Written evidence submitted by the TUC
1. The TUC welcomes the opportunity to put
forward its views to the IDC Inquiry into the World Bank Group
and hopes that they will be reflected in the outcomes and the
recommendations. The TUC Submission seeks to address some issues
relating to the effectiveness of operations of the World Bank,
IFC, and IDA, 16th Replenishment of IDA, reforms of the institutions
concerned and the need for meaningful engagement with parliamentarians,
trade unions and other key stakeholders in their operations.
EFFECTIVENESS
2. In view of the diversity of issues involved
and multiplicity of operations by the institutions concerned throughout
the developing world, our views on effectiveness will be confined
to some key principles which, in our view, should underpin and
guide their action.
3. The World Bank Group (WBG) needs to take
into account the long-term development priorities identified,
and strategies developed, by the countries themselves in close
consultation with key stakeholders including trade unions. These
long-term strategies need to be geared to the achievement of Millennium
Development Goals with especial focus on full and productive employment
for all.[64]
In this respect, the TUC emphasizes the need for the WBG to encourage
governments[65]
seeking its financial and technical assistance to give priority
to job creation and preservation in line with the Global Jobs
Pact[66]
adopted by the ILO Conference in June 2009 and endorsed by the
G20 Labour Ministers[67]
in April 2010.
4. While supporting the initiatives to implement
results-based systems to improve the effectiveness of operations,
the TUC is of the view that some flexibility needs to be built
into them, given the diversity of the economies and the variability
of their capacity to meet the requirements of the system. The
Bank needs to draw on lessons learnt from failed structural adjustment
programmes and be more realistic about the outcomes. The countries
should be allowed more leeway in terms of design, content and
implementation of their own strategies and policies. Moreover,
if the concept of ownership is to be meaningful, it needs to go
beyond government ownership and encompass broad-based ownership
involving all key stakeholders including trade unions.
5. The technical expertise and knowledge
necessary for complex policy formulation and development of viable
long-term strategies may not yet exist in some developing countries,
especially, in the Least Developed Countries. The World Bank and
allied institutions need to provide technical assistance to develop
their human resource base. Countries need to be in a position
to conduct independent, objective and reliable analyses of social,
economic and environmental impact of policies without recourse
to expensive consultants.
6. We are pleased that the Bank recognizes
the importance of Poverty and Social Impact Analyses and continues
to make use of them for its lending operations with significant
effects on income distribution and that it is supported by development
agencies like DFID. However, such analyses, where possible and
appropriate, should be undertaken, not ex-post, but ex-ante,
in collaboration with all stakeholders, as part of project appraisal
and the findings should be made available to them at the earliest
opportunity.
7. In our view, there should be more coordination
and harmonisation of policies and practices between the operations
carried out by the WBG and other development agencies at country
and regional level in order to enhance their operational efficiency.
The TUC supports the WB initiative[68]
aimed at implementing the Accra Agenda for Action (AAA) which
gives priority to increased country ownership, use of country
systems and effective engagement with development partners and
hopes that more action will follow on mutual accountability and
other issues.
8. More caution and clarification is needed
on the use of conditionality which involves the imposition by
the World Bank of a range of policies to exercise influence over
certain sectors and/or on the economy as a whole of recipient
nations. The TUC takes the view that conditions, if any, should
not infringe upon the sovereignty of recipient nations and restrict
their ability to manage their economies[69]
and that they should be strictly limited to a particular project
and progress in its implementation. Despite a pledge by DFID to
promote Core Labour Standards throughout the world, no meaningful
initiative has yet been taken to do so in international institutions
such as the World Bank, IFC and IDA. Both DFID and international
financial institutions need to ensure that all member countries
of the ILO, including low-income countries, fulfil their obligation
to uphold the rights enshrined in the 1998 ILO Declaration on
Fundamental Principles and Rights at work in all development interventions
funded by them.
