Wage and Labour Conditions of Shoe and Garment Workers in Albania

39 Pages·2016·0.62 MB·English

Wage and Labour Conditions
of Shoe and Garment Workers in Albania

Authors: Mirela Arqimandriti
Megi Llubani
Artemisa Ljarja
Wage and Labour Conditions of Shoe and Garment Workers in Albania
Research Paper
Prepared by,
MirelaArqimandriti
MegiLlubani
ArtemisaLjarja
February, 2016
Albania
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TABLE OF CONTENTS
INTRODUCTION.....................................................................................................................................................4
1. OVERVIEW OF THE GARMENT AND SHOES SECTOR......................................................................................5
1.1STRUCTURE OF THE INDUSTRY ANDGEOGRAPHICAL SPREAD..............................................................................................6
1.2ECONOMIC INDICATORS OF THE INDUSTRY REALTED TOGDPAND EXPORTS OFALBANIA.........................................................7
1.3GOVERNMENT PROMOTIONOF INVESTMENTS IN THE GARMENT/SHOE INDUSTRY..................................................................8
1.4THEMAIN EXPORT DESTINATIONS OF GARMENTS ANDSHOES PRODUCED INALBANIA.............................................................9
1.5EXPORTS BY GROUPS OFGOODS................................................................................................................................10
1.6EMPLOYERS’ASSOCIATIONS AND UNION TRADES...........................................................................................................10
1.7EMPLOYMENT AND COMPOSITION OF WORKFORCE.......................................................................................................12
1.8INFORMALITY IN THE TEXTILE AND SHOES INDUSTRY.......................................................................................................13
1.8THE GENDER,AGE AND ETHNIC COMPOSITION OF THE WORKFORCEIN THE GARMENT INDUSTRY.............................................13
1.9STRENGTHS AND WEAKNESSES OF THE GARMENT/SHOE INDUSTRY–RELOCATION..............................................................14
1.10 GENDER ISSUES IN THETEXTILE AND SHOES INDUSTRY INALBANIA...........................................................................15
2. LEGAL PROVISIONS ANDGENERAL WAGE PRACTICE IN THE SECTOR..........................................................17
2.1STATISTICS ON NET WAGES2014..............................................................................................................................17
2.2LEGAL MINIMUM WAGE AND ITS ADJUSTMENTS,MANDATORY CONTRIBUTIONS,LEAVE........................................................17
2.3OVERTIME............................................................................................................................................................18
2.4NATIONAL MINIMUM WAGESETTING MECHANISM........................................................................................................20
2.5LABOUR INSPECTIONS AND OCCUPATIONAL DISEASES.....................................................................................................22
2.6POVERTY INALBANIA THROUGHINSTAT....................................................................................................................23
2.7BARRIERS TO ORGANIZING........................................................................................................................................24
2.8COLLECTIVE BARGAININGAGREEMENTS(CBAS)...........................................................................................................24
2.9INFORMAL WORK...................................................................................................................................................25
2.10LABOR SHORTAGE IN THEGARMENT INDUSTRY...........................................................................................................26
FIELD RESEARCH..................................................................................................................................................27
GENERALINFORMATION................................................................................................................................................27
WORKING HOURS AND LEAVE.........................................................................................................................................27
OCCUPATIONAL HEALTH ANDSAFETY...............................................................................................................................28
WAGES......................................................................................................................................................................28
COSTS OF DECENT LIVING...............................................................................................................................................29
LABOUR CONTRACTS.....................................................................................................................................................29
RECOMMENDATIONS..........................................................................................................................................32
IMPORTING COUNTRIES.................................................................................................................................................33
TRADEUNIONS...........................................................................................................................................................33
REFERENCES.........................................................................................................................................................35
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Acronyms
AIC Albanian Investment Council
AIDA Albanian Investment Development Agency
BiH Bosnia and Herzegovina
CEFTA Central European Free Trade Agreement
CTUA Confederation of Trade Unions of Albania
EFI Economic Freedom Index
EU European Union
FDI Foreign Direct Investment
ILO International Labour Organization
INSTAT Albanian Institute of Statistics
ITUC International Trade Union Confederation
MEDTTE Ministry of Economic Development, Trade, Tourism and Entrepreneurship
MSWY Ministry of Social Welfare and Youth
NRG National Registration Centre
The package Incentives Package for the Industry of Inward Processing Regime
TUTLCI Trade Union of the Textile, Leather and Clothing Industry
UTUAW Union of Trade Unions of Albanian Workers
WBG World Bank Group
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Introduction
Albania is a small European countrywith a population of 2.8 million people according to the 2011
Census. It is located inSoutheastern Europe, bordering Greece to the south, Macedonia to the east
and Kosovo and Montenegro to the north. Itscoastlineof 476 kilometers extends along the Adriatic
and Ionian seas. Seventy percent of the country is mountainous. In 1991, Albania emerged from
nearly 50 years of harsh communist rule with widespread poverty and a nearlydevastated economy
(World Bank Group, WBG, 2015). At the time, Albania was the most isolated country in Europe
with virtually no ties orcooperation with any other nation and dependent solely on its own crippled
industry and agriculture (WBG, 2015).
