Dateline

Factories Should not use COVID-19 as an Excuse to Sack Staff

By The Irrawadddy 21 March 2020

Ye Ni: Welcome to Dateline Irrawaddy! This week, we’ll discuss the closure of factories and resultant redundancies. Chairman of the Confederation of Trade Unions in Myanmar (CTUM) U Maung Maung and U Nandar Sitt Aung, director of Our Generation Network, join me to discuss this. I’m The Irrawaddy Burmese editor Ye Ni.

Dozens of factories have closed and around 10,000 jobs have been lost. How worrying is this situation? Do you think there will be redundancies on a wider scale? Around 500,000 people are employed in the garment industry. Should they be worried?

Maung Maung: It is a cause for concern for the entire country. It will not just affect the garment industry, but the entire country. The country that supplies our factories could not produce materials and the demand has fallen in markets like Hong Kong and Europe. So the garment industry in Myanmar was hit by cuts in both supply and demand. Around 17 CMP [cut-make-package] factories were forced to close and nearly 10,000 employees were made redundant. But the situation is worrying for the entire country. We are trying to take preventive measures.

YN: In their statements, trade unions claimed that factories are closed not solely because of COVID-19, but there were also other factors. What do you say, Ko Nandar Sitt Aung?

U Nandar Sitt Aung: Most of the 17 factories that closed had recent industrial disputes. There is a question about whether those factories have closed due to industrial disputes. Labor organizations have asked if those factories were closed due to shortages of supplies or if it was just an excuse. Taking a look at the recent interviews with factory owners, it appears that they had stocks to run until the end of April. If so, why have those factories closed? Another factor is there are political problems. The UN fact-finding mission report in August targeted investment from Myanmar’s military. For example, the Ngwe Pin Lel industrial zone is owned by the military’s Myanmar Economic Holdings. [The UN] called for a boycott of purchases from garment factories in the industrial zone. Garment factories there already had problems. They will be considering moving and changing their names.

We also need to see if those factories closed because the tax exemption period is over. They may reopen under new names [to enjoy fresh tax exemptions]. These are problems related to investment procedures. The boycott urged by the UN fact-finding mission will be damaging. Chinese factories and those owned by Myanmar Economic Holdings will have to suffer. To avoid this, they will have to move to other locations and change their names. This might be a factor [in closures]. I urge them not to take advantage of COVID-19. They should be open about their difficulties and cooperate as it affects the national interest.

Editor’s note: A plane carrying garment supplies arrived in Yangon on Wednesday. The government has also raised a 1-trillion kyats (US$700-million) fund with 500-billion kyats from revolving Union funds and 500-billion kyats from social security funds to provide loans to factories, hotels and other businesses. It has also postponed commercial taxes until Sept. 30.

YN: What else would you like to add, Ko Maung Maung?

MM: We called for employers to follow the law when closing or downsizing factories. Employers must state clearly why a factory needs to close. There must be transparency. We have no complaint if the closure is due to a real shortage of materials. But we will investigate if the supplies really ran out. I don’t mean we will force our way into factories to investigate. Government agencies like the Commerce Ministry and Customs Department have the data. And Myanmar Garment Manufacturers Association might have data too. We can check the data as well as if the factories received orders from their buyers. Famous brands like H&M have dozens of factories in Myanmar. They are still receiving orders. We will ask them which factories [are still operating]. Chairman of Shwepyithar Industrial Zone management committee U Aye Thaung recently said he could arrange jobs for some 7,000 people. I believe him. A factory in Hmawbi is recruiting. Factories have just opened in Bago and Hlegu industrial zones. There are job opportunities. Those previously working in Hlaing Tharyar may struggle to travel to Hmawbi for new jobs. But there are job opportunities for them.

YN: What can the government do to help those who were made redundant? Governments normally intervene during economic recessions.

NSA: There is a solution. However, concerns will grow as the pandemic spreads. We should be worried about our country if the pandemic continues until the end of April. If we can’t find a temporary solution to import raw materials during that period, we will face a crisis. If the effect is limited to some parts of a particular industry, only those employed in that industry will have to suffer. But if the virus outbreak will result in the redundancies of the majority of employees across the country, it is a national crisis. There are social security funds to help employees in that case. Those funds are also the cause of arguments between Labor Ministry and labor organizations over the exact amount of those funds and how they will be used. If the virus outbreak has an impact on overall industries, the government should adopt a policy for how to use those funds for the employees. There are substantial social security funds, and the government should discuss how to use those funds, through tripartite meetings with employers and employees. This can be a temporary solution. As it is a global phenomenon, we can’t avoid the impact. But we have a chance to find temporary solutions.

YN: What would you like to tell the government?

MM: We know that the government has reserve funds. Our leaders should determine whether to use those reserve funds now. There are social security funds but they are collected for health insurance and not for unemployment benefits. But if the Parliament submitted an urgent proposal to use those funds for unemployment benefits, I think we will be able to financially support those who have lost jobs for one to two months. We will discuss that. The Myanmar Chinese Chamber of Commerce said more than 30 percent of garment supply production has resumed in China. Recently, 60 containers of materials like buttons and zips arrived in Cambodia following bilateral talks. This is very good. We will hold talks with the Chinese Embassy this week and ask for help to prevent the garment industry collapsing. According to the chamber of commerce, there are around 300 [Chinese] factories in Myanmar, and it predicted around 7 percent of them would have run out of supplies. It expects the sector will recover after April. We must take action.

