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Can Adopting International Labor Standards Make Businesses in Afghanistan More Profitable?

Can Adopting International Labor Standards Make Businesses in Afghanistan More Profitable?

Eva Schwoerer has several years of experience in project management, communication, and economic matters. She has been working as a communication specialist for various organizations, media outlets, and UN agencies since 2009.

Often businesses in developing countries shy away from implementing international labor standards out of the assumption that they are only beneficial to workers but negatively impact companies’ profit margins. But is this true?

When Abdullah Qol gets up in the morning after a night of little sleep, he immediately rushes to his factory, one of the largest carpet weaving factories in Afghanistan. He employs more than 20,000 people, many of whom are women, But he insists on doing the design and quality control himself. “I go to bed after 2 a.m. because that is when we close business in the US and I am again in the factory by 7 a.m. to oversee the finishing of our carpets. We exclusively produce for Western markets, and the quality of our carpets, therefore, needs to meet the highest standards.”

At Afghan Bazaar, investing in the well-being of his workers makes it easier for the company to ensure that their carpets meet the high-quality standard needed to compete in international markets. “When workers are rested and motivated, they are more concentrated thus, more able to weave – the sometimes- complicated design patterns,” says Abdullah Qol.

Additionally, teaching them basic numeracy and literacy does not only benefit workers but also decreases the likelihood of making mistakes.

Carpet is one of Afghanistan’s most important export goods

Carpet-weaving has a long tradition in Afghanistan and is one of the country’s most important export goods. Abdullah’s family has been in this business for over 100 years. Their weavers produce around 100,000 square meters of high-quality carpets per year, which are all sold in their stores in Hamburg (Germany), Milan (Italy), and Washington, D.C. (USA). In compliance with the international labor standards; all of the workers are older than 18 years old, work no more than eight hours per day, six days a week, and are entitled to a certain amount of leave days per year. Upon joining, the women, many of whom are illiterate, receive basic literacy and numeracy training to be able to properly apply the carpet patterns provided to them.

One of the women in the factory, Gul Begum, appreciates the conditions at her workplace: “I am comfortable to work here. It is warm and I don’t get disturbed by visiting relatives like I would if I worked from home. I am also happy that they taught me reading and writing when I first joined.”

One of her co-workers adds that she is also happy to work at the company.“I was completely illiterate before, and now I have a skill, can make money and support my family.”

But not all carpets are produced under decent standards. According to War Child UK, an estimated 35 % of carpet weavers employ children under the age of 14, and 56 % employ children younger than the age of 17 despite an international labor convention that forbids the employment of children below the ages of 15 and limits the employment of youths below the age of 18 to the light industries only.

Afghanistan and International Labor Standards

Afghanistan’s economy is a complex mix of formal, informal, illegal, and aid-supported activities, having resulted from a protracted conflict, the erosion of institutions, foreign interference, and aid dependence. Part of a healthy and developed economy is a sound labor market governance system. After recognizing the shortcomings of its labor laws, Afghanistan initiated a reform in compliance with international standards.

Despite the significant improvements accomplished through the official endorsement of the new labor law in late Dec 2019, several gaps in the labor administration system prevail including the lack of labor courts, labor inspections, and an overall need to improve working conditions.

“The government drafts the laws, and the workers and the employers practice it. The push for adhering to labor laws based on international standards can, therefore, only come from the workers and the employers. They should push because it benefits them both.” says Nasir Qasemi, executive manager of Balkh’s Chamber of Commerce and Industries (BCCI). However, few Afghans have access to formal employment. A quarter of the workforce is unemployed, and 80% of the employees are considered informal or vulnerable according to the ILO.  With 400,000 Afghans reaching the age to enter the labor market each year, the competition among workers is high.

