Transcript Visible Links and Invisible Work: Reflections from Leather

Visible Links and Invisible Work:
Reflections from Leather Clusters of Tamil Nadu
Keshab Das
Gujarat Institute of Development Research, Ahmedabad
<[email protected]>
Promises of a New Economic Configuration
Coincidental as it might appear, since around the mid-1980s, the growing
obsession with neolocalism matched with the rise of neoliberalism trends across
the globe (especially, that took off during 1978 to the early 1980s with the US
under Reagan, the UK under Thatcher and China under Deng), there has been a
sustained rise in the sphere of international trade and movement of foreign
direct investment (FDI). The spurt in internationalization signalled the
deepening a new economic configuration - conveniently referred to as
globalization – and, contemporaneously, it is possible to discern a rise in the
participation of enterprises in developing economies in what has come to be
known as global production systems (GPS).
Clear decline in the barriers to trade and FDI has resulted in the relocation and
reconfiguration of processes of production, beyond national boundaries,
especially by the large multinational enterprises. Encouraged further by the
rapid progress in the ICT and reduction in transport costs, the global production
networks (GPNs) have emerged in a number of modern and often labourintensive subsectors in which typically firms are clustered, as for instance,
cosmetics, garments, furniture, furnishing textiles, leather goods,
pharmaceuticals, computer / electronic goods, automobile parts, agro
processing, scientific equipments and so on.
Growing Emphasis upon GPS / GVC / GPN
By the early 1990s concept on the ‘new economic geography’ (Krugman,
1990; and Krugman and Venables, 1991), resonated similar attributes of colocation – the economies of scale and scope - in a broader framework of
regions, focusing on the ‘dynamic effects’ of economic integration between
large regions within a country or between nations. Additionally, Porter’s
notion of competitive advantages through clusters (Porter’s Diamond
model) and work by Gereffi, Schmitz and Humphrey largely influenced
cluster policies that insisted upon participation in GPNs so as to position
local clusters into the GVCs whereby competitiveness of the constituent
firms improves.
It has been argued that it is not necessarily due to taking advantage of the
usually low factor costs by the global lead firms, but a more universal
approach to enhance and share advances in technology and responsible
production through ensuring standards of a range of aspects including those
concerning product/process quality, labour, environment, health and even
ethical aspects. Moreover, it is held, such an arrangement improves the
scope for learning from buyers/suppliers through cooperation among
participants while availing of the opportunity of global subcontracting.
Downside of GVCs
But there are challenges arising out of the nature of chain governance and
underdeveloped local capabilities due to poor infrastructure and
institutions, as characteristic of developing economies.
Reviews of GPS cases across several economies point to the mixed
experiences depending often upon the sector and/or region in question. It
is clear that the GPS does not automatically ensure upgradation into the
GVC; the positioning in the chain would matter as much as the macro
conditions within which participating firms operate. Scholars have
expressed serious concern regarding the unequivocal merits of treading
the GVC route suggesting to be careful about possible “downside” of the
strategy, especially while dealing with the developing economies.
Examples from Asian economies do indicate problematic aspects of such
trans-border business relocation, a major issue being that these are limited
to few sub-sectors those carry out ‘rent-poor’ activities (with the labourintensive, low-value addition component being subcontracted). There are
related issues of stiff selection of subcontractors and absence of
participation in non-labour and/or high-tech stages of a given process.
Exclusionary Tendencies
Despite achieving progress in the product and process upgrading, firms
typically remain out of the design and marketing functions of the chain.
Even when the chain is fully hierarchical and transparent, participating
units would need to invest heavily and also should be in a position to
receive maximum local institutional support.
It is likely that even within the cluster those enjoying the status of local
lead supplier firms (the so-called ‘Ace Club’) are more likely to determine
the nature and extent of gains that could accrue through the insertion of
firms in the chain. Importantly, the spread and depth of informality in the
clusters remain a major challenge to the supposed advantages of the
GVCs.
A Simple Value Chain and Typical Activities
Design and planning
Procuring raw materials
Processing / Assembling / Manufacturing
Marketing
Costumer care
Waste disposal
Objectives and of the Study
With this broad backdrop, an attempt has been made to understand the
experience of developing country firms engaged with global business
typically through subcontracting. The case of the leather and leather goods
clusters in Tamil Nadu in south India has been taken up through a survey of
enterprises to understand the nature of business, production organization so
as to critically reflect upon the question of labour in the infomal sector.
Indian Leather Industry: Externally Oriented over a Century
The organisation of production, conduct of business and institutional
linkages of the Indian leather and leather products industry have had a
distinctive history of external orientation. Receiving a fillip during the
colonial era, the Indian foreign trade continued to have skins, hides and
leather as important items of export, thus helping the domestic leather
industry to grow. Over the last century or so, the contours of growth and
diversification of this industry have been determined by not only the
changing global pattern of demand for the finished products but also the
gradual emergence of some of the poor and developing nations as important
sources of the raw material and the site of certain forms of labour and
production processes.
