The Australian Council of Superannuation Investors released a report this week warning ASX 200 retailers of the risks of relying on low-cost suppliers from Asia.
It said food and beverage brands, manufacturers, retailers and service providers faced reputational, operational and legal risks by outsourcing to jurisdictions with poor labour and human rights conditions.
Here are the 16 Asian nations highlighted in the report and the ACSI’s reasons for concern:
Bangladesh is one of 48 countries worldwide that the United Nations has classified as a 'least developed country', according to economic, health, environmental and educational metrics.
Australia imported 8 times more overall goods and services from Bangladesh in 2012 compared to 2006, with a 20-fold increase in garment, textile and footwear imports.
The ACSI reports:
'Export processing zones are exempt from laws on trade union rights, wages, hours, and safety and health standards. Limited freedom of association is allowed, without formal collective bargaining rights.
Pressure to deliver new, large orders quickly and at low prices, results in the imposition of long hours sometimes by forcible means.
Sexual harassment of women in the workplace; forced labour and trafficking. Recruitment fees charged by agents can be exorbitant, resulting in high levels of bonded labour through worker indebtedness.
Rapid expansion of the garment industry has meant infrastructure development has been outpaced. Key incidents have been attributed to manufacturing occurring in premises unsafe for heavier plant and equipment.
Many buildings are residential, lacking in fire exits, and suitable electrical infrastructure. This has led to repeated health and safety incidents, injuries and lives lost. At least 591 workers were injured and eight workers lost their lives in the two months until 28 January 2013.'
More than 1100 workers died when the eight-storey Rana Plaza collapsed in late April. Workers in the building made garments for European high-street retailers.
The ACSI reports that child labour also occurs, mostly in agriculture, manufacturing, services and street-based activities.'
Cambodia primarily exports garments, textiles, footwear and rice to Australia. The garment industry is Cambodia’s largest contributor of exports and employment. Exports to Australia increased nearly threefold since 2006, albeit from a low base.
Cambodia is also classified as a 'least developed country' by the United Nations.
The ACSI reports:
'The rights to organise and bargain collectively are legally recognised, but in practice intimidation of union workers is reported to have been carried out by both authorities and employers.
The clothing industry is reported to use mainly subcontracted labour, causing difficulties in unionisation and reducing annual and maternity leave entitlements.
The Better Factories Cambodia programme was launched in 2001 after the USA promised Cambodia better access to US markets in exchange for improved working conditions in the garment sector. The ILO thus established a project to help the sector make these improvements.
The latest BFC report in 2012 highlighted problems with excessive working hours, discrimination, underage workers, and pay discrepancies.
Child labour is also common in rural areas in agriculture, shrimp and other seafood industries, construction and domestic servitude. Forced labour and trafficking are reportedly widespread, with men and women often sent to Malaysia or Thailand.'
China still dominates Australia’s import volumes, supplying electronics, foods, furnishings, toys, sporting goods, clothing and footwear to Australian firms. The ACSI reports that real wages in China more than tripled between 2000 and 2010, driving Australian companies to engage in lower cost suppliers elsewhere.
The ACSI is concerned that Chinese workers are denied rights to freedom of association, leading to worker exploitation and poor working standards. Forced labour, bonded labour, child labour, excessive working hours and poor working conditions are also reported, it says.
The ACSI reports that goods sourced from agents in Hong Kong – such as Li & Fung and MAC Group – may have come through other countries in the region with ‘dubious manufacturing workers standards’.
Hong Kong predominantly exports telecommunications equipment to Australia, and also exports plastic articles, toys, games, sporting goods and clothing. Hong Kong-Australia exports fell 30% between 2006 and 2012.
Australia imported twice as much from India in 2012 than in 2006, with textile and clothing imports growing by nearly 50%. Other India-Australia exports include footwear, tea and rice.
The ACSI warns:
‘The rights to organise, bargain collectively and strike are legally restricted in India.
There is also a considerable gender pay gap in India, and child labour including in its worst forms is common in agriculture (including cotton and tea plantations) and textile manufacture.
Forced labour is also found to be a problem in many sectors, including in agriculture, particularly through trafficking of Dalits.
Specific issues have also gained attention in the media, NGO campaigns and company responses. Sumangali workers are a key concern in India.’
Australian imported 36% more Indonesian products between 2006 and 2012, due mainly to increases in crude petroleum, metals and fertilisers. Indonesia’s main consumer-related exports to Australia are furnishings, footwear and electronics.
The ACSI reports:
‘Systematic violation of trade union rights, prevalence of gender discrimination in employment and remuneration, child labour (including hazardous work and trafficking), and forced labour, particularly involving migrant labour.
Short-term contracts used as a tool to exploit workers and prevent reporting dissatisfaction with their working conditions or seeking redress.
Some factories have been found to pay less than the legal minimum wage, and very few pay a living wage. Employees are found to be forced to work overtime, sometimes without pay.’
Australia imported 39% more products from the Republic of Korea in 2012 than 2006, largely due to increases in metals and petroleum products. Cars and electronics are the largest categories of exports from the Republic of Korea to Australia, excluding petroleum.
