“The Low Price” of the textile discounter KiK – consequences for labour conditions in textile factories in Bangladesh

General introduction on globalization

Globalization is more than a word for a worldwide phenomenon; it affects all of us in our today’s lives. It can have considerable, concrete negative effects like the loose of someone’s job or can rest rather unseen, which means without consideration of the consumers when for example parts of cars are built in Eastern Europe and the complete car is later sold in Germany and therefore considered as “German-Quality-Product”. Processes of globalization have direct impact on our consumption, like the availability of fresh tropic fruits, coffee and cheap clothes. Globalization has also touristic and migrational aspects that affect the cultural perspective of a country (Backhaus, N. 2009, 13-14). It is really complicated to define globalization in general, because different groups like globalization supporter and antagonists have a very unequal look on this issue. Another problem is that globalization creates winner and loser, so it is problematic to make a general judgement on if the globalization process is good or bad.

I really like the attempt of a general definition of globalization by Anthony Giddens (1996, 85) where he describes globalization as a process during which social interactions between human beings from our entire world are widening and an intensification happens. Caused by this process distant places get connected in a kind that actions at one place affect and are affected by others far away (Backhaus, N. 2009, 16).

Dimensions of globalization

An attempt to structure the theme of globalization will be made in the following paragraph. Because of the complexity of this theme globalization is divided into different dimensions. This divition is based on Giddens (1996, 92). The figure is adapted from Backhaus (2009, 24).

My focus lies on the capitalistic global economy, because it has a deep impact on the globalization and has a strong influence on our lives. The system of the world market is very powerful and can lead to negative consequences like the financial crisis in 2008/2009 in a very global form.

Outline of my case study

In my case study I like to concentrate on the economic side of globalization. As introduction I will focus on market economy and the allocation of world trade. Then I will highlight global crises that can be seen as consequences of a global economy. After that I like to focus on some detailed example like the textile industry as an example for changes in production and the labour conditions. I also like to do a short side track to the Global Compact and the Corporate Social Responsibility (CSR) and the limit of such commitments. As possible future prospects I will finish with an overview about some models of employment for the future.

First version of my case study

Introduction

This is the first version of my case study. It is a kind of collection of important quotes especially from my key resource. I will use them as a skeleton for my final text.

As I already wrote in my outline of the subject, I like to focus on the textile industry. Discounter, like KIK, buy clothes that are produced very cheaply at low wage countries like Bangladesh. At the beginning I like to give a short presentation of Bangladeshi economy and social situation. Then I want to show the influence of globalisation on the Bangladeshi textile industry.

Brief introduction of Bangladesh

Bangladesh is a country that is very affected by agriculture, because the land is very fructuous. “Eighty percent of the agricultural land is used for rice growing, but there is also wheat, barley, maize, potatoes, pulses, bananas and mangoes.” Nevertheless around 25 % of the population is suffering from hunger. The garment industry contributes enormously to the economic development. 2 million people are working at the 3.500 factories. 85 % are women from the rural regions who need to work in the cities because of job shortage in their home regions. The work at the garment factories is their only chance to receive income that helps to save the survival of the family.

The Bangladeshi garment and textile Industry

“Since 1990, Bangladesh has experienced a spectacular growth in the area of clothing and textiles. Whereas the value of exports amounted to 600 million US dollars in 1990, this rose to nearly eight billion US dollars in 2006. The reason: Bangladesh is one of the poorest countries in the world and, in the past, with favourable customs regulations, was able to export clothing to Europe and the USA without quantitative restrictions. However, in other countries, the bulk buyers, in accordance with the Agreement on Textiles and Clothing of the World Trade Organisation (WTO), restricted imports through quotas. Bangladesh was able to take advantage of this trading advantage, in order to establish itself alongside the textile giants China, India and Hong Kong on the world market.” The export products of Bangladesh shifted from raw material, like jute, and jute products (90%) to clothes based on cotton. The problem is that cotton has to be imported first before it can be part of the garment production. “Bangladesh’s clothing industry did not collapse after the phase out of the Agreement and its preferential treatment.” “In most factories, labour laws are being massively violated. Thus, the extremely low wage level is the main reason for contracts with buyers from the EU and the USA not being lost. Low wage costs make it attractive, i.e. cheaper, for buyers to allow production to continue in Bangladesh – at the cost of the workers, who, with these wages are barely able to survive.”

The discounter KIK and its methods

In general : How discounter determine the prices

"The retail houses and discounters have developed enormous economic power. They are able to determine the prices and are interested in keeping them down. Producers in Asia, Latin America and Eastern Europe are powerless. They have to swallow whatever the corporations dictate.”

“In 1992, Germans spent 64 billion Euros on clothing, but only 56 billion Euros in 2005. This lower expenditure, however, does not mean that, in terms of volume, less is actually being purchased. Indeed, the very opposite is the case.” “In other words, we are consuming
more, but more cheaply. More and more goods are on offer for ever-decreasing prices.”

