Survivors and victims families have been campaigning to secure proper compensation

Survivors and victims' families have been campaigning to secure proper compensation

After four years of campaigning and months of negotiations, an agreement has finally been reached to pay compensation of more than US$5m to the survivors and families of workers killed in a fire at the Ali Enterprises garment factory, Pakistan's worst industrial accident. 

The payments have been made possible after German retailer KiK agreed to contribute an additional US$5.15m to fund loss of earnings, medical and allied care, and rehabilitation costs to the injured survivors and dependents of those killed in the fire on 11 September 2012.

KiK was the only known buyer at the Ali Enterprises factory, in Baldia, Karachi, where more than 255 workers lost their lives and 57 were left injured. Workers burnt to death trapped behind barred windows and locked doors, while others sustained permanent disabilities jumping from the upper floors.

KiK had previously paid US$1m in emergency compensation in December 2012, and Ali Enterprises fire victims have received some payments from public social security schemes in Pakistan to compensate for loss of earnings and medical care.

However, the new funding arrangement follows negotiations facilitated by the International Labour Organization (ILO) over the past few months between KiK, the IndustriAll Global Union and the Clean Clothes Campaign (CCC), at the request of the German Federal Ministry of Economic Cooperation and Development.

KiK's additional contribution will top up the statutory benefits due from the Sindh Province Employees' Social Security Institution to meet compensation levels required by ILO Employment Injury Benefits Convention 121.

Additional periodical payments to victims are expected to begin in early 2017.

"With our financial contribution, we have taken over responsibility for the victims on a voluntary basis going beyond national requirements," says Patrick Zahn, CEO of KiK Textilien und Nonfood GmbH. "This was truly important to us."

According to Gerd Müller, German Federal Minister for Economic Cooperation and Development, the payment is proof that the German-led Partnership for Sustainable Textiles (Textilbündnis) "is making a difference. And it is doing so in a totally new way."

The Partnership has drawn up environmental and social standards to improve living and working conditions of garment factory workers, but also plays a key role in gathering various stakeholders around a table.

"What had not been possible in four years of controversy between the parties has now been achieved through our mediation work and will provide tangible assistance to the victims and bereaved family members of the terrible fire at the Ali Enterprises textile factory in Pakistan," the Minister says.

"We commend KiK for agreeing to fund compensation that meets international standards," adds Jyrki Raina, general secretary of IndustriAll global union.

However, Gilbert Houngbo, deputy director general of the ILO, cautions that "significant further investment is needed to improve the situation of workers in Pakistan in the garment and other sectors, including the effective access to employment injury benefits. We reiterate that good practices in the world of work can only continue to benefit both employers and workers."

Just weeks before the fatal fire, Ali Enterprises received SA 8000 certification from the auditing firm Social Accountability International, meaning it had purportedly met international standards in nine areas, including health and safety.

The ensuing tragedy underlines the failure of social auditing models and raises serious concerns about the standard of safety inspections in Pakistan as well as the implementation of labour laws and building safety codes, the Clean Clothes Campaign says.

"Garment workers in Pakistan continue to be at risk," says CCC's Ineke Zeldenrust. "All buyers must now focus on ensuring that proper and effective due diligence and remediation measures are put in place in order to prevent terrible incidents like these in the future."

This the third in a line of compensation agreements negotiated by the labour movement following large-scale disasters in the garment industry at Tazreen fashions in 2012 and Rana Plaza in 2013, both in Bangladesh.

A short summary of the arrangement is as follows:

  • The US$5.15m to be funded by KiK will include a US$250,000 margin for a fluctuation in costs, meaning that US$4.9m will go to the affected families and survivors.
  • The implementation, administration and governance of the Arrangement will be developed in a process facilitated by the ILO. It will involve close consultation with relevant constituents and stakeholders, as well as a supervisory role for the Sindh High Court.
  • In total, the Arrangement will provide US$6.6m for the compensation process, with US$5.9m being provided by KiK and US$700,000 being funded by social insurances schemes in Pakistan (SESSI and EOBI) as well as the owners of Ali Enterprises.
  • Claimants will be paid a monthly pension. The amount will differ according to the individual's financial situation and number of dependents.
  • The pensions will be not at living wage levels, as the international standards for workplace injury are based on actual wages earned. In the Ali Enterprises Arrangement however the proxy used for the actual earned wages is generous and pensions are indexed to meet the inflation rate.
  • The Arrangement does not cover damages for pain and suffering.