Made in Vietnam

(Fortune Magazine) -- Late on a humid afternoon on the industrial outskirts of Ho Chi Minh City, as loudspeakers inside the gated compound of the Linh Trung Export Processing Zone play a melody releasing workers from their shifts, monsoon-season thunderclouds threaten overhead.

The 1,700 workers at the Danu Vina factory, who make Mickey Mouse, Minnie Mouse and other stuffed animals for Disney (Charts), as well as items for other multinational retailers, gather their belongings from the cubbyholes where they left them and begin to file out.

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Then the clouds open up, and the workers make a run for it. Some have umbrellas or ponchos, but others brave the pelting drops with only a hand to keep the rain from their eyes. It's about 200 yards from Danu's doors to the exit gate of the industrial park and a dozen more to what's known as the Korean Highway. (The road was financed by Koreans, who also own Danu Vina and some of the other factories in the compound.)

Steady streams of semi trucks, oil rigs and long-haul buses ply the four-lane stretch of road, barely slowing their murderous hurtle as workers link arms and dart through gaps in the passing traffic. There are no crossing lights. It is hard to see through the sheets of rain, and the young women shriek with both excitement and trepidation from the splashing truck tires, the thunderous claps and the serrated streaks of lightning overhead.

All of the workers - young women like 23-year-old Duong Thi BeSau ("Baby Six") and her sisters - live on the other side of the highway. They have no choice but to cross the road.

In some ways the busy highway, the workers scrambling to cross it and the excitement and trepidation are all metaphors for the position in which Vietnam finds itself in the world today. More than 30 years after the end of the Vietnam war, and more than a decade after relations were normalized with the U.S., Vietnam is set to merge onto that superhighway of global trade, the World Trade Organization, a move that will expose the country to both opportunity and risk.

Already Vietnam is the second-fastest-growing economy in Asia after China (8.4 percent last year), and the breakneck speed has been accompanied by enormous interest from global manufacturers looking for alternatives to China - from Intel (Charts), which is building a semiconductor test-and-assembly plant, to Victoria's Secret, which sources loungewear from the city formerly known as Saigon.

It has also seen labor unrest: Wildcat strikes against some factories earlier this year, including Danu Vina, resulted in a government-mandated 40 percent increase in the minimum wage, although manufacturing costs are still as much as 35 percent lower than in China.

Baby Six and her sisters, who make some of the products that helped account for $6.6 billion in exports to the U.S. last year, have never heard of the WTO. They read newspapers only occasionally and rarely tune their small radio to the news, preferring to listen to love songs.

They've never heard of Disney either, although they know the names of the characters they have made. "That's MEE-kay!" they shout when shown a Mickey Mouse doll, pointing out the parts they have sewn.

But Baby Six and the roughly five million factory workers like her are at the vanguard of a revolution transforming Vietnam. While the first fruits of capitalist reform were harvested in the 1990s, allowing Vietnamese living at subsistence levels to buy TVs and motorbikes, the new generation of factory workers marks the beginning of a middle class.

In the past decade purchasing power has doubled and poverty has been halved, making Vietnam the third-most-attractive retail market among emerging countries, according to consultants A.T. Kearney.

Workers employed at foreign-invested factories in Vietnam's major cities earn by law a minimum of $55 a month plus overtime, but workers at Danu Vina start out at $59 a month and earn more for each year of experience.

Baby Six, who comes from a small village in southern Vietnam along a tributary of the Mekong River not far from where John Kerry piloted his Swift Boat, makes between $75 and $95 a month. "It's easier than working in the rice fields," she says - a sentiment echoed by many of her co-workers, the majority of whom grew up watching their parents bend and toil in the hot sun to eke out a living on tiny plots of land.

By local standards, these workers make a decent wage. In a good month, Baby Six makes about twice the per capita GDP and half the official salary of a senior government official in Hanoi. But she is shocked to learn that the Minnie and Mickey Mouse dolls she has sewn are for sale at Disney stores in the U.S. for $13. That's a week's pay.