The availability of inexpensive skilled labour to process skin and hides and
make leather products or components thereof is a major factor of location
and growth of micro and small firms (MSEs), in the Indian leather industry.
Building Export Competitiveness: State as Catalyst
The progression of the leather industry during the post-independence period was
also shaped by the support and direction provided through state policies to
promote this sector with a clear focus on playing a role in the global sphere.
The early emphasis on building up domestic technological capability through
leather research and state efforts to encourage exports (by establishing CLRI and
CLE) also had important implications for the sector to remain prepared for
engaging with foreign markets and changes in technology.
Due to the proactive and futuristic policy initiatives exports of leather and
leather goods from India have risen steadily during the last decade and have
remained one of the top ten items in the export basket. While till the beginning
of the 1970s Indian export was almost entirely in raw skins and hides or wet
blue semi-processed leather, the manufacturing of high value-added leather
products, especially, footwear and bags, had hardly attained a semblance of
global quality and also the production was largely confined to the MSEs
including household level enterprises.
Policy Initiatives by the Indian Government to Promote the Leather Sector
The impressive export performance of the leather sector is attributable to
proactive and favourable state policies all through. In 1973, the Seetharamiah
Committee’s ‘radical’ recommendations restricted, for a decade, the export of
raw skins and hides and wet blue leather to a level of 25 per cent of that in
1971-72, and actively promoted exports of finished products.
The emphasis on the markets beyond the domestic brought about a paradigm
shift in the business strategies of the industry, which developed close
interaction with the specialised state sponsored institutes for training,
research and marketing support.
Listed as one of the ‘Focus Sectors’ under Foreign Trade Policy, 2004-09, the
Government of India’s recent policy initiatives to promote the sector include:
i. Funding support provided towards export promotion, technological
upgradtion, market development activities, leather industry infrastructure
strengthening and environmental safeguard measures; and ii. Simplified
import/export procedures – quick customs clearances.
Policy efforts were designed towards building up domestic capabilities in the
sector as well as rendering it a major source of generation of jobs.
Interface with Global Markets
The exports of leather and leather goods from India have risen during the last decade
and have remained one of the top ten items in the export basket. Seven countries
including Germany, UK, Italy and US, account for 70 per cent of total exports. This
also suggests a growing global acceptance of both the products and skill involved.
Export of Leather and Leather Products from India, 2000-2010
(Value in Million US$; Years relate to April-March))
Category
200001
200102
200203
200304
200405
200506
200607
200708
200809
200910
Finished
Leather
Leather
Footwear
Footwear
Compone
nts
Leather
Garment
s
Leather
Goods
381.49
459.25
508.83
555.71
607.73
636.27
688.05
807.19
673.37
625.54
381.37
395.39
423.30
553.04
657.78
807.81
950.90
1174.03
1243.78
1254.37
238.09
233.94
175.07
161.27
179.21
182.58
212.65
269.30
246.35
209.13
460.45
378.75
272.08
301.08
329.44
333.30
308.98
345.34
426.15
428.52
440.37
407.16
425.39
539.21
585.72
660.17
690.66
800.46
873.30
756.02
Saddlery
and
Harness
NonLeather
Footwear
Total
42.66
35.64
43.66
52.71
61.71
77.52
81.85
106.18
92.15
83.39
19.11
26.02
26.88
53.42
73.78
54.85
48.69
46.02
43.53
44.01
1963.60
1936.14
1875.21
2216.45
2495.37
2752.50
2981.79
3548.51
3598.64
3400.97
Export of Leather and Leather Products from India by Region, 2008-11
(Value in Million US$)
Region
2008-09
2009-10
2010-11
Southern
1395.98 (38.78)
1355.55 (39.82)
1494.52 (38.87)
Western
698.36 (19.40)
779.41 (22.89)
965.46 (25.11)
Eastern
542.40 (15.07)
410.19 (12.05)
463.59 (12.06)
Northern
429.46 (11.93)
444.21 (13.05)
425.09 (11.06)
Central
109.75 (3.05)
104.78 (3.08)
113.97 (2.96)
Others
423.51 (11.77)
310.42 (9.12)
382.24 (9.94)
Total
3599.46 (100.00)
3404.57 (100.00)
3844.86 (100.00)
Source:
Notes:
DGCI&S
Figures in parentheses are column percentages showing Share in Total Export.
Data are based on port-wise compilation and does not reflect the accurate regional performance.
