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Tripartite Meeting on Managing the Privatization and Restructuring of Public Utilities

Note on the proceedings

Geneva, 12-16 April 1999

International Labour Office   Geneva

Copyright ® 1999 International Labour Organization (ILO)

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Contents

Introduction

Part 1. Consideration of the agenda item

Report of the discussion

Conclusions on managing the privatization and restructuring of public utilities (water, gas and electricity)

Part 2. Resolutions

Consideration by the Working Party on Resolutions of a draft resolution

Part 3. Other proceedings

Panel discussions

Closing speeches

Evaluation questionnaire

List of participants

 

Introduction

The Tripartite Meeting on Managing the Privatization and Restructuring of Public Utilities was held at the International Labour Office in Geneva from 12 to 16 April 1999.

The Office had prepared a report(1) to serve as a basis for the Meeting's deliberations. It addressed the following topics: privatization and restructuring of electricity, gas and water services as a global phenomenon; and the impact of privatization and restructuring on employment, human resource development, remuneration and other working conditions, and labour relations.

The Governing Body had designated Mr. A. Pierides, Employer member of the Governing Body, to represent it and to chair the Meeting. The three Vice-Chairpersons elected by the Meeting were: Mr. N. Khodeir (Egypt) from the Government group, Mr. O. Carvajal-Bustamante from the Employers' group and Mr. G. Popyack from the Workers' group.

The Meeting was attended by Government representatives from Argentina, Benin, Cyprus, Egypt, France, Hungary, Republic of Korea, Mauritius, Nepal and Peru; 19 Employer members and 20 Worker members.

Representatives of the Arab Labour Organization and the United Nations Children's Fund (UNICEF) attended the Meeting as observers.

The following international non-governmental organizations also attended as observers: Communications International; General Confederation of Trade Unions; International Confederation of Free Trade Unions; International Council of Nurses; International Federation of Chemical, Mine, Energy and General Workers' Unions (ICEM); International Federation of Employees in Public Services; International Organization of Employers (IOE); Public Services International (PSI); and World Confederation of Labour.

The groups elected their Officers as follows:
 

Government group

 

 Chairperson:

Mr. R. Duva Pentiah (Mauritius)

 

 Vice-Chairperson:

Ms. Y.C. Seignon-Kandissounon (adviser, Benin)

 

 Secretary:

Ms. I.M. Amin (adviser, Egypt)

Employers' group

 

Chairperson:

Mr. S. Shepherd

 

Vice-Chairpersons:

Mr. M.A. Hakeem
Mr. L. Karwowski
Mr. J.F. Natera Martinez
Mr. Z. Nkomo 

 

Secretary:

Mr. J. Dejardin (IOE)

 

assisted by:

Mr. E. Oechslin (IOE)
Ms. B. Perkins (IOE)

Workers' group

 

Chairperson:

Mr. S. Mead

 

Vice-Chairpersons:

Mr. R. Benitez
Mr. I. Bin Ismail

 

Secretaries:

Mr. A. Leather (PSI) (12-14 April 1999)
Mr. P. Michalzik (ICEM) (15-16 April 1999)

The Secretary-General of the Meeting was Mr. V. Klotz, Chief of the Salaried Employees and Professional Workers Branch of the International Labour Office. The Deputy Secretary-General was Mr. W. Ratteree, the Executive Secretary Ms. L. Wirth, and the Experts Mr. C. Duchemin and Ms. G. Ullrich, all of the same branch; Mr. J. Myers of the Publications Bureau also acted as Expert to the Meeting. The Clerk of the Meeting was Ms. T. Bezat-Powell of the Sectoral Activities Department.

The Chairperson welcomed the participants and saluted the ILO's new Director-General, Mr. Juan Somavía, who had just assumed office. He drew attention to the vital role that water, gas and electricity infrastructure and services played in economic and social life. In recent years, more than 100 countries worldwide had embarked on projects to privatize or restructure state-owned enterprises, including utilities. Restructuring and privatization were now widely seen as important instruments of government policy for creating appropriate conditions for economic growth and for redefining the role of the State. These processes also had significant employment and social implications. He pointed out that the main objective of the Meeting was to examine issues related to the impact on employment, human resource development and service delivery of the process of privatizing and restructuring water, gas and electricity utilities. He considered the report prepared by the Office as comprehensive, well structured and a useful basis for the Meeting's deliberations.

Mr. K. Tapiola, Deputy Director-General of the ILO, welcomed the participants on behalf of the ILO. He pointed out that this was the first Meeting for the sector since 1987 when Government and Workers' representatives had attended the Joint Meeting on Employment and Conditions of Work in Water, Gas and Electricity Supply Services. Many developments had taken place over the last 12 years as concerns the privatization and restructuring of utilities; these changes were reflected in the Meeting's fully tripartite structure, a novelty for this sector. Already in 1987, the Joint Meeting had noted the emerging trend towards privatization and the need to protect the rights and interests of workers through negotiation, consultation and collective bargaining. It had also considered that the services provided were of such importance that arrangements should be made to make them publicly accountable in accordance with national law and practice. The trend towards privatization of utilities in many countries had been associated with world trade liberalization and globalization as part of promoting integrated and competitive markets. In this context, water and energy generation and distribution were increasingly becoming commodities on the world market and in recent years there had been the rise of both multinational utility and multi-utility enterprises. However, special public concerns existed in this regard as energy, and especially water, were viewed as key services in the general interest of populations which therefore required proper regulation and appropriate public control.

Mr. Tapiola informed participants of a number of new initiatives in the ILO's normative and other work in recent years, aimed at increasing its effectiveness in the context of globalization. One approach had been to highlight certain fundamental principles and rights at work, also known as "core labour standards". They concerned freedom of association, the right to organize and bargain collectively, the prohibition of forced labour and child labour and the elimination of discrimination in employment and occupation. Since 1995, the ILO had intensified its efforts to promote ratification of the seven international labour Conventions which covered these basic rights, and this ratification campaign had led to significant results, over 100 new ratifications of these seven Conventions having been registered since. An important milestone in this regard was the adoption in 1998 by the International Labour Conference of the Declaration on Fundamental Principles and Rights at Work and its Follow-up. This document stipulated that Members of the ILO, even if they had not ratified the Conventions in question, had an obligation to respect in good faith and in accordance with the ILO Constitution, the principles concerning the fundamental rights which were the subject of those Conventions. To make it operational, the Declaration had a follow-up mechanism under which States that had not ratified the core Conventions would be asked each year to submit reports on progress made in implementing the principles enshrined in them, with the aim of determining what kind of technical assistance could best be applied. As of the year 2000, an annual global report assessing progress made by all member States -- those that had ratified as well as those that had not ratified the Conventions in question -- would cover each year, in turn, one of the four categories of fundamental principles and rights. The first report which would be submitted in June 2000 to the International Labour Conference would be on freedom of association.

In conclusion, Mr. Tapiola recalled the importance of developing social dialogue mechanisms at national, regional and international levels so that the voices of all stakeholders could be heard on such a key issue for the public interest as the restructuring and privatization of water, gas and electricity services and this Meeting was a valuable opportunity to focus attention on this topic.

Part 1.
Consideration of the agenda item

Report of the discussion(2)

Introduction

1. The Meeting met to examine the item on the agenda. In accordance with the provisions of article 7 of the Standing Orders for sectoral meetings, the officers presided in turn over the discussion.

2. The spokesperson for the Employers' group was Mr. T. Goldie and the spokesperson for the Workers' group was Mr. S. Mead.

3. The Meeting held six sittings devoted to the discussion of its agenda item.

Composition of the Working Party

4. At its fifth plenary sitting, in accordance with the provisions of article 13, paragraph 2, of the Standing Orders, the Meeting set up a Working Party to draw up draft conclusions reflecting the views expressed in the course of the Meeting's discussion of the report. The Working Party, presided over by the Government Vice-Chairperson (Mr. N. Khodeir, Egypt) was composed of the following members:

Government members

Employer members

Worker members

Presentation of the report and general discussion

5. In presenting the report prepared by the International Labour Office, the Executive Secretary observed that access to affordable and efficient utilities was fundamental to development in all countries and to all the social partners, and the dominant theme concerned change, brought about by restructuring and privatization in the sector in the past decade, only some of which could be documented in the report. This surge in privatization and the growth of multinational and multi-utility companies were difficult to analyse effectively because of the variety of economic, social and political contexts, the different restructuring and privatization approaches used, and almost constant new developments. There was a lack of sufficient data at this stage on employment, human resources, working conditions and service delivery to be able to evaluate whether such experiences had been successful or not. However, the available data showed that the inevitable result of restructuring and privatization seemed to be downsizing, often accompanied by redundancy, retraining and redeployment packages, as well as the challenges this presented for labour law and industrial relations. The report underlined the importance of establishing a moderate pace of change to facilitate social dialogue, public debate and the implementation of monitoring and regulatory mechanisms on such issues as prices for consumers, competition, funding, governance, respect for core labour standards and the public interest. There was a need for further research, including identifying positive practices and outcomes, to inform policy and decision-making.

