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News Clips 29 October, 2013


[ Eligibility for sustainable GSP Plus facility ]
[ 30% textile units shut as of 2010-11; led to huge job losses ]
[ Bangladesh garment industry at a critical crossroads ]
[ Cambodia - Garment Exports Up, Margins Down ]
[ Punjab govt to amend existing labour laws ]

Eligibility for sustainable GSP Plus facility   [ top ]

Dawn, by FARRUKH SAJJAD, 28 Oct, 2013
While EU’s GSP Plus status for Pakistan seems almost a certainty, it remains to be seen whether the country would be able to benefit from this status.

Even without the granting of the Generalised Scheme of Preferences (GSP) Plus status, the European Union is still one of Pakistan’s largest trading partners, and about 30 per cent of its exports are destined for EU countries.

However, our exports to the EU are below potential. With improved access to European countries through the GSP Plus status, opportunities for Pakistani exporters to expand into EU markets would increase manifold. In fact, about 66 per cent of all tariff lines of the EU would have zero custom duty for our exports.

Countries that are eligible for this status are those who are considered vulnerable in their trade profile with the EU. This vulnerability is reflected in a lack of diversification of exports: i.e. 75 per cent of the export share is dominated by seven or lesser items, and exports constitute less than two per cent of EU’s total GSP imports (in case of Pakistan, it is only 0.2 per cent).

While 39 countries meet this criteria, this status has so far been granted to only seven countries, as tariff preferences are conditional on an unqualified commitment for ratification and implementation of 27 international conventions — 16 of which relate to human rights and labour rights, while the remaining relate to governance and development issues.

It is estimated that after achieving the GSP Plus status, 20 per cent of Pakistan’s exports would be able to enter duty-free in the EU, while 70 per cent would be treated at preferential rates.

However, there are many ifs and buts in the EU’s rules for GSP Plus status recipients, which are mainly aimed at protecting the local industry. They include the suspension of the status on items if the import of any item increases by 17.5 per cent over three years, as well as various safeguard clauses etc.

But the scheme still offers many advantages to Pakistani exporters, particularly in leather products, knitted and woven apparel, and other miscellaneous items. It is hoped that if exporters play their cards well, the country would be able to enhance its exports to the tune of $800 million, which would make a huge dent on our adverse balance of trade.

However, the weakest link in the chain is the enforcement and implementation mechanism of the 27 conventions, which the government has already ratified or is in the process of ratifying.

There seems to be no strategy in place regarding how the government would go about implementing these conventions, when its writ is so eroded that it cannot even enforce simple traffic rules. The conventions, which the EU wants us to implement, can be categorised into three groups.

• Conventions on human rights, with a special emphasis on rights of women and children

• Conventions that relate to the environment

• Conventions that relate to governance

On the human rights front, Pakistan signed the convention against torture and other cruel, inhuman or degrading treatment of punishment (CAT) on April 17, 2008, but the ground reality remains unchanged. During the last one year, more than 1,300 cases of torture were reported from the country. The Pakistan Army is reportedly running 52 detention centres. The government needs to work overnight to improve its human rights record.

Similarly, much needs to be done in other fields like labour rights, environment, minority rights and governance. In most of these areas, the legal framework is to be created by aligning national laws with these conventions. The capacities of enforcement officials need to be built, and implementation strategies are to be formulated.

Several steps can be initiated. Firstly, a joint public-private committee comprising senior government officials and businessmen needs to be formed, which may be tasked to prepare a report on the status of implementation of these conventions and give recommendations on the mechanism for their effective implementation.

Then an inter-ministerial committee may be formed to periodically assess the status of implementation of these conventions. After the promulgation of the 18th amendment, many of these matters now rest with the provinces, so they should also be taken on board, and their representation needs to be ensured in the committee.

It would be also worthwhile if representatives of reputed NGOs, like Amnesty International, Human Rights Watch etc. are also given representation on this committee.