Prominence of Leather Clusters of Tamil Nadu
Even as activities concerning leather existed in several parts of India, during the
last century or so, the major tanning industry has been concentrated in a few
urban centres or industrial clusters as Chennai, Kanpur and Kolkata whereas
the leather products manufacturing is spread beyond these three cities and found
notably in Agra, Mumbai, Aurangabad, Kolhapur, Dewas and Jalandhar. Of
these the Chennai cluster (including a few neighbouring areas as well) has been
the most dynamic, produces quality leather and has a strong presence in the
export market.
An estimated 50 per cent of leather production may be attributed to the clusters
of Tamil Nadu which are mostly located in Chennai and the tannery belt across
the Palar river valley (mainly, Vaniyambadi, Ambur, Pernambattu, Melvisharam
and Ranipettai) in the Vellore district.
It is clear that subcontracting and jobwork prevail as a dominant form of
production arrangement and the MSEs play an important role in these clusters.
The markets exist at different layers, the domestic market per se being huge and
calibrated.
Labour at the Works
• Although, traditionally, Chakkiliyans and Paraiyans (Scheduled Castes) were
engaged in the leather works, many of them have moved out and no longer work
for large factories.
• In fact, the large units have started procuring labour (Scheduled Tribes) from
surrounding hill areas (in about 16 km radius, mainly, Alangayam, Javvadu Hills
and Yelagiri Hills) using factory vehicles for their daily pick-ups for the two
shifts. They are trained on job and preferred for ‘competitively low’ salary.
• Labbai Muslim workers dominate the clusters in the Palar valley region and
through strong community network (Jamath) they have better access to raw
materials and capital support. They are also strongly preferred by large units.
• Social restrictions for working in leather factories have withered and members
(including women) from poor households from even Hindu community are
engaged in the clusters.
•In factories, whereas women workers are preferred for activities concerning
finished leather products as drying, trimming, finishing and packaging, male
workers do ‘brawny’ jobs as cutting, stitching, processing and tanning.
Number of Workers in Sample Units
Number of Workers
<10
10-50
51-100
>100
Total
Total Workers
5
537
779
517
1838
Number of Units
1
15
10
4
30
Type of Workers in Sample Units
Type of Workers Proportion (%)
Male
50.16
Female
49.84
Skilled
31.88
Large Units (Activities include collection of raw material, tanning, processing
and manufacturing both finished and semi-finished products. Own ETP.)
Distribution of Units by Workers’ Earnings
Skilled
Earnings
(Monthly in Rs.) Male
Female
< 5000
6
5000-7500
24
20
7500-10000
4
1
Male
3
23
-
Unskilled
Female
12
13
-
Two sample units had engaged workers only on piece rate basis.
Average monthly earning:
Female was Rs. 50 – Rs. 100
Male Rs. 100 – Rs. 200.
Women workers, particularly, are taken on temporary basis to avoid
offering various benefits. ‘Regular’ employees are relieved from their jobs
annually for a period of two months – it is compulsory and a tactic to avoid
claim of permanency. Muslims have a stronger chance of being made
permanent.
Trade unions exist as namesake.
Small Units (Activities include collection, tanning, processing and
manufacturing units. Access CETP)
•Very few female workers
•No trade union
•Large number of units (mostly owned by Hindus) have closed down due to
pollution issue and inability to compete on cost with microenterprises
•Many have shifted to individual activities like procurement of raw
material, subcontracting and networking for exporters.
Microenterprises (Mostly operated from Muslim homestead, with capital
support from within the community.)
1.Undertake jobworks from big companies and focus on making sole,
shoe-upper, trimming etc.
2.Continue in the work due mainly to support from big companies, who
place order at regular intervals
3.Children and women engage in drying and tanning of leather
Workers in Related Enterprises in the Clusters
Small time merchants (mostly, Muslims) engage workers (3- 5 typically) in
small sheds to modify/mend export rejects to be sold in the local markets.
Also, workers are assigned with the job of procuring raw hides and skin
through informal channels (slaughter houses). Workers find jobs such as
dyeing in soaking pits, collecting wool/hair from processing units for
traders and waste from the leather works for the poultry feed sector.
All these in the informal sector.
Labour Institutions and Standards
As observed in our surveys and also by a study of the Chennai cluster by
EDII (2009), labour contractors without having any valid licenses (as with
the State Labour Commissioner) supply workers to tanneries. As most such
labour in clusters across Chennai and the Palar Valley do not have any trade
union membership enforcement of appropriate labour standards through such
institutions is not feasible. “Larger firms, however, have in-company
‘workers’ committee’ to represent the interest of workers to the
management.”
Occupational Safety and Health (OSH) Standards in the leather sector would
include aspects such as chemical safety, machine safety, work environment,
personal protection, emergency management, auditing and monitoring safety
measures, safety and health management. Similarly, occupational hazards in
a tannery would arise while handling machinery and equipments, storage and
application of chemicals, and risky work environment (e.g. slippery floors,
leaking pipes, hanging electricity wires etc.).
