Transcript Title

Challenging the IFIs:
Practical information and strategies for trade unions
Molly McCoy
Global Unions Washington Office
Baku, 13-14 November
I. International Financial
Institutions: an Introduction
The IFIs in the Region
• World Bank (WB)
• International Finance Corporation
(IFC)
• International Monetary Fund (IFC)
• European Bank for Reconstruction and
Development (EBRD)
• European Investment Bank (EIB)
World Bank (WB) and
International Monetary
Fund (IMF)
• Founded in 1944 en Bretton Woods, USA, by
the Allied countries with the objective of
avoiding another crisis like that of the 1930’s
(and thus, maintaining favorable conditions for
peace)
• Original vision: Complements to the UN
system that would support financial stability
and international economic growth
Original functions of the
Washington-based IFIs
International Monetary Fund:
Preserve exchange rates between national
currencies
Provide loans to countries with temporary balanceof-payment problems
International Bank for Reconstruction and
Development (IBRD)  World Bank
Provide low-cost loans for the reconstruction of
Europe after the war
1950s-60s, A new objective:
Economic Development
1950s-70s: IBRD focuses on projects (especially
infrastructure) in developing countries
1956: International Finance Corporation established
with the objective of stimulating private sector
development through support to private businesses
in developing countries
1960: Creation of the International Development
Association (IDA) to provide concessional loans
(0% interest) and grants to the poorest countries
1970s: New role for the IFIs:
Promoting Economic Reform
• 1970s: Expansion of credit at extremely low
interest rates
– The IFIs promote “access to capital markets”
for low-income countries
• 1973: End of fixed-exchange rate regime:
IMF becomes a monitor of balance of
payments, focusing on developing countries
The Debt Crisis
• Early 1980s: Interest rates rise rapidly 
Many countries’ bear unsustainable debt
burdens. Commercial banks limit new loans
and demand payment on outstanding loans.
Some governments assume the responsibility
for private debts.
The
IFIs
devise
“structural
adjustment
programmes” for debt-stricken countries in Latin
America and Africa. SAPs emphasize debt
reduction through fiscal austerity and private
investment.
1980s to early 2000s: Structural
Adjustment Programs Dominate
• 1980s onward: The era of Structural
Adjustment Programmes (SAPs): The IMF
and World Bank demand compiance with
SAPs as a condition of borrowing
– The IFIs push more than 70 countries to apply
SAPs during the 1980’s, under the pretext of
reducing or avoiding indebtedness
• 1990s: IFIs urge transition countries in ECA
region to rapidly undertake SAPs
The Philosphy of Structural
Adjustment
 Reducing the role of the State allows countries to
attract more private investment
 Privatization reduces corruption and makes
bussinesses more efficient
 Trade and investment liberalization decreases
prices, increases productivity, and stimulates
economic growth
 Reducing the cost of labour increases job creation,
and reduces unemployment and poverty
Typical Elements of SAPs
• Reduction of public spending
• Privatization of state-owned enterprises and public
services
• Fewer government internventions in the economy
• Increased openness to international trade
liberalization and foreign investment
• Increased interest rates to develop savings and
attract foreign investment
• Reduction of labour market regulation, social
protection, and subsidies for essential services
1991: Creation of European Bank
for Reconstruction and
Development (EBRD)
• Founded to promote private sector development
following the fall of communism
• Lends to: private and state-owned companies (for
privatization) and some municipalities for projects
(no policy-based lending)
• Members are European-region countries, plus
Japan and US (largest shareholder)
• Now largest single investor in the region
2000s: The failure of SAPs
• In Latin America and the Carribbean, where
govertments adhered to SAPs, economic output
grew by only 3.2% annually between 1980-2006
• In Asia, where governments spurned SAP, output
grew by 8.5% annually during the same period
• In transition countries of ECA, poverty,
unemployment, and inequality increased sharply
during the first year of transition
• In Sub-Saharan Africa, the number of people in
extreme poverty rose from 164 million in 1981 to
298 million in 2004
2000s: Protests Against the IFIs
• At the beginning of the
new millennium, the IFIs’
annual meetings spurred
massive protests from
NGOs, environmental
groups, indigenous
peoples’ organizations and
unions
• Washington (April 2000)
• Prague (Sept. 2000)
• Barcelona (June 2001)
The IFIs respond to the criticism:
Tenets of the current IFI model
1.
2.
3.
4.
