technical and social protection of the workers in any labor unit under their control” and adding “Labor protection at the workplace shall be provided for under internal work rules.” However, Article 10 of the Labor Law also sets out regulatory duties for the MOLSW, stating that the Government labor administrator must be responsible for “the protection, inspection and su-pervision of the correct use of manpower” and “the regulation of labor protection and em-ployment.” This significant devolution in law of labor protection duties to the discretion of em-ployers, who largely are writing up internal work rules unilaterally rather than through some sort of bargaining process with workers, leaves implementation of the law subject to interpre-tations of often vaguely worded legislative provisions. Only through strict and consistent in-terpretation of those provisions, and active engagement to assert those interpretations, can the MOLSW assert its oversight over multiple factories with varying ‘internal work rules’ – but to date, the MOLSW has not measured up to this challenge. According to the decree establishing the MOLSW, the Ministry appears to be primarily con-cerned with social welfare activities (orphanages, veterans centers, old age centers); helping manage the civil service and overseeing civil servant and military veterans’ benefits; monitor-ing and responding to natural disasters; conducting vocational training; and maintaining he-roic monuments and revolutionary cemeteries. Labor regulation and inspection functions appear as only part of one of the 13 myriad objectives to be accomplished by the MOLSW. A Labor Department exists as one of the five departments in the Ministry, and this is the bu-reau primarily responsible for labor law enforcement.


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The ILO reports that the Department of Labor (DOL) of the MOLSW is technically in charge of enforcement of the labor law. However, the DOL does not have civil servants who are particularly assigned to conduct factory inspections, and there-fore when an inspection must be done the inspectors are selected on an arbitrary basis. Moreover, the DOL is hugely understaffed for the duties it must carry out, and most officers do not have prior experience or training in labor inspection. In 2003, it had a total of only 18 officers based at the MOLSW, divided between four different divisions of work – with four assigned to Labor Management, another four assigned to Employment, three assigned to Skill Development, and the remaining three posted to work in Policy and Planning. ILO interviews with employers found that the DOL conducts only a handful of fac-tory inspections in the Vientiane area per year, and that the intensity and thoroughness of the inspections were very low. The DOL is purportedly beset with low levels of pay and morale among its staff, and this translates into frequent movement and transfers of staff. The systematic failure of DOL is exposed in an internal report of the Department dated May 7, 1995.22 In what is an innovative bureaucratic method of burying bad news, the report is transmitted to Mr. Bounpone Sayasenh, Director of the DOL by none other than Mr. Boun-pone Sayasen – which is to say that he sent the report to himself. Fortunately, the Ministry itself sometimes leaks information. The report is a summary of a Swedish International De-velopment Agency (SIDA) funded project to conduct labor law education seminars in each of the 54 garment factories that were operating in Laos in early 1995. Among the labor law violations cited in the report are a lack of written contracts; failure to pay minimum wage to a “majority of unskilled workers”; arbitrary dismissal of workers for missing work, even in cases where there were legitimate health problems; and regular violations of overtime laws, fines and threats of dismissal for refusing to do overtime, or financial penalties for refusing to work on Sunday. Women workers were often forced to do overtime through the night, sometimes sleeping at their sewing machines, in clear violation of Article 33 of the labor law. Factories, which had work stoppages because of delays in orders from overseas coming in regularly, failed to comply with the aforementioned Article 44, requiring payment of 50% of their regular salary on days where work stoppages occur because of the employer. Failure to pay workers for sick days, including days when they were sent home from work, and violations of maternity leave compensation requirements were often frequently found. Most interestingly, the report gives names of some of the factories violating the law.23 Discussions with individuals involved with the project, and persons working with UNICEF and international NGOs, indicated that there were other, even more serious abuses uncovered by the project that were not reported at that time. These included employing children younger than 15 years of age, which one trainer estimated at composing almost 30% of the work force in some factories. A UNICEF report24 stated that “Our interviews and observations indi-cated that there are many girls under 15…” in the factories, a clear violation of Article 37 of the labor law which states “Employment of a young worker under 15 years of age in all socio-economic sectors is prohibited.” Other abuses mentioned by observers of the factory training project, but not reported in the Department’s report, included beating of workers; sackings of women workers when they married, or became pregnant; and even cases of rape of work-ers.25 The US State Department also echoes these concerns about the general lack of enforce-ment of almost all provisions of the labor law. In its latest annual human rights report, it ex-pressed the view that “Although workplace inspections reportedly have increased over the past several years, the MLSW lacked the personnel and budgetary resources to enforce the labor code effectively.” The problems caused by the contradictions and loopholes in the labor law are compounded by the relatively low level of education of workers (and general lack of labor law education


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programs). The ADB estimates that approximately 70% of the work force has not completed primary school, and that only 30% of Lao women are literate26. Even though figures on literacy rate are questionable (research by the LWU men-tions a literacy of 61% for women27), it cannot be presumed that simply posting the code of conduct in the factories will lead to a sufficient level of code aware-ness. In case garment workers do read basic Lao, one should expect that the language in a code of conduct poster uses complicated terms that cause them problems in understanding. Since Laos forbids the existence of independent labor and NGO monitors of the sort found in Cambodia and Thailand, the circle of non-enforcement closes fully, leaving aggrieved work-ers largely without avenues for justice except for the limited ones provided by the LFTU. The Government’s ability to implement the labor law is seriously hindered by interlocking factors including a bureaucratic organizational culture that emphasizes administrative control (through requiring permission) and equates issuing formal decrees with problem-solving; low levels of pay for civil servants which encourage moonlighting and/or corruption28; and inade-quate training for officials on the labor law and its enforcement. Resurgent inflation con-nected with recent rises in electricity tariffs will continue to put pressure on civil servant sala-ries. The ADB found that the Lao civil service has approximately 82,300 employees, but that 89% of them are based in provincial areas so that central ministries are chronically under-staffed – providing yet another excuse for why enforcement of the law cannot be done. The fact that most rural Lao suffer significant deprivation in a subsistence agriculture econ-omy that the World Bank characterized as "low input, low output"29 means that formal sector factory jobs, no matter how exploitative, are highly sought after by internal migrants to urban areas. Until 2005, the LPDR has ratified only four ILO conventions – Convention 4 (Night Work), 6 (Night Work of Young Persons), 13 (White Lead, and 29 (Forced Labor). All were ratified on January 23, 1964, and there have been no further ratifications since then. Only one of these conventions is considered a ‘core convention’ by the ILO. This is the worst record of ILO rati-fications of any ASEAN state. In June 2005, the Lao PDR has ratified conventions 182 and 138 on child labor in June 2005. 4.1. Employment is freely chosen The FWF Labor Standard "There shall be no use of forced, including bonded or prison, labor" (ILO Conventions 29 and 105) Laws and Regulations Lao has ratified ILO Convention no. 29 in 1964, but it has not yet ratified Convention no. 105. In terms of reporting on its actions to implement the provisions of the Conventions it has rati-fied, the ILO's Committee of Experts strongly criticized Laos in their 2001 report for not sub-mitting the reports they are required to submit on the conventions they have ratified. At that time, the Committee chastised the LPDR for also failing to formally reply to comments made by the Committee of Experts for more than 7 years. A lack of capacity at the MOLSW may be part of the problem. However, the lack of independent worker or employer organizations surely contributes to the apparent lack of attention of the Government to its reporting respon-sibilities under the ILO monitoring and enforcement mechanisms. The Labor Law provides in Article 4 that “Employers shall not use forced labor.” The Article goes on to elaborate on situations during which forced labor can be required by the Govern-ment, but then reiterates that only the Governments is empowered to do so and “no person, corporate body or labor unit may force a worker, either directly or indirectly, to work for them or for any group of persons.”


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Compliance situation In 2003, the ILO conducted a comprehensive survey of working conditions in 28 garment and handicraft factories in Lao PDR, working with the active support of the LTGG. Among these 28 factories were 8 factories that were 100% FDI invested, 6 Lao-foreign joint ventures, 10 Lao-owned factories, and 4 micro handicrafts loom (Lao owned) operations. This ILO 2003 report found that there was no indication in any of the factories that forced labor of any kind was employed. Many of the workers in garment factories in Lao PDR are first-generation garment factory workers, usually daughters of families of farmers from rural areas. Since factories are cur-rently exclusively located in Lao PDR’s two largest cities (Vientiane, Savannakhet), there clearly are paths of rural to urban migration for employment in the garment sector. However, no information was found indicated that garment workers are being bonded by any sort of arrangement connected to migration –in fact, complaints about high-turnover of workers seeking slight better conditions at other factories, were voiced both in the MOLSW 1995 re-port, and the ILO 2003 report. 4.2. Discrimination in employment The FWF Labor Standard "In recruitment, wage policy, admittance to training programs, employee promotion policy, policies of employment termination, retirement, and any other aspect of the employment rela-tionship shall be based on the principle of equal opportunities, regardless of race, color, sex, religion, political affiliation, union membership, nationality, social origin, deficiencies, or handicaps" (ILO Conventions 100 and 111) Laws and Regulations The LPDR has ratified neither ILO Convention 100 nor Convention 111. There has been no indication that the Government has plans to ratify either Convention in the near future. However, the LPDR has ratified the Convention on the Elimination of all Forms of Discrimina-tion against Women (CEDAW) in 1981. The Constitution of the LPDR provides for non-discrimination on the basis of sex, social status, education, faith and ethnicity (Article 22) and sexual equality in all spheres (Article 24). According to the LWU, Lao women have one of the highest rates of economic participa-tion in the Mekong sub-region. Article 2 of the Labor Law, which concerns “principle of mutual interest of employers and workers”, provides legal protection against discrimination in the course of work. Specifically, the Article states “the Government shall ensure that employers and workers derive mutual benefits from their relationships without discrimination on the basis of race, color, sex, relig-ion, political opinion or social status.” For pregnant workers, three months of paid maternity leave is required under Article 35, yet the Labor Law indicates that the money must either come from the employer or the social security fund –how it is determined who pays is not made clear. The woman must take at least 42 of the paid maternity days after the birth of her child –yet there is no explanation for why this provision is so specific. Women are not supposed to work between 10 p.m. and 5 a.m. or in “heavy work dangerous to their health”, nor are employers supposed to give preg-nant women any sort of work involving lifting or carrying loads, or standing for long periods of time, during the pregnancy or six months after return to work. Women returning to work after birth can bring their children to the factory under Article 35, and have one hour per day for


