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News Clips 27 May, 2013


[ Walmart refuses to place fresh orders with Pakistan ]
[ Garment factories violating labour laws ]
[ BD to lose duty-free access, warns EU ]
[ Chinese apparel producers abusing BD's free access ]
[ Iran, India agree on bartering oil for textiles ]
[ Cambodia: A rising star with a falling reputation? ]

Walmart refuses to place fresh orders with Pakistan   [ top ]

The News, Sunday, May 26, 2013
KARACHI: Walmart, one of the world’s biggest retail chains, has rejected the offer of Pakistani readymade garments manufacturers to meet fresh orders due to the law and order situation and other economic problems in the country, said Bilal Mulla, leading ready-made garments manufacturer in Pakistan. He was speaking at a meeting of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Saturday about the difficulties faced by export-oriented sectors.

Earlier this week, Walmart banned 250 Bangladeshi garment factories from producing for it. “Taking advantage of the opportunity, we contacted Walmart to divert the orders to Pakistani producers,” said Mulla, who is also Chairman of FPCCI Standing Committee on Export Trade. “But the retail chain refused, citing security issues and the energy crisis in Pakistan,” he added.

On the request of exporters, the FPCCI, which is the apex trade body of the country, arranged the meeting. Only four exporters representing three sectors attended the meeting.

Exporters unanimously agreed that exports had suffered due to the energy crisis and security conditions in the country. FPCCI office bearers believe it would be difficult to achieve this year’s export target of $29 billion as only two-thirds or exports worth $19 billion were realised during the first 10 months of the current fiscal year.

Waheed Ahmed, chairman, All Pakistan Fruit and Vegetable Exporters and Merchant Association, said that there was confusion regarding Iranian trade because banks were refusing to issue Form ‘E’ while State Bank of Pakistan (SBP) denied that there were any such restrictions.

Danish Khan, representing leather garments, discussed problems in exporting jackets using animal fur, saying that bureaucratic hurdles cause foreign exchange losses.

Gulzar Feroz, vice president, FPCCI, demanded that the government should eliminate two percent withholding tax on exports. He also proposed that commercial councilors’ linkages should be established with local business entrepreneurs at the FPCCI level. Mehar Alam, General Secretary, FPCCI, added that commercial councilors should have a training session at FPCCI to understand the trading dynamics.

Shaheen Ilyas Sarwana, vice president, FPCCI, presented recommendations of the apex trade body related to exports. He said that the government should allow export refinance facility (ERF) to the extent of collateral value.

Sarwana further said that ERF is being provided by financial institutions based on available collateral. “Given the economic downturn, substantial margins are now being withheld on the value of collateral. As a result, the financing limit is well below the collateral value,” he added.

The interest rate of export refinance at 8.4 percent is still the highest in the region, said Sarwana and urged the SBP to lower the rate. “It should be allowed at zero percent to export oriented industries,” he said.

Pakistan export finance guarantee facility is limited to the US and EU countries, he said. “Such schemes should be flexible and extended to other countries, especially non-traditional markets,” Sarwana said.

The SBP is currently allowing 90 days deferred payment for export contracts proceeds. “This should be enhanced to 180 days, as the current limit is too short and causes problems for exporters,” the FPCCI suggested.

Moreover, Feroz said that direct and indirect taxes on exports are almost 40 percent. He said the government should also allow 100 percent exemption on exports or compensate through other measures.

He discussed the issues of stuck up refunds of exporters with the FBR and urged the revenue body to issue refunds on priority basis.

Garment factories violating labour laws   [ top ]

The Nation, Sunday, May 26, 2013
Karachi- The governments and international brands are directly responsible for the gory incidents in Ali Enterprises (Baldia Karachi) and garment factories of Dhaka, Bangladesh, as their criminal negligence resulted in loss of lives of thousands of innocent workers. Strict steps should be taken to ensure proper safety of workers and stop turning the factories into slaughterhouses of workers.

Labuor leaders unanimously said this while addressing a large rally in front of Karachi Press Club (KPC) here the other day. The rally was staged by National Trade Unions Federation Pakistan (NTUFP) to express solidarity with the martyrs of garment workers of Bangladesh.

