THE SUFFERING ZONE: FINDINGS FROM MADAGASCAR

This report is based on research into the garment industry in Madagascar by SOMO, based in the Netherlands in September/ October 2001 for the Clean Clothes Campaign and the ITGLWF (African region). Researchers visited 10 factories and interviewed management, trade union and NGO representatives, Governmental organizations, as well as garment workers.

These interviews reveal the state of Madagascar's clothing and textile industry as of October 2001, before the widespread social unrest that erupted in the wake of Madagascar's recent presidential elections. Following the elections, production in Madagascar's apparel factories came to a standstill. According to information from July 2002 (1), the unions adopted a job-saving strategy to try to keep the workers employed at lower capacities, but as the crisis deepened, most workers were dismissed after a few months. Some companies have relocated their operations to Mauritius and at the moment there is no garment production in Madagascar. However, there are signs that factories may be trying to weather the storm: several factories in the EPZ have maintained a skeletal staff of supervisors on reduced salaries, so as not to completely lose experienced people when production resumes.

Introduction
Madagascar was a French colony for more than half a century before eventually gaining its independence, along with many other African countries, in 1960. It is the world's fourth largest island and it is located in the Indian Ocean off the coast of Mozambique. Madagascar is one of the poorest countries in the world, with a Gross National Income per capita at 250 US $ in 2000. (2) Seventy percent of its estimated population of 16 million people live below the national poverty level. Over the last three decades, growth rates have averaged only 0.6 percent each year. With population growth rates of about 3 percent, per capita income has declined sharply. (3)

The economy of Madagascar is dominated by agriculture. In recent years, weak export prices and increasing competition from other producing countries have cut sharply into Madagascar's earnings for traditional agriculture exports such as vanilla, coffee and spices. On the other hand, mining, tourism, and light manufacturing, especially in the textile and apparel sector, have increased significantly since the establishment of the Export Processing Zone (EPZ) program in 1989. (4) The apparel industry contributes about 13% to the Gross Domestic Product.

Neighbouring Mauritius, which is small in size but a garment producing giant, has been instrumental in the development of Madagascar's garment industry. As Mauritius gradually emerged as a "middle income country" and wages increased, clothing manufacturers in Mauritius began to subcontract the labour-intensive part of the production out to countries with lower labour costs, foremost to Madagascar. Along with Mauritius, French companies have heavily invested in Madagascar's apparel industry; recently, investors have come from other countries as India, Bahrain, and Pakistan. (5)

INTERNATIONAL AGREEMENTS
Several international agreements facilitate Madagascar's apparel production, almost all of which is geared for export markets. The WTO's Multi Fibre Arrangement (MFA) benefits Madagascar by setting up quota hurdles for its main competitors: cheap Asian exports to the United States and Europe. In the last few years Madagascar has attracted new investment for its garment industry. It seems that in a relatively short period of time, even as the MFA is being phased out, countries in southern Africa remain attractive to investors who are eager for short-term gains. Because profits can be made within a few years, investors need not make a long-term commitment to staying. After all, according to the manager of a pyjama manufacturing company in Madagascar, the apparel industry "is a fast moving industry," vulnerable to competition pressures, fickle shifts in consumer demand, and the relentless drive to maximize profits.

Madagascar has also attracted investment to its garment industry through policies such as AGOA and the EU-ACP agreement.

African Growth and Opportunity Act (AGOA)
AGOA, which came into effect in 2000, (6) allows dozens of sub-Saharan African countries to export a range of products - especially garments - duty and tariff free to the United States. Madagascar became eligible for AGOA export benefits in March 2001. AGOA's Special Rule also allows Madagascar to source its fabric from anywhere in the world until September 2004, which helps the country since its domestic textile industry is very small.

