Still more winners than losers from cheap oil in the U.S. 17

You’ll get your day in court in India—in 35 years or so 15

Alfonso Morre spent nine years studying applied mechanics and civil engineering. That training has come in handy in his job driving a taxi in Havana. Morre spends his days ferry-ing tourists around in a 26-year-old Russian-made Lada—and his spare time repairing the damage done to it by the city’s cobbled streets. He hopes President Obama’s recent decision to loosen restrictions on banking, travel, and trade with Cuba will create opportunities for the tens of thousands of university-educated Cubans like him trapped in low-skill jobs. “Once the U.S. trade opens up, companies will come here looking for engineers,” says Morre, 33. “Once the new cars and spare parts start coming in, you won’t need to be an engineer to run a taxi here.”

The Caribbean nation of 11.3 million has the best-educated workforce in Latin America—a dis-tinction that may prove to be the Cuban Revolution’s most lasting

legacy. In the early 1960s, Fidel Castro and his barbudos (bearded ones) dis-patched brigades of teachers and college students to the countryside with orders to eradicate illiteracy, which at the time exceeded 50 percent of the popula-tion. The communist regime also estab-lished educational exchanges with Soviet republics. About 100,000 Cubans have attended Russian and Ukrainian uni-versities. Eighty percent of college-age Cubans were enrolled in post secondary education in 2011, compared with 75 percent in Argentina, 71 percent in Chile, and 29 percent in Mexico, accord-ing to the United Nations. (In the U.S. it was 95 percent.)

Cuban-born residents of the U.S. earn 20 percent more on average than the country’s Hispanic population overall, and they’re more likely to own their home, according to an analysis of 2011 Census data by the Pew Research Center. About 2 million Hispanics of Cuban descent live in the U.S.

An emphasis on hard sciences such as medicine and engineering helped the country weather the end of Soviet subsidies in the ’90s. Havana has sent 30,000 doctors to Venezuela under a barter arrangement that has the South American country supply Cuba with about 100,000 barrels of oil a day.

The skilled labor pool will be a big draw for companies looking for invest-ment opportunities on the island should the U.S. agree to end the half-century-old trade embargo, says Philip Brenner,

a professor of international rela-tions at American University in Washington. “The Cuban develop-ment model is going to be based on high-value-added production,” he says. “No one in Cuba is talking

about a future scenario of making base-balls in sweatshops. They have people who would be adept in pharmaceuticals, computer engineering, and advanced mechanical machinery.”

On Dec. 17, Obama announced plans to reestablish diplomatic ties with Cuba and ease restrictions on travel to the island and some commercial activities, such as sales of telecommunications equipment. Jodi Bond, vice president for the Americas at the U.S. Chamber of Commerce, says U.S. companies will likely step up lobbying Congress to for-mally lift the embargo. “There’s poten-tial for explosive growth,” Bond says, citing health, technology, and telecom-munications as industries with some of the best investment prospects. “Much of that may move slowly, but the compa-nies see a lot of promise.”

Brazilian contractor Hélio Piza over-sees 60 workers at a state-owned sugar-processing plant in Cuba’s Cienfuegos province. On a late December after-noon, workers at the 30-year-old mill were welding together handmade parts for the sugar cane grinders. “The level of academic preparation here is very high,” Piza says. “Education allows Cubans to be ingenious with the little they have available.” His biggest chal-lenge is recruiting young people willing to work for a state salary of about $20 a month—less than they’d earn working at paladares, private restaurants catering to tourists, or taking visitors on fishing excursions. “It’s difficult to motivate workers to be productive on the kind of money we can offer,” Piza says.

At Brascuba, a cigarette- and cigar-making venture of state-owned

Tabacuba and Souza Cruz, the Brazilian subsidiary of British American Tobacco, 46 percent of the largely local workforce of 500 has a college degree. “The Cuban workforce is a key point for investment in the country,” says Alexandre Carpenter, Brascuba’s Brazilian co-president. “When you’re installing a new machine, for example, you have high-level discus-sions with the engineers. They are much more prepared than the average Brazilian worker.”