Baby Six was born in 1983, eight years after the last American troops left Vietnam. For her, the war was a long time ago, and she neither knows much about it nor cares. Instead she spends her days picking up whatever stuffed animal is passing through her work station and sewing several quick stitches with a needle.

Danu makes stuffed toys and furry products such as bedroom slippers and Halloween costumes for name-brand retailers in the U.S. and Europe. When the production schedule calls for Disney characters, Baby Six's job is to sew the red bows onto Minnie Mouse heads.

Danu workers start at 7:30 A.M., get 15-minute breaks in the morning and afternoon, plus an hour for lunch, and finish at 4:30 P.M. They work six days a week, a total of 48 hours, the standard in many manufacturing countries of Asia.

When there's overtime - which there frequently is - they have the option to refuse it. Most only do so if they're sick. Overtime pays time and a half, plus double wages if there's a Sunday shift and triple for a national holiday. If they work until 9 P.M., they get a free dinner in the company canteen.

The factory also employs a full-time doctor and nurse to provide free onsite medical treatment. One recent day Baby Six was suffering from a cold and headache and went to the clinic for injections she believed would help. The factory also reimbursed her for visits to a private doctor.

Manufacturing in Vietnam is nothing like it was in the 1990s, when sweatshops run by Korean and Taiwanese subcontractors making clothes and shoes for Nike and other brands made headlines instead, prompting consumer boycotts.

Nike (Charts), with more than 130,000 workers at 165 subcontractors in Vietnam, has put the most muscle behind improving conditions. "We cannot stomp out every case of malfeasance on the part of every manager," says Amanda Tucker, Nike's chief representative in Vietnam. "The solution is to have good systems in place to deal with it."

Big companies like Nike and Disney send their own monitors to conduct regular inspections. "That old attitude that it's the subcontractor's responsibility is totally gone," says Carey Zesiger, a Vietnamese-speaking American who runs Global Standards, a monitoring organization in Ho Chi Minh City that audits factories for multinationals. "There were some abuses here in the 90s, but Vietnam doesn't tolerate that very well."

Labor standards aren't perfect at Danu. Disney monitors its subcontractors all over the world to make sure they meet its code of conduct, drafted ten years ago in the midst of the sweatshop uproar. In two visits to Danu this year, monitors found "some issues of noncompliance," says Mark Spears, director of international labor standards at Disney. They included record-keeping discrepancies regarding wages, minor health and safety violations having to do with safeguards on machines and a lack of clearly marked emergency exits.

Factory manager Andy Kim spent the summer correcting the violations, but Disney decided to hire an outside auditor to keep a close watch. Disney is strict, notes Kim, an observation confirmed by the manager of another factory, which sought accreditation by Disney and was denied. "Our labor standards exceed those of our other clients," Kim says.

"Keep out if you don't have business here!" reads the scrawl painted on the steel door of the room that Le Thi Mai, 24, a quality-control worker at the Danu factory, shares with her sister and another woman from their village in mountainous Ha Tinh province in central Vietnam.

Inside the tiny room, painted a tropical shade of aqua and decorated with calendars and promotional posters, is a single-burner hot plate, an electric rice cooker, a five-gallon jug of drinking water, and a bathroom with a squat toilet and plastic wash basin where the girls bathe after work and wash out their uniforms. Clothes hang on a pole suspended from the ceiling. By the door is a heart-shaped vanity mirror with a tray to keep their shared comb, tweezers and a red silk rose. A platform bed, which they cover with woven mats and where the three girls sleep together, takes up almost all of the floor space.

Mai, who has assigned her younger sister to the middle of the bed and her fellow villager, who works at another factory in the industrial park, to the space against the wall, says they all get along. "We never argue," says Mai, "because I'm the eldest, she is my sister, and she is new."

There is a sorority air in these dormlike rooms, and indeed these young women plan to stay for only a few years - until they meet someone and get married, or until their parents set up an introduction back home. If they do want to stay on at the factory, there's usually a chance to become a line supervisor after a few years. But most don't have career ambitions.

Unlike China, where factories provide housing onsite and deduct room and board from workers' pay, migrant-worker living in Vietnam is a free-enterprise affair. Workers rent rooms from landlords within walking distance of industrial parks, in two- or three-story shop houses.