According to the Economic Freedom Index (EFI, 2015) Albania’s economy has benefited
substantially from increased openness and flexibility over the past decade. Although the state
continues to control key enterprises, particularly in the energy sector, the economy is mostly in
private hands. Beneficial structural reforms have included bank privatization, implementation of
competitive flat tax rates, and modernization of the regulatory environment. Although Foreign
Direct Investment (FDI) has increased in recent years,
overall levels still remain among the lowest in the region
Quick facts about Albania:
(EFI, 2015). Deeper institutional reforms to reduce labor
Population: (2.8 Million)
market regulations and increase the efficiency of the
Male: 50.53 %;
Female:49.6 %
judiciary, which remains subject to political interference,
GDP (PPP) $31.6 billion
are critical to further success. Corruption continues to
2.1 % Growth
2.3 % 5 years compound
undermine the prospects for long-term economic
annual growth
development. Expansionary public spending has led to
$ 11377 per capita
Unemployment rate: 16.1 %
budget deficits and rising public debt, now over 70 percent
Inflation (CPI): 1.9 %
of GDP (EFI, 2015).
FDI inflow: $1.1 billion
In 2014 Albania became aEuropean Union (EU) candidate
Source: Economic
country on condition that it makes further progress in
Freedom Index (EFI, 2015)
reforming the judiciary and law enforcement to combat
deeply rooted corruption and organized crime, especially
human trafficking, fraudulent documents, and money laundering. The EU is demanding reforms
in the judiciary and law enforcement agencies to combat deeply rooted corruption and organized
crime. Judges sometimes face threats and physical violence. Protection of intellectual and real
property rights is weak, particularly for land tenure (EFI, 2015).
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The entrepreneurial regulatory framework has become fairly streamlined, and starting a business
takes less than the world averages of seven procedures and 30 days. Minimum capital requirements
are modest. Despitesome reform, labor market rules remain relatively rigid. Government subsidies
and price controls distort domestic prices for electricity, water, agricultural products, and railroad
transportation (EFI, 2015).
1. Overview of the garment and shoes sector
Albania has a small textile and shoe industry that relies on low–labor cost assembly operations and
competes with lower-cost Asian producers who are also becoming more productive (WBG, 2015).
Exports were dominated by footwearand garment clothing in 24.3 % in 2007 and after 2008 the
share of textile and clothing in the Albanian export basketwas15.7%(WBG, 2015). According to
the Albanian Investment Development Agency (AIDA, 2015) thetextile, garment and shoe sectors
are today important parts of the manufacturing industry in Albania and play a crucial role in the
economic and social welfare of the country, becoming the second and third after minerals in the
export share of the country.Moreover,thetextile and clothing industries represented mainly from
the production of garments and a small production of textile and wool materials use part of the
existing facilities, cheap labor costs and workers’ experience(Ministry of Economic Development,
Trade, Tourism and Entrepreneurship, MEDTTE, 2014). This industry is managed by joint stock
companies mainly from neighboring countries with which Albania has close economic ties, such
as: Italy, Germany, Greece etc. Business partners from neighboring countries brought modern
technology in the operation of the market. The value of exportsof Albania from the shoes industry
for the year 2014 was 306 million EUR and 305million EUR, for the garment industry, while the
number of employees had already reached approximately 28 000 (MEDTTE, 2014). Leather and
shoes industryis represented mainly by inward processing companies so-called Fasons that work
with the purchaser material. These sectors represent 34% of total exports and 45% of the workforce
in the processing industry (Albanian Investment Development Agency, AIDA, 2015).
