No Child's Play: Tackling Child Labour in Pakistan

The serious issue of child labour is as multifaceted as it is serious. It follows then that resolving this issue requires concerted, often collaborative and always non-sequential effort from several stakeholders across the public, private and civil society sectors. These efforts have a new entrant: the Federal and Provincial Ombudsmen in Pakistan. In partnership with a wonderful team at UNICEF Pakistan, I was privileged to have led the initiative of establishing a Children's Complaint Office as part of the institution of the Federal Ombudsman of Pakistan and later in the offices of the Sindh Ombudsman and Punjab Ombudsman. These Child Ombudsmen offices will help protect and promote child rights and fill a massive void in the justice system by providing access to children to have their grievances redressed. Hitherto, the only recourse was to approach the courts, which are largely inaccesible to children, costly and time consuming. The Ombudsmen, by their very nature, resolve disputes and redress rights through mediation and are therefore quicker and their services are free to the public. The Federal Ombudsman has already started offering an online complaint service and others will follow this model soon. Moreover, the Child Ombudsmen will address systemic issues and hold public agencies accountable for their acts of omission or commission in relation to child rights.

The Punjab Ombudsman recently held an official launch of its services in Lahore. The occasion served to remind everyone of some grim facts: there are over 3m child labourers in Pakistan; the enforcement of existing laws and compliance with the UN Convention on Child Rights is poor; and agencies dealing with child rights tend to under-resourced and on the fringes of priority of policy makers. Although not discussed at the event, one also has to realise that the Child Ombudsmen's jurisdiction does not extend to private sector organisations. In that respect, its work on child labour will be focused on holding public agencies accountable for their actions to prevent and reduce child labour, including in the private sector.

Ofcourse, child labour continues to be tackled by other stakeholders. Ever since Life Magazine broke the story in 1996 about Nike using child labour to produce its footballs in Pakistan, Pakistan has come under scrutiny. Nike owned up to its mistake and has since launched a rehabilitation program and now requires its supply chain vendors to not employ any child labour and if they do, to take him/her out of the factory, provide education and re-hire them only when they were legally employable. The story scarred both Nike and Pakistan.

Subsequently, the ILO in Pakistan has implemented several industry specific and broad based projects, aimed at reducing child labour. These projects have had strong allies in the respective industries and have helped clean up the country's image a tad, if not remove the scourge of child labour.

Two issues arise from this overview: one, to address child labour issues in private sector organisations, what should be done? Establish private sector Ombudsmen or extend the jurisdiction of the public sector ones? Get the SECP involved through its Code of Corporate Governance? And what about using SMEDA to tackle this issue as a priority?; and two, what steps can or should companies take to prevent use of child labour not only in their own factories, but also down their supply chains? Export-driven industries have to meet certification requirements from buyers, but what about companies catering to domestic markets? The new National Child Protection Policy is under finalisation, but it too does not offer any answers to either of these issues. The UN Global Compact's Pakistan network also has little to show for its efforts on this front, although it counts the Employers Federation of Pakistan as a member.

The search for solutions to this issue, it seems, shall continue.

Bringing Better Corporate Governance on Board

Absence of adequate professional capacity is a persistent bane for efforts aimed at developing a strong corporate sector anywhere and Pakistan is no exception. Along with cross-representation of family members on Boards which tends to lead to conflicts of interest and to a hazy corporate culture, the fact that members on Boards of Directors are not always up to speed on the cutting edge of knowledge, international best practice and even the country's own laws and regulations, weakens corporate governance. The promulgation and enforcement by the SECP of the Code of Corporate Governance in 2002 has helped raise standards but has a supply-side bias and does not stress capacity building of Board members enough. Now it seems the regulators may finally be taking steps to correct this.

According to a report in the daily News, the Karachi Stock Exchange has been directed by the Securities and Exchange Commission of Pakistan to amend its listing regulations to include a provision that members of the Board must possess a certification under a Board Development Series, an internationally accredited Director Education Program developed by the Pakistan Institute of Corporate Governance. This regulation would be implemented in phases, with at least one member of the Board to have this certification before 30 June 2011 and thereafter, every following year minimum one director on the board "shall acquire the said certification under this programme".

The Pakistan Institute of Corporate Governance was established a few years back as a not-for-profit company and hopes that this Business Development Series, which is accredited by RiskMetrics Group of USA, and allows for due recognition by rating companies when evaluating the participant’s organization, will strengthen corporate governance in Pakistan.