Poverty erradication
Increased spending on infrastructure
Reduction of conditionality
Private sector development/ Public sector
efficiency
1. Poverty Reduction
1999
• The IFIs declare that poverty reduction is their
first priority
• The IFIs introduce the “Heavily Indebted Poor
Country” (HIPC) initiative to provide debt relief
to the poorest 41 countries
• “Poverty Reduction Strategy Papers” are
introduced as the framework for IFI country
programmes
2000s: The IFIs promote the Millennium
Development Goals
2005-2007
• Multilateral Debt Relief Initiatve (MDRI) brings
more debt relief to HIPCs
2. New focus on infrastructure
• Following a decline in infrastructure investment
(public and private) in the 1990’s, the IFIs insist
that new investment in infrastructure is essential
for commercial and economic development
– 2005: EBRD publishes a new transport sector
strategy
– 2008: WB publishes Sustainable Infrastructure
Action Plan for 2009-11
• WB and EBRD lend to national and subnational
agencies for infrastructure projects
3. Reduction of conditionality
• 2005 – WB and IMF revise their policies on
conditionality. WB presents its 5 “good practice
principles on conditionality”
• 2007- IMF limits its use of public sector wage
bill ceilings for certain countries
• November 2007 report from the NGO Eurodad
criticizes the World Bank’s “progress”:
– “2 years after the application of the new principles,
71% of loans contain sensitive conditions, in particular
privatization.”Avg number of conditions per loan is 24
(of which 6 are economic policy conditions)
• 2008 IMF report finds lack of progress on
conditionality
4. Private Sector Development
• Change in terminology: emphasis on promoting
private sector “participation” (instead of
privatization)
• Public sector “modernization” and “efficiency”
projects can be precursors to privatization
– Rationalization of expenses, tariff reform, staff
reduction, decentralization, etc..
• Doing Business and “investment climate” projects
support reforms favorable to employers
– Labour market reforms such as reducing the cost of
hiring and firing, limiting collective bargaining,
eliminating restrictions on work hours, etc.
Private Sector Development and
Doing Business
• WB’s Doing Business report ranks countries on
labour market regulation: less regulation  better
score
• ECA region is “reforming” more rapidly than any
other region in the world, according to Doing
Business
• Croatia, FYR Macedonia, Georgia, and Bulgaria
were “best reformers” in 2007 according to Doing
Business
– Georgia’s high score was a result of its recent labour
market reform
How do the IFIs achieve this
model?
1. Policy reform programmes
2. Projects and strategic investments
II. Trade union intervention in IFI
policies
Typical IFI policy reforms of
concern to trade unions
• Fiscal and monetary
policies
• Privatization
• Labor market
flexibility
• Civil service reform
• Pension system reform
• Procurement reform
• Justice system/court
reform
• Trade liberalization
Fiscal and Monetary Policies
Objective – Control inflation and assure economic
stability and debt sustainability
Current Example:
• Russia: “Ongoing projects…include tax
modernization, cadastre and registration,
fiscal federalism, performance-based
budgeting, and treasury development.” -WB
• Georgia: “The IMF strongly urges the authorities
to ensure their 2007 fiscal stance is consistent
with single-digit inflation, and to budget for a
surplus in 2008.” -IMF
Privatization (or “Private Sector
Participation”
Objective (according to the IFIs): Reduce public
spending, eliminate corruption, improve efficiency
Current Examples:
• Kyrgyz Republic: “The IFC will seek to support
investment in private or public-private
infrastructure projects, particularly privatizations
in the power and communications sectors.”
• Ukraine: “Future benchmarks [include] the
adoption of public private partnership (PPP)
legislation to attract private investment in
transport and other infrastructure sectors.” -WB
Current Examples:
• Belarus: “The key transition challenges
over the next few years will be to promote
structural reforms and allow private
participation in the provision of public
services.” – EBRD
• Georgia: “Privatisation or private sector
participation opportunities will be pursued
in (but not limited to) the fields of
telecommunications and infrastructure
services.” -EBRD
Civil Service Reform
Objective – Facilitate efficient public
adminstration through reform of public
sector salary scale, employment reviews,
staff reduction, and decentralization
Current Example:
• Moldova: “[Loan] might focus on public
administration and civil service reform…
This might include policy development
capacity, pay reforms, staffing rules, code of
conduct behavior, assignment of
responsibility and accountability, anticorruption.” -WB
Civil Service Reform
• Kyrgyz Republic: “Setting public sector
remuneration and ensuring that public servants
receive adequate remuneration will take
considerable time and will require gradual
improvement in reform management capacity”
(WB)
• Belarus: “[Objectives include] optimization of
the Government’s structure based on functional
reviews, cadre rightsizing, and strengthening
capacity of civil servants.” –WB
Pension System Reform
Objective – Reduce public spending and develop
financial markets through the partial or complete
privatization of the pension system
Current Example:
• Azerbaijan: “The [Bank] may also help develop a
multipillar pension system.” –WB
• Armenia: “The draft pension reform concept
would also involve the mandatory introduction
of a second pillar for those above 30 years of
age … a flat-benefit budget-financed first
pillar and a universal zero-pillar for those that
did not contribute to the system” -WB
Procurement System Reform
Objective: Ensure that the national procurement
system is consistent with international standards
so that private companies (including foreign
companies) have fair access to public contracts
Current Example:
• Azerbaijan: “Improvements in…public
procurement would enhance accountability.” –
EBRD
Justice System Reform
Objective: Improve the functioning of the court
system, promote access to justice, create a legal
climate that defends the rights of businesses and
investors
Current Example:
• Belarus: “Support will be provided for programs
that build up the capacity of judges—including on
human rights—the development of an effective
pre-trial supervision process and an overall
strengthening of the courts system.” -WB
Justice System Reform (cont’d)
• Azerbaijan: “The Judiciary Reform Project is
supporting the government’s ongoing reform
program to improve the functioning of the civil,
criminal, and economic courts by strengthening
the management capacity of judicial institutions.”
