Feudal Businesses cornering GSP plus benefits in Pakistan

Sergio Restelli

Well meaning incentive systems devised by international community for the socio-economic upliftment of developing countries may also end up as a tool in the hands of exploitative classes in these societies. Pakistan’s performance under the Generalised Scheme of Preferences Plus (GSP+) scheme of the European Union (EU) is an interesting case in point where even after passage of 8 years, little improvement is seen in the condition of poor labourers including women and children. This lack of progress speaks volumes about the vested interests of the exporter lobby in Pakistan which despite enjoying significant tariff benefits under GSP+ deprive the weaker sections of even their basic rights. The stagnant economic condition and poor human rights of these workers also expose the silent support extended to this lobby by a complicit political and diplomatic class, which ensures the continuation of these benefits by reassuring the EU about Pakistan’s intent of working on the pitiable condition of women and children employed in affected industries.

The game has been in open display for the past few years during the visits of EU representatives to Pakistan for evaluating the progress achieved on desired areas under GSP+. During one such visit in February 2022, EU’s Special Representative for Human Rights, Eamon Gilmore called out Pakistan’s poor performance in three major areas, i.e. education, rights of children and women in the country. Pointing towards the state of labour rights, he observed that women earn less than minimum wage in the textiles industry, a sector benefiting significantly from the programme. On education, Gilmore noted that a large number of children are out-of-school and are being placed in a cycle of disadvantage. However, despite noting these abject human rights conditions, the EU appears prepared to extend the benefit to Pakistan for another two years.

The European Institute for Asian Studies (EIAS) through its policy brief published in March 2022 sheds more light on this vicious cycle which has seized the vulnerable workers in Pakistan. According to the report, Pakistan has greatly benefited from generous tariff preferences (mostly zero duties on two thirds of all product categories) under the GSP+ arrangement since 2014. However, a closer look at the labour conditions in the country reveals a disturbing picture. Trumping the original idea of making a positive impact on labour conditions in Pakistan, the concessions have effectively turned into a piggy bank for the powerful business lobby. Most of the advantages out of the scheme get pocketed by the business elite and modern Zamindars (feudal landlords), with little positive impact on the poorest levels of society. This results in a tendency to declare themselves poor while siphoning the benefits under the scheme to offshore bank accounts.

Ironically, policy markers chose to look the other way for most of the time. Perhaps they are guided by a notion that it is important to maintain their GSP+ status to avoid their own responsibility of improving working conditions and providing job growth in the country. They also fear that any considerable improvement in the socioeconomic condition may lead to Pakistan losing the privileges. As a result, EU unknowingly end up incentivizing policy makers in Pakistan to keep workers poor and slow down innovation. On paper, several laws and regulations exist or have been introduced by Pakistan to comply with the conventions. Yet, the responsible institutions fail to implement some of the most basic elements of these conventions. Required control mechanisms and enforcement procedures are also found lacking. The occasional critical voice raised by local NGOs, academics, trade unions and civil society groups in Pakistan seems to fall on deaf years.

The EIAS report contends that labour conditions and children & women’s rights have not been improving sufficiently in Pakistan. In fact, despite being officially outlawed for years, bonded labour arrangements (debt slavery) continue to be widespread. Many of Pakistan’s estimated 60 million illiterate people in rural areas have no other option but to sell their workforce for minuscule wages to local landlords, who charge the workers and their families for living on their properties. Captured in a spiral of rising debt, an estimated 3 million people in Pakistan effectively live as indentured servants.

Furthermore, child labour is commonplace with poor children having no choice but to support their families. This leaves them unable to attend school for formal education. There are currently over 2 million child labourers in Pakistan. Overall, women and children are among the most vulnerable groups, subjected to human trafficking and forced to work under inhumane conditions; putting them at great risk of facing sexual violence. Law enforcement in this regard has been abysmally weak, particularly outside of the densely populated Punjab province, which accounts for a disproportionate 98% of convictions of human traffickers in the country.

The Pakistan Workers Confederation (PWC) alleges a “state of near non-implementation” with regard to many of the International Labour Organization (ILO)’s core labour conventions. Its reports show serious deficiencies in adherence to safety standards, the right to unionise, or equal treatment of women. A PWC report also highlights a stark example of workers’ poor condition in Sialkot, a city in Punjab province. Being a global hub for the production of surgical instruments and sports equipment (with about 70% of global football manufacturing), many multinational companies operate factories in the city. Yet, many workers earn below the minimum wage here. Moreover, even though the GSP+ conditions require all workers to receive social security cards, only 10% of the workforce have actually received them. On top of that, Pakistan is yet to ratify the ILO’s 1970 Minimum Wage Fixing Convention.

Despite glaring lack of compliance, the EU refrains from suspending GSP+ benefits for Pakistan; this forms a major part of criticism voiced against the scheme. The need for greater clarity, transparency, standardised procedure is increasingly being felt to ensure trickling down of benefits to the deserving sections of the Pakistani society. Unfortunately, a failure on this account would subject EU to accusations of putting geopolitical and geo-economic considerations over the original intent of GSP + programme.