Monday, July 28, 2014

Trade Unions: Dying Breed

Majyd Aziz

Trade Unions in private sector in Pakistan, by and large, can be aptly described as in-house unions, pocket unions, or fill-in-the-blanks unions. Radical labor leaders have gradually been eased out and there are more moderate and sensible workers’ representatives now who base their future on practical economic solutions, who adhere to the concept of industrial peace, and who utilize human skills of negotiations and consideration to hammer out agreements rather than resorting to strikes and other anti-labor tactics to achieve their objectives.

Today, efforts are being made by social and human rights activists to send out motivating signals to the “dying breed” to learn from the global initiatives undertaken by various labor federations who, in recognizing the effects of globalization on the working class, are banding together in an effort to resuscitate the terminal patient. Interestingly, the various global unity groups, having a focused agenda, have not been able to bring about a renaissance within the disarrayed and disorganized labor movement in Pakistan. Although these global programs do have members and linkages in Pakistan, nevertheless there is no display of a trickle-down effect among either local unions or the general workforce. 

Some activists cite the 2014 International Trade Union Confederation Global Rights Index of the World’s Worst Countries for Workers, that depicts Pakistan as ranked near the bottom at four on a scale of one to five. ITUC identified Pakistan as one of the 30 countries at risk “experiencing a profound failure to guarantee laws that ensure fundamental rights for all workers.” Notwithstanding this penchant many activists have for highlighting only the negativity against Pakistan, the Index also includes USA, Argentina, Hong Kong, Indonesia etc in the same category. What these activists also fail to underscore is that in the bottom at five are those countries that do not guarantee rights and in this list of the worst countries in the world to work in and where workers have effectively no access to these rights and are therefore exposed to autocratic regimes and unfair labor practices”, ITUC has included China, India, Bangladesh, UAE, Turkey, Greece among such 32 countries.  It should be noted that China, India and Bangladesh are Pakistan’s regional competitors, especially in textiles.

How is the survey for Global Rights Index done? According to ITUC, it “sends the questionnaire in an electronic and word format to its affiliates asking them to share it broadly with their membership. Furthermore, five regional meetings are conducted with regional human and trade union rights coordinators where the questionnaire is disseminated, explained and then filled out. In addition, the ITUC contacts unions directly by phone and email when it becomes aware of violations to confirm relevant facts. Violations are only recorded if unions can provide relevant facts. Anecdotal references and mere statement of opinions are avoided thereby increasing the reliability and comparability of the information.”

Pakistan is not the only country violating many of the labor rights. However, what some activists complain that “the government and/or companies are engaged in serious efforts to crush the collective voice of workers putting fundamental rights under continuous threat” is nothing but opprobrium usually heard at May Day rallies. The employers or the governments are not principally responsible for the union movement to lose steam. The business dynamics have changed, especially when a massive inflow of migrant workers started coming into urban cities like Karachi, Faisalabad and Lahore. The power of union leaders proportionately diminished when laborers accepted the conditionalities of working as contract workers rather than so-called permanent employees. Their concern was the current paycheck rather than gratuity, bonus, leave encashment, etc. Nowadays, workers don’t want to hear about EOBI, Social Security, NIRC, etc. Furthermore, with more entrants in the labor market, the bargaining power of the laborer correspondingly reduced too. Unskilled workers are available at even less than the guaranteed minimum wage as ordained by the government. 

Pakistan faces another labor problem too. While skilled or technically competent people are also in demand in foreign countries, there is scant scope for the unskilled, with low literacy quotient, to obtain higher paying jobs. The housing sector would be the new booming industry in Pakistan and the dilemma is that there are few skilled workers even in this sector. The trade bodies related to construction and housing, such as ABAD, do not have a game plan to deal with the expected upsurge, especially in low-cost housing. To make matters worse, even the fifty plus industries that depend on housing and construction are also deficient in developing or having a skilled workforce. Here too, even the unions have not demonstrated any attempt to encourage unskilled workers to learn new skills.