Vendors along the narrow lanes sell a colorful array of fruits, vegetables and meats. The rooms are usually unfurnished; most workers roll woven straw mats over their tiled floors at bedtime, and if they're at home during waking hours they sit cross-legged on the floor. Roommates group themselves first by family relation, then by village.

Mai and her roommates each pay $7.60 a month rent, including electricity and water, for a ground-level room that provides little privacy from their neighbors or passersby. Food is another $7 to $10 a month per person. The factory deducts $3.75 a month, plus 5 percent of base salary (roughly $3.25), for health insurance and social security.

The women get free uniforms. After expenses, Mai keeps about $50, or three-quarters of her salary. She spends some of that on haircuts (50 cents), shampoo in single-use sachets (3 cents), colorful hair ties (25 cents), plastic bracelets (30 cents), online chat or gaming at the Internet café (18 cents an hour), a group trip to the karaoke parlor ($1), and concerts and comedy performances that pop up at nearby outdoor venues on Saturday nights (75 cents to $1.25). The rest is kept in a wad in her pocket until a trusted courier can take it to her family or she can remit it through the post office.

Mai and the other women also buy gold. On paydays the counters of the gold shops along the Korean Highway are thronged several deep with workers. They have taken their work-issued ATM cards to the Vietcombank at the exit of the industrial park and withdrawn their salaries from their direct-deposit accounts. They don't trust the bank very much; they just see it as a paymaster with a digital screen instead of envelopes on the factory floor.

None of the girls is old enough to remember when the paper money issued by the South Vietnamese government became worthless upon the Communist takeover in 1975, but distrust of cash is imbued from a young age. Plus, their bank accounts pay 2.4 percent annual interest, less than inflation, and quite a bit less than the 12 percent gold has increased in value this year. It's a detail not lost on these women, even though most have only a ninth-grade education.

So they pick out pretty rings and necklaces, which have the dual purpose of serving both vanity and investment value. By the end of the pay period, however, the girls who have not managed their finances well and need cash to pay their rent are back at the same counter pawning their purchases. If the price of gold has risen, they may get back more cash than when they started, but the opposite is just as likely. In either case, the gold seller keeps 4 percent of the transaction.

Mai came south because most of her friends did. She begged her mother to let her go and promised to stay only one year. That was five years ago. Yet Mai has never been to downtown Ho Chi Minh City. The bus makes her carsick. The closest she ever came to a vacation, other than annual visits home for Tet, was an outing to a nearby theme park with go-carts and a water slide.

"My parents don't want me to work in Ho Chi Minh City," she says, "but all my friends are here, so they have to allow it. My first friend went back home and got married. And now I'm 24 years old, and I don't even have a boyfriend. Usually girls in my province get married at 18 or 19, so I don't think I will ever have a husband. It's my destiny."

She did have a boyfriend for a while. He's a long-distance bus driver three years her senior, and when he asked her to marry him, she said no. "We have conflicting characteristics," she sniffs, noting that their Chinese zodiac years are out of sync and that his hometown is too far from hers. "He said, 'If you don't marry me, I'll never get married,'" she recalls with evident satisfaction and a steely glint. "He's still single."

In a few days Mai will attend the wedding of a fellow Danu worker, Thanh Nga, who is marrying a man from a furniture factory she had met at a wedding party. "Once I had to attend four weddings in a single week," Mai complains, adding that her usual gift of 100,000 dong ($6.30) was taking a toll on her savings. "I'm very happy for them, but I feel sorry for myself," she says, fingering a frilly invitation addressed "To Mai + Lover," traditional etiquette in Vietnam for inviting a single woman to a wedding. "I'll probably just end up living with my mother," she sighs, "but I don't really have a plan. At least I have savings. Maybe I'll open a food shop someday."

On the big day the bride and groom carry sparklers down the aisle of a restaurant, declare their love on a stage in front of 200 guests, pour pink champagne into flutes, and toast their future. There are seven workers' weddings going on in the same restaurant on this hot Sunday morning, and the competing toasts, cheers and singing create a celebratory cacophony.

