AFTER failing to meet the heavy investment required for complying with workplace and environment standards in the global supply chain, many small and medium enterprises have either scaled up their operations or closed down.

And this has resulted in a setback to the sector’s exports.

The situation remains the same today as most textile and clothing units are still struggling to meet the global supply chain standards.

One reason for the industry’s low compliance with social and environmental standards is the liquidity crunch they are facing to finance their working capital requirements. This is in contrast to the situation in regional countries like Bangladesh, India, China, Vietnam and Cambodia.

Industry representatives say these countries — which are in direct competition with Pakistan’s textile and clothing sectors — have the full support of their respective governments through policies that help maintain the cash flows of industrial units engaged in the export trade.

Contrary to this, Pakistan’s export-oriented industrial units are facing cash-flow problems because their huge funds are stuck-up at various levels with different government bodies, including the customs and sales tax departments.

Apart from global and country-specific standards, there are some that are laid down by individual buyers for suppliers

Talking to this writer in his factory office in the Korangi Industrial Area, Rajby Industries Director Masood Naqi said it was not easy to comply with requirements under the ILO, Universal Declaration of Human Rights and the UN’s Convention on the Rights of the Child.

While not denying the benefits of social workplace responsibility standards at industrial setups, he said these require huge funds from individual organisations and also on a collective basis.

Naqi blamed the social lag due to the absence of political will on the part of successive governments. “Typically, we tailor good policies but are extremely poor at implementing them. This does not only frustrate our objectives but also ends up in the wasting of precious time,” he observed.

World standards-compliant industrial units become efficient and quality-conscious. This reduces their cost of production, which helps them stay competitive in the international market. The objective of these standards, besides ensuring social responsibility towards workers, is to meet quality and safety benchmarks and ensure timely delivery as per the customer’s needs.

Naqi said a huge amount of Rs200bn belonging to the export sector is stuck up on account of sales tax refunds and drawback of local duties, taxes and levies. The unpaid funds are not only choking the industry’s working capital but also inhibiting it from investing in social services.

Meanwhile, apart from global and country-specific standards, there are some that are laid down by individual buyers for suppliers. With growing awareness, the buyers’ rights are getting tougher with each passing day. Before purchasing any product, a foreign buyer verifies that it complies with the relevant standards.

Naqi cited the example where a buyer, after visiting his production facility, did not place any export order after finding out that the unit had no fire hydrant system. In order to avoid such a situation in the future, the company spent a hefty sum of Rs7m to install such a system, he added.

Similarly in 2005, another buyer, through an audit company, objected that the factory had no water treatment plant in the washing area. And the management again had to dish out a huge amount of Rs30m.

And even after complying with these individual requirements within the four walls of a manufacturing facility, the exporters face issues related to the treatment and disposal of solid and liquid waste.

Most regional countries have moved forward by setting up ‘green production units’ and adopted energy conservation measures, fow which they get carbon credits from the buyers said Naqi. Pakistani exporters should also need to set up such production facilities to push up sales in the world consumer market.

The compliance issues cannot be met individually but on a community basis or at the government level. And the environmental problems have to be tackled on a larger scale and through joint efforts. And while safety and security at work and production places can be ensured, the buyers also demand security during the transportation and the shipment phases.

Meanwhile, special companies are assigned the world over to dispose of solid and liquid waste and governments have designated specific areas for the disposal and dumping of industrial waste after proper treatment.

About 10 years ago, a combined effluent treatment plant was set up at Korangi. But this project failed due to a lack of interest by the industry and the monitoring bodies set up by the provincial and federal governments.

Naqi said Pakistan could enhance its textile and clothing exports in a short period if the government sorts out some of the basic irritants facing the industry. Our local labour is cheaper by 70pc when compared with India and Vietnam, 50pc by China and at par with Bangladesh, he added.

It should also be noted that the prices of all the inputs of the textile industry, including cotton, are linked with international rates. Therefore, no one with their own cotton crop can claim having an advantage.

Published in Dawn, Business & Finance weekly, October 5th , 2015

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