The ACSI reports that Korean firms tend to discriminate against women and foreign workers. 'Bonded labour of migrant workers is a risk,' it reports. 'Also, foreign-owned enterprises located in free economic zones or (export processing zones) are exempt from otherwise mandatory monthly leave, paid holidays, or menstruation leave for women.'
Australia imported 36% more Malaysian products between 2006 and 2012, primarily due to increases in imports of hydrocarbons and electronic equipment. Malaysia also exports a significant amount of furnishings to Australia.
The ACSI warns that forced labour occurs in Malaysia via the withholding of migrant workers’ payment and travel documents. Human trafficking is also a concern.
‘The US Bureau of International Labour Affairs in October 2012 added Malaysia to a list of countries suspected of using forced labour, with
respect to palm oil production as well as garment manufacture,’ the ACSI reports.
‘There is a significant gender pay gap, no minimum wage, and some prevalence of child labour, particularly in rural agriculture.’
The United Nations considers Myanmar - formerly known as Burma - one of the world's 'least developed countries'.
Australia’s trade with Myanmar – primarily in fish and seafood – peaked in 2009 but may increase with recent diplomatic and trade discussions. As such, the ACSI says Australian companies should educate themselves of their responsibilities and ensure they adhere to Ruggie and OECD guidelines.
Australia imported 20% more Pakistani goods between 2006 and 2012. Main imports were textiles and clothing, sporting goods, and rice.
The ACSI warns of issues with safety and fires, child labour, and worker exploitation in Pakistan. ‘Union organisation and collective bargaining are prohibited in Pakistan’s (export processing zone),’ it reports. ‘There is a gender pay gap, and sexual harassment in the workplace is not legally prohibited … Bonded labour is also reported to be widespread, with Pakistan described as a source, transit
and destination country for trafficked persons.’
Australia imported 44% less from the Philippines between 2006 and 2012. Main imports from the Philippines include electronics, toys, games, sporting goods, fruit and nuts.
The ACSI reports:
‘There is reported to be an environment of violence and intimidation against union members and employers engaging in anti-union measures.
Child labour, involving dangerous conditions and involuntary servitude, is found, but the government appears to be making some efforts to remedy this situation.
Forced labour is found in agriculture and fisheries, through debt bondage, as well as trafficking, with allegations of police complicity.’
The ACSI warns that Australian companies should carry out due diligence when sourcing from the island nation. ‘Although Singapore is a non-OECD country, it does not appear to present the same high (labour and human rights) risks that some of the other countries listed here do,’ the council reports.
Australia imported 41% more Singaporean products between 2006 and 2012. Foods and electronics account for the most significant exports, and increased 24% during that time.
The ACSI notes that there is little to no indication of child labour in Singapore but trafficking and sexual exploitation ‘has been reported as a problem’.
Australia imported 36% more from Sri Lanka in 2012 than in 2006. Principal Sri Lankan imports are tea, tyres, clothing and textiles with exports in the latter two categories more than doubling in the six-year period.
The ACSI reports:
‘EPZs (export processing zones), within which wages and working conditions are set by the Board of Investment and union activists are only permitted with employer approval. Government labour inspectors are not permitted to enter unannounced.
Child labour is described as prevalent in agriculture, but this is generally found to be around attending school, and there have been no reports of prevalent child labour in the EPZs or the garment industry, although the UNHCR suggests children work in some other industries, including fireworks manufacture and fishing.’
Australian imports from Taiwan increased marginally between 2006 and 2012. Leading consumer-related imports include electronics, toys, games and sporting goods.
The ACSI reports that Taiwanese workers suffer forced labour, gender discrimination and restricted freedom of association. ‘Allegations of poor standards are not considered as numerous or egregious as in other countries,’ it reports.
Australia imported 60% more from Thailand in 2012 than in 2006. Imports are led by vehicles, gold and plumbing equipment. Seafood imports rose 53% in the six-year period.
The ACSI reports:
‘Forced labour exists in Thailand’s shrimp, fishing and seafood processing industries. The ITUC (International Trade Union Confederation) reports that an assessment found that 57% of Burmese migrant workers in the seafood industry in one province in central Thailand experience conditions of forced labour.
Lack of legal protections is an issue for migrant workers, various ethnic groups, indigenous people or stateless people with the ILO finding that the state apparatus has often been complicit in forced labour and trafficking.
The ITUC reports that children are employed in fisheries, shrimp farms and seafood processing under conditions which are often hazardous, and that many children are also employed in textile and garment factories close to the border with Burma and they are reported to operate dangerous machinery.
Notwithstanding government programs to address child labour, prosecutions have been rare.’
Australia’s imports from Vietnam fell 31% between 2006 and 2012. In terms of consumer-related imports, Australia typically imports Vietnamese garments, electronics, furnishings, footwear, seafood, coffee, fruit and nuts.
The ACSI reports that child labour, health and safety, working hours, collective bargaining rights and discrimination are ‘all widely documented risks in Vietnam’.
‘Protections against these risks are generally not codified in law, however amendments to labour laws made in 2012 are expected to improve the situation,’ it reports. ‘The new laws will be implemented in 2013.’
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