Russia: “A new project is currently under
development for judicial reform (FY07) with a
focus on improving dispute resolution, the
enforcement of laws, and the transparency of
information.” –WB
• Kyrgyz Republic: “A Judicial Reform Study and
Judicial Reform project are envisioned to
modernize the judicial system and improve its
effectiveness and transparency.” -WB
Trade Union Intervention in IFI
Policies
1) Indentify the union’s policy priorities
2) Seek information about IFI programmes and loan
conditions in your country
3) Determine the union’s response to problematic
(or positive) IFI policies
4) Present the union’s position to both the IFIs and
the government
5) Involve the community in the union’s campaign
Sources of information about IFI
polices
• The government
• National Development Plan (such as PRSP) may
provide basis for some IFI strategies
• Consultations or public meetings with the IFIs
• Official IFI documents
– Country Assistance/Partnership Strategy (CAS) - WB
– EBRD Country Strategy
– Article IV Consultation Report - IMF
Official IFI Documents
• Contain the IFI’s analysis of the country
• Indentify priority sectors and themes for IFI
projects and programmes
• Serve as the base for technical assistance,
project lending (for EBRD and WB), and
policy lending and conditionality for the
next 3-4 years
WB & EBRD Country Strategies
Contents:
• General national context: the government’s
development plan, economic, social, and political
challenges
• History of IFI cooperation and loans with the
country, including a detailed analysis of the most
recent lending programme
• Bank’s current country strategy: neccessary
reforms, social and economic objectives, types of
assistance envisioned, criteria for evaluation
country performance and monitoring IFI
programme (latter in WB strategies only)
Political and Programmatic Areas
covered in the country strategies
• Poverty and the
MGDs
• Socio-political and
economic concerns
• Social services
• Debt sustainability
• International trade and
regional relations
• Private sector
development,
investment climate,
and labour market
regulation
• Governance and legal
system
• Procurement system
• Infrastructure needs
IMF Article IV Consultation
Reports
Contents:
• Description of recent financial and
economic activities in the country
• Summary of discussions between the
government and the Fund
• The IMF’s conclusions and
reccommendations, based on consultations
with government
Policy areas covered in Article IV
Consultation Reports
• Fiscal and monetary policies
• Financial sector
• National budget, including the public sector wage
bill
• Risks and vulnerabilities (capital flows, current
account, debt)
• Structural policies (trade, labour market, energy
policy, etc.)
• Institutional issues (financial sector regulation,
corporate governance, etc.)
Effective intervention in IFI
policies
1. Read official documents of both the IFIs and the
government (PRSP, national development plan,
country strategy, etc) to understand current
debates
2. Analyze IFI proposals: identify harmful and/or
positive programs for workers
3. Prepare a response: use data and evidence to
justify the trade union position, prepare
declarations, propose alternatives
4. Demand meetings with the IFI in question and
with the government, or determine whether a
consultation is already planned
Consultations with the IFIs
• During prepartion of the Article IV Report and
CAS, the IFIs hold “civil society consultations,”
including with trade unions
• IMF: Annual consultations with unions
• World Bank: CAS consultations every 3-4 years
with a variety of civil society groups, plus more
frequent sector-specific and other thematic
consultations
• EBRD: Country strategy and policy consultations
held regularly with a variety of civil society
groups
How do consultations work?
Consultations can be:
• Information meetings
• Interviews or surveys
• Online discussion or
forum
• Open meetings for all
kinds of civil society
organizations
• Small meetings with
invited groups
• Negotiations
• Cooperation and joint
planning
How can unions participate in IFI
consultations?