6. The Workers' spokesperson welcomed the useful report prepared by the ILO and the opportunity to discuss complex and wide-ranging changes facing utility services around the world, particular problems, and ways to reorganize in the future, both in formal sessions and informal settings at this Meeting. The Workers' group thought that the Meeting could proceed along lines similar to the "partnership agreements" between employers and employees which were supported by the Government and increasingly prevailed in the United Kingdom. This process emphasized maximum participation, openness based on a full airing of each party's case prior to reaching decisions, and answers in the form of conclusions at the end of discussions. Emphasis would be placed on finding answers that the ILO and its constituents could adopt and use. The ILO report recognized the essential nature of water, gas and electricity to life in developed and developing countries, the increased demand derived from a growing population and challenges posed to different service providers: governments, employers and workers. Workers had many bad experiences with change, however, notably the thousands of utility workers who had lost their job and the severe erosion in workers' and trade union rights. Much damage had been caused by adherence to an ideological dogma that private was good and public was bad, which was not always true. There were many cases of ill-thought through financing of public utility services and questionable use of public funds. Despite these past wrongs, the Workers' group wanted to work positively with government and employer representatives at this Meeting to agree on a set of conclusions and an action plan to be commonly shared, based on quality utility services furnished by service providers who respected proper standards of service delivery and proper treatment of workers who provided them. General principles to be respected included safeguards for workers and the public, transparency in decision-making, honouring of fundamental rights of workers and trade unions, and recognition of the need for further research and analysis of future directions. The Workers desired a more open and informed climate of decision-making on utility service provision based on social dialogue, rather than the confrontational climate prevailing around the world. In addition, they wished to see codes of conduct established and complied with by international agencies, governments and others involved with service provision, in order to safeguard employment standards.

7. The Employers' spokesperson noted that his group intended to focus their contributions on both the economic benefits and the social costs resulting from privatization. Economic benefits included reduced government debts, lower real prices, improved productivity, increased private investment and heightened competition and profitability. Social costs included increased unemployment in the short term as workers moved from public to private enterprises. The speaker added that the report was well done and informative but contained some inaccuracies and omissions which hopefully would be addressed by an additional discussion point which would be suggested by the Employers' group. Privatization and restructuring were at different stages among the countries represented in his group, as well as among the three sectors (water, gas and electricity). Generally speaking, the Employers' group felt that the pace of privatization was proceeding appropriately within the limitations placed on each kind of utility and that proper consideration was being given to the impact of privatization and restructuring on employees. This was one of the most significant changes in the process over the last 12 years as the Deputy Director-General of the ILO had said in his opening address to the Meeting. Moreover, the Employers' group looked forward to a discussion on tripartism as proposed by the Workers' group and generally to a constructive exchange of view among the three groups.

8. The Government Vice-Chairperson remarked that the ILO report to the Meeting was informative and constructive. The Government group expected a very productive Meeting resulting from the discussion over the next five days which should introduce new ideas and experiences.

9. An observer, the General Secretary of Public Services International (PSI), welcomed the chance to discuss again the privatization and restructuring of public utilities. Twelve years ago it had been a bipartite meeting, while this one was tripartite. He had hoped for real social dialogue with employers at the world level, along the lines of similar meetings at European level, but noted the absence of representatives of multinationals that dominated the world market. The ILO's Joint Meeting on Employment and Conditions of Work in Water, Gas and Electricity (JMWGE) held in 1987 had concluded that in the process of privatization every effort should be made to protect the rights and interests of workers through negotiation, consultation and collective bargaining and to render services publicly accountable. Yet, the restructuring and privatization of water and energy often resulted in job losses, trade union derecognition, higher prices, excessive rates of return, impaired services, hidden subsidies and weak regulation. The goal of maximum rates of return on capital to maximize dividends had placed an unacceptable burden on workers and consumers. The use of privatization proceeds to reduce taxation or debt levels, thus introducing hidden taxation and obscuring the true costs, required that better data on the full impact of privatization on public finances be produced. PSI felt that the World Bank and other bodies financing development should ensure, namely, that there was no discrimination against public sector options; no specific favouring of multinationals; and strict action against corruption and bribery. He hoped that the Meeting could agree on a number of points, among which: abstaining from giving preference to any one approach to restructuring; ensuring democratic, transparent and fair assessment of options; effectively combating negative employment and social effects; respecting workers' acquired rights by principal employers as well as subcontractors, retention of employees' status as public service workers in transfers, and compliance with sectoral agreements on pay and conditions on the part of all employers; obtaining commitments from multinationals to honour their obligation on European works councils, discuss extending these worldwide with the international trade secretariats, and observance of the principle of non-discrimination by multinationals operating outside of their home country in respect of the full range of employees' rights; and stressing the role of the State with regard to regulation of the sector. He trusted that the Meeting would adopt the resolution to be submitted by the Workers, and that the conclusions would reflect the commitment on all sides for a true social dialogue.

10. An observer, the Deputy General Secretary of the International Federation of Chemical, Energy, Mine and General Workers' Unions (ICEM), representing 20 million workers (one-third of them from the energy sector), commented on the true revolution occurring in the energy and water sectors worldwide, which was presenting major challenges to all participants. Government's role was being redefined, employers were facing increased competition and new environmental demands, while workers and their unions were obliged to find new global ways of defending themselves in this field. Because energy and water were social products and basic needs, to which billions of people had poor access, greater social control of these sectors was vital for the future, and a socially balanced approach to privatization and restructuring of public utilities was required, safeguarding the interests of workers and consumers. ICEM did not support privatization that led to job losses, attacks on trade union rights, higher prices for small consumers and declining social standards, but could accept partial involvement of private capital in certain contexts, where governments defined framework conditions for universal, quality service guarantees for all consumers, fair pricing mechanisms, environmental and safety norms, as well as trade union recognition, maintaining employment, health and safety standards, social benefits, training and staff development. Energy and water policies and ownership structures should be defined in a democratic and transparent process, free from pressure from international financial institutions to choose specific models. Trade unions and other interest groups had to be involved in all phases of restructuring, and be represented in planning and regulatory bodies. Governments had a major role to play in this sphere, and there was a need for minimum rules and harmonization at the international level on issues such as union rights, health and safety, the environment, and training. The ILO should be the global standard-setter in the social sphere, including for the World Trade Organization (WTO), with its work complemented by global agreements between trade unions and multinational companies, like that signed in 1998 between the ICEM and the Norwegian oil and gas group, for example. Such enforceable agreements would help to build a social basis for the new global energy and water industries.

11. An observer, Assistant to the General Secretary of Communications International (CI, formerly PTTI), which represented workers in various industries including the electricity industry, stressed that CI strongly supported the ILO's sectoral activities. He highlighted the need for all stakeholders to be given the opportunity to participate in changes, and expressed concern that privatization was taking place without consultation concerning financing, particularly with regard to World Bank involvement. Governments should ensure that workers were properly consulted. CI believed that the World Bank should fund public utilities, not just private firms. Experience with privatization, new technology and restructuring had been less than positive, inevitably leading to job losses, and had encouraged outsourcing, while few staff had been transferred to new firms or offered new training. Productivity gains should be shared with workers, and the development of new services ought to lead to new employment opportunities. The infusion of multinationals' social and labour practices within the utilities sector should emphasize the positive aspects, and ensure that their behaviour outside their home countries respected fundamental international labour standards and principles of consultation and participation. Long-term investment in infrastructure and human resources should be the aim, rather than quick profits; codes of conduct could be appropriate in this regard. In such a changing environment, the social partners had to find positive ways of working together, putting aside greed, to ensure achievement of social and economic goals.

12. An observer, the President of the International Federation of Employees in Public Services (INFEDOP), stressed that privatization of public utilities should not be a matter of ideological bias. Trade union organizations' main focus was on the interests of workers affected by privatization. However, unions should also defend the delivery of services to all at reasonable prices, taking account of the need to improve national finances and ensuring that privatized firms honoured their service obligations and the binding clauses they had signed on prices and distribution. He emphasized the need for governments and/or employers to start open-ended dialogue with workers on all relevant issues such as employment, pay and working conditions, prior to privatization or restructuring. Partial privatization had to be carried out under a single consultation and negotiation body, whether the employers were public, private or semi-private. Workers had to be able to ensure that their legitimate rights were met, while maintaining minimum guaranteed services in case of labour disputes. The consequences of restructuring and privatization should be carefully measured, and the report had not sufficiently highlighted the scale and nature of dismissals nor the categories of workers affected -- some of them were difficult to employ elsewhere, hence the great importance of training and retraining. Furthermore, he underlined the need for substantial compensation in case of redundancies, and for true bargaining with workers.