Lucila Gomez earned a degree at Moscow State Textile University and worked in Bulgaria before returning to Cuba. Today she makes a living ironing shirts at the Hotel Tryp Habana. She

hopes the recent thaw in U.S.-Cuba relations will lead to the reopening of the pajama factory she once supervised in the capital. Says Gomez, 65: “Hopefully, I won’t have to end my career doing laundry.” �Anatoly Kurmanaev, Eric Martin, and Sabrina ValleThe bottom line The Cuban Revolution’s emphasis on education and hard sciences may make the country a draw for investors.

80%

Share of college-age Cubans enrolled in

postsecondary education

Manufacturing

China Tries to Perfect The Science of the Shirt

▶ Rising payrolls and fast fashion are driving a quest for efficiency

▶ “You can’t waste labor, because wages are too high now”

One thousand one hundred and sixteen seconds. That’s exactly how long it should take to stitch together a men’s dress shirt, according to Eugene Lee, a plant manager at Hong Kong’s TAL Group. He knows, because his job is to get the production line at the factory he oversees in Dongguan, China, to run with Japanese-style precision. Each team of about 30 workers is assigned targets. Attaching a collar? That should take 23 seconds. A cuff? Twenty seconds.

Lee’s line supervisors will some-times stand behind workers at sewing machines, stopwatch in hand, to assess whether a team’s working too fast or

13

◀ A manager reviews performance against production targets at the daily kaizen (Japanese for continuous improvement) meeting.

Made to Measure

▲ A management trainee times a worker.

TAL Group’s factory in Dongguan has adopted a data-driven approach to making shirts, in part to offset a more than 70 percent rise in China’s average manufacturing wage since 2009.

too slow. The information is posted on a whiteboard, so managers can iden-tify bottlenecks. “In the old days a leader used a gut feel, but a lot of times the analysis was incorrect,” says Lee. “We’re using real data.”

TAL is one of several companies trying to squeeze more productivity from its Chinese workforce. The effort by factory operators in industries such as apparel, toys, and electronics is largely a response to rising labor costs. According to the National Bureau of Statistics of China, urban manufacturing wages rose 73 percent from 2009 to 2013, the latest year for which data is available. “You can’t waste labor, because wages are too high now,” says Shaun Rein, man-aging director of Shanghai-based China Market Research and author of The End of Copycat China. “The typical Chinese worker is about a quarter as efficient as a German or an American factory worker,” he says. For companies looking to boost productivity, Rein says, “there’s a lot of low-hanging fruit,” such as investing in worker training and automation.

One of the world’s largest makers of men’s dress shirts, privately held TAL has more than 25,000 workers in

China, Vietnam, and other

Southeast Asian countries and logged sales of $850 million in 2014. Customers include Burberry, L.L.Bean, and Eddie Bauer. Like other apparel makers, TAL is adapting to the rise of fast fashion. H&M and Zara introduce styles every few weeks, spurring other retailers to step up their own schedules. Orders are smaller and more complex. A men’s dress shirt that used to come in one standard fit might now be available in classic, slim, and extra slim. Brands and suppliers have to work together more closely, says Jim Ditzel, senior vice president for supply chain at L.L.Bean. “It used to be they would just cut and sew for us,” he says of TAL. The two companies now also “share information on trends, what they see in the market-place, and what we are seeing.”

Another feature of today’s high- velocity retail environment is that cus-tomers are much less tolerant of delivery delays. “In a two-season year, [mer-chandise] would be on the shelf for six months, so if you missed the deliv-ery deadline by two weeks, it was no big deal,” says TAL Chief Executive Officer Roger Lee. Nowadays, some customers

assess a 10 percent penalty if a shipment is even one day late. “And on top of that, we have to air ship the goods ourselves—at our own expense,” Lee says.