Although AGOA hasn't displaced Europe as Madagascar's main export market, the US is becoming more and more important to the island nation's garment industry. Total export to the United States soared from 80 million US $ in 1999 to more than 271 million US $ in 2001. (7)

The feelings towards AGOA are ambiguous in Madagascar. Although most of the management we interviewed clearly think that duty- and quota-free access to the US market helps to enhance Madagascar's competitiveness, they also see AGOA's short tenure - the Act will expire in 2008 - as a major setback. For their part, trade unionists in Madagascar are sceptical that the road to development really leads through AGOA, which has brought minimal gains to workers.

Whether Madagascar is still interesting for garment manufacturers after the removal of the quotas under the MFA, at the end of 2004, and after the phase in of local content rules under AGOA, in September 2004, remains to be seen.

EU-ACP
Mauritius falls under the ACP-EU agreement, which grants it duty- and quota-free access to the European market under certain conditions. Again, this bi-lateral trade agreement has its ambiguous points. On one hand, the ACP-EU stipulations - that 50-60 percent of an export's value must be added in the beneficiary country (see box) - are seen by many, including the UN's International Labour Organisation (ILO), as "too stringent to ensure significant benefit to the infant ACP countries," newly industrialized countries which are only able to add 20 to 48 per cent added value. (8) On the other hand, some observers predict that the provision will help Madagascar to make its garment industry more profitable by concentrating on labour intensive garment production like hand knitted sweaters and by creating backwards linkages by building up a textile industry. The representative of the employers' association agrees and identifies quality and "added-value" products as the key to Madagascar's future success in the garment industry.

Of course, the deeper concern is whether the focus on trade and investment, and especially the focus on investments in the garment industry, will result in improved living standards, shared prosperity, job creation and improved incomes for Madagascar's workers.

AN OVERVIEW OF THE GARMENT INDUSTRY IN MADAGASCAR

The passage of a new investment code in Madagascar and the establishment of an Export Processing Zone (EPZ) in 1989/1990 had a positive influence on industrial output in general and apparel exports in particular. Madagascar's main attraction for garment manufacturers is its labour costs: manufacturers consider Madagascar to be "dead cheap," even when accounting for other problems, like the bad infrastructure. In the global apparel market, manufacturers compete based on labour costs, and "as soon as the standard of living [wages] goes up in one country we need to go to less developed countries", mentions an investor from Hong Kong.

As most production is subcontracted and buyers shop around for the cheapest prices, this causes manufactures to sell their wares to buyers at lower and lower prices. One manager says that prices have fallen 20% over the last year; another mentions a 50% cut in prices over the last 10 years. Retail customers from the US pay lower prices than the customers from Europe, but the advantage in producing for the US lies in the larger orders placed by big retailers such as the Gap.

Despite the cheap labour, investors must deal with other costs related to infrastructure. Most companies have several telephone lines to make sure that at least one is working. The garment production in Madagascar is centred in and around the capital, Antananarivo, which is about 250 km from the port at Toasmasina. Since there is only one road to the port, when it gets blocked, the delivery of products faces large problems. "The timing for the delivery of the products is very tight and when we can't make the orders in time by boat we have to fly the garments to the buyers, which is very costly" according to a factory owner. Another burden on the manufacturer's profits comes from the costs of maintaining expatriate managers. Most management and supervisors are from abroad and the costs involved for housing, airplane tickets, salaries, etc are skyrocketing. For example, a house for an expatriate manager is easily 7 million FMG (US$ 1053) per month.

EPZ
The companies producing garments for export in Madagascar can all be found in the EPZ, called the Zone Franche, which gives lucrative incentives to export companies, including tax-breaks. Madagascar differs from other countries in that the EPZ expands across the whole island: EPZ status can be given to all companies anywhere in Madagascar and is not restricted to specific geographic zones. The national labour laws are applicable for EPZ companies but in practice these laws are not in implemented by the government, which causes serious problems for workers and unions. As a result, the hardships for the workers in the EPZ are multiple and many dub the Zone Franche the Zone Souffrance: the suffering zone.