The shoes and garments industries have developed easily in Albania due to advantages such as
flexibility of large and/or small orders, skilled labor force, deliveries at short distance and
relatively low transportation costs within the European Union countries. In addition, labor costs
are significantly lower due to the fact that Albania has the lowest minimum wage compared to
other countries in the region, followed by Kosovo; multiple language skills of workers due to
extensive immigration and influence of neighboring countries such as Italy and Greece. Finally,
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the sector is strongly supported by facilitating policies initiated by the government, aimed at
creating easiness in the work of factories operating in this area. According to the Chamber of
Façons of Albania (CFA, 2014) 1335 production units of the Façon sector are registered in the
National Registration Centre. Moreover,the average age of the employees in this sector is 31 years
old, and 95 % of employees are women compared to 5% men.
1.1 Structure of the industry and Geographical spread
According to Albanian Institute of Statistics (INSTAT, 2014) there were 748 manufactures of
garments and 190 manufactures of leather and related products registered and active in 2014.
While according to the report prepared by the Chamber of Façons of Albania (CFA, 2014) 1335
production units of the Façon sectors producing garment and shoes are registered in the National
Registration Centre.
Table 1: The garment and shoes enterprises distributed through the regions
Albanian Regions No of factories
Garment production Shoes Production
Berat 38
Dibër 4 0
Durrës 128 44
Elbasan 25
Fier 67 12
Gjirokastër 21
Korçë 73
Kukës 5
Lezhë 24 9
Shkodër 33 17
Tiranë 286 87
Vlorë 44 10
Total 748 190
Source: INSTAT (2014) the register of enterprises 2014
In Albania there is a mix of foreign owned, locally owned and combined companies (with shares
from Albanians and foreign subjects). Typically the foreign owned are mostly Italian and those
combined have also shares from Albanian and Italian physical persons. The table below shows a
breakdown of factories in the garment and shoes industry divided between male and female owners
(administrators).
Table 2: The garment and shoes enterprises divided by owners: female and male
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No. of factories
No of factories
Garment enterprises Shoes enterprises
Total 561 138
Female owned 315 57
Male owned 246 81
Source: INSTAT (2014), the Register of Enterprises 2014
In Albania garments and shoes industry are mainly working in the Façon sector of the industry.
Theterm “Façonindustry” is used in Albania to refer to theinward processing industries of textile,
garments and footwear manufacturing. The partial or fully finished products are almost exported
to other countries and not sold in the country. These products represent the major portion of the
country’s exports.The size of workplaces might differ from a region to the other within the country.
The size varies from 1000 employees to 30(CFA, 2014). There are no official data about the exact
breakdown of factories according to their sizes.
According to unofficial data (testimonies from workers interviewed and other sources of
information) shoes and garment work is distributed even in homes where not only adult’s works
but also children are involved and they have to fulfill a certain quota/norm predetermined by the
factory. According to the report of International Trade Union Confederation (ITUC, 2007)children
are employed in much higher numbers in home-based operations. They usually help parents,
mainly motherswho receiveworkthroughintermediaries who distribute works for people athome.
ITUC (2007) says that it would be easy to blame the Albanian companies for exploiting adult and
child workers, but those really responsible for these Medieval working conditions are the big
international buyers that impose indecent prices on their suppliers. At Filanto Company, for
example, a pair of shoes bought from the factory in Tirana costs 4 Euros and is resold for between
22 and 30 Euros in the shops of Italy (ITUC, 2007).
1.2 Economic indicators of the industry realted to GDP and exports of Albania
The textile and shoes industries has been very important for our country, in terms of trade, GDP
and employment and have contributed significantly in our economy. The textile and shoes
industries provide opportunities for export diversification and expansion of manufactured exports
because of the low labour cost advantages. Below in the tables is presented the contribution of
garment / shoe production to the national economy, in GDP and exports, comparing the GDP
contributions of the garment/ shoe industrybetween 2010 and 2014.