13. An observer, representing the services, energy and water sector of the Latin American Confederation of State Employees (CLATE), observed that the State was the arena where conflicts of interest between classes and sectors had to be resolved, the basic tool for generating national strategic policy. Through the neo-liberal model based on social exclusion, the economic power of multinational enterprises was extending ever wider around the world, ensuring corporate growth by appropriation and plundering of non-renewable natural resources (water, gas, oil) and other public services in a captive market. This policy of privatization of services and energy sectors was being undertaken throughout Latin America. Its consequences were redundancies, increasing precariousness of employment for workers, misery and marginalization, as well as loss of everything the labour movement had achieved. This policy has also led to greater foreign debt and dependency of Latin American countries on the centres of power and the multinationals. He underlined the important political, economic, social and cultural role played by the energy sector in contemporary societies, equivalent to that of education. No nation could be truly independent unless it had full control of these sectors, and sovereignty in this field could assist general improvements in standards of living. The survival of the neo-liberal model required the abstention of the State from participation in services, energy and telecommunications, and the decline of the educational system. The report saw energy as a social good, quite contrary to the prevailing view in Argentina, which was taken to be a global model, a paradigm of privatization. He highlighted the negative effects of this approach in a country where the only industry in the sector that still remained to be privatized was nuclear power -- even in that industry, greed would have primacy over safety of the nuclear installations -- namely: loss of sovereignty to multinationals and power centres that ran the country and managed the utilities, turning the country into a private limited company; loss of labour rights (greater job precariousness and losses, longer hours, compulsory transfer of workers, particularly victimizing trade union officials, wage cuts and ideological persecution); unemployment growth (from 6 per cent in 1990 to 22 per cent in 1999); corruption (selling off state assets at rock-bottom prices, vast growth in employers' incomes); higher prices for services; and greater inefficiency and poorer services.

14. An observer representing the United Nations Children's Fund (UNICEF) explained her organization's interest in fresh water and sanitation and the desire to learn from different experiences in service provision. Privatization and restructuring could be complementary to, but not a substitute for, the State's responsibility to ensure fresh water for all as a basic staple of human well-being. In UNICEF's experience micro-credit facilities for construction and maintenance and community-based management of water resources were important tools to guarantee access. Transparency and openness in public decision-making played an equally important role since many of the poorest members of communities were politically marginalized and often overlooked in the planning process.

Privatization and restructuring: Results and methods

15. The Workers' spokesperson recalled that, contrary to the conclusions of the JMWGE in 1987, privatization had not been very good for job growth, and had in many cases led to decertification of trade unions, price increases, decreased public accountability and maximization of profits to the detriment of workers and the public. Examples were cited from developed and developing countries. Too often restructuring was based on political dogma that was anti-public service. Moreover, the true costs of privatization were frequently obscured. This mismanagement of the process led to valuable public assets being sold at well below their value, and in some cases to domination by multinationals of local or national markets. Furthermore, in contrast to the public sector approach of long-term planning, privatized companies displayed short-term visions with regard to returns on investments under pressure from financial analysts, resulting in a decline in maintenance and quality. Multinationals often undermined accountability through large initial payments to induce privatization, and both the World Bank and private national banks discriminated against public utilities in loan approvals. Corruption and bribery had to be outlawed and violators banned from further tenders; the Worker members welcomed support for this position from the Employer members.

16. Worker members recorded their disagreement with the view that privatization was necessarily positive, a point that the ILO report underscored by demonstrating that there was no evidence that privatization automatically led to better utility services. They believed that public control of utilities ensured adequate quantity, quality, environmental protection and product soundness. There was no substantial evidence that movement from public to private ownership was necessary for an effective public utility system, nor that privatization guaranteed such efficiency. Research results from the Asia and Pacific region, applicable to other regions, had demonstrated little evidence that privatization and restructuring in their various forms had been assessed for their benefits and costs, nor that governments had made privatization proposals following dialogue with trade unions and other stakeholders. Concerning the effects of privatization, examples were cited of successful "de-privatization" of electrical services in the United States (New York State) which had led to productivity gains and price decreases. A contrasting picture was painted in Australia between the experiences in the State of Victoria -- marked by a decrease in public debt but an increase in private debt, increases in utility sector unemployment without any definitive link between privatization and overall employment gains, and reported increases in "fuel poverty" among those who could not afford to pay the new rates -- and those of New South Wales, which had refused privatization on the basis of a study which showed that over a period of five to seven years, privatization gains initially accruing to the State would be overridden by losses in government revenue.

17. Worker members emphasized the need for clear prior assessments of benefits, costs and alternatives to privatization. A regulatory framework along the lines of the Australian "National Competition Policy" was recommended when considering reforms. Based on the principle that no privatization or restructuring should take place unless a clear assessment could be made that the benefits outweighed the costs, the policy required a public benefit assessment to measure the true costs of privatization predicated on eight criteria concerning finances and budgets, the environment, impact on consumers, sustainable economic development, social welfare and equity issues, and the full range of employment and labour questions under discussion in the Meeting. A balance between social and employment concerns was also beginning to influence World Bank policies as the ILO report to the Meeting pointed out.(3)

18. Moreover, restructuring was a broad term in which the re-engineering or redesign process determined its success. The ILO report(4) had correctly emphasized that the full and active involvement of trade unions and the workforce in the process of design, implementation and monitoring of change by means of consultations, negotiation and collective bargaining was the key to meeting reform challenges. Most of the time, however, especially in developing countries, restructuring occurred without full disclosure of information to trade unions, thereby undercutting their full involvement. It was more encouraging to see support for greater worker participation among the Governments represented at the Meeting. An openly democratic, public process prior to decisions on restructuring was desirable, one in which all stakeholders had a say, and which should include discussion on tendering criteria and access to all tender documents. The principles contained in the Arrhus Convention adopted by European environment ministers in 1998 specifying public access to information and justice should also guide workplace restructuring in this context.

19. The Employers' spokesperson agreed with the need to distinguish between privatization and restructuring. Clearly, no one privatization or restructuring model could be applied to all jurisdictions, as a range of options could be envisaged to mitigate impact on employment and maintain quality based on what worked for each jurisdiction. Examples from a number of developed countries (Australia, Canada, United Kingdom) were cited as illustrations. Nevertheless, though differences might exist for different locations or utility subsector, in each group potential positive benefits of privatization could be identified. The assessment of benefits in each particular case, such as those cited by Worker members, underlined the need for verifiable indices as the ILO report noted. The Employer members were open to further considering the kind of public benefit assessment recommended by the Workers' group as one mechanism to help decide on change. In addition, the Employers supported the position that corruption and bribery should be eliminated; privatization should be seen in the framework of normal business practices.

20. The Employers also agreed that the process of change should involve dialogue and consultation. Re-engineering was essential within all organizations to ensure their productivity. The logical conclusion to such a process would be that privatization proved beneficial by accelerating the change process. Transparency at the earliest possible stages would aid this process, but clarity was needed on definitions. Tripartism carried different connotations for different jurisdictions and, for this reason, the Employers' group preferred consultation and social dialogue to define the desirable process. Since restructuring and privatization were occurring all over the world, the Employers hoped that common action between interested parties would ensure that such processes worked to the benefit of both organizations and their workers.

21. Another Employer member, referring to particular examples mentioned from around the world, emphasized that assessment indices were critical to measure success. This was a crucial point for the Employers' group; it was covered in the body of the report via its inclusion in discussion point 10. It was hard to be definitive as to the positive or negative results of privatization in all cases. In his country (Australia, State of Victoria), large-scale privatization characterized by record international prices for the sale of electricity assets had led to steep decreases in prices and state debt, at the same time overall employment had increased, with the unemployment rate noticeably better than the national average.

22. Government members (Benin, Egypt, Hungary, Mauritius) accentuated a number of variables for success: the need for a gradual transition to restructuring and privatization, especially at the early stages in some countries, the importance of recognizing that a single model of transformation was not viable given varying national conditions, and the crucial role played by social dialogue. Privatization in Egypt had taken three years, and no worker had lost his/her job in the process, which had been firmly based on dialogue with all concerned parties and concern for the social dimension of change. It was acknowledged that workers in Hungary did not necessarily benefit from privatization initially, thereby increasing the need for communication between them and the Government. Benefits had clearly been obtained in the form of productivity gains and financial savings. To enhance worker support for these gains, in agreement with the trade unions, the Government had established a considerable fund based on the privatization proceeds to retrain workers who had lost their jobs and to encourage new owners to respect existing employment levels and the collective agreements. Certain facilities (price discounts) had also permitted workers to buy shares in the privatized companies. Shareholding by workers would also be tried in Benin which was still in the throes of structural adjustment and would not fully privatize services such as electricity. Privatization in Mauritius was much further down the road also, though tentative steps had been taken in the form of a concessionary agreement with a private company to diversify power production based on sugar-cane residue. It was expected that the agreement would add capacity to the national power grid while maintaining quality standards, with minimal impact on public financing or workers' employment. Government expectations for restructuring in the national water authority not having been met, a new approach was being taken in this subsector, relying on tendering for water supply provision among reputable international firms which could eventually lead to a strategic public/private partnership.