Borrowing from lean manufacturing, a concept popularized by Toyota Motor and other Japanese companies, TAL is running more—but smaller— production lines. That way a problem with one worker or machine might affect only tens of items rather than hundreds. Teams are a third the size they used to be, and pay is based on the team’s output rather than the worker’s. Each team has a floating member (called a water spider, “because they jump all over the place,” says factory manager Lee) who can perform various tasks, whether assisting a colleague who’s fallen behind or fetching labels.

As they invest more in training, com-panies have more to lose from employee turnover—and greater incentive to treat employees better. “No workers will come and join a factory” if conditions are poor, says Allan C.K. Chan, associate head of the Institute of Textiles and Clothing

1,116

Seconds it takes to sew a men’s shirt

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(7)

Global Economics

◀ Employees made a device to refill dye in the machine that prints sewing patterns.

▲ Workers use a color-coded light system to summon line managers and technicians or call for supplies.

▲ A floater delivers supplies to members of his team. Floaters are called water spiders because they jump around.

▲ The spoon clamp in the quality-control department was also devised by employees.

◀ Unlike seamstresses at other factories, TAL’s stand so they can move easily between machines.

at Hong Kong Polytechnic University. Still, the new world of shorter produc-tion schedules takes its toll, according to Geoffrey Crothall, communications director at China Labour Bulletin in Hong Kong. “All the pressure that sup-plier factories get from brands gets trans-ferred down to the workers,” he says. “The line supervisor is under pressure to ensure quality control and bulk deliv-ery, all in the short time required. It inev-itably ends up creating tension between workers and managers.”

TAL is handling more of the logis-tics and delivery work itself, often using customer-provided sales data to deter-mine how many shirts to make and then sending the finished goods directly to stores. It’s investing in new areas: In October it led a $12 million funding round for Metail, a British startup that’s developed a virtual fitting room. Online shoppers upload an image of them-selves and key in body measurements to generate a MeModel, a digital avatar that they can use to try on clothes. Metail wants to amass a trove of infor-mation on size and shape that retailers and fashion brands would pay to tap.

With e-commerce playing an ever bigger role in fashion, CEO Lee

Justice

India’s Stagnant Courts Resist Reform

▶ A backlog of 31.4 million cases defies easy solutions

▶ “Delays, etc., I mean, even judges get used to it”

Puneet Mittal, trim and sharply dressed, walks into the lobby of his law office in affluent South Delhi, a smartphone pressed to his ear. He turns to a recently hired associate, Bhavesh Verma. “We’re leaving at 9:30. And I don’t want to waste

anticipates demands on manufacturers like TAL will only grow. “There will be a lot more styles; the order size will get smaller. It’s a continuous battle,” he says. “It all comes down to how effi-cient we can make our operations.” �Bruce Einhorn, with Dexter RobertsThe bottom line Double-digit annual increases in wage costs are forcing Chinese factories to invest in Japanese-style efficiency.

time.” But through no fault of his own, that’s just what Mittal’s going to do.

He is making his daily plunge into India’s court system, a maze of delays and procedures that puts even the most basic justice out of reach for mil-lions. At the end of 2013, there were 31,367,915 open cases working their way through the system, from the lowest chambers to the Supreme Court. If the nation’s judges attacked their backlog nonstop—with no breaks for eating or sleeping—and closed 100 cases every hour, it would take more than 35 years to catch up, according to Bloomberg Businessweek calculations. India had only 15.5 judges for every million people in 2013, then-Prime Minister Manmohan Singh said at the time. The U.S. has more than 100 judges for every million.

Beneath a top layer of established attorneys such as Mittal, the courts are plagued by “goondas in black,” a phrase that pairs the Hindi word for “goons” with a sly reference to the black suit jackets lawyers wear in court. To keep collecting fees, these lawyers demand one hearing after another, with no intention of seeking a resolu-tion for their clients, says Alok Prasanna Kumar, senior resident fellow at the

23

Seconds to attach a collar

20

Seconds to attach a cuff

“The needle on the sewing machine goes up and down about 20 percent of the time, and the rest is handling.”

——Roger Lee, TAL Group CEO

Global Economics

15

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