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News Clips 21 October, 2013

[ Garment-makers for duty-free inputs to maximise exports ]
[ Bangladesh: Burned down Aswad factory slipped through new safety net ]
[ Bangladesh poised to hike garment wages, but may not end strikes ]

Garment-makers for duty-free inputs to maximise exports   [ top ]

DAWN, Nasir Jamal, October 21, 2013
WHILE the European Union is expected to open up its markets to duty-free imports from Pakistan next year, the country’s garment industry remains far from ready to grab the opportunity.

Garment manufacturers claim the government’s restrictive import policies are blocking their access to new raw materials, which they require to diversify their product lines to take full advantage of the duty-free access under the EU’s Generalised Scheme of Preferences (GSP) Plus scheme.

According to the Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA), the country could utilise only three textile categories out of the total of 73 that it was given duty-free access to under the EU’s limited, unilateral trade concessions from November last year.

“This is because we do not have access to finer, synthetic fabrics used to make products like ladies’ garments, sportswear, etc., which involve high value addition to fetch higher prices. Our garment industry is still forced to produce low value added garments,” said Ijaz Khokhar, a leading exporter from Sialkot and former chairman of the PRGMEA.

“The government must relax the import policy to allow the value added textile industry to get the maximum benefit from the GSP Plus scheme, as the country has no raw material, except for cotton. Producing garments of generation III and IV is still a major challenge, as we are currently making just generation I or II garments, mainly because of the lack of raw material on account of high taxes on import,” he said.

“On the other hand, our rivals in Bangladesh are enjoying duty-free import of every raw material and, hence, have increased their value added textile exports to $26 billion, compared with Pakistan’s garment exports of $4.5 billion,” he argued.

Khokhar said he had interacted with many Chinese investors who were interested in relocating their manufacturing facilities to Pakistan because of rising labour and other costs in China. “Nonetheless, the Chinese investors too feel impeded by restrictive fabric import regime.”

Garment exporters say the local garment industry comprises small to medium-sized units. Such manufacturers are unable to import the raw material required to diversify their product lines because of their small scale. “We cannot afford to import raw materials even under the duty and tax remission for exporters (DTRE) scheme because of our size. The scheme, like many other such policies, has benefited only the big exporters,” said another garment exporter from Lahore.

He said the duty-free import of synthetic blends and cotton fabrics could double the country’s apparel and sportswear exports, as both raw materials are not manufactured domestically. Small trims, carrying no commercial value, should also be made duty-free to reduce delays, and the removal of import duties on raw materials would make our products competitive under the EU’s GSP Plus scheme, he added.

Khokhar was of the view that it was imperative for the government to give the value added textile industry across-the-board duty-free access to raw materials.

“The government should allow a free import mechanism for raw materials for the apparel sector. Even if a part of the imported duty-free raw materials winds up in the domestic market, as is feared by policymakers, it will not hurt any one. The government allows its duty-free fabric import under the DTRE scheme, but it is not feasible for SMEs to avail the scheme.”

He said the duty-free import of fabrics was also of crucial importance for value added exporters because of limited dyeing facilities in the country, and the energy, especially of gas, shortages for the industry.

Many garment exporters are also disappointed over the delay in the processing of their refunds. “Billions of rupees stuck in sales tax and other refunds have caused a cash flow problem for the industry,” said Pakistan Textile Exporters Association Chairman Sheikh Illyas. He added that few exporters could afford to bear the delay in the release of the refunds.

No exporter has received refunds for two per cent sales tax on purchases of raw material for export since February 2013, while claims from 2010 are still pending as well. Many say the Federal Board of Revenue (FBR) is delaying refunds to show higher tax collection.

Meanwhile, FBR officials say the board is releasing refunds pertaining to the current financial year. Claims from previous years will be cleared only when the government decides to do so, they say.

“There are a lot of discrepancies in the refund claims, which we are sorting out. But where genuine claims have been established, we are releasing the refunds,” said an FBR official in Lahore.

Khokhar was of the opinion that the bank guarantee system, which was in vogue before the introduction of DTRE, should be revived, at least for the small to medium scale exporters.

“This will ensure that exporters are able to import the required fabrics and that they do not face a cash crunch because of stuck up tax refund claims. If any one doesn’t convert duty-free imported fabric into garments for export, the FBR can get his bank guarantee encased.”

Bangladesh: Burned down Aswad factory slipped through new safety net   [ top ]

GUARDIAN, October 9, 2013
ISLAMABAD, April 19: Pakistan’s export of textile and clothing rebounded in March 2013 as it witnessed a growth of over 13 per cent from a year ago.

