Urban E Troubles Column Express Computers 1st July 2013 publication

Indian Medicinal Plants

Managing organized retail published Express Computers 1-15th June 2013

Tale of Misgovernance: Bangladesh Garment Factory

Tale of Misgovernance: Bangladesh Garment Factory 

Photo: Associated Press

The recent collapse of the garment manufacturing building in Bangladesh has caused the death of 1127 people and injured 2000 others. Scores of people have been maimed for life. Rubble removal work has taken a near full month. One woman survivor is pulled out on the seventeenth day.

Pope Francis has characterised the Bangladesh garment workers as slaves. Disney walked out of the country. It did not want its brand to be associated with such bad publicity. Human rights workers protested before UK high street retailer Himark’s offices in London and there were protests in many cities across the world.

Official garment worker minimum wage in Bangladesh is $37 per month. Overwhelming majority of people working in these factories are women. There are 4500 garment factories in the country with the majority of them located in Dhaka and some in the port city of Chittagong.

Bangladesh is the world’s most popular low cost garment manufacturers’ destination. While the monthly wage paid to garment worker in Bangladesh would rarely exceed $50, in Shenzhen China the wage is $335 and in Hanoi Vietnam it will be $100. Other outsourcing garment manufacturing locations in the world are Indonesia, Thailand, India and a few others.

The purchasing capacity in the new markets is much lower than in mature markets of North America and Europe. Rising demand from India and China is adding to the demand for low cost outsourcing manufacturing. Production time lines are becoming shorter and pressure to produce faster is increasing.

Today garment workers in Bangladesh work 14 hours a day, six days a week, live in dormitories several people to a room in sub human conditions and have practically no right to protest. Any sign of protest or dissent will lead to instant firing and replacement with another worker willing to work in the same conditions. Allegations of sexual abuse and harassment also abound.

While we can badger, criticise, protest and demand major garment retailers of the world to be more humane in their sourcing, take responsibility for the outsourcing contractors and insist on globally accepted norms for treatment of workers, the situation will get resolved only through collective action and pressure.

There are four major actors in this entire business, each of whom has a role to play:

1. Governments
2. Global retailers
3. Civil society groups
4. Customers

Governments:

A building collapse of the type that happened at Rana Plaza is primarily a result of apathy and mis-governance. This is not a one off tragedy but is one in a series of periodic disasters. Just a few days after this building collapse, a fire broke out at the Tung Hai Sweater Factory in Dhaka and another eight more people died.

It is not uncommon in South Asia and other developing countries that regular pay offs are made to enforcement machinery officials to look the other way at rampant violations of codes and laws. Tip offs by officials to builders and garment manufacturing operators, whenever inspections by outside agencies is planned, are common.

On the eve of an inspection, the premises are cleaned up, fire extinguishing equipment from outside is brought and placed at strategic locations and an impression of compliance is given to the inspection party. The nexus between business, corrupt politicians and officials is common knowledge in these parts.

Garment manufacturing brings in $18 billion of hard currency for a country whose GDP is around $118 billion. 49% of the population of Bangladesh is below the poverty line and earns less than $1.25 a day. A regular job that gives a person a chance to survive is a cause of envy in such communities. There is too much of stake socially, politically and economically for Bangladesh and pressure from the global community can force change.

Global Retailers:

While it is understandable that global retailers look to outsource manufacturing to the cheapest possible location; this does not mean that search for higher shareholder value and profit overrides human dignity and humane practices. Incidents like the one in Bangladesh have been occurring again and again. Each outrage is followed by assurances to improve compliance of contracts, global standards, tougher inspections and increased oversight. The regularity at which these incidents occur indicates a lack of will on the part of these players. Sustained pressure is necessary to force change.

Civil Society Groups:

They are the global watchdogs. Repeated campaigns and pressure against erring groups and governments is critical. In response to domestic and international pressure, the government has been forced to shut down eighteen errant garment manufacturing factories. The cabinet has approved changes to raise the minimum wage of garment workers and improve statutory compliance.

Clean clothes campaign launched with help of local and global unions, labour rights organisations has lead to some global retailers like PVH who own the Calvin Klein brand, Tommy Hilfiger and German retailer Tchibo to sign on an agreement for independent building inspections, pledging to enforce worker rights, training and public disclosure. Continued pressure will force others to sign such pledges.

Customers:

They are the ultimate arbitrators of any business. Customers can refuse to buy products manufactured in factories where basic human standards have not been complied with. Customer pressure has lead to substantial diminishment of use of child labour in factories in India. Wildlife protection groups inspire customers to boycott purchase of furs, shoes, garments made out of skins, bones and parts of wild animals.

The cost of non compliance can be made unacceptable for government, global retailers and outsourced manufacturers if the customer refuses to buy these products that are tainted by the blood of the impoverished. 