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nursing. Article 17 of the law also protects pregnant women, or women who have given birth in the last 9 months, from termination. Article 54 of the Labor Law regulates provisions of retirement pensions, and is has different standards for men and women. The right to “retire on a pension” is set for men at the age of 60 years, whereas the stipulated age for women is 55 years. For those who have completed 25 years of “hazardous employment” (which is not defined), there is a required period of work of 20 years, and men must be at least 55 years, and women at least 50 years. But the fact that these ages are the de facto retirement ages, setting out a discriminatory standard, is shown by the provision that if a worker does not reach the re-quirements for a retirement pension, they are entitled to “lump-sum compensation.” Practice of religion during working hours was not mentioned as a matter of concern by any reports or information received during the research process. Lowland Lao are primarily Bud-dhist and do not require specific prayer times during the day. Compliance situation The ILO 2003 survey of 28 factories found no evidence in any of the factories of discrimina-tion in respect to employment and occupation. However, the survey found that a number of factories are not complying with requirement for 90 days of paid maternity leave for their workers. Survey results found compliance by factories in the following categories: 87.5% FDI, 83.33% joint venture, 60% Lao owned, and 75% small hand-loom factories. However, research on women’s employment in the formal sector by the LWU found that women tend to be in “low positions that involve neither management nor decision-making, even with the same educational and work qualifications as their male counterparts.” The LWU noted: “More often than not, employment and recruitment policies discriminate against women, and recruitment and promotions within organizations are not often female-friendly.” Not surprisingly, in the same report, the LWU found that average salaries for women in the textile and garment industry are lower then men’s –but failed to provide specifics.30 Primary barriers cited by the LWU for discrimination include a lack of access to education for women, or likelihood that girls will be educated for shorter periods than their male siblings. The LWU finds that youth (age 15-24) literacy rates for women are lower than men (75% women vs. 83% men), however they note that progress of poor urban girls has seen greater progress in recent years. Girls’ primary school enrolment rates also lag behind boys, with 86% of all boys entering primary school in 2001, while only 74% of girls entered. Only about half of all children entering primary school will ultimately enroll in secondary school (i.e. start-ing 6th grade), and girls are found to drop out of school earlier, and in higher numbers, than boys. It should also be noted that there are major differences as the analysis moves to the situation of ethnic minority girls, who are located in more rural, isolated areas – but who may make up more of the work force if rural to urban migration for work in garment factories con-tinues. Social roles place continued importance on woman’s roles on housework, including care of children, cooking and cleaning, and other household work roles. Single women living with their families are expected to support their mother in this work, in addition to their work at the factory. Married women similarly have this dual role of household keeper, and factory worker. 4.3. No Exploitation of Child Labor The FWF Labor Standard "There shall be no use of child labor. The age for admission to employment shall not be less than the age of completion of compulsory schooling and, in any case, not less than 15 years." (ILO Convention 138) "There shall be no forms of slavery or practices similar to slav-


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ery, such as the sale and trafficking of children, debt bondage and serfdom and forced or compulsory labor. [...] Children [under the age of 18] shall not perform work which, by its nature or the circumstances in which it is carried out, is likely to harm their health, safety or morals." (ILO Convention 182) Ratified conventions and laws The LPDR ratified both ILO convention 138 and 182 on June 13, 2005, but given the recent accession to those conventions, periodic reports have not yet been submitted by the Gov-ernment to the ILO. Lao PDR is a signatory to the Convention on the Rights of the Child (CRC), and is therefore required by Article 32 of the CRC to “provide appropriate penalties or other sanctions to ensure effective enforcement” of legal provisions designed to protect chil-dren from performing work that is “hazardous” or “harmful to the child's health or physical, mental, spiritual, moral or social development.” The minimum age for working is 15 years old. The Labor Law provides in Article 37 that “An employer may employ young workers between 15 and 18 years of age provided that they do not work for more than six hours per day or 36 hours per week” and states that children in this age bracket “…shall not be employed to perform arduous work or work which is damag-ing to their health.” The law then proceeds to list specific types of dangerous work for which employment of children between 15 and 18 years is prohibited. Examined from the perspec-tive of garments and textiles, only one of these prohibitions – “work involving chemicals or explosives and poisonous substances” – is potentially applicable. Article 37 also references other types of dangerous work in Article 25, and indicates these types of work are also not permitted for children between ages 15 and 18. There are several types of prohibited activity that are potentially relevant to garment and textile work, but their application would likely de-pend on the particular conditions of work encountered in a specific factory rather than across the entire sector. Article 25 includes “direct exposure to gas or smoke having an adverse effect on health”, “direct exposure to dangerous chemicals, in particular to explosives”, “work in an abnormally hot or cold environment”, and “direct use of constantly vibrating machinery.” There is no information on how subjective determinations would be made, such as what con-stitutes an “abnormally hot” environment –does this need to be a furnace making metal, or will an unventilated, oppressively hot garment factory meet this standard? Article 37 further provides that it is against the law to require children between ages 15 and 18 to work between 22:00 and 05:00 hours, and indicating that children must receive a mini-mum of at least 11 hours of rest between shifts. Compliance situation The ILO 2003 survey found significant indications of problems with the employment of what the survey termed “young labor”, i.e. youth in the 15 to 18 year age group. As noted above, employment of children under 15 is illegal, and there are restrictions on hours of work and conditions of work that can be required from youth in the 15-18 years group. Fully 50%, or 14, of the surveyed factories were found to be using youth labor in violation of provisions of the labor law. A fundamental problem that has yet to be resolved is the matter of documentary evidence for proof of age for workers. The Lao National ID system suffers from significant problems, and many persons (especially from rural areas where many workers come from) are not provided with the Lao National ID card because of basic governance failures (lack of materials, in-struction, requirements for bribes to receive services) or discriminatory attitudes among local authorities to ethnic minorities. The remoteness of some areas, lack of resources for a com-prehensive census, and lack of education among rural populations about requirements for personal identification all contribute to the problems faced by the national ID system.


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A fallback system that is sometimes used is to rely on a confirmation document from the village chief of the home village of the worker, attesting to the workers’ age. The problem is that such documents can easily be forged and there are indications that this occurs. It is unclear whether there is a specific regulatory requirement for employers to check proof of age when hiring, but good practice would dictate that they should because legally they will be held responsible for hiring underage workers. No regulation could be found to indicate that employers must file proof of age with the authorities. The US State Department’s annual review of human rights practices found in Laos that “Some garment factories reportedly employed a very small number of underage girls. The Ministries of Public Security and Justice are responsible for enforcing these provisions, but enforcement was ineffective due to a lack of inspectors and other resources.” The occurrence of underage labor in garment factories in Lao PDR appears to be a continu-ing problem. Informed observers from UNICEF and SIDA informed a researcher from AAFLI approximately 10 years ago about the presence of girls in the garment factories that they believed were under the legal working age of 15. SIDA conducted training on the labor law in 54 garment factories in 1995, and one of the trainers informed AAFLI that she thought as many as 30% of the workers at that time were younger than 15 years old. A report by UNICEF found that “Our…interviews and observations indicated that there are many girls under 15…” in the factories at that time. 31 4.4. Freedom of Association and the Right to Collective Bargaining The FWF Labor Standard "The right of all workers to form and join trade unions and bargain collectively shall be recog-nized." (ILO Conventions 87 and 98) "Workers' representatives shall not be the subject of discrimination and shall have access to all workplaces necessary to carry out their represen-tation functions". (ILO Convention 135 and Recommendation 143) Laws and Regulations The Lao Government has not ratified ILO conventions 87 or 98, and has given no indication that it will do so in the foreseeable future. The fact that the provisions of convention 87 are incompatible with the high degree of Government control over the LFTU and the LNCCI indi-cates that a decision to ratify these two conventions would likely have to come as part of a comprehensive re-ordering of the labor relations system in the Lao PDR. No observers or reporters on the labor scene in Laos believe that is likely at this time. In line with the pattern of extending rights in one provision of law, and then restricting them with another provision of law, the LPDR Constitution provides in Article 31 of the Constitution that “Lao citizens have the right and freedom of speech, press and assembly; and have the right to set up associations and stage demonstrations which are not contrary to the law.” Furthermore, Article 34 of the Constitution provides that ““Lao citizens have the obligations to respect the Constitution and laws, and to observe the labor discipline, the regulations in carrying out livelihood in society, and the regulations and order of the country.” (Empha-sis added in both quotations) Similarly the Labor Law provides in Article 3 that “Workers and employers shall have the right to organize and belong to any mass and social organization that has been formed lawfully. Such mass and social organizations shall have the right to adopt their rules, to elect their representatives, to organize their administration, to carry out their activities independently, and to belong to any labor federation or confederation within the country. Procedures for the establishment, functions and activities of these organizations shall be determined by regula-