“The largest discounters pay their suppliers up to 15-20 percent less for their goods than normal department stores (ActionAid,2007, p.16). Because of the great amounts of goods they can order, they are able to force down purchasing prices to an enormous extent.”
”Suppliers in developing countries are becoming increasingly dependent on a few multinationals and their importers. With continually decreasing prices, they force down wages. Ultimately, it is the garment workers in the factories who suffer.”

“The phase-out of quotas led to price reductions and strong competition among the poor countries that export clothing and whose national income is heavily dependent on exports.” “The poor countries, competing to retain their clothing industry, try to offer the lowest wages. If, however, one looks at the various cost components from the viewpoint of the buyer/company, wages only account for 0.5-1 percent of the ultimate selling price of the product, as the following chart illustrates. In contrast, marketing and advertising, as well as the profit for the company in Germany/ Europe amount to about 25 percent of the endselling price. An increase in wages is, therefore “peanuts” in the eyes of the buyer.”

Costs.jpg

This figure is adapted from the brochure of the CCC. “Only around 14 percent (factory and wage costs) remain in the country of production, e.g. Bangladesh.”

Purchasing practises of business companies: three tendencies

1) Cheaper:
• Prices are dictated, the producer in Bangladesh take such small prices because they otherwise loose the job. “Suppliers are threatened with being removed from the lists, if they do not reduce the price.”
• Although the costs for energy have raised, the prices for garment still decline.
2) Quicker:
• “Collections change more and more frequently: In the past, there was a change twice per year; today, depending on the retailer, such a change can take place up to 12 times per year.”
• “Delivery times are becoming shorter and shorter.”
• “Today, buyers, with the help of global electronic networking, are able to control the entire value chain. In the internet, contracts are awarded with the help of “online reverse auctions”. Those wishing to make an offer can see what price the others are offering, leading to scandalous underbidding. Interested parties have to act quickly since a contract can be awarded within a few hours. The supplier, therefore, does not have much time to make his calculations.”
2) Risk-shifting:
• “Suppliers have to adjust to the fact that merchandise, depending on sales levels, can be ordered at short notice. Companies reduce their stock levels to a minimum in order to cut costs. “Quick response” is a form of information technology, which functions as follows: “Once per week, usually on a Sunday after weekend trading, the company sends an order to the supplier, who receives it on Sunday evening. He then has to deliver the goods by Wednesday.” (Abernathy et al 2005). The company not only saves storage capacity, but also passes on all risks to the suppliers (that have costs for the purchase of materials).”
• “Suppliers are increasingly being forced to take on more tasks formerly carried out by the textile trader. Thus, more and more suppliers have to buy cloth and yarn and other accessories (buttons, zips, etc.) at their own risk. Buyers are, thereby, able to reduce delivery times and cut costs.”

What does KIK do to defend themselve?

Stefan Heining (CEO of KIK): “At KiK, the social, ecological and economic added value is very important. This is why today, we take advantage of our strength and size to campaign for the principles of sustainability and to promote continuous improvement. In 2006, we established a strict code of conduct to which all our suppliers are committed. We consequently work on the implementation of the entailed demands. Even though it needs a lot of effort, patience and the ability to take occasional setbacks, our measures in regards to social responsibility serve as role models in the discount domain and help to impose standards. We have begun to optimise our business activities in line with ecological aspects and we will continue to do so in the future.”

Code of conduct of KIK: “ The regulations of the code of conduct contain all the usual conventions of the International Labour Organisation (ILO) for good working conditions. These include adhering to maximum working hours and paying a minimum wage as well as a safe and clean working environment, freedom of assembly and collective bargaining and the prohibition of child labour. According to the ILO convention on the protection of the children (No.138) the bottom age limit of employees is set at the age of 15 and in exceptional cases at the age of 14. This rule is part of the code of conduct of KiK.” “The nine main points of our code of conduct: working atmosphere, working hours, payment, employment conditions, health and safety at work, no forced labour, prohibition of child labour, no discrimination, freedom of association.“

Bangladesh – Labour Standards

The labour standards at Bangladesh in the factories of the suppliers of KIK are very poor. The people aren’t allowed to join/build up a labour union. The sewers have to work regularly overtime, because they need to fulfil daily goals. The working time is 9-14 hours a day, which makes 80-100 hours a week. To work overtime is not optional. The workers lose their jobs when they do not work overtime. They have to work 6 or 7 days a week. Payment isn’t based on transparent criteria. Date of payment is too late (middle till end of following month). Overtime isn’t paid transparently, too. The workers don’t have a contract of labour and don’t get an overview on their working hours and the resulting payment. 85 % women are working at the factories. They are suffering from the discrimination caused by the headmen. Health, hygiene and safety requirements are really bad. In most cases there is no drinking water available and factory canteen or day-care facilities for children are only in use when the auditor comes for a visit.

