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News Clips 25 July, 2013


[ ‘Steps to be taken to revive garments industry’ ]
[ Bangladesh: BUET teams to inspect factories not covered by US, EU buyers ]
[ Obama’s blunder with Bangladesh ]
[ India seeks US GSP renewal ]
[ Insight: Jeans and shoes show criminal underbelly of China-EU trade ]

‘Steps to be taken to revive garments industry’   [ top ]

THE NEWS, Correspondent Report, July 25, 2013
LAHORE: The Punjab chairman of Planning and Development Board, Irfan Elahi, has said that all possible steps would be taken for revival of the garments Industry in the province and the Punjab and federal governments will assist the industry in the effort.

He was chairing a meeting on efforts to promote the garment industry in the province. The member of Public Sector Development, P&D, Dr Naveed Ahmad Chaudhry, heads of the sub-committees and its members; Sajid Minhas, chairman of the Pakistan Ready-made Garments Manufacturers and Exporters Association and senior representatives of the departments concerned also attended the meeting.

During the deliberations, it was pointed out that Pakistan can benefit tremendously from the emerging opportunity where Chinese garments exports are getting expensive while the Bangladeshi garments industry is in crisis, and it is the right time for Pakistan to take immediate steps for revival of the garments industry to make full use of the opening. The participants appreciated the initiative taken by Punjab government and gave recommendations for improving the energy supply, security situation, setting up of specialised garments clusters, facilitation in custom procedures in line with specialised requirements of the garments sector. The causes of the decline of the garments industry were also discussed in the meeting.

Irfan Elahi emphasised the need to investigate and study the specific causes of the decline of the garments Industry before embarking upon efforts for its revival, to ensure that past mistakes are not repeated. He told the participants that recommendations of the sub-committees the be furnished to the chief minister of Punjab, who is keen on the revival of the garments industry in the shortest possible time.

During the meeting, heads and members of the sub-committees, constituted for promotion of garments industry, gave presentation with regard to proposals finalised by the respective sub-committee. Issues relating to GSP-Plus (duty-free trade with the EU), energy, skill development, garments clusters/industrial zones, import and export policy, logistic support and the industrial forum were discussed in detail at the meeting. The participants also gave recommendations on how to revive the garments industry.

Bangladesh: BUET teams to inspect factories not covered by US, EU buyers   [ top ]

FINANCIAL EXPRESS, Monira Munni, July 24, 2013
The government under a project, funded by the International Labour Organisation (ILO), will arrange inspection of the apparel manufacturing units that would remain beyond the safety coverage by top European and American buyers.

The project will aim to ensure greater safety and sustainability of the entire apparel industry, officials said.

The Labour and Employment Ministry, in association with the ILO will implement the project under which the Bangladesh University of Engineering and Technology (BUET) will carry out the inspection, they added.

The move came after some 70 European and some 17 US buyers' announcements about their own safety programmes in Bangladesh's garment factories. The programmes include the inspection of about 1,500 apparel units, especially those having direct business relations with them.

The safety programmes of European and American buyers will leave at least 50 per cent of the country's apparel units outside the proposed inspection programme.

These factories are engaged in manufacturing and exporting activities, either in the form of direct shipment or through sub-contracting.

"The government with the support from ILO will do the inspection work which is expected to start after the Ramadan," Labour and Employment Secretary Mikail Shipar told the FE.

According to the tripartite action plan formulated earlier on fire and building safety, the government was to inspect all the garment factories, he said adding: "But now we have decided to inspect factories beyond the coverage of the European and US buyers."

Sources in the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said a large number of non-compliant factories -- mainly the sub-contracting ones -- might face shutdown after the inspection.

The BUET has sent a list of about 30 hi-tech equipment in this regard and the authority concerned has given its nod to purchase those, Joint Secretary of the Labour Ministry Faizur Rahman said adding those equipment will be purchased with the funds provided by the ILO.

Tender for purchasing the equipment will be floated this week, he added.

He said the BUET with other engineering universities and experts has already formed some 30 teams to inspect the factories.