Interventions in the areas of SA 8000, OSH, cleaner production etc. are yet
to be taken up across units in the clusters.
The Spatiality of Clustering as Policy Focus
An industrial cluster, intrinsically, is a dual-entity, encompassing a sectoral
and spatial connotation.
The spatiality is not merely the place, that is, say, rural or urban, but has a
strong reference to the level of regional development that determines the
cluster’s access to both social and economic infrastructure.
Especially in the context of developing economies, industrial clusters
cannot be viewed only from a sub-sectoral market expansion point, that too
for a very few sectors and involving few firms in a cluster.
Beyond the hype of neo-localism, cluster promotion strategies must
encompass a regional development perspective, wherein addressing issues
of structural infirmities, especially, basic infrastructure and job creation,
assume critical importance.
Reflections and Concerns
Even as a surging literature on GPNs has been reinforcing the potential of such
an arrangement of globally spaced out subcontracting, there remains a small but
insightful set of writings which draw our attention to the strangely digressed
issue of labour (‘disposable people’) and informality (eg., Bales, 2000 and
Seabrook, 1996). These bring out the systematically exclusionary nature of such
heavily controlled/manipulated forms of governing production and allied
activities. It is rather disturbing that the discourse surrounding this form of
subcontracting has hardly even made mention of a huge amount of work
conducted in the developing economies focusing the informal sector dynamics.
Further, there are no details about labour contracts, skills development, work
organisation and worker participation, labour-management relations, wages,
etc. not to mention the threat to a wide ranging labour rights.
In fact, as Harvey (2011: 168) would put it, by establishing flexible labour
markets and curbing/dismantling the powers of trade unions and other workingclass institutions, “technologically induced shifts in job structures…render large
segments of labour force redundant” and that completes the “domonation of
capital over labour in the market place. The individualized and relatively
powerless worker then confronts a labour market in which only short-term
contracts are offered on a customized basis.”
Concluding Observations
The case of leather clusters of Tamil Nadu underscores the experience that in a
situation of overwhelming presence of informality and socio-economic
inequality, subcontracting between unequals would typically take advantage not
only of lower labour costs but weak/non-existent labour institutions. It can
happen with greater speed, depth and ‘success’ when the state or the dominant
agency of transacting business collude with the stronger of the links,
particularly, if those happen to be powerful multinationals.
Even when state has played a proactive role in promoting this industry and its
external orientation, informality in the labour process remained a deep-seated
reality (Damodaran, 2005).
The invisibility of the work at the lower rungs of production organisation
renders governance of value chains a blip and such subcontracting squarely
benefits the dominant agent(s).
Select References
Bales, K. (2000), Disposable People: New Slavery in the Global Economy, University of California Press, Berkeley.
Damodaran, S. (2005), ‘State Policy, Export Orientation and Labour: An Analysis of the Links in the Leather and
Leather Products Industry’, Indian Journal of Labour Economics, 48 (4), pp. 981-996.
Das, K. (2005), ‘Industrial Clustering in India: Local Dynamics and the Global Debate’, in K. Das (Ed.), Indian
Industrial Clusters, Ashgate, Aldershot, UK, pp. 1-19.
Das, K. (2011), ‘Regional Value Chain in Industrial Clusters: Pointers from the Leather Clusters of Tamil Nadu,
India’. Paper presented at the Stakeholders Consultation on Strategic Partnership for Policy Development and
Action to Foster Regional Cooperation in South Asia, organized by RIS, New Delhi, June 13.
Entrepreneurship Development Institute of India (2009), Diagnostic Study of Leather and Leather Products Cluster of
Chennai, available at http://msmefdp.net/ResourceBank/Diagnostic%20Study/ Chennai-DS.pdf
Harvey, D. (2011), A Brief History of Neoliberalism, Oxford University Press, New York.
Knorringa, P. and J. Meyer-Stamer (2008), ‘Local Development, Global Value Chains and Latecomer
Development’, in J. Haar and J. Meyer-Stamer (eds.), Small Firms, Global Markets: Competitive Challenges in the New
Economy, Palgrave Macmillan, Hampshire.
Nathan, D. and S. Sarkar (2011), ‘A Note on Profits, Rents and Wages in Global Production Networks’, Economic
and Political Weekly, 46 (36), pp. 53-57.
Roy, S. (2009), ‘Footwear Cluster in Kolkata: A Case of Self-Exploitative Fragmentation, Working Paper No.
2009/02, Institute for Studies in Industrial Development, New Delhi.
Seabrook, J. (1996), In the Cities of the South: Scenes from a Developing World, Verso, London.