A Bangladeshi textile factory, where at least seven workers died and more than 50 were injured in a fire on Tuesday, slipped through the net of international safety deals despite making fabric used by brands such as H&M, George at Asda, Primark, Next and Morrisons.

The Aswad Composite Mills factory, in Gazipur, outside Dhaka, was not one of almost 1,600 sites due to be inspected under the accord on fire and building safety because it was not a garment factory dealing directly with brands.

The blaze was reported to have originated in the knitting section of the factory, which belongs to part of the Palmal group.

The incident raises further questions about factory safety in Bangladesh less than six months after the collapse of the Rana Plaza factory, where more than 1,100 workers died and which led to the formation of two international deals to pump money into improving factory standards.

It also comes at a sensitive time in Bangladesh, with the government due to rule on a new minimum wage for textile workers.

More than 93 retailers, including H&M, Next, Primark and Marks & Spencer, have signed the legally binding accord, which ensures a commitment to carry out fire safety and structural inspections on thousands of buildings.

Asda's owner Walmart and Gap have signed a less stringent US deal, known as the Bangladesh worker safety alliance. This also failed to cover the Aswad factory.

Sam Maher, a campaigner at Labour Behind the Label, a pressure group for workers' rights, said the fire showed that thousands more potentially unsafe buildings housing workers producing goods for the UK could slip through the net.

Maher said: "There's no reason why garment workers should get protection afforded by inspections and those in fabric mills don't. It doesn't make sense to buy from a company without checking all its buildings."

Palmal, Aswad's owner, has several clothing factories that are set to be inspected under the accord and many of the garments these make are likely to have used fabric made at the company's mill.

Aminul Islam, administration officer at Aswad, said some international brands had a direct contract with Palmal to source fabric made at the mill.

A spokeswoman for George at Asda said: "We are deeply saddened by what has happened and our thoughts go out to the families and victims of the accident. George at Asda has a long standing relationship with Aswad Mill, we do source fabric from there and we are working with the owner to ensure we help them however we can.

"As part of the Walmart family we have a safety programme that rigorously inspects the factories that make our garments and other products. Typically that program does not extend to the facilities that make materials like fabric for those garment factories.

"Given the situation in Bangladesh, we, along with Walmart, believe the government of Bangladesh and the industry should consider whether to extend factory safety programs to this next level of production"

Morrisons and H&M said they sourced clothing produced by Palmal's garment factories supplied by the company's fabric mill, but that they had no direct relationship with the mill.

Next said in a statement that Aswad provided fabric to a separate clothing supplier.

Primark said it had made its last order with Aswad in March after the company broke its code of conduct. A spokesman said: "Incidents like this demonstrate the requirement for the accord to be effective, and for all members to work in collaboration for sustainable change in Bangladesh."

Meanwhile, inspections of garment factories covered by the accord are not likely to begin until November at the earliest. Although some brands, including Primark and Tesco, have been doing their own inspections – which have already uncovered at least one unsafe factory – it is not clear if this work will meet the requirements of the international safety deal.

Andy York, a member of the steering committee co-ordinating the setup of the body implementing the accord, said third-party consultants were being hired to begin inspections while the permanent staff were hired. An executive team and chief inspector are expected to be in place next week after months of legal and organisational work.

Negotiations are also continuing on how any work to improve factories might be funded. It is hoped that money from the EU and individual governments can help support factory owners and the Bangladeshi government, but brands might also have to chip in more funds.

York said companies had signed up to the deal with no idea of the potential costs but he urged those companies yet to sign, such as Edinburgh Woollen Mill, to have a change of heart. He said: "The first thing is that no worker should pay with their life for a garment or anything else."

Bangladesh poised to hike garment wages, but may not end strikes   [ top ]

REUTERS, Shyamantha Asokan, October 21, 2013
DHAKA (Reuters) - Bangladesh's garment factory owners are penciling in a minimum wage increase of about 50 to 80 percent and will ask retailers to pay more to defray the cost, as the government tries to end a wave of strikes that hit nearly a fifth of workshops last month.

The world's second largest clothing exporter hopes to announce a new minimum wage early next month, bowing to international pressure after a string of fatal factory accidents that thrust poor working conditions and pay into the spotlight.

Workers want the minimum wage, which was last raised in 2010, to go up to 8,000 taka ($102) a month - 2-1/2 times the current rate.

Factory bosses have formally offered 3,600 taka. Several, however, told Reuters they anticipated that Bangladesh's official wage board would set rates in the 4,500 to 5,500 taka range, and they intended to seek between 5 and 15 percent in price hikes from retailers.

The wage board was due to meet on Monday before submitting a draft proposal to the government.

"These workers' rights are being discussed all over the world now and the government is nervous," said Amirul Haque Amin, the head of the National Garment Workers Federation, an umbrella group representing 37 unions.