Time will be the judge of whether this aim is met.

CSR in the Textile Industry

Saw this very interesting article in the China Daily, which highlights steps taken by the top Chinese textile firms to improve their CSR practices and reporting. From this report, it does appear that it's not just window-dressing, as sometimes these things tend to be, because the steps indicated--improvement in working conditions, fairer wages, more efficient use of energy--all are substantive initiatives that clearly show the integration of CSR within operations.

Interesting to note that not a single Pakistani textile firm has signed up to the UN Global Compact (UNGC) network. While membership in the UNGC is not the ultimate test of commitment to CSR, it is a telling indicator.

Will Pakistan's textile industry take note of what their Chinese counterparts are doing?

Souring the Deal? CCP Claims Existence of a Sugar Cartel

Fresh from the traumatic ups and down suffered at the hands of the government as mentioned in a previous post, and smack in the middle of a perennial sugar crisis, the Competition Commission of Pakistan (CCP) appears to be back in full swing, claiming in a report submitted to the Supreme Court of Pakistan, that the preliminary results of its investigations into the sugar crisis pointed to 'collusive behaviour and prima facie cartelisation'. Snippets of the report can be read in this news story in the daily Dawn.

Interestingly, the CCP website also carries a Policy Note on the alleged Price Fixing Agreement between the government and the Pakistan Sugar Mills Association (PSMA), allowing the fixing of prices at certain rates. In this Note, the CCP advises the government to scrap the Agreement since it amounts to 'legitimization of practices prohibited under law' and urges it to 'not provide any patronage to anticompetitive practices and measures that in effect promote and encourage collusive behaviour'.

All this brings three questions to the fore:

1. How responsibly are the Boards of the sugar companies, almost all of whom are listed companies on the country's bourses, acting?

2. What role has the Securities & Exchange Commission of Pakistan (SECP) played so far in reviewing corporate practices that another regulator is tagging so publicly as inappropriate and illegal?

3. With all and sundry apparently wanting to sweeten the deal for the sugar barons, will anyone in government pay heed to the CCP's advice?

Paying the Price of Confronting Pakistan's Cement Cartels?

I am thankful to Salman Naveed Khan, CEO of One Tree Hill, an integrated solutions firm based in Lahore, for pointing out to the news about the recent judgment of the Competition Commission of Pakistan (CCP), which concluded that 20 cement companies had formed a cartel; a heavy $77m financial penalty was also imposed by the Commission on the guilty companies.

Almost immediately--and somewhat predictably--after the judgment was announced on 27 August 2009, the Chairman of the CCP, Khalid Mirza, was sacked. The Prime Minister himself has denied that the judgment itself was the reason for the ouster and in a fairly bizarre move, overturned the order of termination of Mr. Mirza's contract and restored him for one month. This is the second time that Mr. Mirza, an ex-World Bank senior manager, has been shown the door because of what appears to be a principled and professional stand; his stint as Chairman of the Securities & Exchange Commission of Pakistan was also cut short, despite improvements he brought about in the institution.

Without going into details of this flip-flop decision making, the incident does send a poor signal to the regulators and also reflects on the immense political influence that the business community wields. As indicated in the judgment (click here to download it or go to www.mca.gov.pk--makes very interesting reading on how the business operates to the detriment of consumers) the cement industry has been notorious for its tendency towards cartelisation and has been found guilt twice before: in 1992 when the CCP's predecessor, the Monopoly Control Authority (MCA) found that cement companies had formed a cartel in the wake of the post-floods reconstruction; and in 1998, when the MCA determined that a cartel was formed to hike the price of cement by nearly 100%. This history aside, the fact that the regulator was willing to confront the business community for engaging in uncompetitive practices was an act that needed to be backed by the government. I am willing to believe that by appointing a professional like Mr. Mirza, the intentions of the government were nobler than they might appear to be in the wake of the recent charade, but commitment requires appropriate action to give it credibility; when put to the test, the government seems to have balked. The government would also be bucking the global trend, which has witnessed regulators eschew liberal, unregulated-economy models for a more balanced, stronger regulatory regime.

If the government does indeed back down and the judgment is not enforced or a compromise arrived at with the cement industry, aside from Mr. Mirza, it is the consumer who will be paying the price of confrontation. Wonder if the government ever considers that when taking such politically motivated decisions?