How can new governance arrangements such as public-private partnerships contribute to business regulation in developing economies? More specifically, which governance instruments are best suited to make domestic for-profit actors comply with social standards? Seeking to address these broader questions, this study opens with a puzzle of varying degrees of labour standard compliance across Asia’s garment economies. Whereas problems with labour standards persist throughout the region, evidence points to improved compliance in Cambodia’s garment sector. This improvement is supposed to be due to an innovative policy project called Better Factories Cambodia, which involves public and private actors from different levels to induce compliance in an extremely difficult environment. Drawing on compliance theory, the study advances the hypothesis that this success is due to a combination of management and enforcement instruments. A comparison of Cambodia’s and Bangladesh’s garment sectors and a process analysis of the causal mechanisms in operation verify this complementary-compliance-hypothesis. Thereby, the study lays a foundation for future theory-guided research on business regulation through new modes of governance.
Table of Contents
1. INTRODUCTION
1.1 Subject and Research Question
1.2 Methodology and Collection of Data
1.3 Research Objectives and Structure
1.4 Review of Literature
1.4.1 New Modes of Governance
1.4.2 Compliance Theory
1.4.3 Labour Standards and Business Regulation in Developing Economies
2. THE DEPENDENT AND THE INDEPENDENT VARIABLES
2.1 Dependent Variable: Compliance with Labour Standards
2.2 Independent Variable: Mode of Governance
2.3 Alternative Explanations and Logic of Comparison
3. VARIATION IN LABOUR STANDARD COMPLIANCE: EVIDENCE FROM CAMBODIA AND BANGLADESH
3.1 The Global Garment Industry
3.2 Improved Compliance in Cambodia
3.3 Persistence of Non-Compliance in Bangladesh
4. THEORETICAL FRAMEWORK: COMPLIANCE THEORY
4.1 The Enforcement School
4.2 The Management School
4.3 Complementary-Compliance-Hypothesis
4.4 Operationalization
5. HOW TO MAKE BETTER FACTORIES?
5.1 The US-Cambodian Trade Agreement on Textile and Apparel
5.2 Eliminating Free-Riding: A Necessary Condition
5.3 Better Factories by Enforcement
5.3.1 Monitoring: Data about Non-Compliance
5.3.2 Sanctioning Non-Compliance
5.3.2.1 Phase 1 (2001-2005): Hegemonic Enforcement
5.3.2.2 Phase 2 (2005-2008): Transnational Market-Driven Enforcement and Increased Capability of Local Unions
5.3.3 Reduce of Intentional Non-Compliance
5.4 Better Factories by Management
5.4.1 Monitoring: Data about Capacity Deficits
5.4.2 Capacity Building
5.4.2.1 General Capacity Building
5.4.2.2 Customized Capacity Building
5.4.3 Reducing Non-Compliance Due to Capacity Deficits
6. CONCLUSION
6.1 Summary of Empirical Findings
6.2 Outlook on Future Research
6.3 BFC - A Model for Regulating For-Profit Actors in Developing Economies beyond Cambodia and the Garment Industry?
Research Objective and Topics
The primary objective of this work is to explain the variance in labour standard compliance across Asia’s garment economies by analyzing the Better Factories Cambodia (BFC) project. It seeks to identify the specific governance mechanisms—namely the combination of management and enforcement strategies—that have contributed to improved compliance in Cambodia, despite unfavorable institutional conditions.
- Analysis of compliance theory and new modes of governance in developing economies.
- Comparative case study of Cambodia and Bangladesh to identify causal mechanisms for compliance.
- Investigation of the "complementary-compliance-hypothesis" within the garment sector.
- Evaluation of public-private partnerships (PPPs) as instruments for effective labor regulation.
Excerpt from the Book
5.2 Eliminating Free-Riding: A Necessary Condition
In its initial form BFC was conceived as the monitoring arm of the US government. Its primary function was to monitor compliance performance of Cambodian garment factories. On the basis of the information thus generated, the officials of the US DoL decided whether or not to grant the bonus quotas to Cambodia. However, BFC’s monitoring scheme suffered from a serious shortcoming. Factories’ participation was voluntary. This created a situation resembling a multi-player collaboration game which provided individual factories with strong incentives to defect. The problem was that the extra quotas were awarded to the sector as a whole, based on overall performance. This created a perverse incentive for individual factory owners not to participate in the monitoring programme.