Fortunately, today there are some moderate and erudite labor leaders who are well-versed in labor laws, who are involved in intensive lobbying for amendments in various labor related legislation, and who have a respectable command of the working environment. However, certain work-related issues often escape their focus. There is limited attention towards motivating workers to enhance productivity, to maintain hygiene at workplaces, to improve punctuality, to ensure education and health for workers and families, and to promote the orientation of safety and disaster management procedures. Sadly, there are some labor leaders who still continue with their trite litany about “appointment letters” and inflation or resort to long-winded rhetoric even at focused meetings. 

The power of trade unions, as stated above, has diminished primarily because of the labor leaders themselves and less due to employers asserting their influence or the government turning a blind eye. The salvation for labor probably lies in per force implementation of 27 Conventions, that also include labor related, if Pakistan is to enjoy the fruits of the EU GSP Plus status for the next decade. What labor leaders seemingly failed to achieve, European Union will ensure that laws, rules and conventions are assured, understood and implemented. Winston Churchill, the great statesman very rightly said that “some see private enterprise as a predatory target to be hunted, others as a cow to be milked, but few are those who see it as a sturdy horse pulling the wagon.”

(Part 2 of 2-part series)

Trade Unions: Losing Steam

Majyd Aziz

A Worker’s Union is an integral part of an industrial or commercial unit’s working environment. The workers have a fundamental right to form an association to project, promote and protect their rights, their needs, their demands, and their remunerations. Unions are formed not only in the public sector organizations but are also very significant in private enterprises. There can be more than one Union in an enterprise but only one is designated, through a democratic process, of representing the workers as their Collective Bargaining Agent. Labor Unions got their primary boost after Zulfiquar Ali Bhutto and his Pakistan People’s Party came into power in 1972. The socialist mandate of the government gave impetus to workers’ representatives to form their own Unions and also group into Workers Federations. 

There were labor leaders galore and there was this sense of perceived omnipotence in most of them much to the consternation of industrialists and businessmen. Industrial unrest became the norm and Labor Courts were inundated with all kinds of cases, mostly frivolous, or to coerce the employers to accept the dictates of this new band of leaders. Although there were some moderate persons among the labor leadership, the majority of them were in a belligerent mood and they created havoc in many establishments. A large number of industries closed down, many industrialists left the country and, with the government in no mood to rein in the radical elements, Pakistan saw decline in industrial output, in new investment and in attracting even foreign investment. The labor leadership obtained more power after Bhutto started nationalization of industries and service sectors. This further aggravated the dismal scenario and Pakistan lost five years of growth apart from the tremendous loss of half of the country in the 1971 War in East Pakistan.

Come Martial Law of Gen Zia ul Haq in July 1977, things seemingly cooled down. Radicalism yielded to realism and the workers’ representatives were subdued through various measures, including banning unions in public sector organizations. The pressure eased to some extent on the private sector and there was again infusion of domestic and foreign investment into the country. Of course, there were strong unions in many private enterprises but by and large industrial peace became a common feature in industrial estates. With the advent of the Benazir Bhutto regime, the sparks flew again with the result that there was a marked revival of the labor extremism that had been tamed in the past many years. 

The Musharraf government put lot of emphasis and gave considerable importance to attracting investment and rebuilding the country. Labor leaders were told not to rock the boat and were clearly reminded that the goalposts had changed. A labor and social activist was made the Labor Minister and he very shrewdly sidelined the mainstream labor leadership. The aging leaders were gradually put to pasture and the new leaders came with a conciliatory outlook and a pragmatic vision. The labor unrest in private enterprises dwindled down drastically and most of the enterprises conveniently got rid of unions and in-house agitators and adopted the hiring of contract workers rather than a permanent workforce. Labor lost its luster and its critical mass. This continued even after the Zardari government came into power. It was felt by the business community that there would be a strong labor transformation after the advent of the PPP government. Premier Yusuf Raza Gillani did convene a Tripartite Labor Conference but it turned out to be nothing more than a PPP worker jalsa thus vitiating the purpose of this crucial Conference.

There has been a paradigm shift in the trade union influence among workers over the past two decades. The gradual veering away from having a permanent, on-record, labor force in the plants led to a proliferation of so-called contract workers that has over the past many years led to this decline in unionized membership. This was not an overnight transition nor was it a planned or a deliberate employer strategy. This was the result of other factors that impacted upon the trade union movement. Labor Unions have become skeletons of the past. It is a fact that except for enlightened employers who accept and encourage healthy union activities in their plants and businesses, a deep-rooted dislike to demands of workers more often than not discourages employers from allowing workers to chart a course on the pathway of basic labor rights.

