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* Engineer had said building was unsafe day before accident
* Death toll climbs to 501, scores still missing
* Canada's Loblaw says will add "building integrity" to audits
By Ruma Paul
DHAKA, May 3 (Reuters) - Police investigating the collapse of a Bangladesh factory building that killed more than 500 people have arrested an engineer who warned the day before that the eight-storey complex was unsafe.
The arrest of engineer Adbur Razzak brought to nine the number of people held over the April 24 disaster, which has put the spotlight on the many Western clothing retailers who use Bangladesh as a source of cheap goods.
One firm whose garments were being made in the doomed building, Canada's Loblaw, said on Thursday it would continue to produce clothes in Bangladesh but promised to improve the facilities it uses there.
The death toll from Bangladesh's worst industrial accident rose to 501 on Friday, with the scores of relatives still gathered at the site in a Dhaka suburb clutching photographs of loved ones attesting to the many more still missing.
Engineer Razzak had been called to Rana Plaza in Savar, 20 miles (30 km) north of the capital, by its owner when cracks appeared in concrete pillars the day before the accident.
Despite his warning that the building was unsafe -- quoted in local media hours before it came crashing to the ground -- thousands of mostly female workers were sent back into its upper storey factories when the morning shift began the next day.
Police said Razzak had been arrested because he had been involved in the original construction of the building.
Duty-free access offered by Western countries and low wages have helped turn Bangladesh's garment exports into a $19 billion a year industry, with 60 percent of clothes going to Europe.
The European Union has said it is considering trade action against Bangladesh, which has preferential access to EU markets for its garments, to pressure Dhaka to improve safety standards.
About 3.6 million people work in Bangladesh's garment industry, making it the world's second-largest apparel exporter after China. Some earn as little as $38 a month, conditions Pope Francis on Wednesday likened to "slave labour".
Walt Disney Co said in March it would no longer allow its branded products to be made in five countries, including Bangladesh, in an effort to ensure production in safe conditions.
Loblaw Cos Ltd, which was using a factory at Rana Plaza to make clothes for its discount "Joe Fresh" line, said it would remain in Bangladesh because well-run factories can help lift people out of poverty in developing countries.
Loblaw promised to start a relief fund for victims and said it would add "building integrity" to its audit of suppliers' facilities.
"I am deeply troubled. I am troubled that despite a clear commitment to the highest standards of ethical sourcing, our company can still be part of such an unspeakable tragedy," Executive Chairman Galen Weston told reporters.
Other retailers that were using factories at Rana Plaza, or had done so in the past year, include Britain's Primark -- which has also pledged to compensate victims -- Matalan, Spain's Mango and Benetton.
There were about 3,000 people inside the complex, which was built on swampy land, when it collapsed. About 2,500 people have been rescued, many injured, but many remain unaccounted for.
The building's owner, Mohammed Sohel Rana, his father, four factory owners and two engineers have since been arrested, while the local mayor has been suspended from office accused of improperly approving its construction.
It was the third deadly incident in six months to raise questions about worker safety and labour conditions in Bangladesh.
In November, scores died in a garment-factory fire in Dhaka, many of them because supervisors ordered workers back to their stations even as an alarm rang and smoke rose through an internal staircase.
Human-rights groups say there has never been a case in which a factory owner was prosecuted over the deaths of workers.