They said, to avoid repetition of Karachi and Dhaka tragedies, it is necessary that local and international labor laws be strictly applied in all textile and garment factories. The international industrial safety standards for labour should be implemented to save the lives of workers.

A large number of workers, trade unions activists, political leaders, representatives of human rights organizations, intellectuals and students attended the rally. Carrying banners and placards, they chanted slogans demanding safety measures for the factory workers.

NTUF president Muhammad Rafiq Baloch, general secretary Ghani Zaman Awan, deputy general secretary Nasir Mansoor, labor leader Usman Baloch, Gul Rehman of Workers Rights Movement, Riaz Abbasi of Atlas Battery, NTUF Balochistan president Allah Warraya Lassi, president of Gadani Ship Breaking Labor Union Bashir Ahmed Mahmoodani, Ghulam Muhammad of Landhi Action Committee, Muhammad Aslam of Kohinoor Employees Union, president Al-Ettehad Power Looms Workers Union Abdul Muhammad, Shaikh Majeed of PIA, Muhammad Mubeen of Mactor Pharma, Razaq Kachelo, Rashid Abbasi and others addressed the rally.

The speakers said millions of Pakistani and Bangladeshi workers are related to textile and garment industries; however, in both countries these workers are even deprived of the rights guaranteed to them under the local constitutions and labor laws.

They said working conditions for these labors are very poor and they have to work 12 to 14 hours a day. They said hardly 3percent of these workers are registered with social security institutions. In their factories trade unions and collective bargaining agents are virtually non-existent. Many big factories, working for decades, have not even bothered to get themselves registered.

They said, due to the pressure of influential industrialists, the process of labor inspection has been put on the back burner. Resultantly, the number of industrial accidents has risen sharply. Three major human tragedies in such factories in short span of eight months have diverted the world attention to this sensitive issue.

These incidents started with a huge fire in Ali Enterprises, Balida Karachi, burning alive more than 300 garment workers. Then in November 2012 more than 150 workers perished in fire in a Dhaka factory and recently more than 1200 workers died in collapse of a building in Dhaka, housing garments factories. All these incidents took place in the garment factories that make garments for renowned international brands. These international brands, in order to maximize their profits through the use of cheap labor, are violating all local and international laws.

They said it is a misfortune that in the 21st century after death of thousands of workers in these industrial accidents a discussion on the basic rights of workers has started.

They said it is inevitable that the local and international labor laws should be implemented in consultation with the labor unions and workers’ organizations, and all international brands be made bound not to begin production till ensuring adherence to local and international labour standards and laws

BD to lose duty-free access, warns EU   [ top ]

DAWN, May 26, 2013
DHAKA, May 25: The European Parliament in a resolution yesterday said Bangladesh’s duty and quota-free access to the EU market can be withdrawn in the event of serious and systematic violations of the principles set out in different human rights conventions. Members of European Parliament (MEPs) called on the European Commission to investigate the country’s compliance with these conventions.

They expect an investigation to be considered if Bangladesh is found to be in serious and systematic violation of the principles laid down in these conventions.

Following the recent fires and building collapse at factories in Bangladesh, the MEPs called for justice for victims and EU action to prevent similar events in future.

They want the Commission to promote responsible business conduct among EU companies operating abroad and ensure strict compliance with all legal obligations in the areas of human rights, labour and the environment, according to the EU parliament website. The resolution insists that those responsible for the collapse of the Rana Plaza, the Tazreen factory fire or any other fire should be brought to justice, that the victims should have full access to the justice system, and that a financial compensation plan should be established.

MEPs recognise the importance of the recently finalised Accord on Fire and Building Safety in Bangladesh between the trade unions, NGOs and some 40 multinational textile retailers and call on all other relevant textile brands to support this effort. The action plan adopted in early May with a view to reforming the labour laws is also a welcome measure, say MEPs.

However, they want the government and the relevant judicial authorities to investigate allegations that the national building regulations were not implemented due to collusion between corrupt officials and landlords seeking to reduce their costs.

Chinese apparel producers abusing BD's free access    [ top ]

FINANCIAL EXPRESS, FE Report, May 25, 2013
Chinese manufacturers are allegedly shipping textile products to the European Union (EU) using labels of Bangladesh, which enjoys duty-free and quota free access for its products to the EU, said OLAF, an anti-fraud investigator of the bloc, on Thursday.