Course after course comes out of the kitchen, a feast for which the groom's parents have spent almost $600. The bride changes from her white Western-style dress into a red dress of happiness, takes off her pearl choker, accepts a thick gold necklace from her mother-in-law, and goes around to the tables with her new husband to greet well-wishers. Mai has dressed in black. She leaves early.

Baby Six shares a third floor room in a shop house with her two sisters, BeBay ("Baby Seven"), 22, and BeTam ("Baby Eight"), 18, plus a cousin, Pham Quynh Diem Trang, 23. Their room is bigger than Mai's, although they do have a fourth person sharing it.

Baby Eight is the newest - and still a ninth-grader (she started school late). She took a job in a Chinese-owned candle factory for the summer, making the minimum wage, while awaiting the results of her ninth-grade exam. If she passes she plans to go back to tenth grade and complete high school - and maybe beyond. She has a dream to someday be a policewoman. Baby Six and Baby Seven did not pass their exams, so their educations ended at the compulsory ninth-grade level. From there they had three choices: marry, till the family rice fields or go to work in a factory.

The jobs they have as young adults mirror their interests as children. Baby Six was always a girlie girl who had a doll with blonde pigtails and moving eyelids. Now she works at Danu.

"It was kind of accidental how I got this job," she says. "I just saw the sign for positions available, but maybe that's why I like it so much, because the dolls are so cute."

Baby Eight was more of a tomboy who liked to mold things out of mud along the banks of the Mekong's tributary. Now she makes candles. Cousin Trang used to build small houses out of sticks and rafts made of banana leaves. Now she works among the 4,000 people employed at a Japanese-owned factory, Nissei Electric, which makes fluorocarbon-resin wires, coaxial cables and optical fibers.

"I like it because I get to see what the inside of a cell phone looks like," Trang says. She also likes being the highest-paid of all the girls, taking home more than $100 a month from a job that occasionally includes an overnight shift. Baby Seven, who played with her sisters' hair as a child and may end up being her village's stylist someday, makes shoes at another factory in the industrial park. "I just like my job because I can make money!" she says.

Baby Seven, because she has the least amount of overtime of all the girls in her room - in part because of a trade dispute with the European Union that has curtailed Vietnam's shoe exports - usually makes dinner. On this particular weeknight she has made anchovies braised in a dark, caramelized citronella sauce and white rice. There's no refrigerator, so she has to make exactly as much as they will eat. Nothing goes to waste.

The girls rarely talk about work when they are together, but they do talk about missing their village. Their family home is a thatched structure with a dirt floor three times larger than their current room. It's more comfortable here, they say, and they like their tile floor because it is cool and easy to clean. But in the village they all slept in a large bed, and it took a few weeks of painful shoulders to get used to sleeping on tile. They all say they miss big trees. The industrial park has only planted saplings.

On a recent Sunday their father, Duong Van Sem, 54, has come to visit, and the girls sit on the floor eating lychees in front of a fan, while he holds court and smokes cigarettes. They all swat the bugs that come in through their open-air window, drawn by the wet fruit, body heat and fluorescent lighting. Overhead is a shrine to their ancestors. Baby Seven tended it that morning by replacing last week's offerings with a bowl of fresh mangoes and some incense.

"Five of my eight are married now," says Sem, "so having these three working helps us at home a lot. Mostly we buy fertilizer with what they earn. We already had a TV and a motorbike." It's just Sem and his wife taking care of their two acres of rice paddy, their ox, and some chickens. "Believe me, working in the field is harder than this factory work. Three women cutting rice all day earn only 50,000 dong [$3.15]." His three youngest daughters, he says, are lucky to have escaped it.

Soon it is bedtime, almost 10:30 P.M. Baby Seven dampens a rag and wipes it across the tiles as her roommates roll out the sleeping mats. The bugs won't come in when they turn out the lights, they say.

In the morning they will wake at 6:30 and put on their uniforms. At seven they will secure a padlock to the outside of their door and stop for a quick breakfast of rice noodles on the way to the factory. Then, at the edge of the Korean Highway, they will link arms, wait for a lull in the traffic, and, with trepidation and excitement, cross the road to another day.

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