The equipment will be used for inspecting the building safety related issues like building structures, the Secretary said. When asked Mr Shipar said the ILO-funded project is not connected with the inspection programmes that already have already started by different authorities and the Labour Department.

"The inspection going on is mainly focused on fire and other safety related issues while the latest will be carried on both fire and building safety like structure, load bearing capacity and so on," he explained. When his attention was drawn to the number of the factories, Mr Shipar said the number is in between 1,500 and 2,200.

Replying to another question, he said the ministry is working to increase the number of inspectors.

According to the national action plan on fire and building safety, the inspection programme is supposed to be completed within three months, he said adding that it might take more time.

The pressure from both home and abroad to ensure fire and building safety in the country's garment factories mounted following two major accidents -- one at Savar in April last that killed more than 1,100 workers and the other at Tazreen Fashions in Ashulia in November last that took the lives of about 112 workers.

Obama’s blunder with Bangladesh   [ top ]

JAPAN TIMES, Kevin Rafferty, July 23, 2013
HONG KONG – President Barack Obama recently announced that he was suspending Bangladesh’s trade benefits under the Generalized System of Preferences (GSP) because the country failed to give its workers proper rights.

Not for the first time, I have to wonder at the clumsiness and the lack of sensible, let alone sensitive, policies by the administration of President Barack Obama.

No doubt he was inspired by horror and outrage after the deaths of almost 1,500 workers in a series of criminal accidents in Bangladesh’s factories making garments for the biggest multinational companies in the world such as Wal-Mart, Primark, H&M, Marks and Spencer, Topshop.

Bangladesh factories suffered from several fires where workers could not get out because the exits were blocked. One fire last year killed 113 people. But the truly murderous culmination came in April when an eight-story factory, whose owners had ignored planning and construction regulations, suddenly collapsed like the proverbial pack of cards.

Police had warned about cracks, but the factory owners told worried workers that if they did not go to work they would lose their jobs: 1,129 of them lost their lives, and others survived only after crushed limbs were amputated. It was the world’s biggest factory disaster.

The punishment that Obama has imposed is like an old-fashioned sledgehammer to crack the proverbial nut — but the sledgehammer has missed its target. That’s a good thing because if Obama had succeeded in hurting Bangladesh, those he would have hurt most would have been the women who work sometimes in unsafe conditions of semi-slavery to produce garments for the world.

As Kimberley Elliott of the Center for Global Development noted, the U.S. action is in most ways a symbolic measure because GSP does not cover clothing, which accounts for 90 percent of Bangladesh’s exports to the United States.

The punishment affects about 1 percent of exports, or a trifling $35 million in goods, so it seems a clumsy way of making a point. It may be that Obama understood that what he was doing would have very little impact on the economy but nevertheless wanted to send a warning shot. But the way he did it smacks of bullying.

It also sends dangerous messages in different directions. It might encourage the European Union to follow suit, which would threaten more than $12 billion worth of Bangladesh goods. Washington’s action could also encourage big retailers to rethink and try to pull out of Bangladesh because Obama has withdrawn a significant seal of approval from the country.

Already one chief executive of an American company that designs and distributes high-end apparel from Bangladesh told the New York Times, “Right now, the name of Bangladesh just gives a bad rep (reputation) to a company.” A number of international companies are keen to explore other opportunities away from disgraced Bangladesh.

I have to declare an interest. I watched the creation of Bangladesh and its bloody Caesarian birth out of Pakistan with India as midwife. Even in the heady days of independence, the economic plight of Bangladesh seemed desperate, with few exports but heavy dependence on imports for all sort of basic goods, from food to energy and clothing.

Worse still, the life expectancy and literacy rates of the infant country were among the lowest in the world. The land was crisscrossed by rivers curling round each other like snakes in an orgy.

The main means of transport were country boats with home made patched up sails that had to be pulled if there was no wind, or slow buses or slower trains, all of which were usually so crowded that there was no room to stand, even on the roof.