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tion.” While in fact appearing to grant freedom of association, the law dictates the implementation of these rights by setting out that they must follow procedures and regulations, which will presumably be written by the Government. The ILO succinctly comments: “There is a legal recognition of the freedom of association and the right to collective action but there are not specific decrees for the imple-mentation.” The Government then makes it known that it will refuse to allow any other labor union organization except the LFTU, and the effective grant of freedom of association by the law is stripped away. The ICFTU’s annual Trade Union Rights report for 2006 stated that: “Trade union freedom does not really exist in Laos…Labor unions may…be formed in private enterprises, but they must be affiliated with the government sanctioned Lao Federation of Trade Unions (LFTU). This body is directly controlled by the single political party, the Lao People’s Revolutionary Party (LPRP)… The Constitution further limits trade union rights by stating that Lao citizens can only set up associations or hold demonstrations that are “…not contrary to the law” – making independent unions un-Constitutional. The Labor Law echoes this formulation, indi-cating that workers and employers can belong only to any organization “that has been formed lawfully.” The fact of the matter is the LFTU is a state controlled labor federation in a one-party state where any sort of open dissent or protests have been dealt with quickly and harshly by the authorities. Freedom of association and attempt to exercise that right through public assem-bly outside the frameworks set out by the LPRP can lead to imprisonment and worse.32 Am-nesty International echoes this view, noting simply “The Lao government greatly restricts the fundamental rights to freedom of expression, association and assembly.” The law drafters’ true perception of labor unions as a government controlled organization imposed on workers in a top-down manner is revealed in Article 11, which states that “A trade union should be established in all labor units in accordance with specific regulations of the sectors concerned. Where there is no trade union, workers' representation shall be es-tablished.” Article 17 of the Labor Law provides clear protection for trade unionists against anti-union firings by employers. The law outlaws firing a “worker who carries out trade union, workers' representative or other social organization activities with the approval of the employer or out-side of working hours; and a candidate for election to a position as a trade union or workers' representative.” The difficulty faced by LFTU units is their duality of roles. On one hand, Article 11 makes them legally responsible for labor discipline – the classic role of a state-controlled trade union body. On the other hand, the LFTU is supposed to represent the workers in making claims of the employer. Article 11 states that: “Trade unions or workers' representatives shall be re-sponsible within their labor unit for promoting solidarity, training and mobilization of workers with regard to labor discipline; work performance according to production plans established by the labor unit; presentation of any claims regarding compliance with labor regulations and contracts of employment by the employer; participation in the settlement of labor disputes; and negotiations with the employer on matters relating to salaries, hours of work, rest peri-ods, working conditions, and the social security system provided for under laws and regula-tions.” The right of trade unions under Article 40 to “negotiate with the employer in respect of salary or wage levels” also reinforces this grant of bargaining/representation authority. The fundamental problem is there remain wholly inadequate guarantees of this right to col-lectively bargain because there is no provision in law and no formal mechanism, which com-pels employers to bargain with trade unions in any manner whatsoever. Rather, the law simply provides the LFTU with the right to negotiate –and leaves it to the union (if one has


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been formed), or a LFTU district level leader supporting an unorganized group of aggrieved workers at the factory level, to find their own way. Significant restric-tions on the right to strike contained in the Labor Law, and the Lao PDR govern-ment’s strict restrictions in practice on public assembly and protest, leaves the LFTU with only one route –consultation, backed by whatever government influ-ence the union can mobilize– to deal with recalcitrant employers. Research by the ILO in 2003 found that some of the larger garment factories, mostly foreign-owned, had informal mechanisms for consultations with the workers. For example, two Vien-tiane based foreign direct investment factories -the Lao Garment factory and Trio Garment factory- were found to hold monthly meetings between management and labor representa-tives to consult on a large number of issues affecting workers in the factory. However, the ILO reported that wages are not on the table for discussion at these meetings, and any agreements reached between the two sides is framed as a commitment by management to take the agreed-upon action because there is no signed agreement between both sides. Collective wage negotiations in the garment sector do not occur outside of the annual consul-tation on minimum wages convened by the MOLSW. Such negotiations would have to occur at the enterprise level, between workers and the employer, but this usually does not occur and workers end up being “wage takers” who must be satisfied with what the factory unilat-erally sets. The result is that dissatisfaction with wages or working conditions felt by workers in a factory will usually result in workers leaving the factory to seek employment elsewhere. Compliance situation As noted above, the Labor Law does not compel employers to bargain with workers. The LFTU is acknowledged as lacking capacity in collective bargaining, and union formation con-tinues to be strongly influenced and guided by garment factory management. According to research done by the researcher previously (in 1996, 2005) in Laos, there are no collective bargaining agreements in the garment sector. These findings are strongly supported by the finding of the ILO 2003 survey, in which none of the 28 factories surveyed, afforded workers with the right to collectively bargain. The Lao garment sector is essentially bereft of any sort of formal negotiated agreement between workers and employers. When combined with the significant restrictions in law and practice on the organization of trade unions outside of the LFTU, and involvement of factory managers in establishing unions in garment factories, it is not surprising that enterprise level unions have little possibility to negotiate improvements in wages and conditions of work in the factories. Concerning freedom of association and collective bargaining the US State Department’s an-nual report on human rights was characteristically blunt. They found that there is “no right to organize and bargain collectively.” Equally important was their finding that there was essen-tially no enforcement for the right of association which technically exists in the Labor Law. The State Department report continued by stating “According to NGOs and embassies based in Vientiane, the law generally was not enforced by the MLSW, especially in dealings with joint ventures in the private sector… According to labor activists the FLTU [LFTU] needs gov-ernment permission to enter factories and must provide advanced notice of such visits; the FLTU [LFTU] is in effect powerless to protect workers who filed complaints.” There are no indications of CBAs in other economic sectors. Since the LFTU is the sole legal trade union body, the lack of LFTU capacity to effectively initiate and conclude CBAs in the garment sector can be assumed to also apply to employees in other sectors. 4.5. Payment of a Living Wage The FWF Labor Standard


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"Wages and benefits paid for a standard working week shall meet at least legal or industry minimum standards and always be sufficient to meet basic needs of workers and their families and to provide some discretionary income" (ILO Con-ventions 26 and 131, the Universal Declaration of Human Rights, art 23(3) and art 25(1)). "Deductions from wages for disciplinary measures shall not be permit-ted nor shall any deductions from wages not provided for by national law be permitted. De-ductions shall never constitute an amount that will lead the employee to receive less than the minimum wage. Employees shall be adequately and clearly informed about the specifications of their wages including wage rates and pay period." Laws and Regulations The LPDR has not ratified any ILO instruments relating to minimum wages. However, it has recognized the Universal Declaration on Human Rights, which provides in Article 23 that all persons shall be provided with “just and favorable remuneration ensuring for himself and his family an existence worthy of human dignity…” Article 2 of the Labor Law states that “Employers shall provide workers with fair wages, safe working conditions and social protection” and Article 39 provides for equal remuneration for equal work without discrimination according to sex, age, nationality, or ethnic origin. Article 38 of the Labor Law defines wages as “remuneration in the form of money”, and Arti-cle 41 dictates that wages “shall be paid on time and fully in cash directly to each worker, except where it is otherwise prescribed by government regulations or by a specific agree-ment between workers and employer.” So on one hand, payment of wages must be timely and in cash, but on the other hand, theoretically a bi-partite agreement can override this re-quirement. The Labor Law assigns responsibility to the government for determination of the minimum wage. Specifically, Article 40 provides that “The Government or body concerned shall peri-odically establish minimum salaries or wages for each region. Employers shall not establish a minimum salaries [sic] or wages level lower than the level periodically fixed by the Gov-ernment for each region. The periodic fixation of the minimum salary or wage level in all labor units shall be subject to the Government’s supervision and control.” Unfortunately, Article 41 of the Labor Law contains a potential loophole in universal minimum wage coverage, noting that where the Government has not set a minimum wage for a spe-cific region, or “where the employer allowed workers to bring and do supplementary work outside their labor unit, at their home or elsewhere, wages may be paid on the basis of pro-ductivity or on a lump-sum basis.” Payment of salaries must be done at least once a month, at a fixed time, according to Article 43 of the Labor Law. For wages paid based on a computation of hourly work, or piece-rate, salary payment must be made at least twice a month, or at an interval of at most 16 days. Payment of salaries must be done on working days, either at the workplace or close nearby to the workplace. In the ILO 2003 Survey, it was found most of the 28 factories paid wages on time –only 1 FDI, 1 joint venture, and 2 Lao owned factories did not pay in a timely fash-ion. Article 41 of the Labor Law further stipulates that all payments to the worker (salary, benefits, and bonuses) be recorded in an account book which must be signed by the worker, and pro-vides the right to workers to seek clarification of calculations of their wages and salaries. Article 14 of the Labor Law allows employers to place new employees on a probationary ba-sis in order to “ascertain their ability to perform their duties.” The maximum length of the pro-bationary period depends on the skills required for the job –in the case of work “requiring neither experience nor specialized skills” the probationary period cannot be more than 30