OLAF had conducted a series of investigations with the Bangladesh authorities over the import of textiles to the EU which were fraudulently declared as originating there, according to a senior source at the anti-fraud agency, German news agency DPA said.

Bangladesh is the world's second biggest exporter of textiles behind China and enjoys duty-free access to the EU markets, the news agency said.

"This makes Bangladesh an obvious choice for fraudulent operators seeking to avoid import duty on Chinese textiles," the news agency quoted OLAF source as saying.Two recent investigations into a Bangladeshi supplier found that the duties evaded amounted to 10 million euros ($12.9 million) during a period of two to three years, he said. This amount would now be recovered.

"These investigations help to protect the Bangladesh textiles industry ... and therefore indirectly the Bangladeshi workers," the news agency said.

Bangladesh has been in the spotlight after a building housing garment factories collapsed in Dhaka last month, killing more than 1,100 people and highlighting the conditions in which factory workers operate.

Also on Thursday, lawmakers in the European Parliament called for justice for the victims of factory fires and collapses in Bangladesh, and said the EU should take action to prevent events similar to those in Dhaka last month.

Lawmaker Veronique de Keyser described the situation in Bangladesh as 'exploitation of one human being by another human being.'

"Bargains come at the highest price - blood. We all wear 'blood clothes', just like we speak about 'blood diamonds'," she said.

The lawmakers called on the European Commission to promote responsible business conduct, and said Bangladesh must adhere to human rights conventions if it wants to retain its duty and quota-free access to the EU.

Iran, India agree on bartering oil for textiles   [ top ]

TEHRAN TIMES, May 24, 2013
Iranian and Indian officials have reached agreement to barter Iranian crude oil for Indian textile machinery, the Mehr News Agency reported. "Iran is a major exporter of crude oil to India. The two countries have reached agreements to barter Iranian crude oil for Indian textile machinery," Mehr quoted Iranian Trade Promotion Organization deputy director Reza Tofiqi as saying on Wednesday. On Sunday, around 60 leading companies held an exclusive textile exhibition in Tehran. Indian deputy minister of textiles, Mrs. Zohra Chatterji, attended the exhibition. She said that Iran is currently importing 13 percent of its needed textile machinery from India, but the figure could double in the future.

India is looking to broaden its range of exports to Iran to help balance bilateral trade under an agreement that allows the countries to bypass Western sanctions, Indian industry and government officials said.

India is one of the largest buyers of Iran's crude oil and so far, 85%-90% of India's exports to Iran has been agricultural products such as basmati rice and soymeal. But now, India plans to also export products such as textiles, pharmaceuticals, medical-diagnostic equipment, auto components and consumer goods.

"We are looking at diversification of our exports," said Ajai Sahai, director general of the Federation of Indian Export Organization.

Last year, India and Iran entered into an agreement in which India would pay for about half of its crude oil imports from the Middle Eastern country in Indian rupees instead of U.S. dollars. The move followed U.S. sanctions that have shut down the global financial system for Iranian crude trade.

But the value of India's exports to Iran is far lower than the value of its imports. India exported $2.95 billion worth of goods to Iran last year, while its imports from Iran totaled around $11 billion.

India's imports from Iran, which mainly comprise crude oil, are expected to fall to around $10 billion this financial year because of a decline in oil prices.

Mr. Sahai said the trade organization aims to raise the value of Indian exports to Iran to around $4.5 billion to $5.0 billion in this financial year.

Cambodia: A rising star with a falling reputation?   [ top ]

JUST-STYLE, Jozef De Coster, May 24, 2013
Cambodia's reputation as a standard-bearer for apparel workers' rights is wearing thin - and yet the country is a rising star when it comes to attracting foreign investment and increasing exports.

There are many reasons to deter brands and retailers from sourcing clothing in Cambodia.

The Kingdom has no local textile supply chain. Corporate social responsibility is more a question of paperwork than of really caring for workers' well-being and for the environment. And general education and productivity of workers is low, with primary school drop-out rates of 45.5%.

Reports of illegal strikes and mass faintings of exhausted girls abound - more than 2,100 faintings in 29 factories in 2012, and over 500 in five factories in the first quarter of 2013. And in the last week alone there have been two partial collapses at factories that have resulted in at least two deaths.