What was the hope for this country, except for the heartwarming energy and enthusiasm of the people?

To cut a long story short, Bangladesh, after a painful start, has begun to make important steps forward, thanks largely to the women in the textile factories. They are the backbone of the $20 billion in clothing exports that have helped Bangladesh to climb up the world economic tables. Per capita income, thanks to annual growth of 6 to 7 percent, is $1,700, and Bangladesh now occupies 44th place in the global economic league tables.

It has gained a place in Goldman Sachs’ N-11 group of countries, meaning the Next Eleven, which have the potential after the BRICS (Brazil, Russia, India, China and South Africa) to become the big movers and shakers of the world economy in this century. The list is an odd one, with some doubtful names on it, but it puts Bangladesh in the august company of Mexico, Indonesia, South Korea and Turkey, which have begun to make their global presence felt.

Who could have imagined such Bangladeshi progress even 10 years ago?

But the women textile workers have achieved much more for their country. They have helped to change the social fabric, so that in key indicators such as life expectancy, infant mortality, the schooling of girls and combatting undernourishment of children, Bangladesh is now superior to its big neighbor, India.

Does Obama wish to bring his sledgehammer policies to crush their future and that of Bangladesh?

It would have been — would be — far better for Obama to use carrots before resorting to a stick. The U.K. government has shown a more enlightened attitude by asking leading companies buying goods from Bangladesh how they can work together to improve the standards of the factories. European retailers have also shown the right attitude — to try to make the working conditions safer and better for the women. But their U.S. counterparts walked away from any such deal, not wishing to get involved in legal obligations.

There is surely room for big international retailers to squeeze their profits to ensure safer production. Industry sources calculate that Bangladesh women get the lowest monthly pay of all the Asian women working in garment factories, a mere $37 for a 48-hour working week, against $120 in Cambodia, $145 in Vietnam, $300 in factories near Jakarta and $500 in Guangdong.

At the international level, where is World Bank President Jim Kim?

He has been quick to make grand statements about defeating poverty globally, but in this key area of actually doing something to protect vulnerable workers who are trying to raise themselves out of poverty, I cannot find a single word from Kim or the bank or indeed from the Asian Development Bank or from big international aid givers, apart from the United Kingdom.

Are they waiting for the Bangladesh government to ask for help to defeat its own corrupt part in allowing infringement of building codes that led to the rise and fall of unsafe factories and for protection of the politically connected factory owners who profit from slave labor and exploiting the women? Shame.

India seeks US GSP renewal   [ top ]

BD NEWS 24, July 24, 2013
Indian commerce minister Anand Sharma, during his recent visit to the US, has already pushed Washington to continue with GSP benefits to India amid rising chorus in the US that India should no longer get these benefits.

The GSP system seeks to promote economic growth in the developing world by providing preferential duty-free entry for up to 5,000 products.

Among developing countries, India was the top GSP-beneficiary in 2011 with $3.7 billion in imports entering the US duty free. Anand Sharma highlighted its significance for the labour intensive small and medium enterprises mostly employing women in India. Exports from US saw a 4 per cent growth in the last fiscal, to stand at $36 billion, that is 12 per cent of the country’s total exports in that period.

Pending renewal of the GSP programme, all products shall be exposed to the Full Rate of Import Custom Duties, against a 5-6.5 per cent advantage exporters are getting now under the GSP.

The increased cost of imports will make products of Indian origin expensive and highly uncompetitive in the US market and this will be a major setback to all the Indian exporters, said Sanjay Budhia, chairman of the CIIs national committee on exports. The Indian effort to secure a renewal of GSP benefits in US comes at a time when Bangladesh is trying to revive it and have it extended to its main export, that of ready-made garments.

The US revoked the GSP benefits for Bangladesh products to push Dhaka adopt more labour friendly policies and improve working conditions and workplace security in its industry.

Bangladesh is seeking a revival of the US GSP for all its products, including the main export, ready-made garments, which were not covered by the GSP so far.