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days. However, for work that requires specialized skills, the probationary period can extend up to 60 days. If the employer finds that the worker “continues to lack the necessary skill for the work”, the employer has the right to extend the proba-tionary period for a maximum of an additional 30 days. Article 14 requires that “throughout the probationary period, workers shall be paid at least 90 percent of the applicable salary or wage.” There is no provision in law for any apprenticeship wage, so any such wages below the minimum wage are illegal. In terms of the relation between transfers and wages, Article 21 of the Labor Law provides that a factory can undertaken temporary transfers for a period of not more than 3 months for reasons of “temporary cessation of activity, for disciplinary reasons, as a means of prevent-ing damage to its activities, or as a means of protection against a natural disaster.” With the exception of transfer for disciplinary reasons, the law requires that the staff person be paid whichever is the higher wage of the two positions (previous one, and one to which the em-ployee is transferred.) In its annual human rights report, the US State Department contends that workers in Laos do not receive a living wage. Specifically, it reported that “The daily minimum wage was…insufficient to provide a decent standard of living for a worker and family… Some piecework employees, especially on construction sites, earned less than the minimum wage.” No further information or research on a living wage in Lao PDR could be found. Compliance situation The ILO 2003 survey discovered generally good compliance with the minimum wage. Both FDI and Lao-owned factories all were found to be paying the minimum wage, while 5 out of the 6 joint-venture companies were also in compliance. Only the micro-enterprise handloom factories producing silk were found to have problems complying – only 50% of those sur-veyed paid the minimum wage. The ILO notes that there is an annual tripartite mechanism “Meeting for Negotiations on Minimum Wage for Lao Workers” which is convened by the MOLSW (and presided over by a MOLSW Deputy Minister) in which the MOLSW, LFTU, and LNCCI take part. However, this meeting is apparently only an advisory body, since the final decision-making on minimum wage determination remains solely in the hands of the Government. Debates between worker and employer representatives are occurring on the wage issue. Recent reports from a national workshop held on November 20, 2006 in Vientiane saw the LFTU demanding that wage increases should at least match the rise in the cost of living – with Khamla Lolonesy, LFTU Vice-President, stating that “Our wages are too low in relation to living expenses…we have to calculate a new employment wage.” However, this call was met with employer opposition from the Vice-President of the LNCCI, One-sy Boutsivongsakd, who said increases in wages would cause Lao PDR to lose its competitive edge. He com-pared the situation in Lao PDR with PR China, noting the latter has low wages yet has higher productivity than Lao PDR.33 Article 40 provides “Workers or trade unions or workers repre-sentatives” with the right to negotiate with an employer over wages, but does not legally compel the employer to negotiate. The Lao government raised the official minimum wage to 200,000 kip per month (about 16 euro) in 2005. Many factories include an ‘attendance bonus’ to reward workers who do not miss work during a month, and provide either a meal allowance or plain rice free of charge. Wages for unskilled labor at garment factories, including bonuses and lunch, now run about 290,000 kip or about US 23 euro monthly34. In terms of piece rate and homework, the Labor Law does not specifically provide for how such wages should be calculated, leaving this to the discretion of the employer. A survey of


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24 factories by the ILO found that the piece rate system was instituted with a base salary guaranteed at 135,000 kip/month, and that all but one of the garment factories paid this equivalent of the minimum wage for piece-rate workers. A major issue, which is not addressed in the Labor Law but should be of signifi-cant concern to auditors, is the apparently common practice of employers fining workers for mistakes or defects in production. These fines are usually deducted directly from a worker’s wages, and therefore can significantly reduce the take-home income a worker receives. In the ILO 2003 Survey, it was found that 25% (2 of 8) of the FDI factories and 50% (3 of 6) joint venture factories made deductions for defective outputs – but interestingly, only 1 of 10 Lao factories (which often receive orders from the FDI and joint venture factories) engaged in these type of deductions. Another important issue connected with wages, which was uncovered by the ILO 2003 Sur-vey, is the connection between wages and sick leave. Article 29 of the Labor Law provides that “Upon presentation of a medical certificate, workers remunerated on a monthly basis shall be entitled to sick leave with full pay for up to 30 days per year.” For those paid hourly, or on the basis of piece-rate, this paid sick leave is available only after they have worked at the establishment for 90 days. The ILO 2003 Survey found that the FDI factories are fully complying with this legal requirement. But 1/3 of the joint venture factories and 2/5 of the Lao-owned factories violated this provision, forcing workers to choose between being sick and facing a cut in their wages. Finally, none of the small handloom enterprises gave paid sick leave to their employees. MOLSW inspectors are responsible for monitoring compliance with these provisions of the Labor Law. 4.6. No Excessive Working Hours The FWF Labor Standard "Hours of work shall comply with applicable laws and industry standards. In any event, work-ers shall not on a regular basis be required to work in excess of 48 hours per week and shall be provided with at least one day off for every 7-day period. Overtime shall be voluntary, shall not exceed 12 hours per week, shall not be demanded on a regular basis and shall al-ways be compensated at a premium rate." (ILO Convention 1) Laws and Regulations The LPDR has not ratified any ILO Convention dealing with hours of work. According to the Labor Law, the work week is set at 48 hours, with one day off in seven, and 36 hours for workers in particularly dangerous professions.35 Employers are supposed to arrange a “reasonable production schedule” that allows for breaks of 5 to 10 minutes every 2 hours. Article 27 of the Labor Law stipulates that overtime can only be scheduled after prior consultation with the workers concerned and the labor union/workers’ representatives, and in any case, cannot be more than 30 hours per month, or more than 3 hours in a row – except in instances of “exception situations such as a natural disaster or unexpected event of a kind that would cause great damage to the labor unit.” There is no further guidance in law about what constitutes such an “unexpected event”, theoretically leaving this to the discretion of the employer. It is illegal for an employer to require a pregnant woman, or a woman with a child aged younger than 12 years, to perform overtime. Overtime rates are clearly defined in Article 42 of the Labor Law. For overtime “in the day-time during a regular working day”, overtime pay is 1.5 times the rate of normal pay. In cases


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when overtime occurs “at night on a regular working day”, overtime pay is calcu-lated at 2 times the rate of normal pay. Finally, overtime performed on “a day of weekly rest or on an official holiday” is paid 2.5 times the normal rate for hours worked during the day, and 3 times the normal rate for hours worked at night. However, what specific hours constitute “day” and “’night” are not specifically defined in the law – though there is a clue in Article 33, which prohibits employment of women to work “during the night in all industrial sectors” between 10 p.m. and 5 a.m. There is no legal provision stipulating on how working time must be recorded by employers, nor is there any legal provision stating that overtime rates apply to piece-rate payment systems. Article 42 also mandates that a shift differential of an extra 15% pay must be paid to workers who work on a shift that occurs between 22:00 and 05:00 hours. Article 29 of the law provides Thirty days of paid sick leave, and workers receive fifteen days of annual leave under Article 30. Compliance situation The ILO 2003 Survey found significant problems with employers’ requirements that workers must perform overtime. Researchers found that overtime was voluntary in only 37.5% of FDI factories, and this figure plummeted to zero (0%) for workers in joint venture and Lao-owned garment factories. These results indicate that with a few exceptions, Lao garment workers must perform as much overtime as employers want, and whenever they want them to do it. This is a serious concern that needs to be closely explored, especially when considering many of the garment factories employ young (15-18 year old) laborers. However, in terms of payment, the Survey found that 100% of FDI companies, 83.3% of joint venture companies, and 80% of Lao companies make their payments for overtime in accor-dance with the Labor Law. In Article 27 of the Labor Law, it mandates that if a workplace requires workers to perform more than 30 hours of overtime in one month, it must request prior authorization from the MOLSW, and provide evidence in writing that the labor union or workers’ representatives in the establishment concur with the request. Therefore, for audit purposes, it could be checked whether there are written submissions for permission for overtime over 30 hours a month (i.e. an average of 7.5 hours of OT per week) filed with the MOLSW. MOLSW inspectors are responsible for monitoring compliance with the law concerning over-time. 4.7. Health and Safety The FWF Labor Standard A safe and hygienic working environment shall be provided, and best occupational health and safety practice shall be promoted, bearing in mind the prevailing knowledge of the indus-try and of any specific hazards. Appropriate attention shall be paid to occupational hazards specific to this branch of the industry and assure that a safe and hygienic work environment is provided for. Effective regulations shall be implemented to prevent accidents and minimize health risks as much as possible (following ILO Convention 155). "Physical abuse, threats of physical abuse, unusual punishments or discipline, sexual and other harassment, and intimi-dation by the employer are strictly prohibited." Laws and Regulations The LPDR has not ratified any ILO conventions concerning occupational safety and health.