The catalytic factor has been the focus of many labor federations away from unionization of private sectors and concentrating on having a strong control on workers in the public sector organizations. It was in state-owned enterprises where real potential lay and where they could muster political patronage, power and privileges. More importantly, labor federations were and still are more or less personal fiefdoms of the leaders. This individualistic control is averse to a true democratic hierarchy or succession. Ergo, a labor federation is usually an extension of the leader’s personal vision.

Another factor that diverts the attention of labor leaders is that they are often on foreign-sponsored junkets where they hobnob with counterparts from other nations and use all means to source funding for their projects. While appreciating their desire to generate foreign funds, it has been alleged by some quarters that at times their proposals for sponsorships highlight negative aspects of the labor situation in Pakistan, often detrimental to the image of the motherland. 

The inability of the tax collectors to enforce a broad-based tax regime has encouraged a pushback to an undocumented economy in many areas and sectors. The high General Sales Tax, the unbridled influx of smuggled, under-invoiced and mis-declared foreign goods, the exorbitant utility charges, the menace of extortion and deteriorating law and order, and other negative factors have aggravated the situation and thus SME employers are not eager to get themselves registered or maintain documentation. This is one more reason why many enterprises are out of the tax net. Thus workers of these units are deprived of many of the legal remedies and prescribed benefits under the law. It also impacts upon the efforts of labor leaders to increase their membership base.  

The momentum of the labor unionization movement has decreased. There are no more formidable and strong labor leaders anymore. This has been understood and accepted by the moderate leaders of the workers. They are, thus, cautiously and prudently working within the system while leaving their rabble-rousing dramatics for the Red Salute rallies or celebration of May Day. They now seriously want the wheels of economy to move. As Charles Dickens said, “Industry is the soul of business and the keystone of prosperity”

(Part 1 of 2-part series)

Thursday, June 19, 2014

Finland-Pakistan Trade: Revisiting the Potential

Majyd Aziz

The introduction of mobile phones in Pakistan brought about a brand that became a familiar and household name all over the country. Nokia was the dominating brand and ruled over the airways. Few consumers knew the country of origin and probably the Nokia distributors never needed to advertise the fact that Finland is the birthplace of Nokia (of course, the ‘nationality’ has since been transferred to Microsoft of USA). Over the years, cell phones have become a necessity rather than a luxury and gradually 130 million Pakistanis became cell phone users. This surge in usage resulted in the advent of a multitude of brands, mostly cheap gadgets from China or Korea’s Samsung. Nokia lost its leading market share while other heavily-advertised and affordable brands took center stage.

This narrative is a manifestation of how bilateral trade becomes hostage to one commodity or one brand or depending on a very narrow product base. This scenario drastically impacts on the imperatives of enhancement of bilateral trade and inducing investment in various sectors. Pakistan’s bilateral trade relationship with Finland has lost its luster. As is the norm in Pakistan’s export regime, the domestic exporters also are dependent on very few items of exports and there has not been any revolutionary diversity to expand the product base. Ergo, Pakistan’s exports to Finland are restricted to few textile and leather items.

Pakistan and Finland bilateral relations were established on 12 January 1951 and are based on cooperation in national security and economic development. Apart from the trade relations, Finland is also one of the ten countries that support the Multi-Donor Trust Fund. This Fund, administered by the World Bank, is financing the reconstruction and development work in Khyber-Pakhtunkhwa, Federally Administered Tribal Areas and Balochistan. Recently, being the member of EU, Finland supported the campaign that enabled Pakistan to achieve GSP Plus status in EU.

A survey of bilateral trade for the last five years reflects a downward trend in Finland’s exports to Pakistan while exports from Pakistan are on the rise. In 2009, Finnish exports were $418 million and subsequently dipping to $281 million, $110 million, $70 million and $63 million in the next four years. On the other hand, Pakistan’s exports that were $35 million in 2009 ascended the export ladder registering export figures of $52, $ 71, $72, and $75 in the next four years. What is prominent is that the main Finland exports were primarily the mobile phones that amounted to $ 372 million, $ 200 million, $57 million, $31 million and $18 million in the last five years. This trend is apparently due to either the low demand for Nokia due to excessive imports from China or, it is possible, that most of the Nokia phones could be entering the Pakistani markets via Dubai. In the case of Pakistan’s exports, the contribution of textiles is $23 million, $33 million, $53 million, $54 million and $ 56 million while the exports of leather goods were from $5 million and settling down to a maximum $10 million.