Most of the production in Madagascar is (hand)knitting and the cutting and sewing of garments. There has been little investment on the raw materials side, towards production of yarns and fabric in order to allow the industry to vertically integrate. When looking at the companies investing in Madagascar, the initial investment was mostly Mauritian and French led, although lately new investment is coming from India, Hong Kong, China, Bahrain and other countries.

According to information of the employer organisation in Madagascar and the labour department there are about 160 garment producing companies in the EPZ, bringing employment for 65000 people, which is about 30% of the employment in Madagascar. 85% of the employment in the EPZ is within the garment and textile industry. In 2000, the clothing and textile exports amounted to 1600 Billion FMG (US$ 241 million) which is 40% of Madagascar's total exports, across all categories, and 70% of the manufacturing export.

Labour conditions
Both unions and managers agree that there are 2 kinds of factories in Madagascar: One group reasonably follows the labour law and tolerates union organising. The other group of companies are hostile, prohibit union organising, and thwart the implementation of the labour laws.

Wage
The low labour costs are seen by many producers as the main advantage to doing business in Madagascar. For the workers, this means a very tight situation. The basic wage is 180.000 FMG (28,69 $ US Euro) per month which is by far not enough for one person to live on, let alone to support a family. "We feel exploited" a group of workers who produce garments for clients like Jacadi, Cyrillus, Pierre Cardin, El Cortes Ingles, and Decathlon, said during an interview.

In several factories, the workers said their bosses promised them a bonus provided by the buyer when they completed the order. In one of the factories, producing an order for the Gap, the workers have never seen this money because the director claimed they had spent too much time on the order and therefore the whole bonus was already used up on overtime wages. In another factory the 20.000 FMG (US$ 3.19) bonus given to the workers by the Gap is added to the minimum wage to make a higher base; those who earn more than 200.000 FMG per month as a basic salary -- most of the workers -- do not see the bonus at all.

The wage slips the workers are getting are often unclear or sometimes do not state the actual wage for the month.

The unions mention that the minimum wages have not been negotiated for the last two years as the tripartite structure (government, employers, and workers) does not function. The minimum wage has been established by a decree of the Labour Minister.

Piece Rate
Workers can earn additional income by doing piece rate or overtime. Under the piece rate system, a worker's wage is tied to how productive she is, i.e. the more items she can make in a specific time interval, the more her wage. The opportunity for earning extra money, however, is thwarted by managers who set the production targets too high or ratchet the target upwards as soon as the workers are able to reach it. When workers can't make the targets within the normal working hours they have to do overtime, which is not paid or if it is paid at all, at a lower rate than the law mandates. Adding to the arbitrariness of the situation, workers will often not be told beforehand what their target is.

Workers from one factory tell in an interview that although they are paid on piece rate, they hardly ever make more money than the basic wage per month. "As soon as we make more money in a month, this extra money will be used to cover other months in which we were not able to make enough pieces to reach the basic salary" says one of the workers who is working on pyjamas for Etam at the moment.

Overtime
Managers must, by law, ask governmental labour inspectors for permission to keep workers for overtime. In practice overtime is readily given and companies rarely ask for permission and can schedule overtime with impunity, which means that overtime is a major problem in the EPZ. The typical work day begins at 7 or 7.30 am and goes until 6 pm; when there are a lot of orders, the shift can last until 10 or 11 pm or even the whole night through. Often the workers have to work in the weekends. Most of the workers do not have free time, not even time to eat with their family: "barely any time to live" says a union activist.

As with piece rate, the overtime system is arbitrarily applied on the factory floor. The workers are not told in advance when there will be overwork or until what time they are expected to work, which means that their family never knows when the workers will arrive home. Overtime is compulsory and managers have a "no excuses" policy. Instead of spending their meagre wages on bus fare, many workers will walk home, which can add hours to their already long days. Most of the workers are women with an additional burden of housework and children. Women are not supposed to work at night according to the labour law but in most factories they do, even pregnant women.

Part of the workers interviewed mention that the overtime is not paid according to the law, which stipulates that the overtime wage should be paid at 30% higher for the first 8 hours, 50% for the next hours, and 100% for national holidays. For example factories pay only the normal wages for the hours of overwork when the target has not been reached.

