Tuesday, August 23, 2011

A stone for Surya Nepal Garments!


This story has been copied from my email forwarded by one friend i don't know the real writer of the story but i like this and posted in my blog

Few people know the real story behind the rise of garment business of
Surya Nepal, known primarily as a cigarette manufacturer in Nepal.
Seven years ago, at the peak of armed conflict in Nepal, a handful of
people at the top echelon of Surya Nepal thought of doing something
that would increase employment opportunities to the people in the
families of deprived class. They chose a place no other than
Biratnagar, unusual in many ways, as most except Momento did not have
any name - it establishments outside of Kathmandu valley. Their target
then was Indian market, which none of the garment manufacturers until
then had thought of as an emerging lucrative market.
Indian market could well have been catered from Birgunj, as well. But
the choice of Biratnagar as the manufacturing site came for two
reasons. First, of course, is that in spite of Biratnagar´s standing
as a political and industrial hub much of the populous countryside has
been economically backward. Labor availability and the presence of
basic industrial infrastructure led Surya Nepal to choose Biratnagar.
The second reason is strategic in many ways. Biratnagar is closest to
any of the ports for third country exports. It is also closest to
markets in India but had no congenial environment for local
productions then. Troubled places normally do not allow local
productions to flourish but allow import of any product without any
hindrance just as we feel comfortable in brushing our teeth every
morning with imported Colgate tooth cleaning materials but found
serious threat to our national pride when Colgate was having its own
manufacturing operations in Nepal.
There is also another strange point about the beginning of Surya
Nepal Garments. It did not just open its business at presumably the
most difficult political environment in Nepal´s history, it was the
time when garment industry as a whole was about to be written off as
irrelevant. The privilege of multi-fiber agreement was waning and the
entrepreneurs who made hefty profits in the period prior to that had
already planned their exit. Surya Nepal Garments wanted to be a
phoenix and prove that nothing is invincible.
Seven years later, they found that they were wrong!
What really pushed these people, with apparently challenging zeal, to
lose their grit? Why did they lose their patience? Why are they so
willing to waste millions of rupees of investments and not accept any
rapprochement by iPhone-brandishing labor unionists?
Much of the story of the genesis of Surya Nepal Garments is not known
to anyone. Even the promoters cannot narrate it in the same spirit as
it was foreseen then. For almost two years at the outset, the
promoters started marketing garments under their name, which was
produced in other factories in Nepal under a mechanism known in
business as “business outsourcing”. Within two years, their factory
was ready, which was an acquisition of a manufacturing set up in the
vicinity of Biratnagar. The business had an impeccable beginning with
workers trained by an Italian trainer for over six months. Such was
the zeal of the company to get perfection that they brought trainers
from Italy. They did not hire anyone who approached them. They went to
villages and selected women who should be given a job. They trained
them. The objective was that that those without jobs should be given
one so that they don´t have to take to guns. The objective of
selecting women was also with some intent. The company management
thought that elevation of women´s standing in the family is necessary
for peace in the community. Grand objectives!
For four years, the company ran reasonably well by Nepalese standards
(as frequent but short production disruptions are taken as routine in
Nepal) with some seven hundred - mostly women - laborers. The company
was outsourcing to other companies, as well, providing employment to
over 1,300 workers in those companies. The problem seems to have
started for trifling reasons because one splinter faction of Maoist
Trade Union wanted to prove its mantle. Back in March, there was a
strike for almost a week for no fault of the company but on the call
of the central level Trade Unions. As per the “no work no pay policy”
of the company, no payment of wages and salaries for that period was
supposed to be made. The company had already paid, but there was an
understanding that such payment would be deducted at the earliest. In
June, the time came for such an adjustment. 
Even before the adjustment was to be made, the workers in
apprehension of such a deduction picketed Human Resource Manager´s
office. They did not just do the picketing. They put nearly 40 senior
management staff in confinement for almost 36 hours in the middle of
June this year. Government agency charged with overseeing the
operation of industries - the Ministry of Industries - did not know
this. It did not even care what´s going on out there. The local
administration, however, did all it can from the beginning. Morang
Chief District Officer deserves all the credit for trying to resolve
the dispute amidst all chaos, although he also could not succeed as
the company itself found going out of the business because of the
order-cancellation by major buyers in India and European countries.
Companies do not produce for inventory build-up, they produce for
markets. In today´s competitive business, markets do not have patience.
Trade Unions do not realize this but, in trade, compliance with time
is extremely important. Surya Nepal Garments was exporting to India
and a few prominent European countries to the tune of Rs 300 million