Table 3. Shoes Industry in Albania in EUR
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Year 2010 2011 2012 2013 2014
Total exports
shoes in EUR 181,465,742 216,401,304 212,058,631 241,596,713 306,230,551
Total exports in
EUR 1,153,912,064 1,406,404,234 213,030 1,759,982,250 1,826,850,041
The ratio of the
shoes industry
with the other
exports 16% 15% 99544% 14% 17%
Total GDP in
EUR 8,854,604,177 9,290,172,164 9,520,078,495 9,646,819,908 10,003,924,491
The report of
the shoes
industry with
the GDP 2.0% 2.3% 2.2% 2.5% 3.1%
Source: INSTAT 2015
Table4 – Garment Industry in Albania in EUR
Year 2010 2011 2012 2013 2014
Total exports garment in EUR 214,152,158 239,460,423 230,679,803 252,947,902 305,783,227
1,153,912,0 1,406,404,2 1,521,642,8 1,759,982,2 1,826,850,0
Total Exports (EUR 1€=140leke) 64 34 57 50 41
The report of the garment industry
with the other exports 19% 17% 15% 14% 17%
8,854,604,1 9,290,172,1 9,520,078,4 9,646,819,9 10,003,924,
Total GDP in EUR 77 64 95 08 491
The report of the Apparel industry
with the GDP 2.4% 2.6% 2.4% 2.6% 3.1%
Source: INSTAT 2015
1.3 Government promotion of investments in the garment/shoe industry
In terms of investment Albania has understood the value and importance of Foreign Direct
Investments and its contribution to the economic and social development of the country bringing
with them capital transfer, technologies and skills (Nene &Zoto, 2013). The trade policy in Albania
is guided by the principles of the World Trade Organization, of which the country is part since
September 8, 2000. According to MEDTTE (2014) after joining the WTO, all trade policies in
Albania are based on i) a strategic document, which is the report of Albania’s membership in this
organization and ii) the Uruguay Agreements. As of July 2007 Albania is also part of the Central
European Free Trade Agreement (CEFTA) together with other Western Balkans countries.
According to this agreement within CEFTA countriesall goods are traded without customs duties,
with the exception of some agricultural products originating from Bosnia and Herzegovina (BiH)
(MEDTTE, 2015). This agreement has provided exports of industrial products originating from
Albania without customs tariffs and no quotas in all CEFTAs countries.
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In the front of domestic policies the Albanian government launched a special Incentives Package
for the Industry of Inward Processing Regime also referred to as “Façon industry”. According to
MDTTE (2014) this package takes into account the declining performance of this sector year after
year and the considerable decline in exports from 47.72% in 2009 to 29.45% in 2014 (INSTAT,
2013). The positive incentives from Albanian Government has done so by consulting exclusively
with entrepreneurs in the garment and shoes industry, thus excluding other stakeholders and not
taking into consideration working conditions and workers’ rights in the labour market. In itself the
package is a set of facilitating measures on garment and footwear producers as an effort to give a
boost to this sector, which has been the traditional priority exporter for Albania and one of the key
industries to employ a large number of people in the past two decades, despite the negative impacts
from the Eurozone crisis in the past few years (MDTTE, 2014). The package aims to increase the
level of exports from 405 million EUR during the first year of the package to 900 million EUR at
the end of the third year and an increasing number of employees from 28000 (first year of the use
of the package) to 100000 employees in the sector by the end of the third year (Incentives Package
for the Industry of Inward Processing Regime, (The Package, 2014). It includes a series of
measures that offer garment and shoes producers state facilities for a symbolic rent of only 1 Euro,
accelerate VAT refunds to 30 days and lift a series of customs barriers. According to the
government, the 5% extra on the income tax will be returned to the garment and shoes producers
in support of employment incentives by paying social security and health insurance for new
employees for a certain period (MDTTE, 2014).
1.4 The main export destinations of garments and shoes produced in Albania
Based on information from INSTAT (2015) the main export destinations are Italy followed by
Spain and Germany, Greece, Kosovo and USA. This is also reported by the ACF (2014) which
explains that the main exports destinations for the Façon sector who mainly cover garment and
shoes industry are Italy with 82, 5%, Greece with 7.9%, Germany with 7.3% and other countries
such as Spain, France etc.Albania exportsgarment and shoes but italso importsfor such products
citizens use.
Table 5: Exports vs. Imports with the most important countries (in million ALL)
Exports Imports
Garment and shoes Garment and shoes
Year 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014
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