9. Despite criticism[70]
from the international trade union movement[71]
over the World Bank's excessive reliance on labour market deregulation
to promote employment, advocated repeatedly[72]
in Doing Business, we regret to note that significant progress
has yet to be made on the use of more appropriate Employing Workers
Indicators (EWIs) other than those relating to labour market flexibility
to assess an enabling environment for business to flourish. The
international trade union movement has raised the issue on a number
of occasions with the World Bank[73]
and would like the IDC to recommend that DFID proactively support
the adoption of measures to promote employment in line with the
Decent Work Agenda.[74]
The vast majority of countries eligible for receipt of financial
and technical assistance from the WBG have ratified ILO Conventions
relating to Core Labour Standards and are required to respect
them.
IDA
10. The TUC has consistently supported the
UK Government's generous contributions[75]
to the replenishment of the IDA, continues to do so and expects
the UK Government to play a leading role in persuading the donor
community to increase their contributions to the 16th Replenishment.
We are strongly of the view that countries should be encouraged
to make contributions commensurate with their economic weight.
In light of the pledge by the current Government to fulfil the
commitments made by the previous Government to increase ODA to
0.7% of GNI by 2013, it is hoped that the UK contribution to the
16th Replenishment will rise and that the UK Government will make
use of the opportunity to highlight the need for more coordination
and harmonisation of policies and practices in IDA countries on
which its own bilateral aid is concentrated.
11. The TUC is conscious that a large number
of the world's poor and vulnerable live in the 79 countries to
which the IDA provides financial and technical assistance at concessionary
rates and that the vast majority of them are almost totally dependent
on vital public services—health, education, water and sanitation.[76]
The TUC expects the current high level of support[77]
for the social sector and the development of infrastructure to
be maintained or increased without prejudice to the special themes[78]
in the allocation of resources following the 16th Replenishment.
12. Some of the current beneficiaries of
the IDA are fragile island economies[79]
and/or countries like Bangladesh with extensive low-lying areas
exposed to climate change in need of both financial and technical
assistance to plan for, and invest in, effective long-term strategies
to deal with the consequences. The creation of green jobs, development
of renewable energies and promotion of energy efficiency should
be given priority in the countries concerned in order to mitigate
the impact and the current collaboration between the World Bank/IDA/UNDP[80]
needs to be enhanced and expanded to include other development
agencies and multilateral banks.
13. There are a few countries[81]
among the 79 beneficiaries of the IDA which have failed to ratify
some key ILO conventions[82]
including C138 and C182 relating to the abolition of child labour.
In our view, not much progress has been achieved through the IDA/ILO
collaboration[83]
on the respect of core labour standards in IDA countries, especially
with regard to child labour, although the issue was raised during
the earlier replenishments. The IDA, being part of the WBG, needs
to ensure full compliance with Core Labour Standards in all its
operations in countries benefitting from its financial and technical
assistance. All member countries of the ILO, including low-income
countries with a combined of population of some 2.5 billion people,
have an obligation to uphold the rights enshrined in the ILO Declaration
on Fundamental Principles and Rights at work adopted in 1998.
REFORMS
14. The TUC has long supported reforms of
international financial institutions including the World Bank
so that the representation of developing nations on its governing
structures is reflective of today's economic, political and demographic
realities. The institution created 66 years ago mainly for post-war
reconstruction of Western Europe had its remit extended to the
alleviation of poverty in the developing world. The shift in the
geographical focus has not, however, been accompanied with any
corresponding changes to its governing structures in order for
the interests of developing nations to be adequately represented
in them.
15. The underrepresentation of developing
nations[84]
on WB governing structures is indeed mirrored in the voting power
determined in proportion to their shares of the capital of the
World Bank.[85]
As a consequence, developing nations—recipients of financial
and technical assistance from the World Bank and IDA—are
not adequately represented in the decision-making processes and
have so little voting power that they are unable to exercise any
influence over the decisions affecting the lives of their citizens.
