12/13/12 10:26 PM Bangladesh Fire Raises Pressure to Improve Factory Safety - WSJ.

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Associated Press
Labor groups say that more than 500 people have
died in Bangladesh factory fires since 2006. Above,
garment workers
Bangladesh Fire Raises Pressure to Improve Factory Safety
By SYED ZAIN AL-MAHMOOD in Dhaka, Bangladesh, 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 fac-
tory 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 peo-
ple, the country's worst industrial accident, was a
tipping point.
Garment workers have clashed with police weekly
in Ashulia, the northern industrial suburb of Dha-
ka where Tazreen is located, demanding compen-
sation for victims' families and safer working con-
ditions. Pressure is mounting on big buyers such
as Wal-Mart Stores Inc. WMT +0.15% and Hennes & Mauritz AB HM-B.SK -0.51% 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.
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Skeptics have said Bangladesh's niche as among the world's least-expensive place to
make clothingthe minimum wage for garment workers is less than $37 a monthis
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 pro-
duce 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-in-
creasing 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-man-
agement company.
Pierre Brjesson, 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.
Brjesson 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 union-
ization 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 unau-
thorized 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,
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after owners complained they needed the structures for workers' dining areas.
Manufacturers said they improved workplace conditions in recent years, spurred by de-
mands 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 de-
mand, 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 stan-
dards, said Belal Hossain, a senior official with Bangladesh's labor directorate. "Compli-
ance is going up," he said. "But the rise in the number of compliant factories is still be-
hind 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 au-
thority.
"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 fac-
tory 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.
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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 lo-
cal offices," she said.
Shelly Banjo
contributed to this article.