Nepali Times
"The only way to survive in business is by being ethical."

Sulochana Shah, a trained mathematician, owns and runs Formation Carpet, a successful exporting venture. Shah is also general secretary of Rugmark Internationl, which campaigns for good business/ production practices. Nepali Times spoke with Shah on her business values and the state of the industry.

Nepali Times: Is today's carpet industry different than what it was about a decade ago?
Sulochana Shah: Earlier people were not concerned about the work surroundings, environment or child labour issues. Now they've realised that social responsibility is something that businesses have to be concerned about. When we started out with Formation, we pegged our per square meter rates payment to the cost of living index. We paid more than what others were. I learned a lot during the first ten months. We also introduced health insurance and made it mandatory for younger children of workers to be in kindergarten and older ones to go to school.

Business wise, the early days must have been much better.
Though there were ups and downs, our company kept growing. 1999/2000 was a very good year for us-though everyone was closing, we did well. I believed in the quality of our work, and our customers. My customers are my partners I don't take them as just buyers. I always tell our workers that I am not their employer, the customers are. I am just a manager between them. It took ten years, but I have achieved a lot and my different ways of doing business have obviously made a difference. Today we have almost 300 workers employed in four factories. Now I am also actively involved with Rugmark.

What is Rugmark?
Rugmark is an international trademark registered in Madrid. It certifies that a carpet is made without using child labour. There are six board members representing the producing and importing countries. At the moment, the importing countries are the US, the UK and Germany, and others are in the process of coming in. The exporting countries are India, Pakistan and Nepal. I am also general secretary of Rugmark International.

Are the changes taking place in the industry helping some bring some sort of a revival?
It will certainly come back to life, but not with the approach the industry had before. People are more conscious about quality now, and I'm happy about that. In the past there were hardly any carpet industries that had day-care centres. We had one in our second year. Today, according to Rugmark, there are at least 15 different companies that have day-care facilities for workers' children. You have to share your income with your workers, you have to be ethical, to survive.

How has Rugmark helped the industry in Nepal?
Rugmark International has certified about 400 carpet factories in Nepal, which means they don't use child labour. Rugmark has helped put a stop to this to some extent. More than fifty percent of carpet factories in Nepal don't use child labour, but there are still some who want no part of this. These are days when even businesses have to help in the overall development of social rights by running ethically, by respecting human rights, labour rights, and the environmental impacts. I've practised corporate social philosophy since I started this business. Now it is slowly catching on in the industry. Those who incorporate similar approaches will survive.

What can government do to help the industry?
The government should be very particular when registering factories. The government or the Federation of Nepalese Chambers of Commerce and Industries (FNCCI) should continuously analyse the world markets. Eighty percent of our product goes to Germany, but if we send twice their demand, how can they consume it? The Nepali mentality is to copy whatever is successful. The carpet crisis didn't happen only because of child labour but due to over-production. The government should be strong in enforcement and continuously monitor markets. When the world is talking about labour rights, child labour and the environment we cannot afford to neglect them.

What else do you do?
We registered Lotus Holdings in 1998. We started by investing in companies that were weak financially, and helped in their management. Our first investment was in Lotus Papercraft. We invested 50 percent, so we wouldn't dominate the business. We work in tourism, agriculture, education, power and infrastructure development. We haven't been able to invest in all areas, but we will soon. We are trying to form a development policy the private way. The dividends, when they come, won't be much. But we don't give up. We pick investments if they follow rules and regulations, have proper documentation, etc. We have 12 people in Everest net, which we've invested the most in, six are MBAs, smart, young and creative. You have to create a new system. We are very ambitious, we have a thousand dreams at least we'll realise a hundred.

You're an academic now doing business. How did this happen?
I got two Master's degrees in mathematics, from TU and from Germany, in 1971. My husband and I studied and worked there until we met some high-profile Nepalis who asked us to come back and work for the Royal Nepal Academy of Science and Technology (RONAST). We came back and started working at RONAST but soon found that people were unwilling to accept our new ideas. RONAST had the cream of the country-the medical doctors, the PhD's, the engineers-but they didn't care about Nepal. That hasn't changed. It was frustrating, and after three years I quit.

In 1987 I started working with the Organisation for Participatory Development, but on a voluntary basis, as I'd just started my mushroom farm with a small loan from the Agricultural Development Bank. The NGO sector was equally frustrating. Some years later, a German friend asked if I wanted to start a carpet business. The industry was facing a lot of problems with child labour then. My mushroom farm was doing well, but still in 1991 we started Formation Carpet. The idea was that my German friend would do the marketing and I would oversee production.

How difficult was it get into a business with already a bad name in the market?
Carpets were the biggest source of export income for the government. I took the bad reputation as a challenge. We started with Rs 500,000 and five workers. The crisis had already started and I wanted to save the industry.

(11 JAN 2013 - 17 JAN 2013)