May Issue 2014

After a series of workplace disasters that plagued Bangladesh’s garment industry, US licensor Walt Disney stopped its production of branded merchandise there last May. It also announced the halt of production in four other “highest-risk countries,” including Pakistan, by April 2014, if they failed to meet verifiable standards of compliance — the minimum qualifying requirement of 31 percentile ranking in the World Governance Indicators (WGIs).

Citing “poor governance standards”, Disney has dropped Pakistan from its list of “permitted sourcing countries,” which authorities partners to produce clothing and other goods.

Although Bangladesh had an average WGI percentile ranking of 23, just two points ahead of Pakistan, it was able to avoid the ban by getting a waiver as it signed on to the “Better Work Programme” in October 2013.

“Countries having a WGI ranking of 65 percentile or above need no other requirements to become a Disney supplier,” explains  Amjad Usman, Officer RDA Cell at the Pakistan Hosiery Manufacturers & Exporters Association. “However, if it’s between 65 and 31, an International Labour Standards audit is conducted to remain in the list of “permitted sourcing countries.” If the standing gets below 31, the Better Work Programme needs to be implemented.”

The Better Work Programme is a partnership between the International Labour Organisation (ILO) and the International Finance Corporation. Launched in August 2006, it aims to improve labour standards and competitiveness in global supply chains by improving worker-management relations, working conditions and social dialogue. Basically, it is compliance with international labour standards, both at the factory and the national level.

“It is currently funded by the Australian government, Netherlands Ministry of Foreign Affairs, State Secretariat for Economic Affairs, Switzerland, along with donations from organisations such as the Levi Strauss Foundation,” says Usman.

Disney’s revised sourcing criterion is based on the WGIs report by the World Bank that assesses six key governance indicators: Accountability, political stability, lack of violence, rule of law, regulatory quality and control of corruption in 215 countries. The five countries — Belarus, Bangladesh, Ecuador, Pakistan and Venezuela — from which Disney initially announced to pull out, had the lowest scores on those measures.

The decision was prompted after the September 2012 fire in the Baldia Town area of Karachi that killed at least 258 people, and another fire at Tazreen’s Fashion Factory in Bangladesh’s capital, Dhaka, that killed more than 100 people in November that same year. This was followed by the collapse of Rana Plaza, an illegally constructed factory building in Dhaka that left more than 500 people dead in April 2013.

Pakistan, despite being on the “watch list” for a year, did too little too late to help offset Disney’s decision to discontinue outsourcing from Pakistan. The Trade Development Authority of Pakistan, which works for trade promotion, wasn’t assertive enough to protect the exporters. The authority’s secretary, Rabia Javeri Agha, and Chairman S.M. Muneer, however, were not available for comment.

According to a Dawn report, the hierarchy in the relevant ministries agreed in private that the PML-N government did not realise the urgency of the situation. It cited a senior bureaucrat as saying, “The ministry approached Disney to negotiate a solution, which agreed to defer the decision for a year if Pakistan joined the Better Work project. We then approached the ILO office in Geneva, Switzerland, but it was probably too late. Their central secretariat said they could only entertain two countries in a year and for the current year they had already committed to Myanmar and Bangladesh.”

Even private manufacturers and exporters are critical of the government, blaming it for not working upon their proposals. “Government to bayhis hai. Since 1947 there has not been a single government in Pakistan that has heeded the suggestions of associations and chambers,” complains Muhammad Javed Bilwani, Chairperson Pakistan Apparel Forum. “In other countries, governments make policies as per the suggestions given by the stakeholders. But here they take suggestions, but do the opposite. Things will not turn towards the better until this trend is reversed. The government is at fault, not the industry.”

But what did the Pakistan Hosiery Manufacturers Association (PHMA) do to stave off the ban? “We highlighted the issue with the government, asking them to do something. It said the matter was being looked into. Bas dekhte he hain. 1947 se bas dekh he rahe hain,” he says in a satirical tone. “Now the exporters are worried. First, the sudden rise in the value of the rupee affected our orders and now this import ban. Who should we go to?”

Disney delivers a huge product line catering to kids between the ages of three and 12. These include toys, clothes, blankets and comforters, etc, and quite a few textile companies manufacture and export merchandise to them from Pakistan. These include Arzoo, Afroze, Sitara, Anis Apparel, MK Sons and Nimra Textiles, among others.

“I have been supplying to Disney for eight years,” says Akhtar Younus, owner of Anis Apparels. “We manufacture T-shirts, jackets, rompers and other clothing items.”

When asked if enterprises in Pakistan complied with international labour standards, he replied, “Yes, they do, except for 10-15 per cent of them, which find it difficult because of the complicated procedures involved.” Laws, he said, should be simpler and be implemented with government support. “There are almost 15-17 departments to whom we are accountable. There should be a one-window operation.”

Like Younus, other manufacturers whom Newsline contacted (Arzoo and Afroze Textiles) declined to comment on their projected losses; and it seemed that things were still not clear to them. They confirmed, however, that production had stopped and no Disney consignment was shipped after March 31, 2014.

On the contrary, newspaper reports predict a collective worth of their exports to Disney to be between US$ 150-200 million. Hence, in the absence of any visible efforts by the government, i.e. implementation of the Better Work Programme at the earliest, Pakistan is set to lose huge amounts of foreign exchange, other than affecting the production of almost 30 manufacturing units and the employment of more than 50,000 workers.

The Express Tribune quotes Pakistan Textiles Exporters Association Chairman, Sheikh Ilyas Mahmood as saying that the revision in Disney’s policies would have implications for textile exports from the country. “The loss to the textile business could run into millions of dollars, thousands of workers would be unemployed and small and medium-sized enterprises would shut down.” It is also feared that other major US retailers such as Marvel, Wal-Mart, Macy’s and Gap may follow suit.

As it is, the energy crisis and the security situation have previously brought numerous textile mills to a halt. In fact, the import ban by Disney is part and parcel of a larger problem faced by exporters: Lack of government support.

“First and foremost, the government needs to improve law and order. Even if we have energy, the security situation is terrible,” says Abdul Jabbar Dalal, Member Managing Committee of the Karachi Chamber of Commerce and Industry, who also owns a weaving mill. “Moreover, exporters need incentives. India is giving them so many subsidies, loans. Exporters are being encouraged. But here we have tough conditions and are very much on our own. If exporters are encouraged, Disney will be back along with other buyers,” he observes.

The Pakistan Bureau of Statistics in its annual report stated that in the first five months of the current fiscal year 2013-14, “exports of textiles and apparel from Pakistan grew by 6.02 per cent to US$ 5.68 billion as compared to exports of US$ 5.361 billion made in the previous financial year.” If the prediction made by Sheikh Ilyas Mahmood stands true, this increase may not last for long.

It is time that our industries, as well as the government, follow global concerns regarding the working conditions and the wellbeing of labour in Pakistan. There is no short-term solution: Either we improve our governance or implement the Better Work Programme. The manufacturers from Pakistan, after Bangladesh, must brace themselves for scrutiny never faced before.

“Rather than meeting some favourites in the advisory committee, the government should interact, brainstorm and devise solutions with the association. The Chamber does not have an answer to everything,” says Bilwani. “They should take our advice in matters related to the textile sector.”

This article was originally published in Newsline’s May 2014 issue.