Health and Safety
Basic health and safety conditions are not respected. Almost nowhere does management provide protective gear like dust masks and for the fabric cutters gloves, nor is there clothing for other workers exposed to high-risk conditions, for example boots for those that work in the washing department. In one of the factories we visited, which was working on subcontracted orders for H&M, La Redoute, Lerner Decathlon, and Pierre Cardin, we saw workers starching garments without any protection right under a warning poster that cautioned them to use protection when operating these machines. Few factories have adequate ventilation system and most factories are very hot.

All factories have a contract with a medical facility. In some of the factories there are restrictions on the amount of workers that may go to the medical facilities in one day. Workers mention that the medical facilities mostly only prescribe aspirins and do not administer any real treatment.

The canteen where the food for the workers is cooked is often dirty and the food barely edible. Workers at one factory producing for various clients including Gap and The Limited, complained that they had to eat their food next to the dirty toilets.

Some factories won't let the workers go outside of the gates during the lunch hour. In some factories, the emergency exits are locked. In other factories, for example in one factory producing for Gap and The Limited, workers are locked inside through the night. Some factories have armed guards and in most factories workers are searched upon leaving the factory. Some factories force employees to register their own sweaters and T-shirts so as to prove they haven't stolen their clothing from the factory. Substantial rewards are given to those that report workers that have stolen garments.

Penalties
Most workers mention a penalty system in the factory where they work. They are punished for being too late, for not making the target, for making mistakes, for refusing to do overtime, for talking to union representatives or for other arbitrary reasons. In most factories the penalty system costs them money: some factories dock 25% of their end of year bonus, until 4 warnings later nothing remains of the bonus. Ultimately the penalties lead to dismissal but how many is left to the manager's whims: in several factories the workers mention not to know how many penalties will lead to dismissal, while in other factories it is clear that, for example, 5 strikes is out.

Unions
Madagascar has ratified the ILO core conventions protecting trade union rights. Yet the government is not willing or able to enforce its own labour legislation in the EPZs, according to the International Confederation of Free Trade Unions (ICFTU). In practice, workers' rights are violated everyday: they are not free to join or form trade unions or bargain collectively. The government does little to prevent employers from persecuting union members. (10)

Madagascar counts a great many unions, either organised in federations or autonomous. Organising is difficult as workers that are members of unions are often victimised, degraded, and dismissed. Workers are afraid to even been seen talking to a shop steward. In factories where management accepts the union's existence (according to the law a union has to be recognised when there are 5 members or more in the factory) it is difficult or forbidden to organise meetings. Workers complain that there is either no communication or very bad communication with the management.

When there is a union in the factory, managers claim to be meeting with union representatives, but in reality managers do not deal with unions in good faith. The legal procedure makes striking difficult, and the workers' threat of a strike is often defused by managers threatening to dismiss union activists. One of the managers put it bluntly: "There are almost no strikes in Madagascar, the people have too much to loose," he said.

On a national level the unions are involved in a social dialogue at the tripartite level of government, employers, and workers, but this structure has not been in operation since 1998. A new labour law is in discussion, but this has not been approved by the social partners so far.

There is only one factory with a Collective Bargaining Agreement (CBA), which have to be renegotiated when it expires in late 2001. Although some workers have derided this CBA as a "fake…it only states what is already in the labour code" and condemned it as "drawn up by the management," other workers interviewed saw the CBA as the first step towards improving conditions inside the factory.

Labour inspection
The government's labour inspectors do not have the resources to make proper factory inspections, and their influence is consequently insignificant. The labour law requires that each factory should be inspected at least once every year, but in reality the labour inspector can do little proactive investigation, as they do not have the human and financial resources, and must sit passively, only reacting to complaints.