annually. This market was growing. Recent trend in global garment
trade indicated that traditional advantage of Chinese companies was
eroding as the general wage level in China has been going up. There
was prospect for Nepalese companies. But in fashion business - just as
the garment is - timely supplies more than the prices is important.
Stores in Europe, particularly in Italy with discerning customers,
wanted their shelves to have predictability of supplies. The orders
from Italy and France were cancelled when the news of Surya Nepal
Garments being under trouble circulated in this age of rapid
communications. When orders got cancelled, Surya Nepal had no other
options but to think of something drastic.
Some four days after 40 managerial staff were held hostage by the
workers in most inhuman conditions, not allowing them either drinking
water or access to toilets, the management following due legal
procedures called for a lock-out. It was back in June. Some of the
middle-level staff recall how horrendous was the behavior of the
workers that even pregnant managerial staff were not given humane
treatment during that time.
During much of these two months, the top level management of Surya
Nepal Garments made all attempts to present the reality of the
problems to top-level politicians of all political parties in
Kathmandu. But, who would hear? Procrastination has been the feature
of political leaders in this country. Important issues are best
postponed, but trivial issues, such as, distributing cash dole-outs in
the name of financial assistance remains top priority in the agenda of
any prime minster. Nepal is perhaps a rare country in the world where
Prime Ministers pull out chits from their pockets in the Cabinet
meeting with the names of individuals to be given financial assistance
and get them approved as though the government treasury is his
fiefdom. But very few prime ministers pay attention to what is
happening to companies giving employment to hundreds of people and
contributing to foreign exchange earnings. It was natural that a prime
minister, struggling to have his tenure in office free from all
political problems, not to pay attention to economic woes of a company
and that too of an Indian heritage, as Surya Nepal is apparently a
subsidiary of ITC India Ltd. Politics in our country is not about
economics. It is just traditional feudal politics no matter what the
progressive elements claim in theory. The behavior is totally feudal,
contrary to what they claim in speeches and brainwash the rural youths.
When there was no one to help them except the Chief District Officer
of Morang, who happened to be a rare government official acting as a
professional, the management of Surya Nepal decided to permanently
shut down the factory. The loss of orders and business was
irrecoverable. The fixed investments made in the factory became
irrelevant or “sunk cost” in the current context as there was no other
recourse.
When the company declared its intention to close the factory, it
received panic calls from so-called top-level leaders from major
parties and almost all trade unions. But there was not a single call
from either the prime minister or from his office. It was only then
the private secretary of Industry Minister thought appropriate to call
the factory asking if they can do anything. Nothing, when there was
hardly anything to do in the context of investors putting in so much
in spite of annual losses in anticipation of profits in the future.
The future for the investors did not come. And with the closure, it
would never come.
Hours after the announcement of the closure, the company outlined
payment schedule of retrenchment benefits to workers. In less than 24
hours, 677 of the 700 workers took their payments. All of those were
women. The company management says that there was no problem at all,
although there are media reports that Trade Union leaders want the
company to continue doing business. Yes, political party leaders have
also been asking for the continuation of the factory. Fantastic! Which
of the political party leader risks his or her personal asset for the
employment and the happiness of others? Nobody, for sure! Asking
others to give employment even when there is a loss is very easy, but
practicing oneself is possibly not so easy. You got to be doing
business.
Throughout the process, the company management noticed a strange
point, however. This is important. This is even more important for the
workers who lost their jobs and who will realize the loss in the near
future as Dashain festival is coming so close. Most of the trade union
leaders who came to negotiate with management came in either very
expensive motorbikes or cars and almost all of them were sporting
iPhones. Every now and then during the negotiations, they would
produce very expensive hi-tech mobile handsets, while poor management
officials would attend calls in cheap Nokia handsets. Where does the
money for iPhones to so called proletariat trade unionists come from?
Clearly, this is not what we are led to believe. This is something
else.
Surya Nepal decided to close. It is sad. But it seems they did it for
a reason. It does not really send good signals. But you can send good
signals only when there is something good about it. It was a bold
decision. I admire the decision. I still remember that decades ago
just after my SLC examination, I read a novel titled “A stone for
Danny Fisher” by not-so-mentionable writer Harold Robbins and I had
cried for Danny Fischer on his death while he too was non-mentionable,
my tears on the closure of Surya Nepal Garments .

Letter of credit

 A letter of credit is a document that guarantees the payment from a buyer to a seller in international trade. It is issued by a bank on beh...