We need to study the monitoring mechanism of the EU as well, which is clearly spelled out on their website. We also need to have a panel of competent lawyers who are well conversant with international law and who can defend Pakistan if the relevant agencies find the country in breach of these conventions.

It needs to be borne in mind that the EU has very strict monitoring mechanisms and that the GSP Plus status can be withdrawn on the recommendation of these monitors.

The most revealing case in this regard was of Sri Lanka, which was divested of its GSP Plus status in 2010 due to its alleged violations of the human right conventions when its government was waging its decisive phase of war against Tamil separatists. This adversely affected the country’s readymade garment industry, as many of the units closed down.

Meanwhile, the Trade Development Authority of Pakistan (TDAP) and the private sector should undertake a joint study to identify the products — besides traditional clothing — that can be exported to the EU market.

The government and the exporters should aggressively work on removing supply side constraints like power and gas shortages etc. to increase the share of value added textile products like readymade garments, among others, where Pakistan enjoys a definite competitive advantage.

The EU market is more quality conscious and there is no reason that once Pakistani exports make inroads there they would not like to stay there for a long period.

There is also a lot of potential to enhance non-traditional exports. For example, agricultural products only constitute 8.2 per cent of our exports, and there is no reason we cannot increase this share if we make special efforts in complying with European python-sanitary standards. But unfortunately, exports of this sector have not been able to make much headway.

Meanwhile, our seafood exports are practically banned due to poor hygienic conditions.

The government, in its export vision 2015, has committed to undertake certain initiatives in this sector, but none of them has materialised yet. And despite having the best quality fruits, including mangoes, we have been unable to export our delicacies to lucrative markets like the EU.

There is an urgent need for our traders to undertake practical measures to improve processing and packing standards of food items and make them at par with the EU’s standards. Similarly, we can increase our share in the automotive sector by enhancing the quality of our auto parts.

30% textile units shut as of 2010-11; led to huge job losses   [ top ]

The Economic Times, 27th Oct, 2013
NEW DELHI: About 30 per cent of total textile factories across India were non-operational as of 2010-11 which led to massive job losses in the sector, a study by industry body Assocham has found.

"Of the total 17,987 textile factories across India, 12,688 factories were operational and around 5,300 were non-operational as of 2010-11," the study said.

Bangladesh garment industry at a critical crossroads   [ top ]

Just Style, 28 October 2013
Following the fall-out from the Rana Plaza building collapse and the Tazreen Fashion factory fire, pressure is on Bangladesh to accelerate its reform of the country's rapidly growing garment industry.

Indeed, The World Bank now sees Bangladesh's apparel industry at a critical crossroads, with its most recent Bangladesh Development Update describing the industry's image as "severely tarnished."

"The sector has the potential to become a US$36bn to $42bn industry by 2020 if it can prevent a recurrence of the tragedies seen with the Tazreen Fashions fire and the Rana Plaza building collapse," the Bank said.

On the other hand, it could fall into decline by failing to protect workers' rights and safety, prompting buyers to reduce their dependence on Bangladesh or abandon the country altogether.

The quarterly update described non-compliance in worker safety as the collective failure of manufacturers, buyers, and government. "Buyers have demanded quality at low prices without much regard to the working environment. Manufacturers have cut costs by failing to invest in improving safety and labour standards."

The update also noted that while incremental progress tends to be made after a disaster, many of the steps initially announced are not ultimately implemented. When another disaster happens, a flurry of action is announced again, but implementation remains incomplete and history repeats itself.

The World Bank identified that the most immediate priority for the government is to ensure enforcement of the steps suggested by foreign buyers, international agencies and domestic regulatory bodies.

Withdrawal of trade benefits to the US market under the Generalised System of Preferences (GSP) programme may not hurt the country's garment industry unduly, since the benefits to the industry were non-existent, according to the update.

"But if the EU were to suspend Bangladesh's favoured access to its markets, the country could see its total exports fall by as much as 4.1% to 8.0%," Zahid Hussain, lead economist of The World Bank Bangladesh, explained.

