Introduction to the report of High-Level Tripartite Meeting on Policy Coherence for strengthening the Nexus of Growth, Investment and Decent Work for South Asian Subregion
This meeting was a part of the ILO’s Policy Coherence Initiative (PCI) to improve coherence by by focusing on the policy mix, policy coherence and policy sequencing at national and subregional levels to strengthen growth, investment and employment linkages and to formulate a strategy for achieving employment-rich growth for countries in the South Asian subregion.
The High- Level Tripartite Meeting on Policy Coherence for strengthening the Nexus of Growth, Investment and Decent Work for South Asian Subregion held in Delhi was a part of the ILO’s Policy Coherence Initiative (PCI) to improve coherence and sequencing between different policy-domains for a better Decent Work outcome. Senior delegates from the seven South Asian subregional countries, namely, Afghanistan, Bangladesh, India, Iran, Nepal, Pakistan and Sri Lanka representing the ILO constituents; the UN family and the IFIs; the members from the donor community, the academia, the civil society and the media participated in the meeting. One important feature of the meeting was to bring together multiple faces of the government, the labour ministry, the finance ministry and the Planning Commission for a dialogue with the workers and the employers. The other important dimension was to bring the IFIs and the wider multilateral system face to face with the ILO constituents. The notion of ‘policy coherence’ was the notion of an integrated set of policies required to place ‘decent work’ at the centre stage of macroeconomic policies, the understanding of which can help a much more focussed engagement of the ILO with its constituents in the Decent Work Country Programme. Eminent dignitaries of the rank of Cabinet Ministers along with the Chief Economic Adviser of the Government of India were present in the inaugural session, while the valedictory address was given by the Minister of Labour and Employment of the Government of India. Several Secretaries from the participating countries’ governments were present in the meeting.
Emanating from the recommendations of the World Commission on Social Dimension of Globalization, the objective of the meeting was to explore how better policy matching and sequencing can make a difference in South Asia’s jobless growth. South Asia, in spite of reasonable growth in recent years, has serious problems of open unemployment and underemployment, the latter assuming major dimension. Also there are problems of inequality, decline in real wage of labour and share of labour in value added. Important reasons for this are neglect of agriculture and lack of investment in rural infrastructure. Is this region, like many other countries, on the path of jobless growth? Does it imply a trade-off between growth and decent work? A view expressed in the meeting is that there can be trade-off between growth and employment in the short run; in the long run they are perfectly compatible. The government, therefore, should focus on the growth objective and ensure that relative price of labour is such that capital does not displace labour. Observed short run decline in employment elasticity can be caused by various factors like supply side pressure in the labour market, or increase in productivity. Increase in productivity is essential for real wage to increase. However, while chasing growth objective, state should also play a greater role in correcting inequities of the market solution, regulate the private sector and provide public goods.
Though decent work is a desirable objective, it is far from clear what policies need to be undertaken to achieve this goal. With economic growth demand for labour does increase; it is not clear why this is not creating decent job but expanding employment in the unorganized sector.
There is little hope that manufacturing is going to generate employment significantly. There will be competitive pressure for cost cutting and subverting labour regulations if profitable to do so. It is difficult to protect workers’ rights against competitive market forces. In Sri Lanka, for example, although all labour laws are applicable in EPZ, employers find means of subverting them. In this situation, social security system and social wage can be useful tools to protect rights of the workers and enhance the capacity of the unorganised sector to absorb increase in labour supply. The employers in the unorganized sector may not be in a financial position to provide security and therefore the government has to step in. Given the fiscal pressure on many governments, this may be too costly at least in the immediate future. One way out is to curtail some other existing public subsidies to finance the cost of social security. One can also consider the possibilities of public-private partnership or the involvement of the NGOs to address the resource constraints. Furthermore, while the economy is growing and government revenue is increasing, there should not be a resource constraint in financing social security or undertaking public investment in agriculture or rural infrastructure.
There are serious problems with the argument that rigidities in the labour market are causing increase in capital intensity, stagnation in the organized sector employment and the growth of the unorganized sector. Such arguments miss out on other reasons like decline in the relative cost of capital. Furthermore, fiscal incentives to stay unorganized are non-negligible.
