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News Clips 16 May, 2013


[ Readymade garments: Pakistan’s exports to rise as Bangladesh comes under fire ]
[ Exporters seek effective policies ]
[ Exports of Surti fabric to Pakistan surpasses US, Saudi Arabia ]
[ Europe, U.S. retailers divided on Bangladesh reform plan ]
[ North American retailers devising own Bangladesh plans ]

Readymade garments: Pakistan’s exports to rise as Bangladesh comes under fire   [ top ]

EXPRESS TRIBUNE, Saad Hasan, May 15, 2013
KARACHI: As Bangladesh’s textile industry comes under pressure to improve working conditions, Pakistani garment makers hope to see a rise in exports to global retailers, which increasingly focus on safe factories to place orders.

“We expect to see some of the business shifting to us,” said Shaikh Shafiq Rafiq, Chairman South Zone of Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA). “The same thing happened to us when there was a factory fire in Karachi. The buyers are wary of public backlash.”

Over 1,100 people, many of them women, were killed on April 24 when a Dhaka building housing garment factories collapsed. The disaster sparked angry reaction from international human rights organisations and labour groups to poor working conditions there. In the last few days, Bangladeshi government has allowed workers to organise labour unions and announced plans to increase wages, which at around $38 a month are the lowest in the world.

Some of the leading retailers like H&M, Inditex and Tesco have also become part of a collaboration that plans to fund projects aimed at improving working conditions in factories across Bangladesh.

“They have two advantages over us – one is lower wages and other is duty-free access for their products to European countries,” said Rafiq. “We are catching up on both fronts.”

Pakistan is set to enter the European Union’s GSP Plus programme that will provide garment exports duty-free access to the EU. According to provisional State Bank of Pakistan (SBP) data, textile exports were slightly lower at $9.59 billion in July-March 2012-13 compared with $9.792 billion in the same period of previous year.

But readymade garments exports jumped to $1.2 billion from $1 billion during the same period. It is hard to say how much increase Pakistani exporters have seen since the Bangladesh crisis.

“I believe Bangladesh is losing its competitive edge. They have same problems as we do in terms of law and order. As a matter of fact they have seen more labour unrest,” said Rafiq.

Meeting safety standards

PRGMEA ex-chairman Shehzad Salim said many firms complying with safety standards of international retailers were running close to full capacity as flow of orders has increased.

“Good companies are not short of work,” he said. “But what is happening with Bangladesh will have spillover effects on the entire region. And we are prepared for that.”

Pakistan was also in the limelight last year when a fire in a garment factory killed over 250 employees, forcing the industry to impart emergency exit training to thousands of workers.

“Working conditions in our factories are far better than what you will find in a Bangladeshi concern. Conditions are inhumane there,” said Salim, pointing out that minimum wage in Pakistan comes to around $90.

Yet, labour organisations say not all the companies follow rules and regulations. There are thousands of small factories, which operate as outsourcing units.

Large firms dealing with international retailers, contract out work to smaller units where working conditions could be really bad, according to industry officials.

Reduced buying power of customers in Europe has led to cutthroat competition among garment makers to reduce cost. Exporters also complain that retail chains are squeezing their margins.

“There is no doubt that prices have been under pressure,” said Salim. “But companies which have adopted technology and improved operations will easily sail through.”

Taking up the challenge

Power of international brands can be immense. In the 1990s, Pakistan had to revamp its sport factories in Sialkot where hand-stitched footballs involving child labour triggered a global controversy.

Initially, the industry feared that business will go away to other countries, but through efforts of International Labour Organization, Sialkot Chamber of Commerce and Industry, foreign brands and governments most of the production facilities were updated.

“There was an option before the industry to either bow out or take the responsibility and do everything possible to bring a change,” said Aijaz Ahmed, who works for the Child and Social Development Organization. “Industry opted for change.” Through effective controls child labour stopped, he said. “We ran rehabilitation programmes and won back confidence of international brands.”

Exporters seek effective policies   [ top ]

THE NEWS, Correspondent Report, May 15, 2013
KARACHI: The value-added exporters’ associations have urged the PML-N leader Nawaz Sharif to formulate effective economic and business-friendly policies to revive the country’s sinking economy.

While felicitating PML-N’s victory’s in general elections 2013, Pakistan Tanners Association (PTA) SZ Chairman Amanullah Aftab, FPCCI Vice President and PTA Law and Order Committee Chairman Gulzar Feroz, and Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) Chairman Shaikh Muhammad Shafiq, hoped that the new government would bring a positive impact on regional business.

Aftab and Feroz said that trade and industry were badly hurt due to power and gas crises and the deteriorating law and order situation. They added that the export-oriented industry had suffered the most in the last five years.

They said that the PML-N setup should appoint the most competent person as commerce minister, who should then formulate export-oriented economic policies without fail.