The EU bloc of 27 countries is the destination for 58.1% of Bangladesh's apparel products, thanks to duty-free and quota-free access under the GSP and the 'Everything But Arms' scheme.

The Bank noted that managing the safety of the clothing sector will be critical to export growth - but warned that another near-term risk is the prospect of a disruptive political situation which may impact all exports, not just garments.

Bangladesh garment exports rose to US$6.20bn in the July-September period, up from $4.99bn a year earlier, according to statistics from the state-run Export Promotion Bureau (EPB).

Cambodia - Garment Exports Up, Margins Down   [ top ]

Yarn & Fiber Export, 24th Oct, 2013
Despite concerns that political uncertainty would be a drag on the economy, Cambodia’s garment exports continued on an upward trend in the first nine months of the year, the latest data show.

Though volume increased, factory profit margins were squeezed due to labour disputes and demands for higher wages, according to the Garment Manufacturers Association in Cambodia (GMAC).

Cambodia’s garment and footwear exports were worth $4.1 billion in the first nine months this year, a rise of 22 per cent from the $3.44 billion amount in the nine months through September 2012, the Ministry of Commerce said yesterday.

The numbers came as something of a surprise following months of election-related tension.

After Cambodia’s disputed poll in July, many garment workers were scared to return to factories because of rumours that the country was on the brink of violence. But the tense atmosphere did not keep workers away long enough to make a dent.

The real impact, GMAC says, came in the form of labour demonstrations over unpaid wages, and gripes with management.

An ongoing strike at one of the biggest factories in the country, SL Garment Processing (Cambodia), had cost the company more than $1 million since the latest round of demonstrations began on August 12, according to the management.

International brands HandM and Gap reduced their orders, and Levi’s stopped buying from SL in August.

But Ath Thorn, president of the Coalition of Cambodian Apparel Workers Democratic Union, dismissed GMAC’s suggestion that workers were responsible for lower profits, and said labour demonstrations were too few and far between to have a serious impact.

Thorn attributed any income increase to workers having to do more overtime, and says that a raise in exports can be attributed to enhanced worker output.

“The amount they [employer] pay to worker is increased, and at the same time they get higher quantity too,” he said.

According to GMAC, the US is the biggest market for Cambodian garments and textile products, with imports worth about $1.21 billion in the first nine months, or about 30 per cent of market share. The US is followed by Europe, Canada and Japan.

Hing Thoraxy, senior researcher at the Cambodia Institute for Cooperation and Peace, said that the increasing number of garment exports reflects improved economic conditions in Cambodia and in its export markets.

Thoraxy added that while output is strong, more is needed to diversify and enhance production levels.

“We need to shift from simple T-shirts to produce more complicated products such as coats and shirts with embroidery, to add value to the product,” he said.

Punjab govt to amend existing labour laws   [ top ]

Business Recorder, 28 October 2013
LAHORE: Punjab Minister for Labour and Human Resources, Raja Ishfaq Sarwar said provincial government has decided to amend existing labour laws, besides new legislation to protect the rights of labour and workers.

Raja Ishfaq Sarwar was addressing a meeting of the officers of Punjab Labour Department, PESSI, Workers Welfare and other related departments.

He noted that compensation on the death of factory workers during work hours will be enhanced from Rs2 lakh to Rs5 lakh, adding that implementation on minimum wages (upto Rs10 thousand), announced by the government will be ensured. He said that every company and industrial unit will be bound to provide compulsory employment letter to the factory workers and labourers.

According to a hand out, Raja Ishfaq Sarwar said that labour ordinances 1934, 1969 and 1975 were being amended through Ordinance 2013 so that punishments and fines for CNG, petrol pumps and shop owners would be made more strict and industrial units be dealt with iron hands for not following labour laws.

He said that Labour Ordinance 2013 will soon be implemented after the approval by Punjab Assembly.

Labour minister also observed that Labour department has already started legislation for home-based workers with the help of consultants so as to ensure their security and welfare.