Download International Financial Institutions

International Financial
Institutions
And their relationship to ILO Standards
2012
What are International
Financial Institutions?
• Development banks
• World Bank Group
• IBRD
• International Finance Corporation (IFC)
• Inter-American Development Bank (IADB)
• Asian Development Bank (AsDB)
• African Development Bank (AfDB)
• European Bank for Reconstruction and Development
(EBRD)
• International Monetary Fund (IMF)
What do IFIs do?
• Lend or donate money for development
• One of major (public) sources for development financing
• Mostly to governments
• But International Finance Corporation also to businesses (and similar in other
Dev Banks)
• Different clients depending on project – e.g., NGOs
IFI mandates
• To contribute to economic development
• Tend to be staffed by economists
• Part of mandate is to avoid political situations –
• Which many of them have interpreted over the years to
mean that they were forbidden to consider human rights
• Has also kept them on the margins of UN-system human
rights discussions – e.g., on apartheid
• But there is evolution in some of them
Rights vs Economics
• World Bank uneasy about committing to apply human rights.
• Real conviction among many staff that human rights and economic
development are not compatible, deriving from Charter.
• So no commitment in WB (IBRD) to implementing human rights,
including labour rights.
World Bank Charter
• Article IV, Section 10 : “Political Activity Prohibited.
• The Bank and its officers shall not interfere in the political affairs of any
member; nor shall they be influenced in their decisions by the political
character of the member or members concerned. Only economic
considerations shall be relevant to their decisions, and these
considerations shall be weighed impartially in order to achieve the
purposes stated in Article I.”
• Article III, Section 5 (b) restricts political considerations in Bank
financing: The Bank shall make arrangements to ensure that the
proceeds of any loan are used only for the purposes for which the loan
was granted, with due attention to considerations of economy and
efficiency and without regard to political or other non-economic
influences or considerations.
WB FAQ on human rights
• “How does the Bank's work contribute to the realization of
human rights?
• “Although its policies, programs and projects have never
been explicitly or deliberately aimed towards the realization
of human rights, the Bank contributes to the promotion of
human rights in different areas, e.g., improving poor
people's access to health, education, food and water;
promoting the participation of indigenous peoples in
decision-making and the accountability of governments to
their citizens; supporting justice reforms, fighting corruption
and increasing transparency of governments.”
World Bank web site on human rights (2010)
• As background to the internal developments relevant to
human rights, mention should also be made to the
document issued by the former Senior Vice-President and
General Counsel, Roberto Dañino, entitled "Legal Opinion on
Human Rights and the Work of the World Bank", dated
January 27, 2006. It indicates that human rights may
constitute legitimate considerations for the Bank where they
have economic ramifications or impacts, and it confirms the
facilitative role the Bank may play in supporting its members
fulfill their human rights obligations.
WB Social Protection Strategy 2012-2022
• WB has belatedly realized that social protection is indispensable to
growth and security.
• But in whole strategy paper, the only reference to labour law is that
labour laws are ineffective in many countries and only cover the
privileged.
Nordic Trust Fund
• Had originally been intended to insert human rights concerns into WB
operations, but no internal agreement could be reached.
• Now seen as a WB staff awareness resource”
• “to develop a more informed view among Bank staff on how human
rights relates to the Bank’s core work and mission of promoting
economic growth and poverty reduction. This internal knowledge and
learning program will support activities that:
• capture and make available knowledge about how human rights relate to
the Bank’s analytical sector/thematic work,
• capture and make available knowledge about how human rights relate to
the Bank’s operational work including strategy, planning and
implementation and,
• increase awareness among staff and management of how the Bank’s
work and human rights are related and how human rights aspects can be
applied to the Bank’s work.”
But progress in International Finance
Corporation
• 1998 IFC policy (now outdated):
• Under this policy, IFC will not support projects that use Forced or Harmful
Child Labor as defined below. Projects should comply with the national laws
of the host countries, including those that protect core labor standards and
related treaties ratified by the host countries.
Problems with such texts:
• “Forced or harmful child labour”
• What child labour is not harmful?