The speed with which labour market regulations have been removed in different countries has been reckless and rapid. But governments, with the support of the IFIs, have dragged their feet from improving social protection on the pretext of lack of funds. So in practice the overall impact on labour has been negative, as it has lost legal protection for their jobs without any compensating social safety net in place in most places. Of course, countries with high existing debt-burden will find it difficult to increase public spending without worsening the debt situation. High domestic debt burden (like in India) runs the risk of crowding out investment in other sectors. It leads to a regressive income distribution, another labour issue, since taxes which are used for financing government debt is paid by all citizens whereas the interest payments are made to the rich, who usually purchase government debt through bonds. Nevertheless, a fact to be noted is that the tax-GDP ratio was lowest among the Asia-Pacific countries, even compared to sub-Saharan Africa; therefore there is considerable scope to increase tax revenues. While raising total tax revenues is important, the composition of taxes matter from the labour perspective. A move away from factor taxation (income taxes) towards indirect taxation (such as VAT etc.) puts fewer burdens on labour income. The question then arises as to why tax ratios are stagnant and declining in most countries. It turns out that the reason is due to the liberalization of tariff policies undertaken by most of these countries. Therefore, there is a need for ‘sequencing’; that is, following one set of policies after another and not undertaking all kinds of reforms together. While generating resources is necessary, the ability of the government to spend it effectively, also known as the ‘absorptive capacity’ of the country, is important. Lack of technical capacity in implementing projects, corruption, etc. can undermine efficient use of resources. Finally, there are also many instances of wasteful expenditure undertaken by the government for national pride (an example of national airlines was given) that violate economic logic.
The case studies from the countries of this subregion did admit that the countries do suffer from unemployment, underemployment and overwhelming informality. ‘Employment’ is not central objective to any of them; there are separate employment strategies, Decent Work Country Programmes and support policies for them. Individual countries have problems like war, destruction, unrest, which upset development. There are also problems of inadequate state capacity, lack of security and rule of law (as in Afghanistan). It was commonly observed that there are issues of incoherence, policy mismatches and inappropriate sequencing in addition to the difficulties of inter-ministerial coordination, lack of convergence of their ideas and approach. In some of these countries donors and the IFIs have influence in policies, which limit the space for discretionary spending by the governments. Skill mismatches and social barriers to occupational mobility were also cited as problems.
The presentations by the World Bank and the IMF held labour market rigidities responsible for slow growth of employment. The World Bank also emphasized the role of skill development, education and social insurance. The ADB mentioned that since 2002 ADB is implementing decent work agenda in all its projects and it had a partnership with the ILO. The UNICEF, in its presentation advocated the need for coherent policies linking child labour with youth employment, decent work with the MDGs, and public employment programme with the social sector agenda of the government.
The meeting discussed that there is a good deal of incoherence within the multilateral system. Although the World Bank has taken measures to ensure that the projects it funds do not violate the core labour standards, and the IFC has come out with good practices notes regarding labour standard, they are sending contradictory messages through ‘Doing Business’ surveys, which recognize countries like Marshall Islands and Palau as the best performers in respect of labour regulations. These are the countries, which are not members of the ILO and do not have any labour standards. Moreover, the country offices of the IFIs are not seized with the concern for decent work priorities of their headquarters. Within the organization of the IFIs, there should be better communication. The WTO has called for greater collaboration on trade, labour and social policies.
The meeting noted that enhancing the efficiency of the government and the employers is important for investment to be productive and emphasized the need for policy coherence across countries in the region. It was mentioned that the discussion on policy coherence should address issues such as the compatibility of trade liberalization motivated by WTO with industry promotion promoted by the UNIDO, between trade liberalization with exchange rate policies, and between macroeconomic stabilization as preached by the IMF with employment objectives of the ILO. Finally, the importance of skill development was underscored and it was mentioned that social partners have to take initiative in this regard; bureaucracy alone can not do it. Also the financial institutions should be willing to advance low interest rate loans for skill development.
The meeting recommended that it is important to put decent work at the centre of economic and social policies of the government. Stabilization policies and the existing structure of incentives should be examined in relation to the objective of the promotion of decent work. For this, it is necessary to go beyond the labour ministry and the Planning Commission to the finance ministry. However, the Planning Commission can explicitly consider whether the decent work objective was being met or not by new projects that were under its consideration. There should be positive incentives for employment promotion, encouraging labour intensive sectors without undermining efficiency criteria. Social dialogue should be promoted to achieve a consensus about how to achieve policy coherence. Long term impacts of policies need to be taken into consideration while formulating policies and not just the short run expediency; there is need for recognition that policies tend to be interrelated in term of their overall impact. More pro-poor stance for the IFIs was advocated. It was suggested that for the sake of enhancing FDI at all costs, labour market reforms should not roll back all the protections that labour currently enjoys. In essence, the focus needs to shift from development of the market to the uplifting of the people in the country. Labour market reforms can be undertaken based on careful judgment of their impacts on labour welfare. The issue was also raised as to how to harmonize policies at the regional level particularly to avoid a ‘race to the bottom’ among countries competing among themselves for foreign investment, with regard to regulations and tax incentives. Finally, it was recommended that pilot studies should be undertaken at country level, also at local level to show how an improvement in policy coherence can make a difference on ground.