The power of the employer

The power of the employer ultimately rests in the right to hire and fire, and the employer’s power increases with a rising unemployment rate and lack of alternative employment options. This power can be balanced through the formalization of protective laws, effective law enforcement that prevents employers from easily firing their workers, and the activities of strong trade unions. Unions advocate for the rights of workers and push for the application of labor standards. In the absence of such unions, there is limited social security and employees are vulnerable to exploitation. In Afghanistan, all government employees are mandatorily unionized in the National Union of Afghan Workers and Employees (NUAWE). This gives them certain benefits, such as a guaranteed minimum wage. Most workers in the private sector are not part of a union, and their rights are less protected. “Ratifying ILO conventions is not about the ratification of international labor standards for the sake of ratifying. If it doesn’t translate into benefits for poor people, it doesn’t mean anything at all,” says Tonderai Manoto from the International Labor Organization (ILO).

The power of the worker and the benefit for businesses

With the high level of unemployment in Afghanistan and the absence of sector-wide workers’ unions, why should factories and businesses commit to holding up labor standards, and why should they commit to providing decent working conditions and wages that are high enough to allow workers and their families have a decent living?

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“Social Protection benefits employees and employers. Good working conditions, good pay, and reasonable working hours ensure the workers’ loyalty, and are beneficial to the success of the entire company.” Says Nasir Qasemi. “It is all about the way you say it, not the way ‘the law says it’ but if you do this, it will benefit your company. For example, when it comes to paid leave, employees are not a machine. You need to give them some time off to spend with their families. By doing that, you are saving money, you just don’t know it yet.”

A study conducted by the ILO in several countries found that decent working conditions had a significant positive effect on employees’ productivity and, therefore, also on employers’ profits. The loyalty aspect should also not be underestimated. Habib works for a food processing company in the north of Afghanistan. As a lab technician, he controls the taste of his company’s products and, therefore, holds one of the most important positions in the entire business. A few years ago, a competitor offered him double his current salary – but he turned down the offer. “My company has invested much in improving my skills over the years and trained me to become the most qualified employee in the entire company.” He says. His company was loyal to him all these years, and now he is loyal to it or his company.

“By investing in their employees, companies ensure loyalty.” Confirms Mahbooba Zahmani who also runs a carpet factory with decent working conditions: “Since I have opened my company four years ago, hardly anyone quit.”

When a new employee joins, businesses invest time and money in familiarizing the new staff member with his/her new task. If businesses don’t treat their employees well, they will leave and businesses will lose out on their investment “When my employees first joined, I invested a lot by training them. If I don’t keep them satisfied with a decent salary, they will leave. And, I have to start again from zero. I am not a charity, and it is not like I pay them from my pocket – I pay them from the profit I make through their work for me.” Says Tareq Sakhi who runs a textile factory in the north of Afghanistan.

Rather than decreasing the salaries of their workers to improve their profit margin, companies could improve their workers’ motivation by treating them well. Tohrab Safi, who runs a mobile money business in Balkh and Samangan, has had good experiences with a financial incentive setting. Not enter here, should continue to the next sentence“My employees receive 200-300 USD per month as a base salary. Depending on their performance, they can earn up to 500 USD more per month.” Says Safi. With this financial bonus system, he is encouraging his staff to work better and harder. No enter here “But whoever works hard also needs rest – all my employees get 20 days of paid annual leave per year.” He adds. When employees are more motivated to do well at work, they produce better output.

The future: A fair trade brandmark?

 In the Western world particularly, consumers have become more powerful. They demand to know where the products they buy come from, and under which conditions they were produced. By developing a fair trade brandmark for Afghan products, Afghan businesses could significantly improve their branding in the international markets. By guaranteeing that their products were produced under fair working conditions, complying with international standards, businesses can increase their sales and the prices they charge for the individual products.

At Afghan Bazar, Abdullah Qol offers a kindergarten on site for his employees’ children, free of charge. When asked why he chose to pay for a service that is mainly beneficial to his employees but does not directly translate into increased profit for the company, he paused for a moment. “I treat my workers well and offer free kindergarten to their children. I even have plans to build schools in the coming years to offer free but quality education. Why? My workers should work in carpet weaving, but their children should go to school and get educated because I want the new generation to work in skilled jobs and build proper industries for a proper economy. I don’t want Afghanistan’s future to only depend on carpet weaving.”

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