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Article 49 of the Labor Law regulates all aspects of the occupational safety and health. The law places primary responsibility and discretion for OSH in the hands of the employer, including drawing up all related work rules, and provides limited, quite vague guidance on a selected number of topics: lighting, noise, dust and atmosphere, drinking water and toilets, eating areas, storage of hazardous chemicals, and provision of safety equipment free of charge to workers. The responsibility for educating workers on OSH systems in the factory also lies with the employer. Specifically, the Article 49 provides the following: “The employer shall be responsible for ensuring that the workplace, machines, materials and the various stages of production, in-cluding the use of chemicals under its supervision, are safe and not dangerous to the work-ers' health. The employer shall be responsible for drawing up work rules concerning labor and health protection, including the implementation of such measures as may be required to ensure protection in the use of machinery, and the installation of various safety equipment, in con-sultation with trade unions or workers' representatives in its labor unit. Workers shall be in-formed about these rules, which shall be visibly posted in an open place where they can be read by all those concerned. Necessary measures to ensure safety and sanitation at the workplace shall include:

• Appropriate lighting by means of an electrical installation or natural light, limitation of excessive noise, ventilation designed to expel dust and odors which are dangerous to health;

• A supply of drinking-water and washing water, showers, toilets, a cafeteria, and a changing room for workers;

• A storage room where toxic substances can be kept safely without risk of leakage; • The provision, free of charge, of such personal protective equipment and clothing as

may be required by workers engaged in the production process; • The installation of protective equipment or fencing around any dangerous machinery

or at other places posing a risk, and other necessary measures, such as fire alarms or protective equipment against electric shocks.

The employer shall furthermore ensure that workers acquire sufficient knowledge of the rules governing their own safety and health protection should organize training courses in this re-spect. All measures related to workers' safety and health protection in each labor unit shall be free of charge to workers. Each worker shall diligently and scrupulously observe such measures for their own and other colleagues' safety and health, and must cooperate with the employer in its implementation of compulsory measures designed to protect the workers' safety and health.” Yet in the next section of the Labor Law, Article 50, it states that employers can refuse to hire workers on the basis that they have an occupational disease. An apparent desire for flexibil-ity results in yet another loophole in Article 52 –where it provides that employers or the social security fund are liable to pay for medical treatment for injured workers, giving a clear chance for an employer to transfer responsibility to the social security office, and seek to get off the hook. But then the law’s progressive nature re-appears by Article 53, where employers are required to pay full wages to injured workers for up to six months of the time that they are recuperating. In terms of the specific provisions of the FWF audit manual, it should be noted that the Labor Law provides for OSH protection in generalities, calling on the employer to take appropriate steps to ensure the workplace is safe, drawing up work rules to implement health and safety measures, and providing knowledge and information to workers about those work rules and


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safety issues in general. The result is there are few instances when specific items in the FWF audit manual are explicitly covered in the Labor Law. However, almost all provisions in the FWF audit manual could be considered to be covered by the broad legal requirement that “The employer shall be responsible for ensur-ing that the workplace, machines, materials and various stages of production, including the use of chemicals, under its supervision are safe and not dangerous to the work-ers’ health.” Specific comparison of FWF audit requirements with the Labor Law results in the following analysis: • Stocked first aid kit on every floor of the factory and training of staff in first aid –Article 50

of the Labor Law requires that “All labor units shall be equipped with a first-aid kit.” The law does not specify placement of the kit, nor does it require a certain number of kits (i.e. one per floor, etc.). In terms of training, there is a requirement that employers make sure workers “acquire sufficient knowledge” and “organize training courses in this respect” about health issues, meaning that requirement for training could be considered as cov-ered by the labor law.

• Register of accidents is kept and available – There is no specific provision made in law for a register of accidents.

• Fire extinguishers are appropriate…regularly maintained and charged…display last date of inspection…mounted on walls and columns throughout the factory –There is no spe-cific mention of fire extinguishers in the law, nor information about the requirements for their maintenance.

• Fire alarms are mounted in…workshops and emergency lights are placed above exits and on stairwells – Fire alarms are specifically mentioned as one of the necessary meas-ures that employers must provide for, but there is no specification on the number of alarms or their placement. There is no specific provision on emergency lighting contained in the law.

• Evacuation drills are conducted as required by local law – There is no specific provision made in the law for evacuation drills.

• Sufficient light, fresh air, and dust removal – The law requires “…ventilation designed to expel dust and odors dangerous to health…” and “appropriate lighting” as part of the measures that must be included in the work rules to be drawn up. However, there is no information on how to quantify what is sufficient, and no guidance for doing so in the law.

• Clean, sufficient, and hygienic toilets are available – The law provides that toilets must be available, but provides no requirements on the quantity or quality of those toilets.

• Fresh drinking water is available – The law provides that a supply of drinking water should be available for workers, but no further details or specifications are made.

• Passages, stairs and exits are free of dangers and obstructions, doors and other exits are accessible and unlocked during working hours-- There is no provision in law discuss-ing exit and entry from the factory, nor conditions in which hallways and passages should be maintained.

• Machines are well maintained and safe to use – The law provides that machines shall be “safe and not dangerous to the workers’ health.”

• Factory stores hazardous and combustible materials in secure and ventilated areas; dan-gerous materials are equipped with instructions in workers’ language; workers have…free disposition of adequate protective gear – The law provides that the employer must pro-vide a “storage room where toxic substances can be kept safely without risk of leakage” and “…free of charge…such personal protective equipment and clothing required by workers engaged in the production process…” However, there is nothing in the law about labeling of hazardous materials.

• Appropriate personal protective equipment such as masks, gloves, goggles, earplugs, and rubber boots are available at no cost – The law states that protective clothing be provided to workers free of charge.


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• The factory provides…sitting working positions and chairs – There is no spe-cific provision made in the law for this.

• Working space per worker is in accordance with local law – There is no spe-cific provision made in the law for working space.

• During breaks a canteen is available with sufficient tables and chairs – The law provides that employers must provide workers with a cafeteria.

• Housing facilities provided by company – There is no mention of housing facilities for workers in the law.

Compliance situation The ILO 2003 Survey involved a fairly comprehensive set of questions on basic safety, cov-ering 18 key practices related to safety and occupational health. For the sake of being com-prehensive, the full results of the OSH survey are attached as an appendix. A quick examination points out the following areas requiring attention by auditors: • Extremely poor compliance with safety signals in the factory, with only 25% of the FDI

factories complying, and none of either joint venture or Lao factories making the grade. When combined with almost across the board failure to make employees aware of fire evacuation procedures and apparent unwillingness to conduct regular fire drills in at least half of the factories surveyed, it can be concluded that many Lao factories may not be well prepared to deal with a factory fire. The finding that 2/3 of the joint venture factories and 3/5 of the Lao factories fail to properly maintain their electrical systems raises the concern that there is a serious factory fire just waiting to happen in Lao PDR.

• Despite explicit mention in the Labor Law, 50% of FDI factories, 75% of joint-venture fac-

tories, and 90% of Lao factories fail to properly store chemicals in their factories. • There is an apparent unwillingness by most factories to investigate accidents that occur

in the factories, or report them (presumably to the Lao PDR authorities and/or clients of the factory). To put it clearly, essentially only 3 factories (out of the total survey of 28 fac-tories) take any sort of significant responsibility for investigating, reporting and following up accidents which occur in their factories. Without basic information from factories on accidents, and a lack of regulatory interventions by government authorities to deal with this failure to report, any statistics provided by Lao authorities on accidents in garment factories should be viewed skeptically.

• Lao owned factories have significant problems with OSH, and fail both to provide safety

equipment to their workers and provide instruction to workers in use of safety equipment. Only 1 factory in 10 complied with this requirement.

• Factories across all three types of ownership appear to be largely in compliance with re-

quirements to provide toilets, sufficient lighting for work, and limit excessive noise. High temperatures are a problem in slightly less than half of the factories.

In its annual human rights report, the US State Department found that “The law provides for safe working conditions and higher compensation for dangerous work. Employers are re-sponsible for compensating a worker injured or killed on the job, a requirement generally fulfilled by employers in the formal economic sector. The law also mandates extensive em-ployer responsibility for those disabled while at work, and it was enforced adequately.” However, the report also noted “The labor code has no specific provision allowing workers to remove themselves from a dangerous situation without jeopardizing their employment.”