Session 1: Policy Coherence for Growth, Investment, and Decent Work in South Asia – a Panel
Session 2&3: Policy Coherence at the National Level – South Asian Experience
Session 4: Policy Coherence in South Asia, the Decent Work Agenda, and the Multilateral System – a Panel
Session 5 & 6: How can Decent Work be better incorporated into the Policies and Programmes of Finance Ministries and Planning Commission – a Panel of Labour Ministries
Session 7: Lessons Learned and Ways Forward
I.P. Anand, Employers’ Representative, ILO Governing Body, India (Chair)
Leyla Tegmo-Reddy, Director, ILO Subregional Office for South Asia, Delhi (Welcome Remarks)
Duncan Campbell, Director, Policy Integration Department, ILO, Geneva
Arjun Sengupta, Chairman, National Commission for Enterprises in the Unorganized Sector, India (Keynote address)
C. Rangarajan, Chairman, Economic Advisory Council to Prime Minister, Government of India (Special address)
Ashok Lahiri, Chief Economic Adviser, Ministry of Finance, Government of India (Special Remarks)
Guy Thijs, Deputy Director, ILO Regional Office for Asia and the Pacific (Closing Remarks)
Abhijit Sen, Member, Planning Commission, Government of India (Chair)
Discussants: Jafar Ahmed Chowdhury, Secretary, Ministry of Planning (Bangladesh); Sheila Bhalla, Institute of Human Development (India); S.K. Srivastava, Joint Secretary, Ministry of Labour and Employment, Government of India; Bibek Debroy, Professor, International Management Institute (India)
B. Mungekar, Member (labour and Employment), Planning Commission, Government of India (Chair)
Country Paper Presentations: D.R. Khanal (Nepal); Paula Kantor (Afghanistan); Shyamali Ranaraja (Sri Lanka); Hassan Taee (Iran)
Umesh Upadhyaya, Deputy General Secretary, General Federation of Nepalese Trade Unions (Chair)
Country Paper Presentations: Mohammad Ali Rashid (Bangladesh); Moazam Mahmood (Pakistan); K. P. Kannan (India)
Maxine Olson, United Nations Resident Coordinator for India (Chair)
Presenters: Ashish Narain, Economist, World Bank (India); S. Mohapatra, Economist, IMF (India); Sujatha Viswanathan, Social Economist, ADB (India); Gabriele Koehler, Regional Advisor on Social Policy, UNICEF Regional Office for South Asia; Coen Kompier, Senior Specialist on International Labour Standards, ILO Subregional Office for South Asia
Discussants: Sanjeeva Reddy, President, Indian National Trade Union Congress (India); Qazi Sajid Ali, Managing Director BASF Pakistan (Pvt.) Ltd. (Pakistan)
Yilmaz Akyuz, Former Director, Globalization Division, UNCTAD, Geneva (Chair)
Panellists: Don Somaweera Edirisinghe, Commissioner General of Labour (Sri Lanka); Ghulam Sarwar Hamgam, Ministry of Labour, Social Affairs, Martyrs and Disabled (Afghanistan); Md. Nurun Nabi, Joint Secretary, Ministry of Labour and Employment (Bangladesh); Prajjwal Sharma Aryal, Under Secretary, Ministry of Labour and Transport Management (Nepal)
Moazam Mahmood, Senior Economist, Policy Integration Department, ILO, Geneva (Chair)
Presenters: Pushpalal Shakya, Under Secretary, Planning Commission Government of Nepal; Zia-ur-Rehman, Secretary, Planning Commission, Government of Pakistan; P.K.A.B. De Silva, Deputy Director, Department of National Planning, Government of Sri Lanka; A Nosher, Fiscal Analyst, Ministry of Finance, Government of Afghanistan; J.A. Chowdhury, Secretary, Ministry of Planning, Government of Bangladesh
Sudha Pillai, Secretary, Ministry of Labour and Employment, Government of India (Chair)
Panellists: Rizwanul Islam, Director of Employment and Labour Market Policies, ILO, Geneva; Peter Bakvis, International Trade Union Confederation, Washington D.C.; Thangavel Palanivel, Senior Policy Advisor, UNDP Regional Center, Colombo
N.M. Adyanthaya, Workers’ Representative in the ILO Governing Body, India (Chair)
G.K. Chadha, Member, Economic Advisory Council to Prime Minister, Government of India (Observatory Remarks)
Oscar Fernandez, Minister for Labour and Employment, Government of India (Valedictory Address)
R. Mortezaei, International Relations Expert, Ministry of Labour and Social Affairs, Government of Islamic Republic of Iran (Remarks)
K. Pinnawela, Industrial Relations Adviser, Employers’ Federation of Ceylon (Remarks)
Sukti Dasgupta, Senior Specialist on Employment and Labour Market Policy, ILO Subregional Office for South Asia, Delhi (Vote of Thanks)