"There is this pressure now," Amin said in an interview in his ramshackle office, decorated with satirical posters of harangued factory workers and fat tycoons. "This has given us the opportunity to raise our voices."

The wage negotiations must somehow strike a balance between Western fashion giants, politically-connected factory owners and protesting staff.

The government did not respond to strikes over wages last year, but since then accidents including the collapse of the Rana Plaza factory complex near Dhaka, which killed more than 1,100 garment workers, have put the authorities on the back foot.


Rock bottom wages and trade deals with Western countries have propelled Bangladesh's garments sector to a $22 billion industry accounting for four-fifths of the poor country's exports, with retailers such as Wal-Mart Stores Inc, JC Penney Co Inc and H&M Hennes & Mauritz AB buying clothes from its factories.

Wal-Mart spokesman Kevin Gardner said the retailer "continues to work with other stakeholders in encouraging the Bangladesh government to review minimum wages for workers in the garment industry to ensure worker needs are met."

H&M said it had urged Bangladesh to raise the minimum wage and revise it annually.

"Wages are one of the issues that are at the top of our agenda to drive improvement in the textile industry," Helena Helmersson, H&M's head of sustainability, said in an emailed response to Reuters.

JC Penney did not immediately respond to a request for comment.

The minimum monthly wage for garment workers is 3,000 taka($39), around half of what those in rival Asian exporters Vietnam and Cambodia earn and just over a quarter of the rate in top exporter China, according to International Labour Organisation data from August.

Most Bangladeshi workers take home at least $54 a month because of overtime pay, according to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

Smaller factories will be hardest hit by the expected hike, factory bosses said. Muzaffar Siddique, whose mid-sized factory in Dhaka employs 650 people, said he would have to charge retailers 30 percent more if wages went up to 4,500 taka.


The government is revising the minimum wage as part of efforts to address the industry's "image problem" and hopes to announce the new rate during the first week of November, said Mikail Shipar, the top official at the Labour and Employment Ministry.

Sirajul Islam Rony, a member of the six-person independent wage board, also told Reuters that it was due to announce a figure by next month. It must then be approved by the law and labour ministries.

Export growth is forecast to slow to 7 percent during the fiscal year that started in July, down from almost 11 percent last year, as Western retailers grow nervous about doing business in Bangladesh, according to an Asian Development Bank report.

Garment factory staff went on strike over wages for six days in September, affecting production at almost 20 percent of the country's 3,200 factories, according to the BGMEA. The strikes followed similar protests over the summer.

Workers also held a factory owner captive in his office for more than 18 hours earlier this month until he paid bonuses owed to them for the Muslim festival of Eid al-Adha.

Wages have not kept up with inflation, which is running at a nearly 9 percent annual average since the last hike in July 2010. They would need to hit 3,877 taka just to keep pace with inflation, which is more than factory owners have offered.

Factory bosses counter that they would like to pay workers more but can only cover this cost by charging Western retailers more, which could jeopardize Bangladesh's sole appeal - its bargain basement rates.

"It's a very simple equation - wherever they get a cheap price, they will go there," BGMEA president Mohammad Atiqul Islam said of the retailers. "It's not like they're here because like the Bangladeshi food or the Bangladeshi man."

Retailers have this year cut rates by 3 percent on average, Islam said. Some factories are already struggling with higher costs due to retailers demanding stricter safety standards after the accidents, said Kutubuddin Ahmed, the chairman of the Envoy Group, which exports $200 million worth of garments a year to high-street brands including JC Penney and Inditex SA's Zara.

A factory fire 40 km (25 miles) from Dhaka on October 8, in which seven people died and 50 were injured, has raised concerns that standards have not changed significantly since the April building collapse.

"This is an issue for the small factories. They need money to become compliant," Ahmed said, defining small factories as those that employed up to 500 people, which accounted for a third of the sector.


Many workers say they will go on strike again if their demands for a pay hike are not met, which would be a blow for the ruling Awami League ahead of an election due by January.

While some staff would accept an offer below the 8,000 taka their unions are demanding, anything under 6,000 is likely to spark widespread protests, said Kalpona Akter, the executive director of the Bangladesh Centre for Workers Solidarity, an NGO that helps workers form unions.

Garment factory workers need around 6,450 taka a month just for their basic living costs, according to a survey by the Centre for Policy Dialogue, a Dhaka think-tank, published in September, with many relying on small loans.

"If it's less than 8,000 taka, we have to press the government or the factory owners to increase," said Mosammat Jhumur, a 24-year-old factory worker who shares one bed in a Dhaka slum with two other women and went on strike in September. "If we need to go on the road to demonstrate, then we will do that."