The desire and the determination to revisit the trade scene and chart out a pragmatic course led to Mr Rauli Suikkanen, Roving Ambassador of Finland accredited to Pakistan, (the Embassy of Finland in Islamabad has been closed down since 2012, not necessarily due to any law and order situation) making another focused journey to Pakistan. His presence in Karachi also reflected the need to build up the trade figures and create a favorable perception of the importance of Karachi inspite of the law and order situation. He was very ardent in his motivational interaction with an elite section of Karachi’s trade and industrial community at a business breakfast.  He informed his audience that Stora Enso, a Finnish paper manufacturer, has set up a factory in Kasur while Vaisla, a high-tech equipment manufacturer, is one of several Finnish companies that have been working in Pakistan. He was very optimistic about the increase in trade traffic and said that even though trade is less at this moment but there is a substantial potential for increase in the coming years.

The Finnish diplomat very artfully plugged Finpro, the Finnish trade, internationalization and investment development organization that is expected to provide impetus for growth in bilateral trade. The opening of Finpro offices in Karachi and Lahore are testimony to the action plan of the Finnish government to get Pakistan back on the radar of Finland’s trade and industry. Finpro will offer focal points for Finnish companies that want to look at business opportunities in Pakistan. He informed that Finland Pakistan Trade Council which was not active for past thirty years has now started activities in a very committed manner and the first ever Finland Pakistan Business Summit was organized in Islamabad in February 2014. Fifteen Finland companies and around thirty-five to forty Pakistani companies participated in the Summit that also had a high participation by the Pakistan government and certain cooperatives. The next similar event will be organized in Helsinki in August 2014.

His task list during this visit also included discussions on the preparation of the broad-based agenda, including trade and investment, for the 2014 Inter Ministerial Meeting planned for August 2014 in Islamabad. The onus now lies on the Pakistani government to take the stakeholders into confidence so that a doable agenda is structured. Moreover, an important item on the agenda should be identification and presentation of new products that Pakistan could favorably be exported to Finland.

The fact that Finland is way ahead in many modern technologies and inventions is one more reason for Pakistan to take benefit of the available opportunities. Finland can also assist Pakistan in achieving formidable advancement in agriculture, horticulture, dairy and livestock. At the same time, both countries can take mutual advantage of the rich mining resources of Pakistan, especially in Balochistan. Finland is very highly developed in mining equipment while the mining sector in Pakistan has not realized its true potential due to archaic mining processes and non-availability of hi-tech equipment. Finpro should undertake a comprehensive study of the mining sector and introduce mining equipment through joint ventures, technology transfers, long-term financial credits, and expert advice and guidance. This will enable more Finnish involvement as well as enabling a paradigm shift in the lucrative and highly demanded mineral sector. It would also definitely lead both countries to a more strengthened and stable economic partnership.

Finland and Pakistan are moving on the right track. Finland is appreciative of the fact that a democratic order is in place in Pakistan and Ambassador Suikkanen underscored the continuation of democracy to strengthen the Pakistani economy. Pakistan, with a population nearing 190 million, can also learn from the fact that Finland, with only 5.50 million denizens, is considered one of the ideal countries in the world to live, where the corruption rate is the lowest in the world, and where the educational system is also deemed to be the best. Henry Ford, the US automobile tycoon, made a very poignant remark when he said that “Economy has frequently nothing whatever to do with the amount of money spent, but with the wisdom used in spending it.”

Sunday, June 15, 2014

SAARC Trade: Streamlining Banking Framework

Majyd Aziz

Regional trading blocs have demonstrated a pragmatic solution to enhancement in trade, investment, people movement, and a decisive approach towards conflict resolution. Despite initial misgiving and fear of job losses, revenue losses, or market losses, the evolutionary progress of regional blocs has transcended these doubts to a large extent. The success of regional blocs has enabled trade and industry to create regional linkages, cumulation and focal centers. EU, MERCOSUR, ASEAN, SADC, NAFTA, etc are vivid examples. SAARC is a well-meaning and visionary initiative but its true essence has yet to be savored and it is yet to achieve its potential.