Code of conduct - Usefulness?

The research study in 2008 by Khorshed Alam (AMRF, Alternative Movement for Resources an Freedom Society) shows that voluntary conducts aren’t useful. He was a second time interviewed by the journalist Christoph Lütgert („Panorama -- die Reporter" of the TV-channel ARD) in 2010 and he affirms his former statement that little has changed since the code of conduct has been proclaimed. Audits were made, but only at “good” factories or with well-prepared workers that were forced to say all is really nice in the factory. Sometimes auditors are even tricked.

“The interviews with the workers established that there are massive violations against internationally accepted standards.“

“Nearly all the interviewed workers had never heard the term, Code of Conduct. However, they are aware that companies, buyers and auditors visit the factory and sometimes want to speak to the workers. During these visits, the factory owners put on a show. Toilets are cleaned. The workers are forced to declare that there is no child labour in their factory, that the working atmosphere is good and that their wages are paid on time. They should also say that they are entitled to take regular holidays, are not forced to work overtime and do not have to work at night. When questioned about their pay, they should say they earn more than they actually do. Workers who are very young or look too young are forced to stay away from work when buyers or auditors visit. In the case of unannounced visits, they are locked in the toilets. There are known cases of workers presenting the real situation to buyers and consequently being dismissed for doing so.”

Outlook

In this final part I like to show what can be possible strategies for the future, for example powerful conducts.

Labour conducts

A possibility is the proposed code of conduct of the clean clothes campaign (CCC), that orientates at the core labour standards of the ILO: “The following social standards are based on the conventions adopted by the International Labour Organisation (ILO) (the first four belong to the so-called core labour standards) and the universal declaration of human rights: the prohibition of forced labour, discrimination, the employment of children under 15 years of age, freedom of association, restriction on the number of working hours per week to 48 hours and a maximum of 12 hours of voluntary overtime, the right to a living wage, the employment relationship is stable and contractually regulated and best possible occupational safety and health protection.”

The CorA Network wants to install binding political instruments that are supported and controlled by democratic states or unions that do have already established labour rights in their countries: “The CorA Network wants to increase social debate on economic and political actions and to work for binding political instruments, through which the companies are obliged to respect human rights as well as internationally recognised social and ecological norms. The CorA Network is convinced that the road to binding, internationally effective company regulations is not only ethically necessary, but also urgently required for the benefit of all. Binding agreements can be achieved through a combination of instruments, particularly through financial instruments, through limits, through incentive and sanction systems, through State rules and regulations …”

“For a globally effective programme framework, we need a strong international community of democratic states with the ability to take action. The impact of binding regulations with respect to transnationally operating companies can develop better, when as many states as possible – e.g. in the EU, OECD and the United Nations – take co-ordinated action to achieve these goals.”

Potential research questions

- “The little price” of the textile discounter KIK - consequences for labour conditions at textile factories in Bangladesh. (Who is paying for it at last?; How KIK manages to sell clothes very cheap?)
- Which influences has the market power of a discounter on the prices of production in a global market?
- Are voluntary negotiated agreements useful?

My next steps for developing the case study to a final version

I have to rewrite the case study and show my own arguments that can be supported by some quotes. I need to include other resources on this subject that support the already mentioned ones and give some theoretical background information.

References

--Reibe 21:32, 22 January 2011 (CET)

Literature review

Resource 1:

Title: Internationale Arbeitsstandards in einer globalisierten Welt. Published by Ellen Ehmke, Michael Fichter, Nils Simon, Bodo Zeuner (Hrsg.). Published in VS Verlag für Sozialwissenschaften / GWV Fachverlage GmbH, Wiesbaden 2009.

a) Content of the resource

This book is based on and developed during a project module about International Labour Standards (ILS) in a globalised world at the Otto-Suhr-Institute for politics at the University of Berlin 2005 until 2006. The texts were written by students of this course and their professors. It is an overview about the problem of International Labour Standards (ILS).

b) Usefulness of the resource

This book offers 4 main chapters in which different sub-texts are located. The first chapter gives an introduction and shows a theoretical placement. This chapter is interesting for me because I get an overview of the interaction and the consequences of globalisation and labour standards in deveolping countries. The "race to the bottom theory" is of special interest for me. The second chapter introduces actors and organisations of ILS. The third chapter highlights instruments of ILS. In this part two articles are especially interesting. The first gives a concrete example in the textile industry: the code of conduct by Hennes & Mauritz. The second article appeals to the question "why" the compliance with core labour standards is so low in developing countries. Chapter four ends with an outlook and shows some perspectives.To sum up: This book provides information on ILS and some general aspects on globalisation and its consequences on labour conditions in developing countries. I think it is very useful.

c) Limitations of the resource

It doesn't offer information on the special case I like to highlight as an example in my case study. I like to present the German KIK company as an example for the textile industry that uses globalisation for obtaining cheap manpower.