23. The representative of the Government of Argentina stated that his country had privatized electricity, water and gas at the start of the 1990s, benefiting from strong, cooperative and well-organized trade unions. Job losses were mostly in the form of early retirement or voluntary redundancies, and financial help had been provided to those affected by the World Bank, the Government and private companies. It was difficult to track the employment implications, since the country had been emerging from a period of high inflation and unemployment at that time, and a number of financial crises (Asia, Brazil, Mexico) could distort the statistics.

Combating the employment and social
effects of downsizing

24. The Employers' spokesperson noted that again there was no single overall model which would be effective for all countries. However, a general consensus existed in his group on the need for some form of social safety net, and debate on this subject led to the question of who should have primary responsibility for its provision. In many countries, this clearly lay with governments, but in developing countries this was not necessarily the case. The government had a unique dual role -- on the one hand as legislator and guarantor of the safety net, and on the other as employer or owner, with all the responsibilities that implied. The strength of the net should be commensurate with the employment consequences of restructuring and privatization. Trust funds could be established for purposes such as training, reskilling, and handling redundancies; they would be run first by governments, and then by the new employer. An effort to match opportunities against a register of displaced employees would be among the measures to minimize the negative impact. It should be noted that separation and retirement packages worked differently from one country to another, and they needed to be financially and operationally feasible.

25. The Employers' spokesperson further argued that it was impractical for employers to drive the consultation timetable; this was a government responsibility, determining which level of consultation would work best in their jurisdiction. The government had to decide on privatization, and the utility could not approach them to suggest it. In Canada, collective agreement clauses already covered restructuring, while the adverse impact of privatization was covered by collective agreements and labour law, including specific legislation for the speaker's company, Ontario Hydro. Consultations on privatization would clearly be driven by governments initially, and thereafter by employers after privatization or restructuring had been completed.

26. Worker members observed that consultation with, and participation of, trade unions and civil society had been emphasized throughout the discussions prior to privatization or restructuring, but more effort was required to ensure this applied in all countries, with all stakeholders and under government auspices where appropriate, in order to combat downsizing. They disagreed partially with the argument that there was no single model to fit all circumstances, since there should be a common set of rules, guidelines, procedures and framework agreements for such processes. These could help to avoid the promotion of criminality resulting from downsizing and unemployment. Employment should not be sacrificed on the altar of privatization. Examples were cited from developing countries such as Côte d'Ivoire, where industrial action was necessary to ensure effective negotiation on a compensation and retraining package for workers affected when an electricity company ceased operations without prior consultations with the trade unions.

27. A Worker member proposed a multi-stage, multi-level process to combat the employment and social effects of downsizing. First, at the national level, a tripartite or bipartite system was necessary to determine the scale of privatization or restructuring, the priority areas and details, taking the interests of trade unions and civil society organizations into account. Second, at the industrial branch level, the government needed to consult with trade unions, consumer groups and specialists in the field, on the scope, range, method and schedule of privatization. Third, the State as owner should negotiate directly with the trade unions to obtain agreement on employment, pay, acquired rights, trade union rights, worker shareholding, the work environment, and pensions. Fourth, the government could sign up with an investor, but the latter was obliged to respect the agreement signed between the government and the workers. Finally, the government would monitor the privatized company to ensure that obligations were respected, sanctioning employers who did not comply. New investors could sign agreements directly with trade unions at the end of the process. This was the method and approach used in his country, Hungary, and it depended on a consensus within the social dialogue framework, sometimes linked to industrial action to ensure compliance.

28. The Workers' spokesperson pointed out that the ILO report(5) was quite clear in identifying workers as the major casualties of privatization -- the sheer statistics of job losses were eloquent. He agreed with the employers about a social safety net, but saw a role not only for governments but also for employers, in certain countries and circumstances. It was essential that employers should consult with their workforce first, not wait for the government to tell them to do so. A proper process of consultation should take place with trade unions, consumers, environmental groups, health and safety experts, and society as a whole. Privatization should not take place until change had been agreed between the social partners, and there should be no compulsory redundancies. Regulators needed to ensure that they, rather than financial analysts, had the final say. There was some room for optimism in relation to developments such as the PSI water code and the ICEM/Statoil agreement; good ideas indeed abounded, but they needed to be agreed and implemented to mitigate adverse effects successfully.

29. The representative of the Government of Egypt felt that, once proper consultation had occurred and an effective regulatory body was in place, three dimensions were to be kept in mind: earmarking a certain percentage of shareholding for workers; having worker representatives on the board of directors; and bringing the parties together periodically to evaluate the positive and negative aspects of the changes to that date and to reflect on the future. Egypt had experienced positive changes in this regard in telecommunications, with an increase in employment and no downsizing.

30. The representative of the Government of the Republic of Korea felt that governments should take more responsibility in combating the negative aspects of privatization and restructuring, when job losses were mandated by the need to cut costs and boost productivity. In 1998, 20 per cent of workers left the public utilities in his country owing to restructuring, but there was a good severance package of one month's pay per year of service, early retirement and unemployment benefits, as well as a job advice and prospection service for displaced workers. It was noteworthy that some companies had established outplacement centres for workers, and initiatives for starting new businesses. The Government assisted such centres financially and provided a social safety net, which helped to ease labour-management tensions.

Human resource consequences for workers
of contracting out, transfer or sale

31. The Employers' spokesperson stated that up to the point of sale, tripartite consultation with staff was necessary to decide on such matters as transfers, contractual arrangements, employee status and safety nets. After the sale, it was up to the employer to determine these questions on the basis of bipartite consultations with workers' representatives, usually leading to collective provision agreements for contracting out which covered worker protection. There were collective provisions of this kind at his company in Canada, and similar legislation in other Canadian provinces.

32. A Worker member observed that Canadian legislation was similar to the European Council Directive on safeguarding employees' rights, stressing the need to maintain employment and collective agreements in the case of partial or complete transfers; it was the job of trade unions to ensure that they were respected. Another Worker member noted that in relation to France, three large multinationals -- Vivendi, Lyonnaise des Eaux and Bouygues -- were all major players in water distribution and processing, 80 per cent of the market was given to the private sector, and there were many enterprise and sectoral agreements. Efforts were under way to establish a broader collective bargaining agreement in the industry, focusing on preventing wage reductions, strict control on transfer of staff when operators changed, and maintenance of the quality of water itself and water services. Water supply was a relatively profitable industry which was delegated to 36,000 local authorities. They bore responsibility for control namely of pricing levels. There was some consensus on transfer of contracts, thereby protecting the acquired rights of workers. Workers and employers in the three main groups were concerned that new entrants might be chosen on price grounds alone, and the skills and qualifications of existing workers could be challenged. Water was not a service like any other, and required certain qualifications, know-how, competence and experience, and it was important to protect these as well. He asked Employer members and Government representatives for comments about their attitude to the European "Acquired Rights" Directive when the employer changed.

33. An Employer member responded by observing that the intention of the Directive was to protect workers, and it had been operational since 1977. It was a complex legal document, but did allow employers to restructure, based on economic, organizational, technical and other reasons. There were safeguards for workers, but the key issue was how to manage change. The European Directive was a flawed document, but offered some positive ideas.

34. A Worker member stressed the need to manage transfers effectively. The European Directive should be extended and adapted to other continents, in conjunction with existing collective agreements. He also raised the problem of subcontracting that often violated the rights of workers; safeguards were needed, and some of the profits from these contracts should be ploughed back into training, redeployment, better pay or job creation, negotiated and controlled by the unions and other stakeholders. Transfers often led to increased stress, which impaired workers' performance. Another Worker member gave specific examples from Hungary, where sectoral agreements had been supplemented by local ones, and legislation prevented agreements or contracts being modified for three years after privatization. He echoed the comments of his country's Government representative about the US$40 million conversion fund for energy utilities, which was managed by the unions and supervised by the State. It would operate for five years and apply to about 10,000 workers (30 per cent of the workforce). The fund paid compensation or income support for up to three years to those laid off, on early retirement or in long-term unemployment, supplemented the state programme for retraining workers from the sector, and assisted small business creation and worker mobility.

