Winds of Change

WHILE debate on the contradictions of capitalism, its ruthlessness and vulgarity, gains momentum on the margins of global discourse, capitalism glides smoothly along on the back of its modus operandi: the global supply chains. Termed as the foundation of 21st-century trade, global supply chains account for 80pc of global trade, benefitting Western populations through the availability of cheaper products manufactured by the low-wage, abundant labour of developing countries.

Pakistan is one of the low-cost production centres in Asia. In this country, Sialkot is a hub of several industrial clusters producing surgical instruments purchased by the healthcare industry in the West through global supply chains. According to a 2012 report by the Trade and Development Authority of Pakistan, 2,300 units in Sialkot, employing 150,000 workers, produce 150 million surgical instruments every year. Sialkot manufacturers sell to suppliers at a very small margin of profit; the suppliers then sell to the end users at much higher rates. For example, according to an estimate quoted in the 2010 report of the Rawalpindi Chamber of Commerce and Industry, a pair of surgical scissors costs $1 to produce, is exported from Pakistan to Germany at a price of $1.25 and, probably, sold to a hospital for about $80.

The tyranny of the global supply chain is the ruthless competition inherent in the system: the lowest bidder gets the contract. The problem is compounded when the local manufacturer cuts labour cost to earn profit. The workers end up with low-skilled, low-paid, insecure jobs. I was in Sialkot in 2007 and had the opportunity to visit a couple of surgical instrument workshops by the roadside. Tiny, dimly-lit, poorly ventilated, with workers sitting on the floor, without protective gear, forging and grinding surgical instruments by hand. I spotted child labour. A worker told me it was good if his son learned the skill and brought in some money. His own wages were meagre.

It was the year when Nike had cancelled a contract to the biggest football manufacturer in Sialkot for lack of labour compliance. About 7,500 workers were laid off. The focus of the global media was the sports industry. I thought the conditions in the surgical instruments industry would go unnoticed forever because the end users are faceless institutions — private hospitals, state health services — dealing with the dull, drab and frequently unmentionable routine of sickness, ageing and death, unlike celebrity players and professional teams associated with the glamourous world of sports that celebrates life, youth and fitness.

But I have been proved wrong. A report on Sialkot’s surgical instrument manufacture, brought out in March 2015 by Swedwatch, the British Medical Association and the Medical Fair & Ethical Trade Group, indicates positive change in the exporting companies. Child labour is out; minimum wage is ensured (though the report points out the inadequacy of Rs12,000 per month); work conditions are now on the management agenda. Still, all is not well: there is no unionisation, health and safety conditions are poor, workers lack education on key issues. The man behind the report, Healthier Procurement, is Dr Mahmood Bhutta.

I had met Dr Bhutta in Sialkot during my visits in 2007. An ENT surgeon working in the UK National Health Service (NHS), Dr Bhutta regularly visits Sialkot, his home town. In a 2006 article, published in the British Medical Journal, he had exposed hazardous work conditions and widespread use of child labour in the industry. Soon after, in 2007, he founded the Medical Fair and Ethical Trade Group at the British Medical Association and continued to follow the situation in Sialkot.

In his latest follow-up, the conditions in the subcontracted units for those factories subject to Swedish and UK requirements were found to be satisfactory: ie workers were getting minimum wage and there was no child labour. “We did not com­­p­rehensively ex­­a­­­mine all factories supplying the UK, so we cannot say that all is good in our supply chains, we can only say that we found evidence of clear labour standards improvements in those factories we visited,” Dr Bhutta said in response to my query via email.

The organisation he founded has played a key role in promoting ethical trade in the NHS. The efforts have pushed the UK government to support ethical trade in its 2008-2018 health strategy, ‘Health is Global’ and devise a code of conduct for its suppliers. In 2012, a Labour Standards Assurance System was introduced to protect labour rights in supply chains for contracts awarded by the NHS. In addition, the new EU directives on public procurement, applicable from April 2016, will embed labour standards.

This legislative shift provides an opportunity for local manufacturers to abide by the rules and negotiate for better profit margins. Also, labour and civil society must now push for compliance and help sustain the GSP Plus status granted to Pakistan .

Published in Dawn, August 4th, 2015

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