Sunday, December 16, 2012

Bangladesh Fire Raises Pressure to Improve Factory Safety

AP Photo: Labor groups say more than 500 people have died in Bangladesh factory fires since 2006. Above, garment workers in a factory outside of Dhaka

SYED ZAIN AL-MAHMOOD in Dhaka, KATHY CHU in Hong Kong and TRIPTI LAHIRI in New Delhi

THE BANGLADESH government, factory owners and foreign retailers are facing pressure from workers to overhaul workplace safety in the aftermath of last month's deadly factory fire.

More than 500 people have died in Bangladesh factory fires since 2006, according to estimates by labor groups. The late-November fire in the Tazreen Fashions Ltd. factory that killed 112 people, the country's worst industrial accident, was a tipping point.

Garment workers have clashed with police weekly in Ashulia, the northern industrial suburb of Dhaka where Tazreen is located, demanding compensation for victims' families and safer working conditions. Pressure is mounting on big buyers such as Wal-Mart Stores Inc. and Hennes & Mauritz AB to tighten systems for monitoring factory safety in Bangladesh.

Fearing social unrest and lost orders, Bangladesh's government is promising action. The stakes are large. The country exported $19 billion in garments last year, second only to China, according to government reports. A recent report by consulting firm McKinsey & Co. estimated that the figure could double in less than a decade.

"The prime minister has ordered us to make sure this never happens again," said Mikail Shiper, an official in Bangladesh's labor ministry. Authorities have begun to review the nation's 5,000 registered garment factories and will rescind permits from those that fail safety evaluations, Mr. Shiper said. The government also is looking to install more fire hydrants in industrial areas, he said.

Skeptics have said Bangladesh's niche as among the world's least-expensive place to make clothing—the minimum wage for garment workers is less than $37 a month—is an obstacle to progress. The country's economy in recent years has been propelled by churning out low-cost garments for the West, which labor groups said has come at the cost of worker safety.

As foreign retailers slash prices to attract shoppers, Bangladeshi factories have to produce for less. A Bangladeshi supplier said prices retailers pay for clothes had fallen 3% in the past five years, while production costs had increased 10%.

"It's hard to continue to improve factory compliance and safety when there's ever-increasing downward pressure on the prices that global retailers are willing to pay," said Ifty Islam, managing partner at Asian Tiger Capital Partners, a Dhaka-based asset-management company.

Pierre Börjesson, the sustainability manager for social issues at fashion retailer H&M, said his company does its own safety inspections in Bangladesh, rather than rely on third parties, as many retailers do. H&M, the largest buyer from Bangladesh by volume, has conducted more than 500 inspections at about 200 Bangladesh factories this year, he said.

"The absolute root cause of fires in Bangladesh factories is the electrical situation," Mr. Börjesson said. Fire-safety authorities need to increase safety standards for electrical wiring, for new as well as old structures, he said.

Labor groups said factory owners, a number of whom sit in Parliament, have blocked efforts to improve working conditions and have sought to ensure that a ban on unionization in garment factories remains in place.

"When we spoke up, we had our [nongovernmental organization] license revoked," said Kalpona Akter, executive director of the Bangladesh Center for Worker Solidarity. She said the organization has applied to have its license renewed.

Factory owners this year resisted an order from the fire department to dismantle unauthorized rooftop tin structures, according to Ashulia fire inspector Mahbub Hossain. He said fire officials changed the order to allow such structures on three-quarters of a roof, after owners complained they needed the structures for workers' dining areas.

Manufacturers said they improved workplace conditions in recent years, spurred by demands from foreign buyers. "A minority of factories give us a bad name," said Shahriar Alam, a member of Parliament and the managing director of Renaissance Group Ltd., a large Dhaka-based garment manufacturer.

Pressure from retailers has helped improve some working conditions, including the near eradication of child labor in the garment industry, workers' groups acknowledged. But labor activists said about five new factories open each month to meet rising demand, making it difficult for Western retailers to keep tabs on where their clothes are coming from.

About 70% of Bangladeshi factories comply with the country's labor and safety standards, said Belal Hossain, a senior official with Bangladesh's labor directorate. "Compliance is going up," he said. "But the rise in the number of compliant factories is still behind the curve when matched against the volume of orders."

Retailers often rely on third-party suppliers to get garments made. The suppliers are supposed to ensure that items come only from factories that pass regular inspections for safety and working conditions, carried out by global auditing firms.

Wal-Mart disputed that there aren't enough auditors but said it is looking for ways to strengthen its system to avoid subcontractors using factories without the retailer's authority.

"We can put all kinds of controls in place, but if they don't tell us where they're putting our order, then that is a problem" said Wal-Mart spokesman Kevin Gardner. "The lack of transparency down the supply chain represents a challenge not just for Wal-Mart, but for the industry overall."

Tazreen, the site of last month's fire, supplied clothes to Wal-Mart and other companies after failing audits. Wal-Mart said after the fire that suppliers did business with the factory without authorization and that Wal-Mart has stopped using the suppliers. Tuba Group, Tazreen's parent, said it wasn't aware that the factory had been deauthorized.

The fire is likely to push retailers to buy more of their goods directly from factories, rather than through suppliers, and to conduct more of their own audits, said Rubana Huq, managing director of Mohammadi Group, a Bangladeshi garment manufacturer. "We are already experiencing retailers tightening their audit processes through their local offices," she said.

—Shelly Banjo contributed to this article.

First appeared in The Wall Street Journal, December 15, 2012

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