35. The Workers' spokesperson argued that the rights enshrined in the European Council Directive should be extended to other ILO member States, as they set a baseline for transfers and should apply to subcontracting, as in the Vivendi Charter of Fundamental Social Rights. Part of the proceeds of transfers should fund packages to deal with retraining, redeployment and job creation, jointly controlled by the employer and the trade unions. Experience in the United Kingdom with the transfer of undertakings' protection regulations showed that employers (especially quality employers) generally supported them because they ensured a level playing-field and discouraged unscrupulous employers. In addition, employee share ownership could be useful, but needed to be properly managed.

36. An Employer member agreed with the previous speaker that the Directive's intention was to assist the parties in transfers, but also underscored that the transfer of undertakings' regulations allowed both for transfers respecting acquired rights and for redundancies that would be upheld by the courts. That equality and balance forced the parties to negotiate mutually acceptable terms. On employee share ownership, Irish Telecom was being sold off and workers had been offered 15 per cent of shares, accepting this within the context of restructuring to put the business in shape for increased competitiveness.

37. A Worker member from Latin America felt that the discussion on this topic had been an exchange between Europeans, and regretted the absence of Latin American participants, especially government representatives. His continent lacked a strong regulatory framework, privatization had been imposed on workers rather than agreed upon democratically, employers sometimes enforced job reductions for economic reasons without considering the redundant workers' own economic plight when left without protection whatsoever. Ongoing privatization of social security systems meant that there was little or no safety net. In the neo-liberal system imposed on them, everything was left up to the market, with the government vanishing from sight. The government should be more involved in regulation, and take greater responsibility for the consequences of restructuring and privatization. Latin American trade unions had little influence over change, which was simply imposed upon them by governments and/or employers, and workers consequently suffered the whole range of negative consequences.

The impact on collective bargaining, remuneration
and working conditions

38. The Workers' spokesperson contended that whatever the differences existing among countries or regions, privatization definitely affected collective bargaining. There was no denying the negative impact in many places, marked by a decline in trade union facilities, redefinition of bargaining units and harassment of trade union representatives. New concepts such as use of pay benchmarks combined with old ones such as shifting work to cut costs had contributed to the downward spiral in pay and conditions. As to changes in status, workers wanted to see different policy options under discussion which would preserve for example the public employees' status of workers in privatized utilities, as had been done in developed countries such as Germany and the United States.

39. Worker members pointed out various aspects of the impact privatization had on bargaining procedures and structures. Differences in public and private legislation governing bargaining, lack of respect for international standards and the subdivision of negotiating units and structures even within the same utility, thereby weakening trade union strength, had proven to be serious obstacles in Latin American countries. Noting evidence presented in the ILO report(6) concerning the high rates of unionization in the sector, it was evident that a primary objective of privatization had been to reduce these levels. Among the tactics employed were targeting trade union representatives for redundancy packages and, in the case of Australia, use of standardized individual contracts with all workers in an enterprise to break down collective bargaining. Multinationals especially discouraged so-called "indoor" or non-manual workers up to middle levels of management from union membership and adherence to bargaining units, thereby undermining negotiating structures.

40. Worker members noted the close association between industrial relations protection and the levels of remuneration and working conditions enjoyed by workers faced with privatization and restructuring. As the ILO report(7) suggested, no clear correlation existed between improvements or deterioration in employment terms and a country's status as developed or developing. Indeed there was evidence of both positive and negative outcomes but the end result for workers depended on collective bargaining and legal protection. Some Worker members insisted nevertheless that workers in developing regions such as North Africa faced more difficulties than those in developed regions, and the situation was more dramatic still in Asia as a result of recent events. Examples of trade union struggles to enforce respect for pay levels and employment guarantees arising out of privatization were reported from countries such as Côte d'Ivoire and Tunisia. Other parts of the ILO report(8) referred to growing wage differentials between highly skilled and less skilled workers, and indications from a number of countries pointed to increasing differentials between men and women workers or in respect of workers from minority groups. The issue of longer working hours in industrialized countries also had to be dealt with. An Australian productivity study had turned up evidence that savings arising out of competitive bidding and tendering largely derived from two sources: decreased employment and declining wages and working conditions, further evidence that privatization led to a worsening environment for workers. As the ILO report(9) highlighted, the available research on the incidence for health and safety, especially of contracting out, pointed to a decline in conditions as a result of privatization driven by financial performance criteria and reduced employment. There was more resulting stress and illness, including among mid-level management who were called upon to implement restructuring, sometimes in direct violation of prevailing workplace codes of ethics, were frequently the final victims of the process and enjoyed no trade union protection.

41. The deterioration in remuneration and working conditions resulting from a restructuring process which in some cases went back 20 years underscored the need for more worker protection, including negotiated guarantees of full employment and against redundancies arising from insolvencies, and the right of government inspection and regulation in developed and developing countries. For the Workers' group, the operative word was negotiation of changes in wages and employment conditions, preferably through central agreements. The Workers' spokesperson hoped that the Employer members supported the need for further research on impact trends.

42. The Employers' spokesperson reiterated his group's view that privatization and restructuring impacted differently on bargaining arrangements, remuneration and working conditions according to the geographical or administrative jurisdiction, quoting the ILO report as justification. Examples were cited of positive outcomes from restructuring which split up bargaining units in Canada (Ontario), in contrast to the negative experience decried in Latin America, and the Canadian interdiction of selectively targeting trade unionists for redundancy which contrasted with the Australian example. The ILO report(10) underlined this notion that jurisdictional impact was varied. Two points with regard to bargaining and contractual arrangements needed to be made: first, the Employers believed that governments definitely had a role to play even in largely bilateral bargaining frameworks provided this role was not overly intrusive; second, they absolutely supported the notion that collective agreements should be respected and not unilaterally terminated since they were after all contracts.

43. Notwithstanding their general observations on jurisdictional variance, the Employers had a diametrically opposite view to that of the Workers on trends in developing countries, where they had observed significant improvements in working conditions, specifically health and safety, and remuneration levels following privatization, due to the introduction of international benchmarks for wages and performance-related pay. Globalization had generally favoured these trends. Clearly, wage packages had become more complex -- the compensation differentials between skilled and less skilled workers cited earlier from the ILO report bore this out -- but the Employers believed that change had been more gradual and less brutal than the workers contended. Similar conclusions could be drawn from the impact on health and safety of contracting out which was only one option among many in the privatization panoply.

44. The Employers' spokesperson strongly contested the Workers' emphasis on bargaining processes to the detriment of the positive outcomes in terms of increased employment, better pay and real improvements in other working conditions resulting from privatization. Privatization was often caught up in the broader economic reform agenda which, as in Australia (Victoria), had produced wide-ranging economic benefits under increased competition and laissez-faire restructuring at the same time that the reforms impacted negatively on trade unions, small businesses or between industrial sectors or geographic regions. The removal of artificial income support or competitive barriers logically tended to make strong competitors stronger, and weaker ones even weaker, but the real question was whether the resulting economic benefits were effectively used to offset the social and equity costs via social safety nets for example. The bottom line was that, as the ILO report(11) underlined, recent studies did not show clear patterns in pay level trends linked to privatization or restructuring. The Employers could support further research on these issues, including by the ILO, but wished to see a balance struck in the examination of medium- and long-term economic benefits such as debt reduction, and the short-term social costs associated with privatization.

45. An Employer member further supported the multiple factors which determined higher or lower conditions. Referring to the ILO report's(12) account of legislative changes affecting public and private sector labour relations, and the subsequent complaints investigated by the ILO which did not sustain many of them, he pointed to the increases in wage levels in Australia and New Zealand during the period after the introduction of individual contracts which contrasted with the Workers' arguments that these had reduced conditions.

46. The representative of the Government of Egypt, speaking on behalf of the Government group, recalled the Governments' position on the importance of consultation and social dialogue which had been stated under the previous point for discussion. It should be recognized that in relation to employment and conditions, deterioration was sometimes the result of bad management, not necessarily privatization. His country had carefully studied the experiences of many others to have a more informed view of trends. The representative of the Government of Benin agreed with the Employers that remuneration and conditions of work had frequently improved with privatization in developing countries, but pointed out that this had been offset by increased unemployment for many. The representative of the Government of Mauritius directed attention to positive improvements in pay and conditions of telecommunications workers in a restructured company in his country, with those opting out having received generous compensation packages. He agreed with the Employers on the absence of a firm link between privatization and pay levels noted in the ILO report. The representative of the Government of the Republic of Korea recalled that the Asian financial crisis in 1998 had caused a 5 per cent reduction in wages of Korean public sector workers and a 20 per cent cut in employment, but recent trade union wage demands were likely to restore remuneration to previous levels. Wage increases noted in the ILO report(13) during the period preceding the crisis could be explained by company performance and collective bargaining, so he too questioned whether a definitive link could be made between restructuring and pay levels.