At present, the US[86]
alone holds 16.36% of the total voting power while Japan's share
is 7.86% in the World Bank in 2010.[87]
It is imperative that the quota system, voting, representation
and access to resources be reformed in order to enable low-income
countries to wield more influence. The TUC proposes a qualified
majority system based on a combination of demographics and economic
weight rather than in proportion to the shares in the capital
of the WB.[88]
16. Moreover, as the Executive Directors
of the World Bank serve also on the Executive Boards of the International
Development Association and the International Financial Corporation,
the underrepresentation of developing nations is replicated at
different levels. This is a wholly unsatisfactory state of affairs[89]
that entrenches the interlocking interests of a few developed
countries, compounds the impact of initial disparities and perpetuates
their sway over the development agenda. Although the beneficiary
countries are invited to take part in the discussions leading
to the replenishment of funds, they have little say in the decision-making
processes. It is important that the representation of the interests
of developing countries in the IDA decision-making processes be
increased considerably in the reform of the WBG as a whole.
17. At present, any amendment to the Articles
of Agreement of the World Bank institutions needs to be approved
by three-fifths of the members having 85% of the total voting
power. This is tantamount to the USA having a veto on any reforms,
as it holds 16.36% of the total voting power. It is important
to point out that this is not a theoretical impediment but a practical
obstacle to any reform,[90]
which clearly points to the need for voting reforms in international
financial institutions including the World Bank.
18. According to the Articles of Agreement[91]
of the World Bank, the Executive Directors select a President.
However, in reality, the USA has held the post "by tradition"
since 1944. The vast majority of developing nations are not even
consulted on it other than through the few Executive Directors
supposed to represent their interests. Although DFID signalled[92]
that it would seek changes to the selection processes, the events
which led to the appointment of the current President of the World
Bank showed its inaction in this regard. The penchant for the
maintenance of status quo which confers advantages on developed
countries and the general apathy to change have in the past stood
in the way of meaningful institutional reforms of the WBG and
the IMF. We take the view that developing countries should have
a fair share of power and influence in international financial
institutions, that they should take interest in, and exercise
influence over, the election of the president of the WB and that
the post should alternate between developed and developing countries
with a periodicity of four to five years.
ENGAGING CIVIL
SOCIETY IN
DEVELOPING COUNTRIES
19. The TUC appreciates the initiatives
by the WBG and its regional development banks to engage with parliamentarians
in different parts of the world and agrees that it provides a
valuable opportunity for the WBG to listen to, and learn from,
the people through their representatives. While acknowledging
the need for the WBG to engage primarily with governments, the
TUC considers it essential that the World Bank and its allied
institutions take into serious consideration feedback from people's
representatives, especially, on the impact of their developmental
interventions. Moreover, the WBG needs to pay more attention to
the engagement with parliamentarians in developing countries.[93]
20. Trade unions and other civil society
organisations are willing and able to make a useful contribution
to WBG consultations[94]
if they are given the opportunity by making available relevant
information in advance.[95]
DFID needs to make use of its influence with the WB to support
consultations with trade unions by World Bank missions during
their visits to developing countries. Not only will it enhance
its credibility on civil society involvement in its aid programmes,
but it will also raise the profile of trade unions in the eyes
of developing country governments, thereby, encouraging them to
engage in policy dialogue with trade unions. Moreover, other bilateral
donors are likely to follow the DFID example.
21. The TUC, in partnership with the international
trade union movement, has long argued in favour of substantial
debt relief for developing nations. Debt cancellation schemes[96]
including the Multilateral Debt Relief Initiative (MDRI) and Highly
Indebted Poor Countries (HIPC) adopted so far by the WB and other
IFIs have not been comprehensive enough to cover all creditors—countries,
banks, export credit agencies and other lending institutions.
The TUC welcomes further initiatives by the WB and other IFIs
in this regard.
