Wal-Mart Could Regret Deciding Against Bangladesh Safety Upgrade

Wednesday, 05 Dec 2012 04:38 PM

By Michael Mullins

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Wal-Mart’s decision in 2011 not to provide more funding to help Bangladesh upgrade its manufacturing facilities may come back to haunt the world’s largest private employer, given the deaths last month of over a hundred workers in a garment factory fire there.

At an April 2011 meeting in the Bangladeshi capital of Dhaka, the nation’s clothing manufactures met with several major global retailers, including Wal-Mart, The Gap, Target, and JC Penney, to discuss contractual agreements requiring additional funding to improve factory safety.

Recently unearthed minutes from the meeting have Sridevi Kalavakolanu, a Wal-Mart sourcing director, saying that paying manufacturers more to help upgrade their facilities was too costly.

Bloomberg News obtained a document issued by Kalavakolanu during the meeting in which the Wal-Mart rep states, “Specifically to the issue of any corrections on electrical and fire safety, we are talking about 4,500 factories, and in most cases very extensive and costly modifications would need to be undertaken to some factories . . . It is not financially feasible for the brands to make such investments.”

German retailer Tchibo and the international apparel company PVH Corp., which owns the Calvin Klein and Tommy Hilfiger brands, agreed with Wal-Mart’s position. The Gap didn’t and has since initiated a $20 million plan to improve safety conditions at Bangladesh clothing factories, according to Gap spokesman Bill Chandler.

In the days after the Bangladesh factory fire, Wal-Mart claimed the facility was operating “in direct violation of our policies.” In a statement Wal-Mart added, “Today, we have terminated the relationship with that supplier . . . The fact that this occurred is extremely troubling to us, and we will continue to work across the apparel industry to improve fire safety education and training in Bangladesh.”

Though it is not clear what caused November’s fire, industry observers claim many such fires are caused by poorly identified exits and a shortage of accessible emergency exits, which in many cases are blocked by merchandise.

The Bangladesh blaze was not an isolated incident. In October more than 300 workers died in the Pakistani city of Karachi when the garment factory in which they worked was engulfed by flames.

In order to maintain low prices with profitability, a recent trend among global brands has been to relocate facilities from China, where wages have been steadily increasing, to nations in Southeast Asia, such as India, Pakistan and Bangladesh, according to Maurizio Bussi, director of the International Labor Organization's Decent Work Team in South-East Asia.

Bangladesh's garment industry exports account for 80 percent of the nation’s annual exports, an estimated $24 billion.

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