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Interestingly, the ILO 2003 Survey found that most factories in all categories of ownership/investment are willing to provide compensation for workers who are injured or fall sick as a result of their service in the factory. All FDI, joint venture and Lao-owned factories provided such compensation. It remains unclear, how-ever, how much compensation is paid, and whether these sums are in compli-ance with Labor Law Articles 52 and 53. The question is whether these are sincere efforts by employers to fully compensate workers for damages suffered and provide some sort of sup-port for lost earnings in the future, or whether it is more of a matter of employers simply mak-ing payments so the problem of an injured worker can “go away.” Auditors will have to de-termine this on a factory-by-factory basis. According to the Manufacturing Industry Law of 1999, for which many implementing regula-tions have still not been issued, the Ministry of Industry and Health has the duty to conduct regular inspection twice a year in the factories to check compliance with work safety regula-tions. UNIDO notes that work safety standards are contained in a Decree 103 issued by the Government, but the researcher could not find a copy of this Decree 103. However, UNIDO characterizes those standards in the Decree as “very unclear.” It is not clear to what extent the MIH actually carrying out its duty to conduct investigations. 4.8. Legally Binding Employment Relationship The FWF Labor Standard "Working relationships shall be legally binding, and all obligations to employees under labor or social security laws and regulations shall be respected." Laws and Regulations The Labor Law provides for legally binding contract, in writing, but then provides significant loopholes for unscrupulous employers who might wish to avoid such contracts. Article 6 re-quires written contracts be concluded, stating that “An employment contract shall be con-cluded in writing between the employer and each worker, on the basis of the principle of equality, and must be approved by both parties thereto without contravention of any state regulations.” Article 12 further reiterates that the contract must be in writing, and requires that the employer must assign work and functions to workers, and pay wages and benefits, in accordance with the contract. But then there is a contradiction because Article 13 of the Law provides maximum flexibility to evade this provision by legislating that “However, in some cases an employment contract may be verbal, depending on employment conditions and the nature of the work, such as work on a temporary or daily basis, or employment involving only a small amount of work.” A legally binding relationship is one based on an employment con-tract, with the exception of the provision under Article 13. The exemptions are not at all well defined in the law. There is no customary labor contract in Lao PDR. Contracts can be for either fixed term or indefinite periods, depending on the agreement be-tween the employer and worker. Probationary periods are provided for in law in Article 14, with the probationary period set for up to 30 days for manual (non-skilled) jobs, and up to 60 days for skilled jobs. A one-time extension of a probationary period can be done, but for no more than 30 days. Termination of a worker on probation requires 3 days notice in the case of an unskilled worker, and 5 days notice in the case of a skilled work. In terms of probationary pay, the Labor Law sets this pay at not less than 90% of the level of normal pay. Once a worker is confirmed on a contract of either indefinite duration, or limited period dura-tion, the requirements for notice in case of termination change as well. For workers with in-definite period contracts, advance notice of firing is required for either 15 days (unskilled,


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manual labor) or 30 days (skilled labor). In the instance of a fixed-term contract, the mandatory advance notification period before termination is 15 days. In terms of social security, Article 48 requires workers and employers to pay into a social security fund under the regulations adopted by the Government. Decree 207 issued by the Prime Minister’s Office in December 1999 called for providing mandatory social security coverage to workers in private sector and state owned enterprises, and the creation of a Social Security Organization (SSO). Enterprises with more than 10 em-ployees are required to subscribe to the social security system, while those with less than 10 can do so voluntarily. All workers, both full-time and part-time, are required to be registered. Therefore, all garment factories, which will be audited, must have their workers covered in the social security system. During the first four years of the existence of the SSO, coverage was limited to enterprises operating in the Vientiane municipal area. Starting in October 2005, the coverage area of the SSO was extended to Savannakhet province, making this the second operational area for the social security system. Benefits include medical services; sickness, maternity and funeral benefits; invalidity, survi-vors (after death of covered family member) and pension benefits; and coverage for injuries suffered at work, and effects of occupational disease. Detailed information on all areas of coverage can be found on the SSO website, at www.ssolao.gov.la Payment for Social Security is bipartite, with the employer contributing an additional equiva-lent of 4.5% of the employee’s monthly salary, and the worker contributing 4% from his/her salary. The employer must transfer the total 9.5% monthly to the SSO. Percentage is cal-culated on monthly salary up to a threshold of 1,500,000 per month. The SSO will hold the employer solely responsible for any failure to pay, or underpayment. Late or incomplete payments are subject to an additional fee equivalent to 2% (per month) of the outstanding balance owed. Accordingly, for audit purposes, garment factories will need to be able to show evidence of transfer of monies equivalent to 9.5% of each worker’s salary to the SSO, and demonstrate that the employer’s 4.5% contribution is additional to the money usually paid as wages to the worker. Employers are also responsible for monthly reporting to the SSO on salaries, as well as changes in personnel (reporting additions of new staff, departures, changes, etc.) There exists a tripartite Board of Directors for the Social Security system, set up under the authority of Article 8 of the Decree on Social Security System for Enterprise Workers, which started operation in 2000. A total of 3 Government representatives (Department of Social Security, MOLSW), 4 labor representatives (LFTU) and 4 employer representatives (LNCCI) comprise the Board. One of the four labor representatives is from the LFTU unit in a Thai-owned FDI garment factory, Trio Laos Export, while the remaining members are from LFTU units in state owned enterprises. The ILO is currently implementing a project “Development of Social Security Phase II”, which is ongoing through 2007, to provide necessary technical and capacity building support to the Department of Social Security of the MOLSW so that the social security scheme can be ef-fectively implemented. Compliance situation According to the SSO, they have authorized inspectors that can enter and examine work-places to assess whether the employer is complying with the SSO’s requirements. No infor-mation was found to indicate levels of compliance by employers with the SSO, but according


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to the statement of the Acting Minister of MOLSW, Le Kakanhya, “not all targeted enterprises have joined the social security scheme, but the number of insured workers is increasing”, and he pointedly urged those who have not joined to do so in order to comply with the laws of the Lao PDR.36 A very worrisome finding in the ILO 2003 Survey is the failure by many factories to comply with Article 12 of the Labor Law, and ensure that written employment contracts are con-cluded between the factory and their employees. Only 75% of FDI factories provided written contracts, and this figure fell to 50% for joint venture enterprises and a pathetic 20% among surveyed factories that are wholly Lao owned. The MOLSW 1995 report referred to this is-sue, stating that factory owners which did not have contracts for employees spoke of a trust-ing relationship underpinned by the cultural concept of sanya jai (a “heart contract”, i.e. prom-ised by the heart), and justified their violation of the Labor Law by adding that not having con-tracts helped the factory avoid disputes with workers. The lack of written contracts in such a large number of factories raises major questions about how other required wages and bene-fits can be guaranteed to workers, in accordance with the Labor Law, and buyers’ codes of conduct. The lack of employment contracts in many factories is compounded by a failure by employ-ers in a number of factories to provide workers with the company’s rules and regulations. Article 31 of the Labor Law provides that “Rules of work shall consist of the rights and duties of workers as specified under laws and regulations, and internal work rules of the labor unit and the employment contract signed between the workers and their employer.” The Article further provides that “The internal work rules of the labor unit shall be made known and posted openly so that everybody may be informed.” Given the imprecise nature of a number of requirements contained in the Labor Law (such as in Article 49, where it is left to the em-ployer to draft specific work rules concerning labor and health protection for workers), the drafting of internal work rules is critical for comprehensive regulation of the situation in the factory. Yet the ILO 2003 Survey finds that while 100% of the FDI and joint venture compa-nies provided rules and regulations, the level of compliance drops to 70% for Lao-owned factories, and 25% for smaller handloom enterprises. 5. Partner Network National Partners Under its “Enhancing Access to Justice”, UNDP/Lao PDR is supporting efforts by the LPDR to make Lao Bar Association (which now operates within the Ministry of Justice) an inde-pendent association of legal professionals. This development will need to be watched closely, because a successful project to create an independent LBA would mark the birth of a legal aid system, which might offer benefits to workers with legal grievances against their employer. 5.1. Lao Handicraft Group (LHG) LHG is a network of 62 handicraft businesses, and 30 of those members are involved in silk and cotton fabric production in small factories and home/villages. According to the ILO, the LHG was established in 1998 with support from a German organization, Handicraft Work Governance (SWK). LHG is legally recognized by the Lao Government as an employers’ association, and operates under the umbrella of the LNCCI. The ILO reports that LHG is primarily involved in helping member companies find markets for their goods, and in the textile sector the LHG primarily focuses on high-end silk handicrafts. Partial funding is provided by a $US 20 annual membership fee.


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5.2. Lao Women’s Union (LWU) The LWU is a constitutionally established “mass organization” that is mandated to represent women, and protect their rights and interests. The LWU has an ef-fective network of offices and cadres stretching down to the provincial, district and village levels, and access to the top levels of the LPDR Government and LPRP. Membership was reported at the end of 2005 as being approximately 970,000 women. The LWU is one of the most important organizations supporting health and education, enter-prise development, and gender/rights promotion programs for women and communities in the Lao PDR. Because of the efficacy of the LWU network down to the grass-roots, and the LWU’s astute and well-connected national leadership, and its demonstrated ability to advo-cate for Government policies, it is preferred by international donors, UN agencies, and inter-national NGOs as a national implementing partner of projects. The LWU works closely with numerous Governments ministries and research institutes, in-cluding the NUOL what is this?. In terms of its abilities to affect policies at the national and provincial level, the LWU is ar-guably much more influential than the LFTU. The LWU also has significant more resources, and a broad mandate that allows it to be involved in any project or policy that involves women. The LWU serves as the core driving force within the Lao National Commission for the Ad-vancement of Women, set up by the Prime Minister’s Office, and comprising representatives from all key Ministries and mass organizations in the Lao PDR. The National Commission is tasked with developing policy guidance on gender issues for the Government, and develop-ing plans of action to advance women’s interests and gender equality. The National Com-mission is also involved in monitoring and evaluating the implementation of Government poli-cies promoting ends of all forms of discrimination against women. The LWU has an established Women’s Training Center in Vientiane, and research and train-ing centers in several other provinces. No information could be found that indicates that either the LWU or the National Commission have been closely involved in any programs to address discrimination in employment against women in garment factories. Contact information -- Street address: Thanon Manthatourath, Ban Xiengyeun Thong, Muang Chanthaburi, Vientiane, Laos, mailing address: P O Box 59, Vientiane, Laos; Telephone: 856 (0) 21 214304, Fax: 856 (0) 21 214306, 856 (0) 21 214312; Con-tact: Onechan Patthammavong (f) President, Telephone: 856 (0) 21 214300, 856 (0) 21 911435, 856 (0) 20 990 1118 (mobile), Contact: Khemphet Polsena (f) Deputy President, Telephone: 856 (0) 21 214301, 856 (0) 21 911436, 856 (0) 20 551 4358 (mobile), Con-tact: Bouavone Onechanhom (f) Deputy President, Telephone: 856 (0) 21 214303, 856 (0) 21 911437, 856 (0) 20 990 1119 (mobile) 5.3. Lao Federation of Trade Unions (LFTU) The LFTU was established in 1965. The leadership of the LFTU is selected in elections, which are conducted among the membership every 5 years. Current staff levels of the LFTU were reported to the ILO as follows: 60 staff persons at LFTU headquarters in Vientiane, between 4 to 12 LFTU staff at the provincial level (depending on the size of the province) and approximately 5 staff at each district-level LFTU office. In 2003, the LFTU reported that it had 91,386 members nation-wide (31,920 women, approximately 35%) from 2422 groups and