Indian products that compete with those from Bangladesh for a share of the US market will have an edge if US renews the GSP for India and denies it to Bangladesh, says industry sources.

Insight: Jeans and shoes show criminal underbelly of China-EU trade   [ top ]

REUTERS, Steve Scherer, July 24, 2013
ROME (Reuters) - The importer, a front man for the Calabrian mafia, tells the Chinese seller, who speaks fluent Italian and lives in Rome, that he wants to fix a lower price on the next shipment.

Their business is not drugs or weapons, but Chinese T-shirts, jeans and shoes. The buyer for the mob in Italy's impoverished south wants to declare a falsely low price to reduce the customs duties he must pay because, as he says in a wiretap, "it goes to the state".

This police recording offers a glimpse of the criminal underbelly of trade between the European Union and China, whose mind-boggling size - worth well over 1 billion euros a day - makes it fiendishly hard to police. Making matters worse, the EU is a single market of 300 million people but which has 28 national customs authorities with differing priorities.

Italy, a high-fashion Mecca and home to a culture obsessed with elegant appearances, was the top EU importer of low-cost Chinese clothing a decade ago, before Italian customs agents cracked down on the illicit practice of undervaluation.

Criminal groups trying to evade tariffs by lying about the real value of clothing sold in the EU, China's biggest export destination, had singled out the southern Italian port of Naples as their entry point. There they were declaring pairs of jeans for as little as a euro each and T-shirts for 50 cents.

"The profit margins are high, the volumes are huge and the laws are lax," said Rocco Burdo, the top intelligence officer at the Italian customs agency's anti-fraud unit.

"Undervaluation is a grave threat to all of Europe, and so EU integration should be accelerated to make a unified fight against fraud across the region," he told Reuters at his office's headquarters on the outskirts of Rome.

After the crackdown led by Burdo, the savvy dealers simply re-routed goods through other EU ports such as Hamburg. Italy dropped to number six as importer of Chinese clothing in the region, but it became the top collector of textiles duties, customs data show. National authorities collect customs duties, which vary but amount to 12 percent of the value of a pair of denim jeans or cotton T-shirts made in China, but hand three-quarters of the revenue to the EU's central budget.

Europe has become a bonanza for trade gangs which exploit the free movement of goods within the EU by importing where there are fewest controls.

The increasingly sophisticated practice of undervaluation costs taxpayers billions in lost duties, and it is often accompanied by counterfeiting and value-added tax (VAT) evasion.

Undervaluation accounts for only a small fraction of overall customs fraud, and European officials stress that criminal gangs, not the Chinese government or state-owned companies, perpetrate this type of fraud.

Nevertheless, it illustrates broader trends in an often difficult trade relationship, where China's aggressive business strategy has brought on more than 50 EU trade defense measures for unfair practices.

Duty-dodging is made easier by the Chinese strategy of controlling both production and distribution to maximize profit. Diverging opinions between EU countries on trade disputes, such as in a recent row over Chinese-made solar panels, also reflect an inconsistent approach to fighting undervaluation.

BOTTOM END

In Europe, this kind of fraud is conducted mostly by small companies headed by Chinese nationals living in Europe in collaboration with local companies which operate below the radar, the EU's anti-fraud investigative body OLAF said.

"Valuation fraud mainly involves criminal organizations. It's the bottom end of the market, and outside the normal commercial circuits," David Murphy, head of the trade customs fraud unit at OLAF, told Reuters.

"For a fraud investigation agency, it's very difficult to get to grips with it. When you do engage with it, it either melts away or moves somewhere else."

OLAF is currently investigating six undervaluation cases, some already known to involve Chinese nationals, but most cases are tackled by local authorities.

China is the world's biggest exporter, with EU imports from there worth 289.7 billion euros ($380.6 billion) last year, Eurostat data show. Total EU-China trade hit 433.6 billion.

EU imports of Chinese shoes and textiles, which are the goods targeted by criminal groups practising undervaluation fraud, were worth 36.4 billion euros in 2012.

