The Murky Cocktail

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DUMPING [image, unknown] Corruption

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The murky cocktail
Take fat envelopes and corruption, lethargy and grossly substandard products - mix well and you have the murky cocktail of quality control in developing countries. Michael Benson reports on ten years of work with national standards bodies in South East Asia to protect poor and often inarticulate consumers from the ravages of the free market economy.

Thai authorities testing ballasts used with fluorescent lights; persistance paid.
Photo: Dexter Tiranti

AFTER two hours of poring through the government test results, nitpicking over the minutiae of the figures, the Dutch technical director of Philips turned to his general manager in Bangkok and said very quietly: ‘Take them out’.

These words were important for the public safety of Thai people. More than $100,000 worth of components made by one of the world’s best-known electrical companies were refused entry into Thailand and shipped out of the country.

The Philips products were ballasts, parts essential for the fluorescent lighting used widely throughout South East Asia. Previously in the mid-1970s. Thai police laboratories had identified ballasts and substandard wiring as major causes of electrical fires: fires which had killed many and maimed more in the shanty towns of the poor. The findings prompted the Thai Industrial Standards Institute to introduce a compulsory safety level based upon international specifications.

After two years and some 140 raids, dangerous electrical units had virtually disappeared from the market. But the decree affected all ballasts, including imports. And the Institute’s net dragged in some unlikely fish - barely marginal passes on General Electric Company and East German products and the failure of the Philips ballasts.

Bending over backwards to give the European company the benefit of the doubt, the Thais took more samples and had them tested again. Another batch was sent to electrical testing laboratories in West Germany. The Thai labs again reported failure; the Germans commented cautiously that the parts were ‘marginally acceptable’.

By what margin? The Thai pressed the Philips director - for the Thai standard already included a margin of tolerance. It was at that point the words came: ‘Take them out’. The Philips director decided to send on the consignment to another country.

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Quality marks such as this Thai example, backed by continuous surveillance, could be the answer to both internal and imported dumping.

But the dumping of poor quality products is not confined to Western companies. A Taiwanese firm recently supplied the Mauritius municipal authorities with several hundred pairs of gumboots. Instead of solid rubber heels, they were hollow and bridged with poor quality foam rubber. Why the local authorities imported them at all when they had to pay double the price of excellent locally made boots is another story.

Japanese Steel supplied an Indonesia company with sheet steel of variable thickness - reels which should have been scrapped in the mills. Just some that ‘slipped through’? Very unlikely - Japanese efficiency in quality control is renowned.

Another Japanese firm, Ajinomoto, ship out tons of monosodium glutamate (MSG) as well as setting up factories in the developing countries to make the food seasoning. This is despite MSG’s known effects on the nerve cells of the brain, which bring burning pains in the chest and fever, and is known colloquially as ‘Chinese Restaurant Syndrome’. Barred in US babyfoods and strictly controlled in Western countries’ processed foods, in South East Asia it is sold loose, by the packet. Television commercials show a happy mother sprinkling it liberally on the dinner before serving it up to her enthusiastic children.

Perhaps the depths and seriousness of the exporting of substandard equipment can be gauged by the fact that both the chairman of the Department of Health and a senior official of the government’s Electric Power Research Centre in Indonesia asked me if anything could be done about the essential but unreliable equipment they received from abroad. ‘We cannot depend upon brand names any longer’, they said.

Yet more difficult to police than the doubtful products imported are locally made goods by the subsidiaries of international firms. There are fewer controls on local made products and indigenous management and ownership of shares by Very Important People in government mean that even minimal standards can be ignored with equanimity. Take the Aluminium Company of Canada (Alcan). Alcan’s Jakarta subsidiary has a facade of neatness and respectability. Their factory workers wear clean overalls with the company motif prominantly displayed. Their standard controls are the same as Canada - on paper. Yet they produce substandard aluminium units. The management privately admit it with a shrug of the shoulders. They confided to me that they had to, or Chinese back-street workshops would undercut them. But the onus is on international companies to improve local standards, not reinforce a poor quality market with more rubbish. And local consumers would quickly wise up to the knowledge that it’s cheaper in the long run to pay a little more.