Multinationals and multi-utilities:
Employment and investment

47. The Workers' spokesperson emphasized the need for multinational corporations to honour agreements on privatization concluded at national level. The European Union Directives on works councils could serve as a useful model worldwide for the establishment of similar councils involving workers, which would permit dialogue with international trade secretariats (ITS). He recalled the group's previous position on non-discrimination by multinationals towards their workforce outside the home country in all matters of employment, working conditions and labour relations, including respect for pension rights in all countries. Multinationals operating in the utilities sector should not shift profits to other sectors and, if this kind of cross-subsidization were practised, it should be completely transparent and a matter for public policy. Competition should not be used as a basis for undercutting pay and working conditions, and multinationals should also respect national cultural and ethical norms. The conclusions of the JMWGE (1987) should be applied, namely those which called for remuneration and employment conditions to be determined by collective bargaining in accordance with the following ILO standards: the Right to Organise and Collective Bargaining Convention, 1949 (No. 98), the Labour Relations (Public Service) Convention, 1978 (No. 151), and the Collective Bargaining Convention, 1981 (No. 154). These remained as valid as ever.

48. The Employers' spokesperson agreed that multinational companies should respect relevant local, regional or national legislation. Any violations should be dealt with by the enforcement mechanisms of the appropriate jurisdiction; this was not within the competence of the ILO. National policy and laws should determine whether financial cross-subsidization of sectors should be permitted since, in some cases, especially in developing countries, this might be beneficial to the country concerned. The Employer members did not accept the premise that productivity could be achieved only through job and wage cuts. Multinational companies had a positive impact on human resource management and labour relations through increased capitalization of industries and services, thereby augmenting economic opportunity, by introducing new technologies of benefit to workers and the economy, and through heightened training and skills upgrading of the workforce. All of these contributed to boosting productivity, unrelated to employment or pay levels. Generally speaking, the Employers did not perceive a negative impact from multinational ownership of utilities.

49. The Workers' spokesperson took issue with the idea that multinational corporations actually brought in new investments to a country when assuming ownership of utilities. In reality, they were merely using money provided by other parties such as the World Bank or government loans. From the Workers' experience, the main impact of multinational investment came in the form of job cuts, potentially dramatic ones at that in countries with high unemployment rates such as South Africa. Moreover, investments sometimes flowed out of a country following takeovers by multinationals; the case of New Zealand Telecom provided a prime example. The Workers' group hoped that an outcome of this Meeting would be a set of identifiable strategies for long-term solutions to the problems posed by multinationals throughout the world.

50. The Employers' spokesperson disagreed with the Workers' argument on the trade-offs in economic opportunity costs stemming from multinational investment. The sources of funds for investment were twofold: equity in the form of retained earnings, which might imply some internal corporate trade-offs in terms of the investment destination but still represented a shift in funds to a different locale; and debt financing via loans from financial institutions, which represented a net gain for the country and sector targeted for investment.

State ownership and regulation

51. The Workers' spokesperson stated that since services such as water and energy constituted basic social needs and public entitlements, their provision should always be regulated. A regulatory system should cover prices, profit and reinvestment levels, service obligations and quality, technical and labour standards, equal access to services, and environmental issues. The United States provided one model of an open regulatory system with multiple participants. Such regulation, which needed to be founded on the democratic process, required that authorities at whatever level should ensure the following additional conditions:

52. The Workers' group viewed with concern interference from outside the country or sector in relation to privatization and the regulation of private utilities, a concern that was prompted by pressure, for example, from the World Bank and the IMF amounting almost to blackmail of governmental authorities. The poor quality and lack of access to services in Central and Eastern Europe, contributing to poverty and poor health, amply demonstrated the results of non-regulation in a transitional environment. Moreover, competition was not a guarantor of declining prices or other desirable outcomes of service provision and academic studies were beginning to show that, in the long term, mergers, takeovers and consolidation resulted in the control of main utility services by a small group of companies. For all of these reasons, a firm, transparent regulatory hand was needed.

53. The Employers' spokesperson agreed on a number of points: the need to eliminate bribery and corruption; interdiction of private monopolies; and adaptation of any regulatory framework to the changing market environment, be it a return to stricter or lighter regulation. Employers did not agree on prescribed areas for private ownership of utilities. The State should be free to restructure or privatize part or all of a service -- generation, distribution or supply -- according to market forces. Both the State and private companies should encourage competition as quickly as possible following a decision to privatize, while recognizing that it was not always possible to achieve immediately a non-monopolistic market. In the transition period, there was agreement on the need for a regulatory framework in which the regulator surveyed prices, efficiency and effectiveness of service delivery. However, this need would diminish, though not entirely disappear over time as competition kicked in with self-regulatory pricing mechanisms. In that case, the nature of regulation would likely change from a heavy-handed to a light-handed approach, as had occurred in the gas sector of Canada. Work was still required to assist many developing countries to establish the proper regulatory framework and, in that connection, many different models could be recommended, not just those where privatization had first occurred. Generally speaking, the Employers wished to underline that once a utility went private, it might still be considered a public service in the generic sense of the term, with obligations for companies to act as responsible corporate citizens as with any industry or service, but it was no longer a public utility. The Workers' spokesperson rejected the notion that water, gas and electricity were no longer public utilities.

54. Comments from the Employers' group reinforced the previous points. As with any private sector, competition among utilities in the form of alternative suppliers of services was more effective than a reactive regulatory force. Australian trade practices legislation could be mentioned as an example of the general legislative coverage which obviated the need for a specific regulator in an industry or service. It should also be pointed out that the definition of public services was historically established but not immutable. There was no reason to consider that water, gas or electricity for example, historically considered public services, had a higher priority than food, clothing or shelter, historically considered to be private services. An Employer member questioned the source for the statement by the Workers on the poor quality of services and lack of regulation in the Central and Eastern European region. In Poland, for example, a privatization act and strong regulatory control prevailed. The country provided a good example of the positive benefits brought by the free market and privatization -- goods and services were more plentiful and of much higher quality than those available in the planned economy.

55. Government members (Egypt, France, Mauritius) affirmed the State's continual responsibility to furnish a strong regulatory framework on behalf of all citizens, which would monitor the vital services -- services for the public -- provided by private companies. Companies entrusted with these responsibilities had to be answerable to the State to ensure equal access for the whole population. The regulatory framework should be negotiated with all those concerned by a service in order to enhance its quality, and private monopolies should not be permitted to substitute for public ones. In the case of Egypt, long and careful study of other countries' experiences had persuaded the public authorities that privatization without regulation was not desirable. Regulation not only assured necessary state control but also assisted private companies to solve problems among themselves and better structure their operations. Telecommunications restructuring had gone well in Egypt, and a study of other country experiences in restructuring electricity, gas and water services, involving consultations with industry, consumers, academic and legal experts, would shortly be completed as the basis for an informed choice of policy most appropriate to the national context. Again, two factors would assume special importance in the choice: the social dimension; and the quality and accessibility of the service based on fair rates.

56. Summing up key points of agreement, the Chairperson noted the continual role of the State in restructuring, exercise of this role through effective regulation by means of a regulatory body, establishment of a regulatory framework and body according to national conditions and, as suggested by the Employers' group, adaptations of the framework according to the level of competition in service provision.

Promoting social dialogue and reflecting
the interests of consumers

57. The Workers' spokesperson argued that before privatization took place, a national framework and proper debate/consultation were crucial for decision-making. These should look at a range of options (including continued public control) and be open to negotiation. Debate should be democratic, transparent, fully informed, avoiding secrecy and subordination to shareholders. People affected should be consulted and their views taken account of. The European model for social dialogue worked in Europe, and there was no reason why it could not be extended elsewhere. In terms of civil society, the Workers considered they had a right to represent consumers, because they knew the industry very well and had a responsibility to speak on behalf of their fellow citizens.

58. The Employers' spokesperson responded that there had been a large debate in his group on social dialogue; it should not be over-prescriptive and had to be adapted to circumstances. The European model was perhaps transferable, perhaps not. In the broader context of consultation, the decision to privatize was not negotiable; consultation and discussion could happen and be taken into account, but governments had the final say. At the implementation stage, restructuring and transfer were clearly subject to negotiation, and were also covered by legislation and regulations. Privatization could be just one of a subset of macroeconomic measures, and governments had to act on such matters as fiscal deficit and financial incompetence in public utility companies, without being vetoed by trade unions in respect of choices facing sovereign governments. On dialogue with civil society, the Employers felt that there was a requirement to be good corporate citizens, but that it was inappropriate for either themselves or trade unions to speak on behalf of society -- that was up to consumers' groups.