The PML-N’s success reflects a positive change in society and being a business tycoon himself, Nawaz Sharif and his team would take immediate and proactive measures to lead the economy on the track of development by finding permanent solutions to energy, unemployment, inflation and poverty alleviation issues, they added.

PRGMEA chairman said that with the help of leaders such as Mian Shahbaz Sharif, Ishaq Dar, Ahsan Iqbal, Pervez Rasheed and others, PML-N would be successful in developing a peaceful and business friendly environment in the country and restore the country’s image as a secure destination for trade and investment.

He further added that Pakistan’s value-added sector need a rescue package from the government in order to recapture its lost share in export markets.

Exports of Surti fabric to Pakistan surpasses US, Saudi Arabia   [ top ]

TIMES OF INDIA, Melvyn Reggie Thomas, May 15, 2013
SURAT: Pakistanis are fast lapping up saris and dress materials bearing 'Made In Surat' tag!

For the first time, Pakistan has become the biggest importer of man-made fabric (MMF) from Surat, surpassing even the US and Saudi Arabia. The textile ministry's figures show that man-made fabric and yarn export to Pakistan increased by 30 per cent in 2012-13 and touched Rs 21 crore, as compared to Rs 16 crore in the previous year. The exports to US and Saudi Arabia, in fact, fell year-over-year.

Industry sources said that Surti traders exported dress materials, saris and other fabrics worth Rs 11 crore to Karachi, Peshawar and Lahore alone during the year.

Narayan Agarwal, regional chairman, Synthetic Rayon Textile Export Promotion Council (SRTEPC) told TOI, "Earlier, the fabrics were exported to Pakistan via Dubai and Afghanistan. However, since two years, traders are able to sell their products directly to Pakistan market."

The recent elections and victory of Nawaz Sharif have triggered hopes of an even better trade and MMF makers are expecting a further 20% rise in the exports this year.

Of the total Rs 2,237 crore exports of MMF from India in 2012-13, fabrics accounted for Rs 921 crores and Surat contributed to 60% of this volume. Arun Jariwala, chairman, Federation of Indian Art Silk Weaving Industry (FIASWI), told TOI, "The city's textile trade has a close bond with Pakistan. Many textile traders from the Muslim community have relatives in Pakistan. This too helps in building ties."

A textile exporter said, "Surti saris and dress materials are very popular in Pakistan which only produces cotton-based fabrics. Most of the fabric for 'burkha' is also supplied by Surat."

Dhiru Shah, managing director, Fairdeal Filament Limited, said, "Pakistan is one of our major markets after European Union and we are focusing to increase our export to the neighbouring country in the coming years."

Europe, U.S. retailers divided on Bangladesh reform plan   [ top ]

REUTERS, Veronica Ek and Jessica Wohl, May 13, 2013
Major U.S. retailers including Gap Inc declined to endorse an accord on Bangladesh building and fire safety backed by Europe's two biggest fashion chains, a trans-Atlantic divide that may dilute garment industry reform efforts.

Three weeks after the collapse of a building housing garment factories, which killed more than 1,100 people, Western brands that rely on Bangladesh to cheaply produce clothing disagreed over how best to ensure worker safety.

Sweden's H & M Hennes & Mauritz AB and Spain's Inditex SA, the world's two largest apparel brands, topped a list of predominantly European companies signing an agreement led by the International Labour Organisation, trade unions and other lobby groups.

Major brands and retailers set a May 15 deadline to join the agreement after talks in Germany last month. As of late Monday U.S. time, the only well-known U.S. company to announce it had signed on was PVH, which owns brands including Calvin Klein.

Gap said it was ready to join "today" but first wanted a change in the way disputes are resolved in the courts.

"With this single change, this global, historic agreement can move forward with a group of all retailers, not just those based in Europe," Eva Sage-Gavin, an executive in Gap's global human resources and corporate affairs department, said in a statement. Europe accounts for about 60 percent of Bangladesh's clothing exports, so even without participation from the big U.S. retailers, the agreement may bring some change in a country that has seen at least three deadly garment factory disasters in the span of six months.

Mohammad Atiqul Islam, president of the Bangladesh Garment Manufacturers and Exporters Association, said the deal was a bit of good news in the "worst time for us."

"We believe this decision will motivate other big buyers across the West and the USA to join their hands with us," he told Reuters in an interview.

WAL-MART FLAGS SAFETY CONCERNS

Wal-Mart Stores Inc, the world's biggest retailer, did not say whether it plans to sign the accord. But on Monday it called on the Bangladesh government to stop production at one factory and inspect another where it spotted safety concerns during its own checks. In an unusually blunt and detailed public statement, Walmart asked the government to halt production at Stitch Tone Apparels in Chittagong, Bangladesh, and to inspect Nassa Group's Liz Apparels Ltd factory complex in Dhaka.

The garment companies could not immediately be reached for comment outside normal business hours.

Walmart said it found "structural concerns" at a factory adjacent to Stitch Tone, Dresswell Ltd, which was not part of the retailer's own supply chain. It said the Dresswell factory "appeared unstable and could cause a hazard" for workers at Stitch Tone, which was making clothes for Walmart.