1) If you weren’t invited, contact the representatives
of the local office of the WB or EBRD to
organize a meeting. Contact the Global Unions
Washington Office for assistance and for
meetings with IMF.
2) Ask for the meeting agenda and all relevant
documents in advance of the meeting.
3) Prepare research, data, etc to support the union’s
position.
4) Don’t hesitate to ask questions of IFI
representative, and demand answers.
5) Request a written report of the meeting.
The final result: loans and
conditinality
• The majority of IFI documents are available
online or at the IFIs’ public information
centers.
• World Bank:
http://www.worldbank.org/eca/russian/
• IMF: www.imf.org (documents in English
only)
• EBRD: http://www.ebrd.org/ru/index.htm
Group Exercise
1) Read the programme matrix
2) Identify one potentially problematic or benficial
IFI programme or project
3) Use the provided document to seek more
information about the programme of interest
4) Develop a union strategy towards the programme
you have chosen
•
Consider: evidence or data needed, alternatives, ways
to improve the programme, potential allies, relevant
ministries, press, etc.
5) Present the programme and your response to the
group
III. Trade union intervention in
IFI projects
WB, International Finance Corporation, and
EBRD provide technical assistance and
loans for specific projects such as:
• Reform of a ministry
• Infrastructure construction
• Health
• Education
• Transportation
• Private sector investments
• Microfinance
Examples: Recent projects
• BTC Pipeline (IFC)
• Loan to a private company for construction of a
cement factory in Kazakhstan (IFC)
• Expansion of an large grain farm in Ukraine
(EBRD)
• Construction of a shopping mall in Moldova
(EBRD)
• Loan to a municipal services management
company in Russia (EBRD)
• Creation of clean fuel system in Chernobyl area of
Belarus (WB)
• Highway improvement in Georgia (WB)
Sources of information about IFI
projects
• Upcoming projects are disclosed at least 30 days
in advance of approval on the IFI websites
– Monthly Operational Summary (BM)
www.worldbank.org  projects  procurement 
“monthly operational summary”
– Projects database (IFC) www.ifc.org/projects
– EBRD/AFDB
• Related documents (social and environmental
impact reports, procurement plans, etc) are also
available online
• There are no systematic consultations for projects,
but IFIs hold consultations with “affected parties”
for many projects.
Interventions in IFI projects
1. Indentify projects of interests and read relevant
documents
2. If you oppose the project, work to develop
alternatives
1. For example: If the bank proposes privatization of a
public service as the solution to financial instablity,
consider other alternatives that meet the same
objective.
3. Present your proposal to the bank and relevant
government representatives
4. If the authorities don’t accept the alternative
proposal, consider how the project can be
modified to lessen negative effects or improve
results
Labour Standards in IFI Projects
• In May 2006 the International Finance
Corporation (IFC) adopted standard loan
conditions requiring all new loan clients to respect
the ILO’s core labour standards (CLS)
• In 2007, the World Bank adopted similiar
requirements for its large infrastrucure projects
• In 2008, EBRD adoped similar standards for its
private sector lending operations
• The CLS are:
1. Prohibition of forced labour
2. Prohibition of child labour
3. Non-discrimination
4. Right to organize and bargain collectively
How can unions use the labour
standards?
1. As an instrument to defend workers’ right to
unionize during organizing campaigns
2. The standards can provide support to an
organizing campaign when the local union is
prepared to:
•
•
•
•
Organize
Be in continued communication with the national
center or relevant GUF
Provide reliabe and up-to-date information ,
Work with allied organizations and other partners as
necessary
How can unions use the labour
standards?
2. As a greivance mechanism:
• Unions can bring greivances and complaints
against companies that violate the labour
standards before and after projects are
approved (though unions have more
leverage before projects are approved)
– Complaints should be very precise
Some examples of trade union complaints:
• Right to organize in a garment factory in Haiti
• Child labour in the supply chain of and African
telecom company
• Threats against unions and trade unionists in
Belarus
• Refusal to bargain collectively with unions in a
Pakastani electrical plant
• Discrimination and anti-union action in a Brazilian
airline
• Union’s right to organize workers on a dam
construction project in Uganda
To make an effective complaint,
you must have:
• Specific information
• Continual communication between union (or its
representative organization) and bank to clarify
doubts
• Sufficient time
• The Global Unions Washington Office can:
– Coordinate information
– Facilitate contacts between the local union and local IFI
representatives
– Organize meetings in Washington or in the country
– Seek support of IFI executive directors
Discussion
• What are trade union priorities for dealing
with the IFIs?
• Is there any benefit of engaging with the
IFIs?
• If yes, what do unions need to take
advantage of the possibility to intervene in
IFI programmes?
• If no: How should unions confront the
damaging programmes of the IFIs?