One major impediment in facilitation of trade and investment in SAARC is the lack of banking instruments that are vital for fast track operations of financial facilities. The SAARC business community has to become more pro-active in convincing regulatory authorities and governmental decision makers to remove most of the obstructions and hurdles in opening up the financial sector for business transactions. The SAARC Chamber of Commerce and Industry should become the motivating factor if there is to be a sea of change in the way Intra-SAARC trade and investment is formalized, adopted and implemented.

The present scenario is that the seven SAARC members have no bank branches in Pakistan. Afghanistan has four banks but no branches in other SAARC countries. Bangladesh customers face huge problems in remitting money. In Maldives, a foreign bank is the focal corresponding bank for businessmen. Only one Nepali bank has branches in India. Bhutan has three banks but businessmen mostly use State Bank of India or Punjab National Bank.

Pakistani businessmen doing trade with India have to rely on third country banks for financial transactions. This entails added banking costs, is time-consuming, and at times, the Letter of Credit is susceptible to external factors such as built-up of tension at the border or some extremist event. During the three-day Second India Show held in Lahore in February 2014, where over 130 stalls were set up of Indian products, the Pakistani government accorded special permission to National Bank of Pakistan and MCB Bank to assist Indian exhibitors to deposit their daily revenue for safekeeping and legally remitting to India.

There are some cogent reasons why the process of liberalization of financial facilities has not become a desirable reality. The homework has yet to be done in the regional context because the dynamics of all SAARC countries manifests distrust, discord and disharmony and where broad-based conflicts and contentious issues take precedence over trade and investment liberalization. However, the hardcore decisions will have to be taken because the other regional blocs are rapidly moving towards making financial dealings faster, reliable and more transparent.

It is emphasized that half-hearted efforts or individual banks working on their own in cross-border transactions would not be cost effective nor would they serve the real purpose. There has to be a concerted approach with a common clearinghouse fully armed with all data, regulations, and workable systems, such as easily accessible channels, consistency and flawless management of processes, and state-of-the-art information technology and communication, if SAARC is to have a successful banking model. It is imperative that there should be multi-policy coordination, including a dispute settlement mechanism, among all SAARC Central Banks. Moreover, intra-SAARC remittances must be made convenient and affordable. Unnecessary impediments are in effect Non-Tariff Trade Barriers too and therefore fast track financial facilitation process, including opening of Letters of Credit in each country’s currency, must be streamlined.

The answer also lies in promotion of seamless banking or branchless banking that can be achieved by getting all Central Bank Governors as well as leading bankers, information technology technicians, telecom operators, representatives of trade and industry, and banking management experts to finalize, decide and implement a SAARC-wise seamless banking framework. This would enhance trade, remove many obstacles, introduce regulatory compliance, and bring about customer accessibility, trust and satisfaction. Seamless banking is rapidly becoming the source of financial empowerment. The game changer has been the combination of advanced technology and consumer behavior that has enabled swift transactions at lesser cost with easy access. According to a McKinsey Report, the usage of internet banking has risen over 30% while mobile banking has shot up by 85% across the Asia Pacific region.  

Seamless banking is ideal for SAARC businessmen and more so for citizens in many respects. Many Indians and Pakistanis have kinfolk across the border and fund transfers are a norm. Bangladeshis working in Karachi routinely send part of their salaries through unofficial channels. SME importers and exporters face innumerable problems in sending payments for smaller orders. Pakistani participants at Indian exhibitions take back cash or find non-banking channels to remit their sales revenue. Pakistani artistes also have to circumvent the regulations to transfer earnings. Tourists, or devotees on visits to religious events or shrines, families to weddings or other family events, and of course businesspersons can make their trips comfortable and secured through seamless banking facilities.

As a well known poet versed: Ben-ul-Najoom ke faaslay kum ho chukay hain bahut  / Ben-ul-Qaloob ke liya idraak chahiye (The interstellar distances have decreased a lot over the years/ Lessening the universal remoteness between hearts needs understanding)