• “as defined below”
• Applying their own definition, and not what is in international standards
• “comply with the national laws”
• IFC took no responsibility unless a particular right already guaranteed in national
law
IFC Performance Standards
• Performance Standards first adopted 2006
• PS2: Labour standards conditions for loans to private sector
• Conditions based on ILO standards on fundamental rights,
termination of employment (retrenchment), safety and health
• IFC review now completed. Findings after 3 years:
• IFC considers the framework to be sound and effective. It
does not hinder IFC's business and helps with risk
management.
• Recent annual client survey results show continued
satisfaction with IFC on environmental and social matters.
Clients did not find implementation to be excessively costly.
• In terms of the impacts on market practices, the
Performance Standards have made a positive contribution to
the global convergence of E&S risk management practices.
There are now 68
financial institutions that have adopted the Equator
Principles. Public development financial institutions such as
the OECD Export Credit Agencies and European
Development Finance Institutions have also publicly
referenced the use of the Performance Standards.
• Review findings: Performance Standard 2 (Labor and Working
Conditions) has been broadly applied across regions and sectors,
though the requirements have been challenging for some clients,
particularly in countries where enforcement of national laws is weak or
where such laws do not exist. Requirements on collective bargaining
and workers’ organizations, as well as supply chain issues have proved to
be challenging. The issue of migrant workers, often hired indirectly
through contractors, is another area of challenge for clients.
Clarifications on working and living conditions of “nonemployee”
workers might be needed. Moreover, in a time of economic crisis and
shrinking labor market, the role of PS2 in the context of large-scale
retrenchment should be considered.
New IFC Performance Standards come into
force 2012
• Performance Standard 2: Labor and Working Conditions
• ‘ …recognizes that the pursuit of economic growth through
employment creation and income generation should be
accompanied by protection of the fundamental rights of
workers. .. through a constructive worker-management
relationship, and by treating the workers fairly and providing
them with safe and healthy working conditions, clients may
create tangible benefits, such as enhancement of the
efficiency and productivity of their operations. ‘
•IFC PS 2 based on ILO standards, but
does not rely entirely on them.
•But it is broadly in compliance
IFC Doing Business Report
• Until 2009 ranked countries according to how “business friendly”
they were.
• “Employing workers” section had index of “Rigidity of Employment”.
• 3 components:
• “difficulty of hiring”
• “rigidity of hours”
• “difficulty of firing”.
Beginning to change
• ILO pressure on World Bank on Doing Business, and pressure by
global trade union federations.
• ILO Governing Body Nov. 2008: In September 2008, the World Bank
launched its 2009 edition of Doing Business. The report introduces
important changes that were specifically commented on by the ILO in
direct exchanges with the World Bank responsible for the report.
• Regarding the narrow focus of the report on the costs of establishing
and running enterprises, the 2009 Doing Business report now
acknowledges:
• Rankings on the ease of doing business do not tell the whole story
about an economy’s business environment. The indicator does not
account for all factors important to doing business …
• “Doing Business measures flexibility in the
regulation of hiring, working hours and dismissal in
a manner consistent with the Conventions of the
International Labour Organization (ILO). An
economy can have the most flexible labour
regulations as measured by Doing Business while
ratifying and complying with all Conventions
directly relevant to the factors measured by Doing
Business and with the ILO core labour standards.”
• 2012 Doing Business report:
• More data-laden, less judgemental
• “The employing workers indicators are not included in this year’s
aggregate ease of doing business ranking.”
• Attempts to measure compliance with only 4 ILO Conventions:
working time, termination of employment
Better Factories approach
• In 2001 Better Factories Cambodia grew out of a trade agreement
between the United States and Cambodia. Under the agreement the
US promised Cambodia better access to US markets in exchange for
improved working conditions in the garment sector.
• In 2007, the IFC and ILO began working together on
a more global version: Better Work.
• Aims to improve both compliance with labour
standards and competitiveness in global supply
chains.
• Better Work supports enterprises in implementing
the ILO core international labour standards and
national labour law, and focuses on individual
enterprises.
Compliance assessment in Better Work
• Two categories of reference:
• Core labour standards: The categories of international standards are
those indicated in the ILO Declaration on Fundamental Principles and
Rights at Work.
• National labour law: Standards set in national legislation:
compensation, contracts and human resources, health and safety at
work and working time.