Even when a particularly zealous inspector attempts to inject life into the labour ministry, the bureaucracy's inertia or lack of political will ensures that nothing gets done. For example, one labour inspector spoke of a colleague who filed 52 cases with the Labour court in 1997, none of which has been dealt with yet. Further exacerbating the weak enforcement regime is official corruption, which both unions and the president of the employers' organization agree is a large problem in Madagascar. The Labour Court usually does not function, or if it does, tends to delay cases for several years. Workers don't have the means to wait for several years. Another problem is that neither the workers nor the unions can afford to pay for lawyers to file the case and follow it through. It is therefore not surprising that employers are free to dismiss workers and violate their rights with impunity.

Textile industry
In Madagascar there is little production of fabric at the moment, but part of the future of the island nation's garment export industry may depend on it. After September 2004, in order to export duty free to the US after September 2004, Madagascar must source the raw materials that go into its garment production either locally or from AGOA eligible countries. Of course, domestically produced fabric will help Madagascar meet the current EU-ACP requirement of 60% added value. In order to stimulate the development of an indigenous textile industry, the Madagascar government has plans to develop the textile industry among others through privatisation of the cotton industry.

Customers
Most of the managers we interviewed mention that their customers - foreign-based retail firms - make visits to inspect the labour conditions inside the factories. According to a manager, when buyers do an inspection, "they check everything: the working hours, the benefits, the emergency exits, the toilets, the canteen…everything. They look at the pay slips, at the overtime, the medical facilities, they also talk to the workers; some even choose them themselves from the factory." Visits usually last between 1 and 2 hours. The employers' organisation mentions that one of the problems is that the monitoring is mostly done by representatives from Hong Kong or Mauritius that know nothing from the local situation.

In some of the factories, we saw the buyers' "Codes of Conduct" on the wall. However, most of the workers we talked to were unaware of this and did not know what they meant. Some of the workers though had seen buyers in the factory, inspecting the quality of the garments and occasionally looking in the toilets and checking working conditions. One of the workers who was familiar with the Code of Conduct and with auditors criticized the buyers for "providing a code of conduct which gives rules for working, not for working conditions." Still, in one factory workers confirmed that when the Gap made a thorough inspection, conditions in their factory improved.

Finally
"No nation in our time has entered the fast track of development without first opening up its economy to world markets. The African Growth and Opportunity Act is a road map for how the United States and Africa can tap the power of markets to improve the lives of our citizens" --President George W. Bush, October 29, 2001.

Given Madagascar's experience with development centred around the garment industry, we cannot help but ask these questions: "Development" for whom? Which "citizens" are ultimately profiting?" Does the road to development for Madagascar's citizens lead through the garment industry, when the very people who make these garments are on the "fast track" towards poverty wages and abusive working conditions?

In the current situation, where the Madagascar government is not interested to help workers to safeguard their rights, the only choice the market offers workers is "the choice between being unemployed or being exploited," in the words of one of the country's labour inspectors. The unions, which - through a combination of employer hostility and governmental neglect - have little power to address the "inhuman working conditions" in Madagascar's EPZ garment factories have real doubts about the potential for garment-driven development to improve the lives of Madagascar's working citizens. Although it seems that some of the companies that are buying garments are checking on labour conditions at the factories they contract with, they do not seem to be making a real effort to improve conditions at these facilities.

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1. e-mail from the Friedrich Ebert Stiftung, Madagascar
2. http://devdata.worldbank.org/external/CPProfile.asp?CCODE=MDG&PTYPE=CP
3. http://www.worldbank.org/afr/mg2.htm
4. http://www.usmission.mg/guide.htm#CHAPTER%20II.%20
   ECONOMIC%20TRENDS%20AND
5. interview with the employers organisation, GEFP
6. AGOA is an expansion of the General System of Preferences.
7. http://www.agoa.gov and http://www.census.gov/foreign-trade/balance/c7880.html
8. http://www.ilo.org/public/english/employment/ent/papers/pmd-5.htm
9. interview with the employers organisation, GEFP
10. Internationally-recognised core labour standards in Madagsacar. Report for the
    WTO general council review of the trade policies of Madagascar, Geneva, 19 and 21 February 2001