AsiaInspection Q4 Barometer: CSR, it’s Becoming Harder to Hide. China Growth Hits New Low

HONG KONG–(BUSINESS WIRE)–The second half of 2015 brings numerous developments for compliance.
China’s new Food Safety Law introduces harsher standards and
punishments, Bangladeshi prosecutors bring murder charges against the
owners of Rana Plaza and the Tazreen factory, while the UK’s Modern
Slavery Act demands more transparency in global supply chains. A recent
AI whitepaper analyzes the
impact of consumer awareness on modern-day slavery
and examines the
scale of the problem in more detail. Growth in Southeast Asia continues,
while the yuan depreciation is expected to strongly affect China’s major
imports, particularly Indian textile and apparel.

Southeast Asia Sees Staggering Growth at the Expense of China

China’s exports declined by 6.1% over the previous year in August
according to figures from the country’s Customs
Administration. Observers say the latest figures are another reminder
that China’s economy continues to face challenges in rebalancing to cope
with slowing export demand, particularly after the recent yuan
devaluation. This is supported by AI’s own data which showed a 3.2%
Y-O-Y increase of inspections performed in China
, the slowest growth
in the company’s history, this while Southeast Asia grew 104% Y-O-Y.

Interestingly, China itself has been making strategic investments
outside of its own market into other Asian countries which offer more
competitive labor costs. Recently, the country invested approximately
$4.5 billion in two industrial parks in Bangladesh, despite the fact
that Bangladesh often lacks the most basic infrastructure and suffers
from frequent disruptions to manufacturing

Bangladesh – Compliance Improves, but Remains a Work in Progress

The third quarter marked several government and NGO efforts to improve
compliance in Bangladesh. The gradual upward trend is supported by AI’s
data, with a modest 2.8% increase in ethical scores (from 6.51 to
6.7 out of 10) over the past 12 months, while inspections
grew by 68%
. However, AI data shows that thus far in 2015, 41.6% of
factories audited in Asia showed major non-compliances, and 25.9% were
at serious ethical risk.

The Bangladeshi state authorities say that Bangladesh now meets the
criteria to be reinstated in the Generalized System of Preferences (GSP)
trade program, having lost its membership in 2013. New legislation is in
the works: the Textile Industries Establishment Act 2015, if passed,
will impose heavy fines and imprisonment for operating textile or
garment factories without a license.

Prosecution of individuals responsible for industrial accidents is also
underway. Owners of the Tazreen factory in Dhaka, site of the deadliest
industrial fire in Bangladesh, are to stand trial on murder charges.
This indictment and the murder charges presented earlier this year
against Sohel Rana, owner of the Rana Plaza complex, are among the first
times that owners of garment factories are being tried for their role in
the deaths of workers at their facilities.

The Alliance for Bangladesh Worker Safety released a report about its
second year of work, revealing issues with remediation
efforts and safety follow-up. Less than 10% of the Alliance member
factories inspected made the required changes, citing lack of long-term
funding as the main reason for their failure. The US government will be
working with two Bangladeshi banks to extend credit to the inspected
factories that have a Corrective Action Plan in place.

Vietnam and Cambodia Continue Strong Growth Trend

While China remains the largest supplier of textile apparel to the U.S.,
it was Vietnam that registered the largest growth among the top 10
trading partners, with its apparel exports to the U.S. exceeding $1
billion in one month for the first time – a 12.7% Y-O-Y increase.
Cambodia was also among the strong growers, with a 7.2% increase in July
2015 compared to July 2014. This aligns with AI data, which shows a
continuation of the previous quarter’s strong growth trend in the
Southeast: product inspections grew 168% in Vietnam and 268% in
Cambodia
.

Vietnam has similarly strong trading ties to Europe, ranked second among
the EU’s largest trading partners in 2014, exceeded only by China. With
the long-awaited free trade agreement finally reached between the EU and
Vietnam, this developing economy is due for further expansion and is
rapidly becoming the new dominant force for apparel.

India – Modest Growth in Textile Industry Despite Persistent Problems

The 2015 depreciation of the Indian rupee to a two-year low is expected
to have mixed effects on the country’s fiber, yarn and apparel exports.
While the rupee’s depreciation makes Indian exports more competitive,
most of India’s cotton (70% of total fiber exports) historically went to
China where the buyers, after the yuan was devalued in August, will
likely attempt to renegotiate prices. As a result, Indian exporters will
see increased pricing competition and will not get the full benefit of
the rupee depreciation.

Despite the persistent problems in the sector and the failure of textile
exports to meet the target for the 2015 fiscal year, AI recorded a 40%
Y-O-Y growth in product inspections
in India. Product quality
displayed a 5% increase
, a possible reflection of the recent efforts
by Indian textile companies to innovate in order to boost their
competitiveness, especially overseas.

New Food Safety Laws Effective in China

China’s new Food Safety Law came into effect on October 1st.
The new legislation was passed in April 2015 in the wake of several
high-profile food safety scandals, and was followed up by a number of
new regulations and standards introduced by the CFDA (China Food and
Drug Administration) and other state authorities. Among the proposed new
regulations are additional post-approval measures for food manufacturers
and distributors, including mandatory self-inspections and reporting.

To further boost safety efforts on the international level, the CFDA
voiced its support for the agreement signed by Food Industry Asia with
the World Bank for the Global Food Safety Partnership. The agreement
aims to facilitate public-private partnership in order to develop new
capacities and infrastructure for food safety. China also
signed a Memorandum of Understanding on food safety with Ireland, as
part of the two countries’ expanding bilateral trade.

AsiaFoodInspection saw a 33% increase in performed services over
the past 12 months compared to the 12 months before, showing the
continued demand for outsourced food manufacturing. The most recent
results of those inspections show a 48% failure rate in Q3 – a
decrease on the Q2 figure of 37%.

About AsiaInspection – Your Eyes in the Factory!™

AsiaInspection (AI), a leading global quality control and compliance
service provider that partners with brands, retailers and importers
around the world to secure, manage and optimize their supply chain. With
unique web-based quality control management, AI offers Product
Inspection, Supplier Audit Programs and Laboratory Testing services for
more than 4,000 clients worldwide. The 2015 Q4 Barometer is a quarterly
synopsis on outsourced manufacturing and quality control services
performed by AI each year (product inspections, supplier audit programs,
and laboratory testing).

Contacts

Press Contact
AsiaInspection
Michael Mesarch, (+86) 755
2223 9888
press@asiainspection.com