This was due to the fact that those factories that did join the programme would bear the costs of improvement, while non participating factories could benefit from increased quotas without paying for higher labour standards. In other words, the project suffered from the free-rider problematic. In this situation, the Cambodian government, which feared the failure of the trade agreement and the negative consequences for its economy, had a strong interest in overcoming the dilemma. Through public regulation the Cambodian Ministry of Commerce made an attempt to correct the perverse incentive structure. In March 2001, it issued a prakas (ministerial regulation) which determined that only registered factories would be eligible to benefit from the bonus quotas for the US market. Later, participation was made mandatory for every export processing garment factory. For Registration, factories have to sign a Memorandum of Understanding (MOU) which defines the responsibilities associated with a participation in the BFC project. For instance, factory owners are obligated to provide BFC monitors with full access to their premises regarding announced and unannounced visits. The public intervention proved successful in solving the free-rider problem.
Summary of Chapters
1. INTRODUCTION: Outlines the shift in governance patterns and introduces BFC as a puzzle of improved labor standard compliance in a developing economy.
2. THE DEPENDENT AND THE INDEPENDENT VARIABLES: Conceptualizes compliance and the mode of governance while discussing alternative explanations for compliance variance.
3. VARIATION IN LABOUR STANDARD COMPLIANCE: EVIDENCE FROM CAMBODIA AND BANGLADESH: Compares the successful compliance improvement in Cambodia with the persistent non-compliance in Bangladesh.
4. THEORETICAL FRAMEWORK: COMPLIANCE THEORY: Introduces enforcement and management schools and proposes the complementary-compliance-hypothesis.
5. HOW TO MAKE BETTER FACTORIES?: Analyzes BFC's implementation of enforcement and management strategies, including the role of the US-Cambodian trade agreement and the Information Management System.
6. CONCLUSION: Summarizes findings and discusses the transferability of the BFC model to other countries and sectors.
Keywords
Labor Standards, Better Factories Cambodia, Compliance Theory, Governance, Public-Private Partnership, Garment Industry, Enforcement, Capacity Building, Cambodia, Bangladesh, Export Processing Zones, Corporate Social Responsibility, Trade Agreements, Monitoring, Sanctioning
Frequently Asked Questions
What is the core subject of this research?
The work investigates the reasons for varying degrees of labour standard compliance in the garment sectors of Asian developing economies, specifically focusing on the Better Factories Cambodia (BFC) project.
What are the primary thematic fields covered?
The study covers global garment supply chains, international labor standards, compliance theory (enforcement vs. management approaches), and the effectiveness of public-private partnerships in governance.
What is the main research question?
The study seeks to answer why and how we can explain the variance in labor standard compliance across Asian garment economies, specifically identifying the mechanisms that led to improvements in Cambodia.
Which scientific methods are utilized?
The author uses a controlled inter-sector comparison between Cambodia and Bangladesh, combined with a process tracing method to analyze the causal mechanisms within BFC.
What is addressed in the main part of the book?
The main part focuses on testing the "complementary-compliance-hypothesis," showing how BFC successfully combined enforcement and management strategies to improve working conditions.
Which keywords define this work?
Key terms include Labor Standards, Better Factories Cambodia, Compliance Theory, Public-Private Partnership, and Garment Industry.
Why is the "free-rider" problem significant in this context?
It highlights the initial difficulty where individual factories could benefit from sector-wide export quotas without investing in labor standards, necessitating mandatory participation through government regulation.
How did BFC adapt after the end of the US-Cambodian trade agreement in 2005?
The project shifted from a hegemonic, trade-linked enforcement model to a more market-driven, transnational enforcement system, leveraging sourcing preferences of global brands.
What role does capacity building play in the BFC model?
It addresses "unintentional" non-compliance by providing technical assistance and training, allowing factories to implement complex standards like those concerning health and safety.
- Quote paper
- Philip Schleifer (Author), 2009, How to Make Better Factories, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/170725