Resource 2:

Title: Globalisierung. Author: PD Dr. Norman Backhaus. Published by Prof. Dr. Rainer Duttmann, Prof. Dr. Rainer Glawion, Prof. Herbert Popp, Prof. Dr. Rita Schneider-Sliwa. Published in Westermann Bildungshaus Schulbuchverlage, Braunschweig 2009.

a) Content of the resource

This book provides a general overview on globalisation issues. It catagorizes globalisation and gives a historical background to the development of globalisation. The book offers a chapter on the field of economy.

b) Usefulness of the resource

For me this book is of interest because it offers me on the one side an overview and introduction on globalisation, so that I can get in touch with the theme, and on the other side it provides a description of the production-development in the textile industry.

c) Limitations of the resource

It doesn't offer so many concrete examples. It is more kind of an overview.

Resource 3:

Title: Die KIK-Story - die miesen Methoden des Textildiscounters. Published in TV at „Panorama -- die Reporter"  ARD. Author: journalist Christoph Lütgert. The video was first broadcasted at August 4th, 2010: http://daserste.ndr.de/ndrsondersendungen/ard1584.html

In addition: Online newspaper article: Das schäbige Geschäft der Preisdrücker (TV-Film über Textildicounter KIK). Published at Spiegel Online. Author: Christian Teevs. Published at August 4th, 2010: http://www.spiegel.de/kultur/tv/0,1518,709922,00.html

a) Content of the resource

This video shows the methods of the German textile discounter KIK to reduce their costs. The sufferer are the German sales people and especially the worker of the textile facility in Bangladesh. The sewer were interviewed about their labour conditions. The Bangladeshi sewer earn only 25 Euro per month and have barely enough money to buy food.

b) Usefulness of the resource

These two resources are very useful. They are the starting point of my case study. They provide a special case that I like to focus on. The theme is based on these resources, the labour standards in the textile industry focused on especially Bangladesh. The video offers an insight view in the textile facilities and the living conditions of sewer in Bangladesh. Khorshed Alam, a researcher on labour standards, is also interviewed and bemoans that KIK hasn't changed labour conditions even though there has been lot of criticism in the last years.

c) Limitations of the resource

This reportage only views some aspects of labour conditions. It is necessary to see it as a starting point and investigate more resources connected with ILS.

Resource 4:

Title: Textilarbeiter in Bangladesch wollen höhere Löhne. (Protest gegen Ausbeutung). Published at Spiegel Online. Author: Christian Teevs. Published at Juli 30th, 2010: http://www.spiegel.de/wirtschaft/soziales/0,1518,709358,00.html

a) Content of the resource

This online newspaper article informs about the demonstrations of worker and sewer in Bangladesh. They demonstrate in Dhaka for higher minimum wages. Bangladesh has the lowest industrial wages worldwide. It was about 19 Euro and is now raised to 34 Euro. That isn't enough for the worker. They say that the government acts the way the textile industry desires to.

b) Usefulness of the resource

It shows another side of the labour standard problem and how the exploited people start to engage for their needs. It gives me additional points for new investigation. What are the wishes of the textile working labour union?

c) Limitations of the resource

This article is very short but leads me to investigation about special aspects of labour standards. I also read in another article that says that often the buildings of the facilities are not quite safe. Fire and collapses of buildings occured in the past. During such catastrophes many workers died.

Resource 5:

Title: Who pays for our clothing from Lidl and KIK? Published at Kampagne für Saubere-Kleidung (Clean Clothes Campaign; CCC). Published as brochure at January 1st, 2008: http://www.saubere-kleidung.de/downloads/publikationen/2008-01_Brosch-Lidl-KiK_en.pdf

In addition the online article: http://www.saubere-kleidung.de/2008/ccc_08-01-30_pu_discounter_lidl-kik.html

a) Content of the resource

This brochure offers a lot of information about the textile industry in Bangladesh and the methods of the textile discounter KIK.

b) Usefulness of the resource

It is very useful for my case study. There are articles included of the expert for labour standards in Bangladesh Khorshed Alam. These detailed descriptions support me with the key information I need for developing my case study. The campaign is launched by activists who are really engaged in the issue of labour standards and know about globalisation influences. They highlight many important points.

c) Limitations of the resource

The study for the campaign was published in 2008 and is therefore 2 years old. But I think that this doesn't matter much, because the other articles I read support my opinion that unfortunately nothing has really changed since 2008.

--Reibe 23:32, 15 January 2011 (CET) --Reibe 09:06, 16 January 2011 (CET)