Bangladesh Compensation Fund Far Short of Goal

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Retailers That Used Collapsed Factory Have Donated $15 Million; $40 Million Sought

DHAKA, Bangladesh—Nearly a year after the collapse of a garment-factory complex in Bangladesh killed more than 1,100 workers, labor groups say global retailers still haven’t put up the funds needed to compensate the victims.

A trust fund set up earlier this year by labor groups and clothing companies said it would raise $40 million to help survivors of the Rana Plaza disaster and the families of those who perished. So far, the fund has collected $15 million.

“Unless brands pay up, there is the very serious possibility that the families of victims will not receive proper and adequate compensation,” said Scott Nova, executive director of labor-monitoring group Worker Rights Consortium.

According to the Rana Plaza Donors Fund website, only about half of the 29 international brands that labor groups say produced clothes in the doomed factory building have made contributions. The fund is overseen by the United Nations’ International Labor Organization.

The collapse of Rana Plaza focused international attention on substandard working conditions in Bangladesh, which has become a major supplier of the low-cost fast fashion sold in the U.S. and Europe.

Families that lost breadwinners in the collapse and survivors, some dealing with debilitating injuries, have struggled due to lack of income and the costs of medical care, according to local labor unions.

Mahmuda Akter and her husband, Habib Ullah, were both working in Rana Plaza when its walls buckled on April 24. She was injured. Her husband died. “It’s been almost a year. Doesn’t anybody care if we live or die?”

Ms. Akter says she has been preparing to file a claim with the trust because she needs money to raise her year-old daughter. “My daughter Sumaiya was born three weeks before Rana Plaza,” she said. “She deserves a chance in life.”

The fund, set up to coordinate the payment of compensation funds, has received 238 claims since it began accepting them last month, according to Bangladesh’s Labor Ministry. The claims will be evaluated on a case-by-case basis by a committee, and the amount of compensation will be decided taking into account lost income, emotional distress and medical and funeral costs.

Some retailers have said they won’t participate in the fund.

Italian retailer Benetton SpA, said it hadn’t contributed because the fund envisages “a purely voluntary contribution system, one which was not at all proportionate to each company’s presence in Bangladesh. We did not share this principle because it does not take into consideration the fact that companies generate production risks also in terms of the size of their orders to suppliers.”

The statement said the company had decided to “concentrate funds and efforts to support the victims and their families” through an alliance with Brac, a Bangladeshi nongovernmental organization.

Labor activists have criticized Benetton and other brands that shunned the common approach. “The so-called independent donations fall far short of full compensation,” said Mr. Nova of the Worker Rights Consortium. He said the trust fund is “the only inclusive, transparent” compensation program.

“The 29 brands that sourced from factories within Rana Plaza either at the time of the collapse or in the recent past have combined profits of well in excess of US$22 billion a year,” said Ineke Zeldenrust, of the Amsterdam-based labor rights group Clean Clothes Campaign. “They are being asked to contribute less than 0.2% of these profits to go some way towards compensating the people their profits are built on.”

Brands that contribute to the fund aren’t required to disclose the amounts they donate, but typical donations have ranged between $500,000 and $1 million, according to the fund’s website.

Wal-Mart Stores Inc. combined with two other U.S. retailers to donate $2.2 million to the fund, according to an announcement last month by the fund. Labor groups have complained that the size of the contributions is too small compared with the profits of the companies involved.

Wal-Mart has said it had no production in Rana Plaza at the time of the collapse although it acknowledged that a supplier produced clothing at a Rana Plaza factory in 2012. The company said at the time of its donation late last month that its contribution to the victims’ fund underlined its commitment to raise standards in its supply chain in Bangladesh.

Dan Rees, a spokesman for the ILO, said: “The industry must come together to finance the payments to the victims and related administration of the scheme as quickly as possible and ensure the victims of this accident receive support.”

Source: The Wall Street Journal