59. Government members (Benin, Egypt, Hungary, Mauritius) saw social dialogue as essential. When governments took decisions, they had to consider many factors -- the social dimension, employment and other consequences -- and then move towards agreement with workers on social dialogue. The representative of the Government of Benin informed the Meeting that the World Bank had placed Benin's water and electricity utilities in the privatization portfolio, for implementation by the end of 1999, as a conditionality for structural adjustment loans. Trade unions were strongly opposed, consumers feared higher prices, and the Government was actively consulting the workers to determine their strategy, whether for partial or total privatization, in a context of social dialogue. The representative of the Government of Egypt saw social dialogue as a constant feature in his country. Indeed, the Minister of Manpower (a Cabinet member) had daily meetings with trade unionists, workers' representatives sat on the board of directors of public or privatized utilities and at least two meetings per year were held between the board of directors and trade unions, even when no restructuring or privatization was contemplated. Decisions were affected by the social dimension, price and quality questions, finances, international comparisons and evaluations.

60. Worker members stressed the importance of social dialogue, even in countries where democratic processes were weak or almost non-existent; in such cases, neither workers nor civil society were usually consulted. An example was given of an electricity utility in Asia (Pakistan) where rights had been taken away from 130,000 workers who were subject to unhuman working conditions; the military now controlled the service. The Workers' spokesperson appreciated the forward-looking Egyptian model of social dialogue and the frankness of the representative of the Government of Benin with regard to having to obey dictates of the World Bank that had been arrived at without consultation with the trade unions, consumers or society at large.

ILO priority action on privatization and
restructuring of utilities

61. The Chairperson announced that a draft resolution concerning future ILO activities in managing the privatization and restructuring of public utilities (water, electricity, gas), submitted by the Workers' group, had been referred to the Meeting by the Working Party on Resolutions, in accordance with article 14(2) of the Standing Orders, for consideration with a view to the possible incorporation of its substance in the record or conclusions on that section of the agenda item.

62. The text of the draft resolution read as follows:

63. The Employers' spokesperson identified as their first priority the collection of statistics to develop indices for the future, to allow the social partners to follow trends in the industry. These should be even-handed, short- and long-term data on the full costs and benefits. Education and communication programmes for companies constituted their second priority, especially in developing countries; these programmes would help them to learn from the positive and negative experiences of industrialized countries. Priority should not be given to issuing directives to individual countries, as the government was the primary decision-maker, and the judgement of whether it made correct decisions ultimately resided with the electorate.

64. Worker members recalled a number of UN and ILO meetings and declarations on this issue in recent years, and requested that the Governing Body and the Director-General promote social dialogue before, during and after the privatization and restructuring process. They specifically proposed an international forum to agree on codes of practice and procedures in this area. Furthermore, they invited the ILO to encourage all governments and relevant international organizations to accept a range of principles, obligations, procedures and standards, specifically incorporating core ILO Conventions and the ILO Declaration on Fundamental Principles and Rights at Work and its Follow-up (1998) as basic rules in all international financial arrangements in the sector. The Worker members also requested more research to monitor the effects of changes, in the short and long term, on issues of employment, human resources, trade union rights and the environment, with specific and detailed suggestions for funding programmes on ten substantive themes covering these issues in each region.

65. An observer, the President of the General Confederation of Trade Unions of the Commonwealth of Independent States, called for the ILO to exercise greater influence on governments and other authorities in relation to privatization and restructuring. In this connection, it would be an excellent idea for the ILO to set up a standing body to help with problems of restructuring public utilities, as they affected not only the livelihood of millions of workers in these industries, but also nearly every human being living on this planet. He also felt that greater links could be made with grassroots social organizations, in which workers were sometimes involved, dealing with specific and very serious problems relating to public utilities, as his confederation had done.

66. The representative of the Government of Argentina noted that his country had been considered as a model for Latin America, but felt that the ILO could assist his country and others with better statistics on the employment impact of changes (decline in public service employment and its relation to unemployment growth), and with advice and support services for small business creation, as job losers often did not know how to use effectively their lump-sum compensation.

67. The representative of the Government of Mauritius suggested that the ILO should hold a further meeting on this sector, taking account of new data and developments and reporting on positive and negative effects as the basis for remedial action. The ILO could also provide technical assistance to countries with no experience in this field who were in dire need of help with restructuring and privatization processes.

68. The representative of the Government of Egypt considered the Workers' proposals for ILO action to be very ambitious, some of them falling outside the Organization's mandate, while others perhaps contradicted the authority of governments. The World Summit for Social Development held in Copenhagen in 1995 and the WTO Singapore Declaration had both identified the ILO as the only competent body in this field, and welcomed the idea of an ILO forum on codes of practice.

69. In response to the proposals of the Workers' group, the Employers' spokesperson expressed reservations about the politicized form of social dialogue that the Workers had expounded, because it would be unacceptable in certain jurisdictions. The Employers felt that work on codes of conduct and multinationals was already being undertaken in the ILO, and they did not want an international forum on the matter to interfere with that. He stressed the need for information and statistics to be balanced, incorporating positive as well as negative developments, and pointed to a number of areas of agreement and disagreement with the Workers' group over the subjects which should be researched. Concerning the normative and advisory roles to be played by the ILO, the Employers' group suggested that the ILO should not be asked to step outside its mandate or request other agencies or governments to adhere strictly to ILO standards.

70. The Workers' spokesperson welcomed the very useful comments and observed that the two priority areas which the group had proposed -- social dialogue and standard setting -- were also the subject of two of the ILO's four newly announced strategic objectives.

Consideration and adoption of the draft report
and the draft conclusions by the Meeting

71. The Working Party on Conclusions submitted its draft conclusions to the Meeting at the latter's seventh sitting.

72. At the same sitting, the Meeting adopted the present report and the draft conclusions.
 

Geneva, 16 April 1999.

(Signed) Mr. A. Pierides,

 

Chairperson.

Conclusions on managing the privatization
and restructuring of public utilities
(water, gas and electricity)(14)

The Tripartite Meeting on Managing the Privatization and Restructuring of Public Utilities,
Having met in Geneva from 12 to 16 April 1999,
Recalling that the World Summit for Social Development in Copenhagen in 1995 included basic workers' rights in its conclusions and recommended a reinforcement of cooperation between all competent international institutions, including the UN and its specialized agencies, the World Bank and the International Monetary Fund,
Recalling that in 1996, the Ministerial Conference of the World Trade Organization in Singapore renewed the commitment to observe internationally recognized core labour standards and reaffirmed that the ILO is the competent body to set and deal with these standards,
Also recalling articles 20 and 25 of the UN Declaration of Human Rights,
Recalling the conclusions of the ILO's Joint Meeting on the Impact of Structural Adjustment in the Public Services (Efficiency, Quality Improvement and Working Conditions) (1995), the conclusions adopted by the ILO's Joint Meeting on Human Resource Development in the Public Service in the Context of Structural Adjustment and Transition (1998) and the conclusions of the Joint Meeting on Employment and Conditions of Work in Water, Gas and Electricity Supply Services held in 1987,
Further recalling the ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy of 1977 and the adoption in June 1998 of the ILO Declaration on Fundamental Principles and Rights at Work and its Follow-up;
Adopts this sixteenth day of April 1999 the following conclusions:

General considerations

1. Water, gas and electricity services have a vital role to play in the provision of basic services for the population, the growth of other economic sectors and more generally in the development of society as a whole.

2. The regulatory and structural changes in public utilities services since the Joint Meeting on Employment and Conditions of Work in Water, Gas and Electricity Supply Services of 1987 are very significant. Liberalization of electricity and gas provision in some cases has meant the gradual opening up of some of these services which were formerly supplied by national public or private monopolies.

3. The provision of water, gas and electricity supplies for all -- regardless of the type of ownership of the provider -- must be in the public interest. However, access to these services, particularly the provision of clean water, is still often inadequate and inequalities persist between countries and within countries. It remains a challenge throughout the world, especially in the developing countries, to ensure universal access at least to clean water, which is essential to human health and survival.

Privatization and restructuring methods

4. It is important to distinguish between the processes involving privatization and restructuring. Each of these terms can be defined and understood in a number of ways and, therefore, the concerns and benefits may be different.

5. Restructuring of a public utility can represent an alternative to privatization in terms of improving services. Where privatization takes place, it may be preceded by restructuring. Whether the option be restructuring or privatization, the participation of workers' representatives(15) in such processes, as well as transparency in information and procedures, should be taken into consideration so that there can be positive results for all.

6. Privatization cannot be a substitute for the State's responsibility for ensuring basic services, whether they be public or private. Also, public accountability is necessary for restructuring or privatization, to strengthen public utility services and prevent deterioration in quality of and access to services.

7. Once governments decide to proceed with privatization of public utilities, it is important for all parties that a structured and coherent plan and timetable be elaborated and implemented in accordance with national realities. This could include defining the scope of privatization, identifying the priorities and principles, undertaking general tripartite discussions and dialogue with all parties and stakeholders concerned. Such a process could provide a good basis for the development and implementation of legislation, sectoral agreements and agreements with investors. Consultations with workers' representatives at an early stage of the process should be an important consideration in the drawing up of such texts.