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4922 labor units. It is interesting to note that a very high percentage of LFTU members are members of the LPRP (25,334, approximately 27%), the LYU (34,306, approximately 37.5%), or the LWU (21,436, approximately 23.4%). The LFTU organizes a national union meeting every year in Vientiane, which is supported by the Lao PDR Government. At the provincial level, the LFTU usually meets at least twice a year. The provincial level LFTU is required to provide quarterly update reports on progress to the LFTU Headquarters. Organizing by the LFTU focused on the garment sector primarily takes place at the district level. The LFTU district offices often encourage workers to first join the LFTU, and then seek to persuade them to organize a union in their factory. However, efforts are uneven, and often not sustained at this level by the LFTU – and even where a labor unit is set up in a factory, it frequently occurs that not all enterprise labor unit members take the step to actually join the LFTU. Financial support for the LFTU comes from a very small membership dues payment (500 kip per month per member), which is divided among the district, provincial and headquarters levels. The LFTU produces a fortnightly newspaper, Haeng Gnan (Labor), in the Lao language, which has a circulation of approximately 1500 copies. Other support comes from the Lao PDR Government, international donors, and individuals. LFTU contact information -- Street address: 87 Thanon Lane Xang, Ban Hatsadi Neua, Muang Chanthaburi, Vientiane, Laos, mailing address: P O Box 780, Vientiane, Laos; Telephone: 856 (0) 21 212753-4, Fax: 856 (0) 21 212750, Contact: Bosaykham Vongdala Acting President, Telephone: 856 (0) 21 212751, 856 (0) 21 223498, Contact: Khamla Lolonesy Deputy President, Telephone: 856 (0) 20 551 1037 (mobile)

5.4. Lao National Chamber of Commerce and Industry (LNCCI) The LNCCI is the sole recognized national employer congress in Lao PDR, and operates a website at www.lncci.laotel.com. The LNCCI was established in 1989, and operates under the provisions of Prime Minister’s Decree No. 174 (August 1998), which was later amended by Prime Minister’s Decree No.125 (July 2003). The LNCCI claims 895 business members, which it states come from a wide cross-section of companies operating in the country. Within the LNCCI are 9 business groups, 11 sectors, and 1 association. Headed by a 15 member board, the President of the LNCCI, Kissana Vongsay, states that the organization “main-tain(s) the links between the local industries and the various Government ministries and agencies in views of the expansion of trade and investment” and is “mandated to regulate and eliminate some of the impediments than hinder the competitiveness of Lao enterprises in international markets.” President Vongsay further maintains the organization represents the collective will of his members’ interests to improve business conditions in Lao PDR. A General Assembly of the organization, comprising its membership, is held every three years. The LNCCI has also established provincial branch offices. The LNCCI has set up a number of Standing Committees, which are designed to advise the LNCCI board and rele-vant Government policy-makers in various aspects of commercial and business policy. A Standing Committee on Labor and Welfare has been established by the LNCCI. Reflecting its multiple functions as a regulator, an advisor to Government, and a representa-tive of business interests, it is not surprising that the LNCCI is primarily funded by a conces-sion given by the Ministry of Commerce. The LNCCI is in charge of issuing Certificate of Ori-gin certificates for goods manufactured in the Lao PDR, which are to be exported.


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In discussions with the official business community in Lao PDR, LNCCI is the first appointment to make. The list of the fourteen prescribed duties in article 5 of the LNCCI Articles of Associations is must reading to understand the organization. The LNCCI is basically an intermediary organization under the control of the Government – to represent employers, but also to coordinate the relationship between Government and private business. It serves as a channel for advice to the business community and the Government, as well as a funnel for Government directives and policies regulating what the business sector can and cannot do. The LNCCI is tasked with seeking support for the implementation of skills upgrade/vocational policies, and effecting technology transfer to Lao business – both top priorities for the Lao PDR. The LNCCI is further tasked with taking on the task of research on market conditions, product standards, quality and price of goods, etc. Finally, as if this was not enough, the LNCCI is also designated as the sole Lao PDR link to international business associations, and for negotiation with foreign busi-nessmen to promote industrial development in the country. Disturbingly, the article 1 of the Articles of Association of the LNCCI designate the organiza-tion as “…the representative of the labor force nationwide to formulate comments and pro-posals to the Government and the various International Meeting.” Yet in article 5, the LNCCI is charged with the task to “Mobilize, establish, and supervise business group and associa-tion nationwide.” This is an apparent conflation of labor and employer interests in an organi-zation that cannot even remotely be said to represent workers. Approximately 50% of LNCCI staff are seconded civil servants. LNCCI funding comes from three key sources: fees charged for membership; fees it collects for managing Government regulatory procedures, such as the establishment of a business, and fees for issuing certifi-cate of origin for European GSP (the so-called Form A, which is issued by the Ministry of Commerce); and budget that it receives directly from the Government. LNCCI activities include conducting seminars, conferences, and workshops on various top-ics, and managing the organization of exhibitions and trade fairs to promote Lao goods and products. The organization also serves as the tripartite representative of employers on vari-ous boards. The LNCCI apparently does not have policies or programs specifically related to conditions or treatment of workers. A joint UNDP/UNIDO project (providing $US 2.33 million between 2006-2009) is supporting the LNCCI and business associations in private sector development and improving the ‘ena-bling environment’ for business, and strengthening the capacity of the LNCCI to represent its members. UNIDO is also providing a separate project on improving manufacturing productiv-ity and environmental soundness in production. Contact information -- Street address: Thanon Sihom, Ban Sihom, Muang Chanthaburi, Vien-tiane, Laos, mailing address: P O Box 4596, Vientiane, Laos; Telephone: 856 (0) 21 219223-4, Fax: 856 (0) 21 219223, E-mail: [email protected], Website: http://www.lncci.laotel.com/, Contact: Kissana Vongsay President, Telephone: 856 (0) 20 551 1913 (mobile), Con-tact: Sananh Chounlamany Deputy President, Telephone: 856 (0) 20 550 9363 (mobile). 5.5. Lao Textile and Garment Industry Group (LTGG) The LTGG is the business group under the LNCCI that specifically represents and advocates on issues of interest to garment manufacturers in Lao PDR. Essentially, the LTGG is the sole garment manufacturers association in the country. Among its activities are domestic and international representation for the interests of the Lao garment industry domestically and internationally, education for its company members, engagement with the government and


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LFTU in tripartite mechanisms regarding labor issues, and provision of policy advice to the Lao Government. Contact information: Mr. Chamlong Janetanakit, Director, Lao Textile and Gar-ment Industry Group, Km 2 Luangprabang Rd, Vientiane LAO P.D.R., Phone No: (856) 2144 50 or 222 769 Fax No. (856) 21 216993, E-mail: [email protected]

5.6. National University of Laos (NUOL) The NUOL is the major training institute for human resource development for the market economy. Numerous donor organizations provide financial and technical support for NUOL vocational and business management education programs. NUOL has a Faculty of Econom-ics and Business Administration, and Faculty of Law and Administration. A Lao-Japan Center for Human Resource Cooperation also exists and provides training on human resource and management. The NUOL works closely with the LWU on research and education programs focusing on gender awareness and impacts of gender on development. Information on NUOL can be found at their website, www.nuol.edu.la 5.7. International Partners APHEDA APHEDA (www.apheda.org.au/ [email protected]) is the overseas union aid NGO con-nected to the Australian Council of Trade Unions (ACTU) and operates a Lao PDR program working primarily with the LFTU and the LWU. Key strategies that APHEDA is implementing as part of its Lao PDR Strategic Plan 2005-2008 include improving working conditions through training of staff and members of the LFTU and combating trafficking and child labor, conducting capacity building on OSH issues for the LFTU, and supporting women’s participa-tion, and vocational training (LWU). New areas for possible further research and develop-ment include helping the LFTU better adapt to the demands of representing workers in the market economy. ILO The ILO Sub-regional Office in Bangkok is strongly committed to capacity building for na-tional employer and labor partners in the Lao PDR, and has an excellent ongoing relationship with the MOLSW. They will be a valuable partner for any training on corporate social respon-sibility and codes of conduct in Lao PDR. Ms. Linda Deelen: [email protected] Other international NGOs An excellent database of international NGOs and projects being conducted in Laos exists at www.directoryofngos.org however, a review of the projects indicated almost none that spe-cific target garment factory workers. Most of the projects focus on rural areas of Lao PDR, reflecting the Government’s emphasis on rural development. Possibilities for projects with international NGOs, possibly with the LWU or LFTU as local partners, could focus on gender rights/training, legal literacy on the Labor Law, and health issues (family planning, HIV/AIDS).


