80% of the surgical instruments the NHS imports come from Sialkot, Pakistan. But a new report highlights how international buying practices have driven a race to the bottom on labour standards, and are fuelling child labour.  

Coronavirus has made us acutely aware of the importance of procuring medical and protective equipment to save lives. 

We need high-quality, reliable health supplies delivered quickly to where they need to be. And as taxpayers, we expect our governments to spend our money wisely. 

But how often do we ask our governments how they procure goods and services for our hospitals and clinics? Who makes them? Where they come from? 

The surgical instruments sector in Pakistan

Some of the world’s highest quality surgical instruments are produced in Sialkot in Pakistan. The region is also known for manufacturing footballs and other household goods.

It is estimated that Sialkot produces more than 170 million surgical instruments every year. It manufactures over 10,000 different medical instruments, covering all basic and surgical segments. There are around 3,000 companies – the largest units employing around 450 people, and the smaller ones employing around 15.

Last year, 20 years after a scandal revealed how child labour was being used to sew footballs for the FIFA World Cup, Sialkot factories were once again selected to produce the balls.

Over the last few years, the industry has worked with major sporting brands, ILO, government, NGOs and unions to improve labour standards. Energetic, entrepreneurial and resourceful, businesses in Sialkot have financed and built their own airfield to get goods to customers more quickly, rather than relying on government financing or shipping hubs far away from Sialkot. 

But Pakistan is also beset with chronic poverty, a massive informal economy of vulnerable workers and child labour. At least 10 of the estimated 152 million child labourers in the world are in Pakistan. That was before Covid-19. It is now likely to be far higher.

Covid-19 and child labour

As businesses have closed and exports stopped, millions of workers have lost their livelihoods. A growing number are dying from the disease. The estimated cohort of 22.8 million children that were out of school before the coronavirus are likely to be joined by many other poor children who will have to abandon their studies to seek work to help feed their families. 

The Tuttlingen connection

There is an interesting and decades-long connection between Pakistan's export of high quality surgical Instruments from Sialkot, and family-run businesses in Tuttlingen, Germany.

These factories producing the instruments often operate through middle men,(mostly in Tuttlingen, Germany) who trade with end users, predominantly in the US or Western Europe. There's big money in this trade. A pair of fine surgical scissors which cost $1.00 to produce, exported from Pakistan to Germany at a price of $1.25, can be sold to a hospital for nearer $80.00. 

Instruments made in Sialkot are estimated to make up 80% of imported instruments to the UK's NHS

They are also estimated to make up 80% of the imported instruments to the UK’s National Health Service. 

A hidden workforce

While the final stages of finishing and checking of surgical instruments is done in factories, where quality is checked against European Union or US standards before it is exported, most of the industry relies on family-owned, cottage-based, informal units that fashion the instruments at earlier stages of the production process. These small units depend on a semi-literate, semi-skilled workforce operating in precarious conditions. They are not registered, nor are their workers, who tend to come from the poorest households, historically excluded from educational and formal job opportunities. 

There is no labour inspection or monitoring. Both workers and unit owners tend to be excluded from any statutory benefits, and live hand to mouth. Workers are often heavily indebted, taking loans from their employers. Debts are passed down from one generation to another, and the chances of moving to other sectors with better jobs are small. 

The example of Sweden: change can happen

Manufacturers of surgical instruments in Sialkot are forced to keep prices low to remain competitive. They compete with poorer quality instruments produced in China, Brazil or India, and with higher-quality instruments produced or part-produced in Europe or the USA.  

Subcontracting minimizes company overheads and lowers costs. It also drives down wages and health and safety standards. Subcontracted manual labourers are paid per instrument, and the average worker earns around $2 a day. They have no job security or guarantee of income and no medical insurance or provision of education for their children.

Businesses in Pakistan that are exporting their instruments feel that without being able to charge buyers more, they will be unable to continue improvements in working conditions for their employees. 

Some of the more ethical international health suppliers state that they cannot increase prices and remain competitive, because procurement tenders award contracts heavily based on price. They want to see changes to public procurement tendering and contracting, in which labour standards are given priority in the award criteria for contracts, and price is only one element of this.  

Some European public buyers such as the Swedish consortium responsible for buying health supplies have changed their tendering and contracting criteria. They stipulate that social value is an essential part of the performance of a contract, and place mandatory requirements that each supplier must demonstrate before they are eligible to be awarded a contract. There are markers for progressive improvements as they know some changes will take time to embed. 

What about the NHS?

In England the NHS Supply Chain had developed the Labour Standards Assurance System that used to be seen as a good model to ensure labour standards were respected throughout the supply chain. However, years of under-investment and subcontracting oversight functions to the private sector has resulted in a tick box system that now is unfit for purpose.

That's a shame, because the UK's Modern Slavery Act and its requirements for greater transparency have been highlighted internationally as an example of good practice that others, such as the Australians, have followed and indeed, improved. The system urgently needs an overhaul. The UK government must demonstrate that its national and international policy commitments are aligned with its own internal practices. 

There is now ample evidence from elsewhere that more ethical procurement can work for the benefit of businesses, workers and public buyers without significant increases in cost. Smart, coordinated and joint buying systems can increase leverage, improve efficiencies, and secure more reliable and durable partnerships throughout the supply chain. 

Covid-19 has highlighted the importance of resilience in health supply chains and systems. 

Let's not lose this historical opportunity to ensure that resilience translates into decent work, better business practices and more responsible buying practices by health bodies. 

Read the full report, below.