Standardized Procurement Guidelines: All IFIs
• Since 2010, under pressure from trade unions in particular, all
development banks now apply Procurement Guidelines for major
infrastructure projects.
• Apply only to large construction works, that cost more than $10
million.
• Around 35% of what the WB currently funds, but the figures for other
development banks are not known.
• section 6.21 on Child Labour:
• ‘The Contractor shall not employ children in a manner that is
economically exploitative, or is likely to be hazardous, or to
interfere with the child’s education, or to be harmful to the
child’s health or physical, mental, spiritual, moral, or social
development. Where the relevant labour laws of the
Country have provisions for employment of minors, the
Contractor shall follow those laws applicable to the
Contractor. Children below the age of 18 years shall not be
employed in dangerous work.’
• section 6.5:
• ‘The Contractor shall comply with all the relevant
labour Laws applicable to the Contractor’s
Personnel, including Laws relating to their
employment, health, safety, welfare, immigration
and emigration, and shall allow them all their legal
rights. The Contractor shall require his employees to
obey all applicable Laws, including those concerning
safety at work.’
International Monetary Fund
• No official position on human rights/labour standards
• Sometimes has advised countries not to ratify ILO standards for
development reasons
• But at least once (Indonesia) made ratification of ILO standards a
condition for help
• Current world employment effort together with ILO
Regional Development Banks
Asian Development Bank
• Social Protection Strategy 2001
• Commits ADB to taking account of fundamental workers’ rights in all
ADB operations
• Core Labor Standards Handbook 2006
• But no practical implementation
European Bank (EBRD)
Environmental Policy 2003:
• “In line with its mandate to promote environmentally sound and sustainable
development, the term “environment” is used in this Policy in a broad sense
to incorporate not only ecological aspects but also worker protection issues
…”
• Was revised to “catch up” with IFC and add labour rights.
EBRD Social Policy 2008
• EBRD will seek to support, though its operations, the initiatives of other
institutions such as the ILO and the EU to promote the decent work
agenda. At a minimum, the client’s human resources policies,
procedures and standards shall be designed to:
• • Establish and maintain a sound worker-management relationship;
• • Promote the fair treatment, non-discrimination and equal opportunity
of workers;
• • Promote compliance with any collective agreements to which the
client is a party, national labour and employment laws, and the
fundamental principles and key regulatory standards embodied in the
ILO conventions that are central to this relationship1;
• • Protect and promote the health of workers, especially by promoting
safe and healthy working conditions.
• 7. Projects are required to comply, at a minimum, with:
• national labour, social security and occupational health and
safety laws, and the principles and standards embodied in
the ILO conventions related to:
• a) the abolition of child labour;
• b) the elimination of forced labour;
• c) the elimination of non-discrimination related to
employment;
• d) the freedom of association and collective bargaining.
The Inter-American Development
Bank
• In February 2006 the IADB adopted guidelines on “Managing Labor
Issues In Infrastructure Projects”, applicable to the private sector, that
include extensive references to ILO standards.
Inter-American Investment Corporation
• 26. The Corporation will not invest in projects that use
Forced Labor or Harmful Child Labor practices. Projects
should comply with national laws of the host countries,
including those that protect core labor standards2 and
related treaties ratified by said countries.
• "Forced Labor" consists of all work or service, not voluntarily
performed, that is extracted from an individual under threat
of force or penalty.
• "Harmful Child Labor" consists of the employment of
children that is economically exploitive, or is likely to be
hazardous to, or interfere with the child’s education, or to be
harmful to the child’s health, or physical, mental, spiritual, or
social development.
Bilateral finance –
Equator Principles
• A financial industry benchmark for private banks to
manage social & environmental risk in project
financing.
• Updated in accordance with IFC principles 2006,
and being updated 2012.
• Study finding: Only 5 EPFIs specifically referenced
labour issues, leaving room for doubt about
whether they actually are doing much to take
workers’ rights into consideration. These finds
accord with those of IFC: of the 121 responses to an
IFC survey, 72% stated that health and safety of
workers was a key risk facing their clients; but there
was no mention of any of the other labour issues
contained in Performance Standard 2, not even any
of the core labour standards.