Company turnover is high, with 62.5% of the 273 firms operating in 2009 having entered the industry after 2003, as is labour turnover (on average 20-25% per year).

The public infrastructure is deficient and the cost of electricity very high. Unofficial expenses to corrupt officials can cost large garment factories up to $20 dollars per month per worker.

According to Aon Hewitt's People Risk Index 2013, Phnom Penh, where most factories are located, ranks 127 out of 138 cities surveyed worldwide, which means that Cambodia's capital scores very badly when it comes to finding and retaining qualified people. And yet...Cambodia is a rising star when it comes to garment exports.

In 2012, the country's garment exports to the EU reached US$1.217bn (+32.4%), putting it in 9th position among the EU's principal garment suppliers. With US$2.534bn in garment exports to the US in 2012, Cambodia is the US's number 7 supplier. Investors are rushing in. According to the Council for the Development of Cambodia (CDC), 82 garment factories with a capital investment of US$499m were approved in 2012, as were two sock factories supported with US$25m, four textile manufacturers with US$9m and two glove factories with US$10m invested.

In comparison, in 2011, investments in 45 garment factories were worth US$205m.

It is not just investors from China, Taiwan, Hong Kong, Korea, Malaysia and Singapore who are moving in. The French Chamber of Commerce in Cambodia saw demand for its services triple in 2012 compared to 2011. Requests come mostly from French companies that are working in garments.

In February 2013, UK Trade and Investment opened an office at the British Embassy in Phnom Penh to assist UK companies doing business in Cambodia.

And the Federation of Indian Chambers of Commerce and Industry is convinced there are still opportunities like providing textile materials to Cambodia. By avoiding middle-men in regional hubs like Singapore, Indian textile suppliers could offer Cambodian garment manufacturers 8-15% lower prices, it says.

Ken Loo, secretary general of the Garment Manufacturers' Association of Cambodia (GMAC), recommends a "wait-and-see" attitude following a rise in the minimum wage from 1 May, from US$61 to US$80 per month.

He believes that higher minimum wages in other countries, combined with Cambodia's better market access, will encourage manufacturers to move to to the Kingdom. "If we didn't have so many strikes, the number would even be much higher," he says. He admits that in future Burma/Myanmar will be a strong competitor. "But Myanmar needs time to build up infrastructure. It's about four years away from offering Cambodia real competition," he believes.

Better Factories Cambodia

The International Labor Organization's Better Factories Cambodia (BFC) factory monitory programme was created in 2001, with a mandate to improve labour law compliance and standards in Cambodia's garment factories, as well as to promote the sector internationally among buyers.

But a report published in February this year - 'Monitoring in the Dark', by the Stanford International Human Rights and Conflict Resolution Clinic in partnership with the Worker Rights Consortium - suggests that in many areas BFC has failed to address continuing serious labour rights problems in the Cambodian garment industry.

In particular, the report says that, during the 11 years of BFC's operations in Cambodia, there have been declines in wage levels and basic job security, including widespread use of temporary contracts for workers, union intimidation and excessive overtime. However, BFC's periodic monitoring reports paint a picture that keeps stakeholders happy, including BFC staff, the American Government (which until 2005 linked annual quota expansion of Cambodia's garment exports to the US to improvement in the labour rights environment), the CSR-sensitive brands and retailers sourcing from Cambodia, the Cambodian government, the local garment manufacturers and their association GMAC, and even some NGOs.

This contrasts with the poorly made, but far more realistic, reports by Cambodian unions, which highlight the underpaid and overstretched Cambodian workers.

Brands invited to contribute financially

Also of interest is the changing view on supply chain responsibilities.

In March 2013, while GMAC was negotiating hard with labour unions about a new minimum wage, secretary general Ken Loo said: "One thing GMAC is flexible on is the financial contribution of brands when it comes to paying wages. We have no problem paying the workers anything - so long as the extra money is coming from the buyers."

Also the effect of recent skills development schemes on the productivity of the Cambodian garment industry should be assessed. Mona Tep, director of leading player SHRM&P, which evolved out of the Garment Industry Productivity Centre funded by USAID, points out that two-thirds of Cambodian garment firms have replaced foreign, often non-Khmer speaking Chinese workers such as supervisors, with much cheaper Cambodian personnel.