64 Target 1b, MDG 1 Back
65
The WB seems to endorse public works programme to boost employment
in low-income countries, p23, Annual Report, 2009. Back
66
Recovering from the Crisis: A Global Jobs Pact, ILO, 2009 Back
67
G20 Labour and Employment Ministers' Recommendations, April 2010 Back
68
Following up on Accra: A World Bank Action Plan on Aid Effectiveness,
Feb 2009 Back
69
Partnerships for Poverty Reduction, Changing aid "conditionality",
TUC Comments on draft policy paper, 2006 Back
70
Statement by Global Unions to the 2010 Autumn Meetings of the
WB/IMF, Oct 2010, para24 Back
71
Supporting Accountability, Social Dialogue and Respect for Workers'
Rights, Statement by Global Unions to the 2007 Spring Meetings
of the IMF and World Bank (Washington, 14-15 April 2007) Back
72
Doing Business in 2004, 2003, p xix and Doing Business in 2006,
2005, p.26 for instance. Back
73
In 2009, the WB announced that the scoring in the Doing Business
2010 report regarding provisions for fixed term workers and standards
for severance payment, mandatory days of rest and night work and
holidays and minimum wage levels that comply with the letter and
spirit of the relevant ILO Conventions would reflect the recognition
of the benefits of well-designed worker protection to society
as a whole. Back
74
The Report of the ILO Director-General, Decent Work, 87th Session,
June 1999 Back
75
UK contributed £2.134 billion to the 15th Replenishment,
DFID, Press Release, 14. Dec 2007. Back
76
In 2009, the shares of health and other social services, education
and water, sanitation and flood protection were respectively 16%,
12% and 4%. Annual Report, World Bank 2009 Back
77
Some two-thirds of IDA-supported investments are for development
and maintenance of infrastructure and public services. Back
78
Gender, climate change and fragile and conflict states Back
79
The Maldives and Samoa, Kiribati, Tonga, Vanuatu and other island
economies in the Pacific Back
80
IDA at Work; Climate Change, 2010, p4 Back
81
Bangladesh (C138), Eritrea (C182), India (C132,C182), Liberia
(132), Sierra Leone (C132, C182), Somalia (C132, C182) Back
82
The Maldives has not ratified any of the eight key conventions
while Solomon Islands has ratified only C29 on the abolition of
forced labour. Back
83
Working Together at Country Level, The role of IDA 14, 2004 Back
84
The 2009 reforms increased the number of Executive Directors from
24 to 25, the additional Executive Director being elected to represent
Africa from Nov 2010. Back
85
India's voting power is 2.78% whereas Switzerland's is 1.66% despite
the enormous disparities in demographic and geographic terms. Back
86
Voting Power, WB Website Back
87
At present, five out of the 24 Executive Directors of the World
Bank are appointed by the United States, France, Japan, Germany
and the United Kingdom while 19 others are elected by other 179
member countries while China, Russia and Saudi Arabia have one
director each. The countries in Africa, except Egypt and Libya,
and some island states are represented by just two Executive Directors. Back
88
The Council of the EU with 27 member counties has devised a qualified
majority system in order to ensure that the interests of smaller
nations are not overlooked in decision-making processes. Back
89
See Recommendations, Report of the External Review Committee on
Bank-Fund Collaboration, Final Report, Feb 2007 Back
90
The US Government has, in the past, managed to block the new allocation
of SDRs using its "veto" despite the near consensus
on the issue in the IMF. Similarly, it has used its influence
in the WB to block vital reforms of governing structures. Back
91
Article 5, Section 5 Back
92
"The UK will seek transparent, competitive selection processes
for the heads of all international development agencies-including
the World Bank and IMF and UN-to ensure the best candidates are
appointed, regardless of nationality", p114, White Paper
2006. Back
93
The first Annual Conference of the Parliamentary Network and the
WB to be held in Africa took place in 2007 in Cape Town, South
Africa. Back
94
The WB and IMF are making it possible for civil society to take
part in Annual Meetings through a Civil Society Policy Forum. Back
95
In 2009, the WB adopted a set of new policies on disclosure of
information to the public. Back
96
Debt Relief-The Need for sustaining the campaign over the long-term,
TUC Briefing Paper, Nov 2006, http://www.tuc.org.uk/international/tuc-12612-f0.cfm Back
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