Walmart said it removed its business from Stitch Tone and advised the owner not to continue production.

The inspections also found visible cracks in the wall at Liz Apparels. Walmart said it notified factory owners, the garment association and the government about the safety concern at Liz Apparels and Stitch Tone.

"The government of Bangladesh did the responsible thing last week by closing factories believed to be dangerous," Rajan Kamalanathan, vice president of ethical sourcing for Walmart, said in a statement. "We call on them to show the same leadership in the Stitch Tone Apparels and Liz Apparels cases, and take any actions necessary to ensure safe conditions."

Retailers routinely inspect suppliers, but several companies said after the Rana Plaza collapsed in April that they were not able to check for structural soundness.

Walmart said it hired Bureau Veritas to inspect for structural fire and electrical safety, including checking building designs and permits as part of an expanded inspection process it launched last month.

Rana Plaza was extended to add three more floors, in violation of city building codes, according to the chief engineer of Dhaka's development authority. The day before the building collapsed, cracks were seen in the walls.

North American retailers devising own Bangladesh plans   [ top ]

REUTERS, Jessica Wohl, May 15, 2013
North American retailers on Tuesday discussed forging their own Bangladesh safety agreement, an alternative to a legally binding accord that many European retailers have signed on to, though details of any alternative accord were still unclear.

The discussions on Tuesday were the lat8est in a series of talks convened by large retail trade organizations and including retailers such as Macy's Inc , JC Penney Co Inc , and Sears Holdings Corp , to develop a response to fatal fires and a factory collapse in Bangladesh last month that killed more than 1,000 people.

The National Retail Federation (NRF), one of the largest U.S. retail trade associations, spoke on Tuesday afternoon with other trade associations and with its member companies about a possible accord among North American retailers. Details from those calls are not yet available.

The trade associations collaborating on a possible North American plan also include the National Retail Federation (NRF), Retail Industry Leaders Association (RILA), American Apparel & Footwear Association (AAFA), United States Association of Importers of Textiles and Apparel (USA-ITA), Retail Council of Canada and Canadian Apparel Federation, according to people familiar with the talks.

Meetings among North American retailers are shaping up as an alternative approach to an accord that European-based retailers have reached. The pact, joined on Tuesday by Loblaw Cos Ltd of Canada, includes legally binding commitments to safety improvements, according to industry sources. A copy of the agreement has not yet been released.

Major European retailers such as Sweden's H & M Hennes & Mauritz AB and Spain's Inditex SA have signed on to the accord. Labour groups including Europe's IndustriALL and UNI Global Union, as well as non-governmental organizations, provided the initial draft of the agreement and have set a May 15 deadline for companies to commit to its terms.

Wal-Mart Stores Inc , the world's largest retailer, said on Tuesday that it is not in a position to sign the accord at this time. "Walmart believes its safety plan meets or exceeds the IndustriALL proposal, and will get results more quickly," the company said in a statement.

Wal-Mart has expanded its own safety efforts in Bangladesh over the past several months after the deadly Tazreen factory fire in November.

Earlier on Tuesday, Wal-Mart laid out enhanced plans that include in-depth safety inspections at all Bangladesh factories that produce goods for it and increasing the pace and frequency of follow up inspections.

U.S.-based retailers have been reluctant to join any industry accord that creates legally binding objectives. Gap Inc said it would sign the accord only if changes are made to the way disputes are resolved in the courts. As of Tuesday, the only major U.S. company to announce its support was PVH Corp, whose brands include Calvin Klein.

Robert E. Scott, an expert on contracts and commercial transactions at Columbia Law School, said in an email that the U.S. retailers are balancing a desire to seek improvement in Bangladesh against concerns about exposing themselves to liability for safety issues.

"Perhaps American firms believe that the risk of collateral liability is too great to estimate," Scott said. "But that's not a contract law issue, that's simply a question of balancing corporate benefits of being seen as a good citizen trying to control these conditions on the one hand with the risk of a possible significant liability on the other."

Mike Posner, a professor of business and human rights at New York University's Stern School of Business, in an email said agreement to a legally binding accord by major European retailers has put U.S. retailers under pressure. "The onus is now on American brands to step up to the plate," he said.

Sears said in a statement that the company "is not prepared to sign the current proposal. We are engaged in preliminary discussions about the alternate proposal from the retail trade associations in North America."

A JC Penney spokeswoman told Reuters the company was actively engaged in the talks. "There has been some discussion of possibly melding the two proposals into one hybrid industry solution," she said.

Macy's, whose namesake stores are the largest U.S. department store chain, said it was working with the North American Bangladesh Worker Safety Working Group, which includes NRF, RILA and others.

Bob Kirke, executive director of the Canadian Apparel Federation, said that while his group did not have an announcement to make, "it's fair to say that we're working on different responses to the Bangladesh situation."