Industries in change

During the last few decades economic pressure and increasing global competition have affected the sphere of public services throughout the world, but the services in developing countries have been seriously impacted particularly under the pressure of the structural adjustment programme imposed by the international lending institutions against the backdrop of growing national deficits. Restructuring of public utilities usually preceded privatization in the efforts to improve services, but irrespective of which option to be taken for service improvement, the Conclusions adopted at the ILO Tripartite Meeting in 1999 and 2003 underscored the importance of transparency in information and procedures and of workers’ representatives participating in such processes to ensure positive results for all stakeholders. The Conclusions emphasized, however, that privatization could not be a substitute for the State’s responsibility for ensuring basic services to all, whether they are provided publicly or privately. The importance of strengthening public accountability during and after restructuring and privatization processes was also pointed out to prevent deterioration in quality of and access to services.

The Conclusions also noted that when governments opted to privatize public utilities, it was important that a structured and coherent plan and timetable be elaborated jointly by all parties and stakeholders concerned in accordance with national realities. A proper assessment of benefits, effects and costs before undertaking privatization could help to avoid problems arising from short-term political considerations. Public benefit assessment could include financial and budgetary considerations and implications for economic and regional development. Impact on environment, social welfare, equity issues, implications for consumers and the full range of employment and labour issues covering such topics as employment levels, working conditions, industrial relations and occupational safety and health, should also be considered. The range and type of options would vary depending on national and regional circumstances and there was no one model that could be applicable to different situations The joint elaboration of a plan and timetable could include defining the scope of privatization, identifying the priorities and principles, undertaking general tripartite discussions and dialogue with all parties and stakeholders. Such a process could provide a good basis for the development and implementation of legislation and sectoral agreements, including agreements with investors. Consultations with workers’ representatives at an early stage of the process must be ensured in the drawing up of such agreements for securing the collaboration of workers with management for successful implementation of an agreed plan.

Major changes witnessed in the utilities sector in the last couple of decades also include technological developments, which can improve the quality and quantity of services and also show promise of permitting better working conditions, for instance by reducing some physically strenuous tasks and offering opportunities to women. However, their effective introduction requires careful planning and joint consultation, in view of the potential impact on jobs, conditions of employment, work organization, training needs, etc. For instance, many water, gas and electricity services, particularly in developing countries, are experiencing serious shortages of skilled personnel.

Privatization is being accompanied by an opening of utility markets to cross-border competition, as in the case of electricity and gas supply in the European Union, where both supplies are expected to achieve full liberalization for all customers by 01 July 2007. As of July 2005, full liberalization in electricity supply was declared to have been achieved in Austria, Denmark, Finland, Germany, the Netherlands, Portugal, Spain, Sweden and the United Kingdom, while the rate of liberalization in the rest of the EU countries ranged from 0% in Malta to 90% in Belgium. In the gas market, on the other hand, full liberalization was declared to have been achieved as of August 2005 in Austria, Denmark, Germany, Italy, the Netherlands, Spain and the United Kingdom, while the market is still under total public protection in the Czech Republic, Finland, Greece, Latvia and Portugal (Eurostat, 07/2005 and 08/2005: Statistics in focus).

In the wake of these sweeping changes, utility firms are also becoming transnational. Privatization is being accompanied by an opening of utility markets to cross-border competition, as in the case of electricity supply in the European Union since mid-1996. Cross-border ownership is also spreading, sometimes through mergers but usually through acquisitions. European companies have topped the leaders of activity as countries around the globe are opening up their utility industries to competition. Many States in the developing world are redesigning their utility services, but are constrained by the requirements of international lending institutions, which often reduce labour and involve private enterprise. An interesting development in the sector is that some state-owned corporations are acting as multinational enterprises. They are taking advantage of increased competition in other countries and rapidly increasing their presence across the globe while being protected from competitors in their home market.

All these trends are entailing increased competition, and thus more pressure to emphasize commercial and profit concerns. Yet, while reforms may be necessary, namely to make services more efficient, effective and economical, the public service raison d'être remains important. In a similar vein, the repercussions of these changes on the workforce need to be understood and addressed. For instance, cost cutting that leads to lower employment and poorer working conditions can backfire if the best workers leave or if the workforce reduces its work effort. Retrenchments, sometimes massive, also pose serious problems, particularly in the current high unemployment context. Following liberalization in the European Union, more than 250,000 jobs were lost between 1990 and 1998. According to some, privatization and mergers and acquisitions may reduce employment by another 25 per cent in the industry by 2006. Given the vital role of these industries, governments usually retain some supervision over their operation, irrespective of ownership. Regulations and monitoring span a variety of areas; typically, the health and safety of utility workers and of the communities where firms are located, professional requirements, the volume, structure and conditions of employment and work; and also competition, services delivered and their price. But regulating a large multinational enterprise can often be more difficult for a government than providing the services themselves. Nonetheless, in the wake of privatization and economic liberalization, there is pressure towards deregulation. Undoubtedly the key feature and challenge of this sector in the next few years is change. Change could be well-designed and the transition properly managed if workers, management, users and other stakeholders are involved in shaping it, and if the benefits along with the possible costs of the processes are equitably distributed among those actors and society at large. Social dialogue can play a major role in the transformation of the industry. However in many cases, this requires capacity building for all parties involved.