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List of Acronyms ADB Asian Development Bank GMS Greater Mekong Sub-region ICFTU International Confederation of Free Trade Unions ILO International Labor Organization LFTU Lao Federation of Trade Unions LHG Lao Handicraft Group LNCCI Lao National Chamber of Commerce and Industry LPDR Lao People’s Democratic Republic LPRP Lao People’s Revolutionary Party LTGG Lao Textile and Garment Industry Group LWU Lao Women’s Union LYU Lao Revolutionary Youth Union MFA Multi-Fiber Agreement MIH Ministry of Industry and Handicrafts MOLSW Ministry of Labor and Social Welfare, Government of LPDR NTR Normal Trade Relationship Bibliography Amnesty International, “Lao People’s Democratic Republic: The October Protestors, Where Are They?” Report ASA 26/04/00, May 31, 2000. International Confederation of Free Trade Unions, Annual Survey of Violations of Trade Union Rights 2006, Lao PDR chapter, Belgium, Brussels, released June 2006, www.icftu.org International Labor Organization, Lao Labor Market Indicators 2001-2003. International Labor Organization, “Draft Final Report Study on Working Conditions, Produc-tivity, and Management in the Garment and Textile Industries of the Lao PDR”, by Dr. Il-cheong Yi and Pisith Chooyong, October-November 2003, unpublished report. Government of Lao PDR, Organization of the Government of the Lao PDR (Lao People’s Democratic Republic) ,The Prime Minister's Office, Department of Public Administration and Civil Service, LPDR, produced by United Nations Development Programme, UNDP Public Administration Reform Project, Lao/92/006 and 506 Lao Women’s Union and Gender Resource Information Development Centre, with support from World Bank, Lao PDR Gender Profile, November 2005 Robertson, Philip S., Jr.; “Report to the Asian-American Free Labor Institute (AAFLI) on Cur-rent Labor Conditions in the Lao People’s Democratic Republic (LPDR)”, unpublished report, Washington, D.C., February 1996. Robertson, Philip S., Jr.; "Labor Law in Laos", Asia Pacific Labor Law Review: Workers' Rights for the New Century, Asia Monitor Resource Center, Hong Kong, 2003 UNICEF, Report on the Survey and Situation Regarding the Trafficking of Children in the Lao PDR, prepared by Duang Deuane Bounyavong, December 1995. UNIDO, Lao PDR: Medium-term Strategy and Action Plan for Industrial Development, Vienti-ane, May 2003.


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US State Department, 2005 Country Reports on Human Rights Practices, Laos PDR chapter, Washington, D.C., released March 8, 2006, www.state.gov Vientiane Times, “Workers, Employers Debate Wage Increases”, by Ekaphone Phouthonesy, November 21, 2006. Vientiane Times, “Law Sees Gap for Exploitation”, December 27, 2006. Voice of America, Laos Today: Laos' Garment Exports Not Benefitting As Much from NTR, by Songrit PhonNgern, July 18, 2006. World Bank, Lao PDR Economic Monitor, World Bank Vientiane Office, April 2006. World Trade Organization, “Laos: The Textile and Garment Industry in the Post-ATC Era”, by Banetsay Thephavong, Khouanchay Iemsouthi, and Buavanh Vilavong, www.wto.org End Notes 1 WTO, “Laos: The Textile and Garment Industry in the Post-ATC Era.” The three authors of the article are officials in the Foreign Trade Department of the LPDR Ministry of Commerce. 2 See information on website www.visionlao.com 3 See information on website www.pvgarment.laopdr.com 4 WTO. 5 Tariff distortions faced by Lao clothing imports to the US were significant under NTR. Without NTR, a Lao-produced t-shirt for a man faced a 90% tariff, but after passage that tariff dropped to 17.4%. This placed Laos on parity with virtually every other country in the world that is exporting clothing to the US. 6 Information provided in the WTO report noted a comparison of $US 1200 per shipment of standard containers from Laos versus $US 250 for Vietnamese exporters. 7 Voice of America, Laos Today: Laos' Garment Exports Not Benefitting As Much from NTR, by Son-grit PhonNgern, July 18, 2006. 8 Address: 11/1 Thadeua Road, Chomphet Neua, Sisattanak D27, Vientiane. 9 UNIDO, Lao PDR: Medium-term Strategy and Action Plan for Industrial Development, Vientiane, May 2003. 10 WTO. 11 UNIDO, 2003. 12 ILO, Lao Labor Market Indicators 2001-2003. 13 Statement of Mr. Khamtanh Sophimmavong, Deputy Head of International Relations Division, Lao Federation of Trade Unions, presented at OSH workshop held by AMRC in Phnom Penh, Cambodia, November 20-25, 2000. 14 Comrade Venethong Luangvily, President, Central Federation of Lao Trade Union “Speech by the Representative of the Party Committee of the Central Federation of Lao Trade Union to the Seventh Congress of the Lao People’s Revolutionary Party on ‘the Promotion of Employment and Protection of Interests of the Working People’.” March 2001. 15 The ILO researchers employed a reasonable definition that a labor union exists in a factory if there is a clear leadership, and that LFTU chapter collects union dues from its members at the factory. Where there is a LFTU presence but no functional organization or dues collection, the ILO classified that as indicating a “labor representative” was present. 16 The most specific number was provided by Mr. Khamtanh Sophimmavong, the Deputy Head of the International Relation Division, who stated that membership was 77,057 (27,388 women) during re-marks to the AMRC seminar in November 2000. 17 Labor Law of the Lao People’s Democratic Republic, 1994. 18 “Law Sees Gap for Exploitation”, Vientiane Times, December 27, 2006. 19 ILO, 2003 report. 20 Philip S. Robertson Jr., unpublished consultant report, “Report to the Asian-American Free Labor Institute (AAFLI) on Current Labor Conditions in the Lao People’s Democratic Republic (LPDR)”, Feb-ruary 14, 1996.

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21 ILO, 2003. 22 “Final Report of the 54 Seminars Organized Regarding Labor Law and Other Necessary Laws of the Lao P.D.R.”, Department of Labor, Ministry of Labor and Social Welfare, Lao People’s Democratic Republic, May 1995. 23 The researcher recognizes this report is over a decade old. However, factory problems often persist for long periods of time, so the list of what was found at various factories at this time is included below for the sake of completeness for the auditors. In 1995, Enterprise Si Muang Garment was found to fine workers for coming late, while P.V. Garment refused to allow workers who were late to enter the factory. At Great Lao Garment, any worker missing work three times was immediately terminated without compensation. Fancy Garment and Mode Knitted Wear Co., Ltd. were found to be fining workers for refusing overtime. Shinawatra Lao was found to be failing to pay sick leave pay to work-ers sent home with conjunctivitis (‘red eye’) while Vientiane Garment was discovered fining workers for missing work when they came down with the same affliction. Yakjin No. 1 and Tee Van Tee Garment denied maternity leave benefits. Keen Basic Co. was found to pay only one-month maternity leave rather than three months. M.B.L. Co. was found fining workers for broken equipment, such as sewing needles. No written contracts for workers were found at the following factories: N.R.T. Garment, La-litha, S.I. 24 UNICEF, “Report on the Survey and the Situation Regarding the Trafficking of Children in the Lao PDR”, prepared by Duang Deuane Bounyavong, December 7, 1995. 25 Robertson, AAFLI report, 1996. 26 ADB, Country Assistance Plan (2001-2003). 27 Lao Women’s Union and Gender Resource Information Development Centre, with support from World Bank, Lao PDR Gender Profile, November 2005. 28 The ADB states that civil service wages account for approximately 4% of GDP, which is less than the average in region of 4.5% This is a macro-level indicator of what every Lao person already knows – that Lao civil servants are not paid a living wage, and therefore often resort to corruption. 29 World Bank, Lao PDR Social Development Assessment and Strategy, Report No. 13992-LA, August 15, 1995. 30 Lao Women’s Union and Gender Resource Information Development Centre, November 2005. 31 UNICEF, Report on the Survey and Situation Regarding the Trafficking of Children in the Lao PDR”, prepared by Duang Deuane Bounyavong, December 1995. 32 The arrest in April 1999, and subsequent sentencing to long prison terms, of core members of the Lao Students Movement for Democracy for organizing a peaceful protest of thirty persons in Vientiane is an important indicator of the LPDR Government’s total intolerance for any sort of unauthorized pub-lic assembly. 33 Vientiane Times, “Workers, Employers debate wage increases”, November 21, 2006. 34 US department of state: http://www.state.gov/e/eb/ifd/2006/62007.htm 35 Hazardous professions include mining in closed underground areas, or work at tall heights; expo-sure to gas, smoke, radiation, or disease; exposure to chemicals or explosives; work in ‘abnormally’ hot or cold environments; or work in constant contact with ‘constantly vibrating’ machinery. 36 “Message from His Excellency Mr. Le Kakanhya, Acting Minister of Labor and Social Welfare, Chairman of SSO Board of Directors, at www.ssolao.gov.la/minister.htm

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