On the issue of tax exemptions, if the factories consider changing their names and locations after enjoying tax breaks for eight years, the government can grant, for example, another eight years of tax exemptions and ask them not to close the existing factories. The Union and Yangon governments can also order landowners not to increase workers’ rents. It is reported that rice prices have increased in Hlaing Tharyar. Rice is grown in Myanmar. The price of rice should, in fact, have fallen because lower fuel costs means milling should be cheaper. The government can control the prices of basic foods like rice, onions and potatoes which are grown in Myanmar. It should be lowering the prices to reduce the impact on people. And the government can extend tax exemptions for factories. We have suggested that the government should not charge for electricity if it is difficult for employers to continue operations. If the government says it will not charge electricity bills, for example, for two years, then those factories will be able to continue operations. The government does not need to spend from its pocket to take these measures. If it takes such measures swiftly, it will be good economically. From the health perspective, we want to know what preparations the government has made. Suppose a suspected case is found at a factory and the patient is sent to the Waibargi infectious disease hospital. The government should have told us about what to do with the rest of the workers in that factory and their families. Only doing so will prevent panic. The government should organize drills. We have asked for support from the Union and Yangon governments. If we can control the Hlaing Tharyar industrial zone, which is crowded, this will help a lot. The Union and Yangon governments can take economic and health measures, without spending too much.

YN: Employers have said they face a crisis. They called for postponing [May’s] increase to the minimum wage. They also called on employees not to protest. Employers are also having a hard time. How do you think trade unions should act?

NSA: We started to engage in labor issues last year and, from our experience, we view industrial disputes as rule-of-law problems. According to our research, the majority of cases resulted from the denial of labor rights enshrined in labor laws. Employees usually said they were not given the minimum wage and overtime pay. Such cases were frequent in factories. There were around 900 industrial disputes in 2016 and 2017. Most of the cases involved the minimum wage and overtime pay with some factories seeing more than one case. There must be an effective labor dispute settlement system. There were calls in 2018 for prison sentences for employers who violated labor laws. It was clear that fines alone were not enough to make employers follow the labor laws. In industrial disputes, employers tended to go to arbitration bodies rather than engage with the government and employees. They will pay fines if they don’t want to follow rulings in arbitration. They will pay fines rather than follow the law. The regulators find it difficult to control them. The amendment of the Labor Dispute Settlement Law has damaged negotiation mechanisms. It has become difficult to hold negotiations. Employers do not show up for negotiations and employees have to wait for months. As negotiations do not function, employees have resorted to strikes. If the protestors and labor activists violate the law, take action against them. Suppose the court rules that employers pay compensation, but in that case, employers are not punished at all because the compensation comes from benefits that the firm did not give to employees. Our organization has avoided strikes and adopted a policy to settle industrial disputes lawfully. But there are difficulties. There are delays in legal proceedings as employers did not show up. While the legal approach is not working, there are political pressures against staging strikes. So we are not out of this crisis. It is necessary to have an effective settlement mechanism, particularly during the current crisis. We will check if the factories have run out of stocks and there must be a mechanism to swiftly address this. No one normally wants to stage strikes or protests. But there is no other way out. What all the labor activists can say is that we all are faced with difficulties.

YN: Ko Maung Maung, what else would you like to say?

MM: People only see political changes but we need social reforms too. Labor law is taught only in the third year of law degrees. There are no labor law specialists in the country. It is a problem. Talking about labor law is like talking about federalism. Different ethnic groups have their own definitions of federalism. There is labor law but there are also different interpretations. We were not able to study it. In 1959, the Labor Ministry reported on its activities for the whole year ahead of meetings with the ILO [International Labor Organization]. When it returned, the ministry reported on the ILO discussions to the parliament. Lawmaker Daw San San of Seikkan Township told me about it as she was a Labor Ministry official who participated in the process in 1959. But today the authorities view it as a burden to submit annual reports to the ILO. That mechanism has existed since 1959. [The government] today has no institutional memory and it thinks the ILO is deliberately creating problems. This makes it more difficult to cooperate with the international community. Trade unions submitted recommendations when the law was being amended. The 2012 law says a township-level trade union can be formed if there are two basic-level trade unions in that township. But it was amended so now there must be five basic-level trade unions to form a township-level trade union. It has become more difficult to organize. Apart from in the Hlaing Tharyar and Mingaladon industrial zones, it is unlikely that there are five trade unions in any single township. This is a barrier to representation.

We never have a chance to learn legal theories, we can only learn by experience. There should be more courses on labor law to help reduce industrial disputes. There are arbitration bodies at township, regional and national levels, but have they received any training? At the same time, trade union members who are involved in arbitration bodies should be impartial in performing their duties. There is still room for improvement in this mechanism. Industrial disputes are normal. They happen even in advanced economies like Germany, Canada and the US. Labor disputes will remain as long as there are employers and employees. Our dispute settlement system is poor and needs huge investment.

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