Vietnam could be forced to water down a new law designed to shore up its pension system after tens of thousands of workers protested against the changes in a strike that lasted nearly a week.
Four factories employing more than 90,000 people — owned by subsidiaries of Taiwanese footwear manufacturer Pou Chen Group (寶成集團) — halted production late last month as workers protested new pension rules that go into effect next year aimed at boosting the retirement program. The affected factories resumed production yesterday.
The changed law would prevent workers from receiving lump-sum social insurance payments when they leave companies.
To end the strike, Vietnamese Prime Minister Nguyen Tan Dung’s government is to propose amendments to the law to meet workers’ expectations of payouts when they quit a job.
The protests underscore Vietnam’s challenges in revamping its pension system. The nation’s social security fund is forecast to have deficits beginning in 2021 and risks being depleted by 2034, according to the UN’s International Labour Organization (ILO).
“The challenge is the government cannot bear a sustainable pension system if there are no contributions,” ILO Vietnam director Gyorgy Sziraczki said by telephone. “It is a very, very hard dilemma.”
All striking workers at Pou Chen’s factories in Vietnam have returned to work, spokesman Amos Ho (何明坤) said by telephone.
The work stoppage had little financial impact, Ho added.
Pou Chen’s seven factories in Vietnam make shoes for Nike Inc, Adidas AG and others, he said, without elaborating.
Adidas confirmed that one factory where workers went on strike makes apparel for it and that the company monitored the strike, according to a statement e-mailed last week. Nike said that it does not source from the factories affected by the work stoppage and that there has been no impact on Nike or Converse production in Vietnam, according to an e-mailed statement on Wednesday last week.
Pou Chen climbed 3.4 percent to NT$46.65 in Taipei trading on Thursday last week. Taiwanese financial markets were closed yesterday.
SAVINGS VS SECURITY
The change in the law that workers protested is designed to encourage them to save more money for retirement, Vietnamese Deputy Labor Minister Doan Mau Diep said by telephone.
Under current law, employees are permitted to withdraw money from their pensions with a penalty that reduces future government retirement payments, he said.
“What we were trying to do is to offer workers a more secure life at their retirement ages,” Vietnamese National Assembly social affairs committee vice chairman Bui Sy Loi said by telephone. “However, if workers do not want that change, we can roll it back and add that as one of the options in the new law.”
About 500,000 workers take lump sums from the social security fund every year, Loi said, adding that more increasing numbers take their savings before retirement.
Many factory workers view their jobs as temporary and plan to use pension savings created by mandatory paycheck deductions to start a business or help their families when they return to their villages, Sziraczki said, adding that there are relatively few microfinance programs available to help them.
In reforming the system, Vietnamese leaders must grapple with workers who distrust government institutions, Dane Chamorro, managing director for Southeast Asia at global business risk consultant Control Risks, said by telephone.
“The people fundamentally do not trust their government to follow through on the fact that the money will be there and it will be paid out,” he said.
South Korea told employers to provide retirement plans for staff starting next year after realizing that its state pension fund could go broke by 2060, when its population over 65 is set to triple. Germany and the UK plan to raise their retirement ages from 65 to 67, while Australian Treasurer Joe Hockey wants to increase the threshold to 70, which would be the highest in the world.
Singapore’s government has made it mandatory for companies to offer three more years of work to those turning 62, the official retirement age, and plans to extend that to five years by 2017.
Vietnamese government efforts to raise the retirement age in the past two years have been rejected by legislators.
Vietnamese policymakers have discussed making the nation’s voluntary pension system more attractive by providing matching government funds, though that idea was put aside because of state budget deficits, Sziraczki said.
As of 2010, the mandatory pension program covered about 9.3 million Vietnamese, or 20 percent of its labor force, the Asian Development Bank said. The voluntary system covered 62,000.
Some workers say that they would strike again or quit if the government does not quickly amend the new pension law.
“If the government does not change the social insurance law, up to half of the factory’s workers will quit their jobs so they can be eligible to collect social insurance payments before the new law takes effect,” Le Van Tin, 30, a striking worker at Pou Chen’s Ho Chi Minh City factory, said in an interview. “We cannot work as factory workers our whole life.”
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