Though many of the world's most popular brands sell clothing made in China, the fraudsters who practise undervaluation mainly supply a more informal retail market.

In Rome's growing Chinatown, there are as many as 10 clothing or shoe shops per city block, selling jeans for 20 euros, T-shirts for 10 and shoes for as little as 15.

But it is in open-air markets across the capital where Chinese dresses, jeans, shirts, underwear and shoes are sold at a frantic rate everyday, and it is through these kind of flea markets, common all over Europe, that the criminal groups make their biggest profits.

Also common in the open-air markets is the sale of counterfeit brand-name clothing at heavy discounts compared with the real thing, like rip-off Converse Chuck Taylor basketball sneakers for 20 euros.

Investigators say counterfeiting often accompanies valuation fraud to boost margins further, and in 2011 three quarters of all fake goods seized at European borders came from China.

"I was surprised at the volumes that you can shift through these markets," OLAF's Murphy said. "Initially I thought of it as kind of a minor problem, but in fact vast volumes go through there and vast profits are generated as well."

There are no official estimates on how much EU taxpayers lose to overall customs fraud or to valuation fraud, but an investigation coordinated by OLAF offers some insight.

In conjunction with investigators in several EU states, OLAF dismantled two major Chinese organized crime groups operating out of Austria, Italy and Hungary in 2008 and 2009. Total losses in duties alone were put at 100 million euros, while VAT losses from national budgets amounted to 200 million euros.

As with counterfeiting, VAT avoidance is a common byproduct of valuation fraud. After paying falsely low customs duties at the port of entry, such as Hamburg in Germany, VAT payment is deferred to a country of final destination within the EU that maybe has no sea port, such as the Czech Republic or Austria, and the VAT is never paid, said Murphy.

Five Austrian forwarding agents acted on behalf of Chinese clients to shuttle clothing through customs, handing it over afterward to a network of Chinese distributors and retailers in several European countries.

When the Chinese company running the scam in Vienna was raided by authorities, they found sophisticated equipment used to copy and print false invoices, transport documents and certificates of origin, OLAF said.

"We're talking about billions overall," Murphy said, referring to customs fraud in general. "In my experience, I would say it's much higher than it's estimated."

Italy offers an indicative number. The state collected 3.7 billion euros more in customs duties in the decade that followed its campaign against the fraud compared with what it collected in 2003, before the squeeze, even though volumes decreased.

EU FRAGMENTATION

After Italy, for many years Germany was the top importer of Chinese clothing, though it was never more than the third-biggest collector of duties on garments, data show.

Many of the same companies that were caught practising valuation fraud in Naples moved to Hamburg, Burdo said, citing investigations carried out by his office and prosecutors.

Now Britain is emerging as the main importer of Chinese textiles, though it is no more than the fifth-biggest collector of duties on the goods.

Some countries have taken time to wake up to the fraud and use computer systems to spot irregularities in customs declarations, letting the gangs off the hook. "As each country became aware of the problem and applied risk parameters in their automated declaration system, then the operators would move elsewhere. They are very, very mobile," Murphy said.

Italy's Burdo and OLAF's Murphy say the EU could do more. "Europe, when taken together, is a significant player in the world economy and in world trade, but the EU countries do not play as a team, and this shows in trade with China," Thomas Rosenthal, an economist who heads the research department at the Italy-China Foundation in Milan, told Reuters.

Customs fraud, and undervaluation in particular, is made easier because each country has its own customs agency, and because some countries are wary of imposing any kind of trade restrictions while others value them.

For instance Italy, the EU's second-biggest manufacturer whose goods often compete with Chinese imports, favors curbs while Germany, the biggest and a major exporter to China, appears reluctant to confront an important client.

The EU needs to overcome such national interests. "There should be a further stimulus to political union to become a real global player," Rosenthal said.

In Italy's street markets, most of the Chinese clothing has been brought by truck from the ports of Rotterdam or Hamburg, where it entered the EU, Burdo said. "If there was a single customs service it might function better," OLAF's Murphy said.