New York Times
March 18, 1999
Russia's Patchwork Economy: South Korean Companies, Chinese Workers and U.S. Entree
By RUSSELL WORKING
VLADIVOSTOK, Russia -- It is well after dark on a recent evening, but the red brick garment factory on a bluff overlooking the Sea of Japan is ablaze with light. From inside the building comes a haunting song, unfamiliar in this overwhelmingly Russian city: the seamstresses are singing in Chinese.
Of the many incongruities born of the increasingly complex global economy, this may be among the strangest. For here at Russia's eastern extremity, Chinese workers labor alongside Russians making clothes for a South Korean company, which put its factory here partly to do an end run around United States quotas on apparel imports.
And Russia, which had visions of reinventing itself as a world-class market economy, now finds itself in the company of nations like Indonesia and El Salvador, attractive to outside investors in part for its rock-bottom wages. Seamstresses here often work six days a week, and for as little as 11 cents an hour.
The factory is owned by S. H. International, one of a growing number of South Korean companies making clothes in Russia, in this case T-shirts and sweatshirts, that often end up in American stores like the Gap.
Similar factories have popped up in 10 cities in the Russian Far East, from the hardscrabble town of Partizansk, where three of the four coal mines have closed in the last two years, to Vladivostok, a port city of 700,000 that until 1992 was off-limits to foreigners.
American apparel companies have long farmed out work to manufacturers in low-wage countries. But in an elaborate global system known as the Multi-Fiber Arrangement, which is supposed to be dismantled by 2005, the United States, like Europe, established restrictions on imports from countries whose exports were thought to threaten the domestic apparel industry. South Korean textile companies, limited by American quotas for decades, have sent their cloth to be sewn in faraway factories in the Caribbean and Latin America, which face no such quotas. But now South Koreans are finding a new place to set up shop.
"Through other countries such as Russia you can enter the United States essentially through the back door," said Charles Kernaghan, director of the National Labor Committee, an industry watchdog group based in New York.
For Russia, the apparel companies are a double-edged sword. They provide jobs in a region desperate for investment, and in some cases they reopen closed Soviet-era factories. But some critics fear that the presence of Chinese laborers living on factory grounds is an invitation for the sweatshop conditions common to many South Korean factories in Latin America.
"There's not much good in the whole arrangement, but there's a deficit of jobs here," said Aleksandr Prosekov, deputy chairman of the Committee for Industry in the Primorye Regional Administration, which includes Vladivostok. "At least they pay salaries regularly."
The United States is unlikely to object to the imports from Russia. A Commerce Department official, who spoke on the condition of anonymity, said the practice was legal as long as there was "substantial transformation" of the clothing in Russia. Furthermore, she said, the United States will not impose any serious quotas on Russia as long as imports do not harm American industry. While the United States does set limits on imports of women's and girls' coats, there are no such limits on the production of clothing of the sort made here, polo shirts, sweatshirts and sweaters, which is growing domestically as well.
Vladivostok is only 440 miles from Seoul, South Korea, but it offers a bargain-rate work force. The average hourly cost of an apparel industry employee in South Korea in 1998 was $2.69, including wages, taxes and benefits, according to industry figures. Though that seems stingy compared with the $10.12 United States average, the average Russian hourly cost is just 56 cents.
The Russian figure is less than half that of Guatemala, where the majority of sewing factories are owned by South Koreans, and comparable to China's, where employers say apparel workers cost an average of 43 cents an hour. But exports from Russia, unlike those from China, face few trade restrictions.
These figures, low as they are, probably do not reflect the true take-home pay, according to the National Labor Committee, which has studied wage rates in China and Latin America. And Eastern workers earn far less than the industry averages for Russia. Russian seamstresses at S. H. International, for example, earned 21 cents an hour on average when the regional administration's Committee for Industry last surveyed local wages in October. The average Chinese worker at S. H. earned 11 cents an hour. S. H.'s general director, Hak J. Lee, declined to discuss specific figures at the factory.
The issue of outsourcing -- farming out work to outside manufacturers -- is a sensitive one for American companies, which have been criticized over labor practices of their producers abroad. A Gap Inc. spokeswoman, Kristy Van Koughnet, declined to answer questions about the company's suppliers in Russia and said that questions relating to employment practices should be addressed to the factories in Russia. "Anything about where we outsource is considered proprietary information," she said.
After a reporter asked about conditions in Russian factories, Gap sent officials to look at several sites. At a plant in Partizansk, workers then began receiving free lunch in the canteen, and the company increased wages. After the raise, one worker said she received $49.56 for a month that included several six-day work weeks.
