Wednesday, 27 February 2013

Garment factory Abscondment: was February the month of miracle remedies?


I can’t remember a time when so much has been done to combat the curse of garment factories going out of business, leaving debts to its workers. But not all strategies have worked.

Those that have, or seem likely to:
-          The Supreme Court in China announced that quite small amounts of wage arrears could mean up to seven years in jail for the offending factory owner
-          The Vietnamese government has announced a series of programmes for local authorities to help workers stranded by factories going out of business
-          The Bangladesh Export Processing Zones Authority has insisted the new tenant of a plant, formerly run as a sweater factory till the owners went out of business, pay outstanding debts – including to former workers – before  taking over the factory as a new sportswear plant
-          Its Pakistani equivalent has leaked to a Pakistani newspaper that it has ensured workers got practically all wages remaining unpaid in Pakistan after the bankruptcy of Joe’s Fashion and J&N.
-          In Cambodia, the Prime Minister has insisted public funds are used to pay the $7 mn or so in wages and severance outstanding when Yung Wah Industrial went bust in December. Reports are that this has all been paid.

Three other strategies seem to have been a lot less successful:
-          A campaign by activists to get H&M and Walmart to pay whatever they believe was owed to workers when Kingsland Garment collapsed about the same time as Yung Wah Industrial (the campaigners are somewhat vague about what precisely  Kingsland did owe, but are very clear that Kingsland’s offer is unacceptable)
-          A campaign by a similar  group to get Adidas to pay outstanding wages at Indonesia’s PT Kizone
-          A campaign by almost the same group to get Li & Fung (and/or Esprit) to fund outstanding wages at Hey Tekstil in Thailand and Turkey.

None of these three campaigns has yet produced anything except a lot of spilt ink and a lot of self-righteous venom from the same bunch of ineffectual Western ranters who are behind most of the campaigns concerning the clothing industry that lead nowhere.

There’s no confirmation the first five apparently successful strategies have all worked, or that all the money outstanding has in fact been paid off. But there are a couple of common threads to the three campaigns that seem to have achieved nothing:  they all involve pressurising businesses who’ve already paid all outstanding debts concerned with the bankrupt company to pay out more, and none involve any pressure on the host government to take any responsibility for what’s happened in their country.

That second feature is the important thing. If the law in a country put debts to workers way down the list of creditors of a bankrupt business, campaigners really concerned with worker welfare will prioritise helping local politicians campaign for worker-friendly bankruptcy and criminal laws, and fighting for better treatment of workers in the way existing laws are enforced. It's not clear that foreign activists are in any way responsible for what's happened in China, Vietnam, Cambodia, Pakistan and Bangladesh: the initiatives there came from politicians and government departments working for their people. But there certainly will be times a bit of outside support comes in useful

As the three so far abortive campaigns show, trying to get businesses to pay again for garments they’ve already paid for almost invariably gets nowhere with those businesses – for a very good reason. Once they signal they’ll capitulate to moral blackmail, they invite similar campaigns from every other group with a grievance the group can’t get settled through their own laws. Or don’t want to bother trying to settle legally, since picketing a few Western clothes shops is so much more fun than discussing the messy business of unemployment insurance or factory bonding systems.

Occasionally, Western businesses will buy off moral blackmail because resistance absorbs too much energy or risks alienating potential customers. But such activity doesn’t help the next group of workers finding their employer’s run out of cash: it submits their case to the arbitrary whims of a distant business and the unpredictable judgements of foreign managers. And if those managers do decide to pay out to allegedly destitute workers (all the current cases are in cities with a chronic shortage of skilled garment workers), they create an apparent precedent attracting future claimants.

The PT Kizone case seems to have started the current wave of “abscondment” campaigns, largely because of an odd quirk in the particular circumstances of the case. Indonesia has exceptionally worker-unfriendly bankruptcy laws: the bankrupt company’s assets cannot be used to pay workers because the Indian (yes: Indian) government has filed a court case claiming Kizone’s debts to the State Bank of India  rank higher than those to the company’s staff, so cash is currently frozen. (The question of why campaigners aren’t picketing every Indian Embassy and High Commission in the West is one for those campaigners’ conscience)
Since a number of US colleges have purchase conditions giving an absolute liability on businesses supplying college-branded clothing to ensure factory workers are paid, some other sportswear suppliers (especially Nike) have made ex-gratia payments to preserve their lucrative college sportswear business. That line of business is less important to Adidas than to Nike, but the Kizone campaign’s success with Nike has led activists to decide it might be easier to extract cash from buyers than change the law, or establish insurance programmes.

 It looks though as if, outside suppliers to the US collegiate market, big buyers are increasingly wary of giving way to this kind of blackmail – though Walmart and H&M have now agreed to meet the Cambodian Kingsland workers on March 1

There is no one answer to the problem of abscondment: businesses go bust all the time, and it’s a fact of life that desperate businesses take shortcuts on lots of things – including paying social insurance premiums. If a country like Cambodia tried auditing factories’ financial viability every week, it’s inevitable it would deter foreign investors and the audit system would become corrupt. As with most emerging market worker scandals, any solution has to involve some greater contribution from buyers, sensible and honestly enforced local laws and strong encouragement for better worker welfare.

And on the evidence of February 2013, those solutions owe more to grown up politicians in developing countries than to Western petitions. But who knows whether that’ll all change?

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