 

THE AUTHOR

Sudhir Ahluwalia moved out to the Corporate world after spending over two decades in the Indian Forest Service. He headed multiple consulting groups in Tata Consultancy Services and spent over a decade with them. He now operates as a business consultant and is advisor to multiple companies. He does a bit of freelance writing with focus on Information technology and nature: www.sudhirahluwalia.com.

Measuring upto Financial Inclusion May1st 2013 Express Computers Publication

The IT Outsourcing and Job Loss Debate Published 8th May 2013 www.travelculturemag.com

Paul is 45 years of age, lives in small town near San Jose, California state, USA. He works as a software programmer for a local mid-sized company, is respected for his skills and quality of code that he writes. One morning, he is called to the office of his boss. He is told that the global slowdown has hit the firm hard; the company needs to cut costs and has decided to offload code writing to an outsourcing firm in Bangalore, India. The world comes crashing down on Paul. He is without a job.

Sridhar studied in the local engineering college in Vizag a port town in the South of India. His parents had sold their only possession, a piece of agricultural land, to pay for his education. Sridhar finally got a job with an IT outsourcing firm in Bangalore. Sridhar first priority in life is to earn enough to repay his father’s debt and get his parents out of penury. A stint in the US is his dream. He is determined to compete, work hard, save a lot and finally own a house and lead a good life free from poverty and deprivation.

Paul and Sridhar may be fictional characters but their stories are true. These are getting repeated across continents in Asia, Europe and North America. Both are qualified engineers. One works for $90 per hour the other at $30. The job, they both do, is the same. One has just lost a job to Bangalore and the other has gained one. Both deserve a good life.

The IT outsourcing and job loss debate is not about technology but about profit, shareholder value and people. It is about trying to redress the trade balance between countries. It is about countries seeking to protect their citizens from pain.

India has 1.2 billion people, produces 600,000 IT graduates, 1 million graduate engineers and 16 million engineering diploma holders each year. IT outsourcing is the main export of India and helps to keep the trade deficit from going out of control. The IT outsourcing industry of India has an average age of thirty. The supply is continuous, although there is shortage of experienced resources. Average annual cost to company in India is only $6,500 as compared to $60,000 in the US.

Over time, the global IT industry has adopted the Indian Global network delivery model (GNDM). Herein companies have opened delivery centres called GDCs (Global Delivery Centres) across countries in different parts of the world. GDCs have been built across North America, Europe, Latin America, China, India, Australia and across the ASEAN region. This innovative model seeks to leverage advantages of each location.

At some places like India, China, Mexico, ASEAN region and Latin America cost is low and availability of manpower is comparatively good. GDCs help companies leverage local opportunities and expand their customer base. They also add to linguistic capabilities so critical while operating in non English speaking markets. In these low manpower cost countries size of GDCs are huge with a GDC manpower strength reaching up to 5,000 people.

In an expensive location like North America and Europe, manpower deployed is relatively small and is rarely over 500 people. Hereto, all efforts are made to induct cheaper qualified resources from India. Work visas like H1B and L category for the US become critical to maintain profitability of these companies. This staffing mode is common to both Indian, North American and European companies. Under pressure from local governments, companies have started hiring local manpower. They will continue to do so till such time, this does not significantly erode their profits.

Research, innovation, new product development companies have also moved in a big way to countries like India. New product development work is now being conducted at offsite RDCs (Research Development Centres).

The recent effort to increase cost of applying for a visa, forcing outsourcing companies seeking to induct cheaper resources into the USA by insisting on their paying prevailing market rates to their employees deployed in the US will inevitably result in drying up of inward traffic to the US. Technology resources are a fungible commodity. It will move where it gives the best Return of Investment.

Companies, globally in different times innovate and adapt to new challenges. Protectionism is not new to the world. The GNDC could play an important part in this counterstrategy. Free trade agreements, regional free trade agreements between North America and Latin American countries will come in play. Instead of Indian manpower, the onsite deployment will happen from Latin America. Paul will not get his job back soon. His job will be replaced by a Mexican Paul instead of an Indian Sridhar.

Technology will also be deployed to counter this challenge. Cloud based solutions, may not require onsite deployment of human resources in numbers. Most of the work can happen offshore. Government efforts in protectionism will lead to disruption but will this lead to increased jobs in the US and elsewhere? The jury is still out on this one.

THE AUTHOR

Sudhir Ahluwalia moved out to the Corporate world after spending over two decades in the Indian Forest Service. He headed multiple consulting groups in Tata Consultancy Services and spent over a decade with them. He now operates as a business consultant and is advisor to multiple companies. He does a bit of freelance writing with focus on Information technology and nature: www.sudhirahluwalia.com.

Transform to Flourish Published Express Computers April 2013