The apparel makers have set up shop in unlikely places. Partizansk, a town of 65,000 three hours by car from Vladivostok, might not seem an ideal multinational manufacturing and trade center. Pensioners wheezing from black lung disease pick through heaps of stones outside abandoned mine shafts, looking for coal to burn.
But the Seoul-based Seishin Apparel Company bought and remodeled a bankrupt Soviet-era clothing factory there in 1997 for $760,000 to expand sales in America, its general director, Joo In Ha, said. The Russian subsidiary, Koruss, sold $1.68 million worth of sweatshirts, dresses and polo shirts to Gap in 1998.
Vera Karas, a manager at Koruss, said the regional administration initially resisted the company, fearing it might exploit workers. "But that's not going to happen," she said. Ms. Karas, who worked at the factory when it was Russian-owned, said that the Korean owners treated employees well and hired some Russian managers, like her. Since last May, she added, wages have more than doubled. (When figured in dollars, though, they have actually fallen as the ruble has collapsed.)
Some 600 cutters, seamstresses and others work at tables in Koruss's warehouse-sized rooms, cutting piles of fabric and sewing dresses, sweatshirts, sweaters and polo shirts. Most of them are Russian women; some of the new hires are Chinese. They regularly work five 9- or 10-hour days, and often spend Saturdays at the sewing machines as well. Koruss employees are paid extra for overtime work, but at S. H. International in Vladivostok, workers said their overtime pay an hour was less than their regular hourly pay.
While filling a big order in November, Koruss employees worked several seven-day weeks, they said. (Ms. Karas said this was untrue.)
"You can only go to the toilet when a bell rings," said a 19-year-old former Koruss employee who quit after a month. "If they catch you talking, you get in trouble." She added: "Sometimes we didn't leave until 7 P.M. For those who have families, I don't know how they do it."
Some employees, however, say the work is very welcome. Lyubov Vonyagina, 54, a veteran seamstress, is part of a team that must produce 1,900 T-shirts a day. When they fall short, they stay late. Still, Ms. Vonyagina says she is not overworked, and she scoffs at younger workers who complain. "They aren't used to hard work," she said.
The decision to hire Chinese workers has stirred up anger in some factory towns. City officials in Artyom, 22 miles north of Vladivostok, have criticized a request by Newmax Apparel of South Korea to hire 75 Chinese workers, the daily Vladivostok newspaper reported on Tuesday. Officials also asked the company to double wages and stop requiring seamstresses to work overtime.
In Partizansk, Koruss imported 75 ethnic Koreans from northeastern China because, said Mr. Joo, the general director, there are simply not enough skilled workers in Partizansk to fill orders. But some townspeople are hostile to the idea.
"We don't need the Chinese here," said Lyudmila Samoilova, 43, a single mother of five who runs a newspaper kiosk across the street from Koruss. "There aren't enough jobs for our own people."
Nina Gudozhnikova, director of the Partizansk office of the federal employment service, worries that because Chinese workers at home put in 12-hour days and get only two days off a month, the South Korean factories in Russia will impose similar schedules on its workers. Still, she approved the factory's labor agreement because the women of Partizansk need jobs. "I signed this agreement with serious doubts," she said.
In Vladivostok, at S. H. International, which is owned by the Sunghan Company, 384 Russians work alongside 218 Chinese employees, according to Sergei Kurakin, chairman of the regional Committee for Industry. Two women from Liaoning province in China said they lived on the plant site and worked about 10 hours a day. Like many Chinese traders and workers in the Russian Far East, they say they will be here only for a short time.
Russian workers said the Chinese struck for two days in December because of low wages. But the Chinese, who said they could get in trouble for talking about their work, declined to discuss the matter. "Basically, I came to Russia out of curiosity, as well as to earn some money," one seamstress said.
At a time when most unpaid Russian workers survive on what they can grow in their gardens or borrow from their pensioner parents, many seamstresses are grateful that South Korean companies are investing in the region. Others say they simply must take whatever work they can get. A 30-year-old mother of two complained of a dirty work environment, and a boss who blocked the doors at S. H. and refused to allow employees to leave at the end of their shift.
Mr. Lee, the general director, said, "I didn't do that." Like other South Korean companies, S. H. said it followed Russian labor laws.
In any case, the worker who complained plans to keep showing up on the job. "We have no choice," she said. "We either have to sit at home and go hungry, or go to work in these conditions."
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