Toyota in Indonesia, quite rightly obliged to have 20 per cent components in its locally assembled cars, buys exhaust units from one of the worst Indonesian factories I have seen. The exhaust unit itself could cause blow-back and damage the engine. Toyota could have installed inspectors in that factory; they could have insisted on safe and reliable exhaust systems. They do when they buy from subsidiaries in Japan. But in Indonesia it’s another story - a double standard.

In more than ten years of struggling with multinational subsidiaries to ensure decent standards of public safety, my experience has been that they showed scarcely any interest in the welfare of the consumers who were buying their products.

At a time when the Thai Standards Institute was trying to build public confidence in its quality control mark, the Thai Lever Brothers subsidiary refused to submit its products for certification - that was a blow. For their co-operation would have reinforced general acceptance of the new mark. Levers’ general manager explained: ‘Everyone knows our famous quality. We don’t need your mark - it would only bring down our products to the same level as Thai goods’.

Tests were carried out on two of their famous brands as well as two Thai brands of soap powder. The quality of the Lever products did not exceed the other two and, indeed, the pH factor - which shows whether the powder is too acidic or too alkaline - was closest to the edge of acceptability in one Lever brand. Needless to say the price of the Lever products was greater because their high-powered advertising had to be paid for.

What is to be done about both imported and internal dumping? It is not possible to control the quality of all imported goods. But it is possible to list those products which have a health and safety risk and those where substandard production would have an impact on the economy.

Monitoring and ensuring reasonable quality on imported and internally made products can be done by compulsory standardisation and inspection organised by national standards bodies. Many systems are available. Some have been implemented; others painfully ignored. One prepared for the government of Indonesia lies on the shelves of the Department of Science there, gathering dust.

Even where national standards are introduced, they mean nothing without integrity. Corruption lies behind the failure of most developing countries to control the selling of shoddy and dangerous goods.

South East Asian shoppers may be oblivious to corruption and the behind-the-scenes manoeuvres which leave dangerous products on the market.
Photo: Dexter Tiranti

The considerable advances made in Thailand are due in a large part to the dedicated and incorruptible Thai Industrial Standards Institute. At the opposite extreme is Indonesia. The collapse of Indonesia’s non-oil economy in the last few years is probably because it is one of the most venal countries in Asia.

The poor standards of Indonesian goods, helped by corruption, must have contributed to the 30 per cent shortfall of exports on forecast for 1981. Attempts have been made to ensure the major exports reach minimal quality standards and ensure the country’s products don’t get a bad name. The Department of Commerce recently built seven new testing laboratories for exports like processed foods, sugar and Javanese coffee, to ensure there was no adulteration. Yet despite the laboratories’ work, rejected adulterated exports to USA increased from $5 million to $20 million in two years. An Indonesian informant solved - the puzzle for me; blank approval certificates from the laboratories are handed over to the exporters - no questions asked - in return for fat envelopes of money.

Besides mandatory quality controls of national standards bodies, international corporations who want to establish subsidiaries in developing countries should, with very few exceptions, be refused entry.

It is a myth that foreign companies bring a transfer of technology and much-needed finance. Technical training is available free through the United Nations family and bilateral technical aid programmes; money is available through appropriate sectors of the World Bank and from other sources. All that most multinationals, particularly in the consumer goods field, can offer is participation in the prevailing corruption with very little - if any - improvement in the quality of indigenous goods.

How much contribution can be made by multinationals to the health of a developing country could be summed up with this example:

The British general manager of a large pharmaceutical company in Indonesia once commented privately that his biggest problem was in maintaining quality. When I asked what happened to the sub-standard batches which came off the line, he grinned. ‘Have to keep the profits up for head office, old son.’ he said.

Contrast this with the production output of the Mauritius Pharmaceutical Manufacturing Company, a local firm. After a review of the company in 1981, Professor Arnold Beckett, then president of the British Pharmaceutical Society, stated that the quality of drugs sold by them were ‘in every way comparable to those produced by industrialised nations’.

The experience of many people who have worked in developing countries over the years like myself, and have fought to protect public interests, is that the majority of multinationals add nothing to the progress of a country. In some cases, through imported or locally made shoddy and dangerous goods, they seriously undermine development. Only their advertising, corruption and government apathy keep them there.

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