How Good Are Inspections of Chinese Factories?

I love my MacBook, as well as my iPhone and iPod, as many people would swear by their Apple products but I now wonder if I will have the same personal struggle I had with Nike more than a decade ago over the treatment of workers in Chinese factories.

Despite all the recent frenzy in the papers about the upcoming public listing of Facebook, Jeffrey Lin and ?Lin-sanity? at the New York Knicks, Apple has continued to grab headlines, not just for hitting a record share price of over US$500, protests and chaos by frenzied prospective buyers at Apple Stores in China but more markedly for its disclosure last week to finally allow its working conditions at its Chinese facilities to be audited, with findings to be made public later by an outside independent party.

Wait a minute, did I say independent?

Apple Inc. has reportedly long resisted calls for independent scrutiny of its vendors and supply chain. However, following a spate of criticism from recent coordinated protests at Apple Stores around the globe and news reports of harsh conditions inside some Chinese factories that make its idolized Apple products, the company founded by the late Steve Jobs finally announced last week that an outside organization will inspect the working conditions at the factories of its suppliers in China.

The Fair Labor Association will conduct ?independent assessment? after Apple?s suppliers have pledged ?full cooperation? and given the FLA ?unrestricted access to their operations? whereby the findings and recommendations will be posted in the FLA homepage in ?early March,? according to a company statement by Apple, whose market value is reportedly more than Google and Microsoft combined.

It is certainly good news that Apple, which has since 2006 released its own annual audit reports of its suppliers, has eventually decided to open its doors and outsource these inspections.

But can anyone explain how can the FLA be any independent party when the companies that financed this non-profit labor rights organization include Apple itself?

The FLA was founded in 1999 from recommendations by a task force created by former US president Bill Clinton and some apparel and footwear companies, including Nike, to combat child labor and harsh, abusive working conditions.

According to the FLA homepage, the organization "holds its participants - those involved in the manufacturing and marketing process - accountable to the FLA Workplace Code of Conduct" and "Independent External Monitoring is part of the FLA's core work".

That sounds good but the FLA is not without its own share of critics.

For example, NonprofitWatch.org, which keeps a tab on public interest groups and raise issues regarding transparency, conflicts of interest and accountability within the non-profit community, has publicly challenged the integrity of the FLA for its conflicts of interest following attacks by anti- sweatshop campaigners.

The Worker Rights Consortium, an independent labor rights monitoring organization, reportedly challenged the notion of independence since FLA is funded by the very companies it conducts its investigations on.

The FLA last Monday began the first inspections of the Shenzhen assembly facilities known as Foxconn City.

Close to a quarter of a million people work at this complex owned by Foxconn Technology Group.

Similar inspections will also be conducted later this year at Foxconn factories in Chengdu, Sichuan province.

FLA will undertake similar audits of Quanta Computer Inc and Pegatron Corp., where a lot of the iPhones and iPads are made, an Apple press release said last week.

Did this mean the audits were scheduled? Well, good luck then. If these inspections are pre- arranged, it may be a self-defeating campaign or just a public relations gimmick, consisting of merely tick-the-box exercises. Unannounced and surprise audits are the most effective.

No doubt they are unpleasant for the factories being inspected, according to some folks I know who outsourced manufacturing to factories in southern China.

"Surprise audits are surely more reflective of the factory's real condition although most factories would not accept this with great pleasure," according to the owner of a company involved with toys. But that is exactly the point.

"I think it is very well known that some Chinese factories have second locations where the real production goes on and the showcase factories that get inspected are just that - for show," says Steve Weyer of Greater China Consulting Ltd., a supply chain and logistic specialist consultant focused on the Greater China region.

Weyer has personally witnessed appalling working conditions, including environmental violations, with what appear to be under-aged factory girls at the plants of companies with huge reputations to protect on a global scale. But big name firms regularly outsource inspections to companies that routinely pass factories on safety and labor standards when in reality, if independently re-audited by the Western clients, they would likely to have failed.

Inspectors of the western clients are sometimes even offered bribes to overlook obvious violations, Weyer said. So, what was the outsourced company doing in the first place?

"A poor job in the first place or taking bribes to pass it or both?" said Weyer, who recommended the book "Factory Girls" for better understanding of life for young Chinese women in a factory, like the working conditions they have to endure, how they skirt minimum age requirements with fake or borrowed identity cards.

As for myself, I recommend the book "Poorly Made in China" for further insights. The opening chapter relates how a Chinese factory has the premises filled with staff working on the assembly lines. Then, just after foreign visitors exit the premises, all the workers vanish.

In the latest developments, The New York Times reported over the weekend that the FLA president has already begun praising the Foxconn plants following the initial visit last week. Worker rights groups lashed out at the FLA boss calling his comments "hasty" based on "nothing more than a guided tour provided by the owner".

(Vanson Soo runs an independent business intelligence practice specialized in the Greater China region. A separate version of this runs in The Standard of Hong Kong. Email: soovans@gmail.com)