8. Restructuring and privatization of utilities are often part of broader economic reform programmes, making causal links even more difficult to establish. More data collection and research, including the development of indicators for data analysis, are required to measure and evaluate the experiences of restructuring and privatization of public utilities. In preparing for the data collection and research, the ILO should consult widely with governments, employers and workers' representatives on agreed criteria to ensure that the data collection is on a common basis and within common parameters.

9. Where corruption and bribery practices exist in the utilities sector, these hamper the development and delivery of efficient services and are condemned. Measures should be developed and enforced to outlaw such practices and ensure that restructuring and privatization take place within the normally recognized business parameters in a democratic and transparent framework.

10. Where international and national institutions provide support in terms of loans and investment for the development of utility infrastructure and services, such support should be extended equally to both private and public sectors.

11. A proper assessment of the benefits, effects and costs before undertaking restructuring or privatization can help to avoid problems arising from short-term political considerations. The range and type of options will vary depending on national and other circumstances and there is no one model that can be applied to different situations. Such an evaluation should be based on comparative assessments of different options and include provisions within the public sector. Lessons about the effectiveness of, benefits and problems arising from different approaches can also be learned from countries which have carried out extensive restructuring or privatization.

12. In developing national competition policy, the concept of a public benefit test could be useful to explore as a means of providing a framework for discussing potential costs and benefits before proceeding with restructuring or privatization of public utilities. Such a public benefit assessment could include financial and budgetary considerations and implications for economic and regional development, including employment, as well as environmental, social welfare and equity issues, implications for consumers, and the full range of labour issues, that is, employment levels, working conditions, industrial relations and occupational safety and health. Such a test must take into account a balanced approach and the full impact on the community and be carried out by a competent body.

Role of the government in terms of the employment
and social effects of privatization and restructuring

13. Governments have a crucial role not only towards the public in the provision of utility services, but also as employers when they decide to restructure or privatize as they are the owners of public utility enterprises. Governments decide to restructure or privatize, and so they should be accountable for driving the consultative process. When private utility enterprises decide to restructure, workers and their representatives should be consulted. Governments are also responsible for developing adequate regulatory and monitoring mechanisms.

14. The rapidity, extent and complexity of change in the utilities sector in recent years make it difficult to establish direct causal links between the restructuring and privatization of utilities, national economic, employment and service delivery indicators. However, it is clear that when public utilities are restructured or privatized there are often significant job losses.

15. Governments also play an important role in providing a social safety net particularly to employees affected by privatization and restructuring. The extent to which governments can provide such a safety net varies in accordance with the economic and political situation of the country concerned. They should develop, if required by the social partners, trust funds and other measures for retraining, reskilling and handling of redundancies in the first stage of restructuring or privatization and for which the new employer can be responsible later on. A registry of displaced workers could be kept and matched up with job opportunities in the labour market. Assistance can also be given to workers to find jobs or start up small businesses through the setting up of employment exchanges and providing labour market information. Agreements on reserving a percentage of the income from privatization for compensation packages and retraining for displaced workers are another means of mitigating negative employment and social consequences. The possibility for workers to acquire shares in privatized companies is sometimes available. Framework agreements and guidelines are important when dealing with downsizing and can also help address the problems created by unemployment.

Social dialogue in restructuring and
privatization of public utilities

16. The parties record that the term "social dialogue" does have broad and varied meanings worldwide. Social dialogue should take place at all appropriate stages of the decision-making process, including within the regulatory framework. Such dialogue should not be over-prescriptive, should be adapted to circumstances and should include particularly those affected by the changes, taking their views into account.

17. Social dialogue and a participatory approach to the labour-related aspects of restructuring and privatization, as well as to the actual design, planning, implementation and follow-up of restructuring can enhance the legitimacy of social partnership and also produce positive results for the enterprise and its services to consumers.

18. When a public utility is to be privatized, there should be discussion at the earliest appropriate stage between the government, the workers' representatives and the private employer on how to handle transfers and develop social safety nets. Once a utility is privatized, then it is the management of the utility, subject to the industrial relations system and labour laws in place in the countries concerned, to determine how to organize, for example, the consultation process and contracting out arrangements. Depending on the circumstances there are a range of practices, as for example maintaining jobs and collective agreements already in existence, as well as social benefits and workers' rights. In other situations, it is up to workers to decide to transfer voluntarily to the privatized utility. The experience with the European Directive on the rights of employees in the event of transfers is one of a range of examples of a means of safeguarding the rights of workers in the process of change.

19. A fundamental requirement of restructuring and privatization is that it is carried out in an open and transparent process involving all parties concerned without damaging commercial confidentiality. Care needs to be taken in this regard to ensure the representation of those most in need of utility services. Wide consultation and dialogue, including discussions on criteria for tendering and making information publicly available at an early stage, are important to ensure a democratic process.

Collective bargaining, remuneration
and working conditions

20. One of the effects of privatization and restructuring has been the subdivision of public utilities into different forms. This has sometimes resulted in replacing one collective agreement by several, either through a single bargaining unit or through different workers' organizations. Such trends could imply a fragmentation of collective bargaining and the formation of new collective bodies. At the same time, in restructuring and privatization, care needs to be taken so that the rights of workers to organize and bargain collectively are not diminished. Governments should have a role in monitoring legislation and practices surrounding the collective bargaining process. Such situations, however, also reflect the important role played by the industrial relations system of a country.

21. The effects of utility privatization and restructuring on remuneration and working conditions seem to be mixed. In some cases, there have been improvements for workers including remuneration increases but, in other cases, this has been accompanied by job losses and lower wages. Changes in wage levels and structures across countries cannot be attributed only to restructuring or privatization as a range of factors are involved. Safety and health could be jeopardized by undue stress on commercial gains, but there is also evidence that working conditions have improved in certain cases. What is important is that when privatization or restructuring is decided upon, changes affecting pay and working conditions should be properly negotiated and agreed.

Multinational utility enterprises

22. Reductions in jobs and wages should not be the main focus of multinational utility companies in improving productivity gains. Multinational utility enterprises must follow the labour and other laws of the countries in which they operate. These include, as the case may be, laws providing for the right of workers to organize and bargain collectively, as well as those which may permit or prohibit cross-subsidizing of other sectors of multinational operations from profits made from the utilities sector.

23. Consultations and agreements between workers' representatives and particular public and private multinational utility companies could contribute to ensuring a positive impact of the activities of these companies on human resource management, labour relations and service delivery in the countries where they operate.

The role of the State and utility regulation

24. Both privatization and restructuring of public utilities and their operation require an effective regulatory framework. Such regulation would set parameters for prices and standards of service. The replacement of the public monopoly by a private monopoly should be avoided or if monopoly continues it should be strongly regulated. If and when true competition develops in a sector of the utilities, then regulation could be reviewed and eventually changed.

25. Effective regulation includes four key elements -- transparency, affordable costs for consumers, consultation and profitability. Utility and government information and methods must be open for review by industry, workers' representatives and the public. When utilities are privatized, the State should still retain a responsibility in ensuring universal access to water, electricity and gas services at affordable prices.

Future ILO action

26. The Meeting asks the Governing Body and the Director-General to encourage dialogue on proposals for restructuring and privatization of public utilities and to encourage and facilitate tripartite discussions among representatives of governments, workers and employers at the national level.

27. The Meeting invites the ILO to encourage governments and relevant international organizations to examine the implications for employment, wages, workers' conditions and rights at work, of restructuring and privatization of public utilities; to observe the importance of public service obligations, including obligations on fundamental principles; to ensure that there is information-sharing on public sector provision and financing options when restructuring or privatization is under consideration; and to ensure that regulation is based on transparency, information and consultation.

28. The Meeting calls on the ILO to encourage relevant international agencies to bear in mind the social dimension, especially the principles and rights stated in core Conventions and the ILO Declaration on Fundamental Principles and Rights at Work and its Follow-up (1998).

29. The Meeting requests the ILO to collect a comprehensive range of statistics or indices in order to analyse and monitor the full costs and benefits of privatization and restructuring of public utilities and the effects on the environment, employment, management of human resources and the rights of workers' organizations. These should include data relating to a range of economic indicators, as well as information based on country surveys. Special attention should be given to analysing the impact of privatization on employment and unemployment and the means by which redundant workers can be helped to become productive.

30. The ILO should communicate with its Members in providing this data as well as information about the various experiences, both positive and negative, of privatization and restructuring so as to better assist countries, especially developing countries, in assessing their own situations in regard to the advisability, methods and effects of privatization and restructuring of public utilities. The ILO should provide technical assistance to countries which have no or little experience of privatization or in restructuring of public utilities.

31. The ILO should fund programmes in each region to examine both the positive and negative impact of restructuring and privatization on employment, wages, working conditions and labour costs in the water, electricity and gas sectors, as well as the impact on women, ethnic minorities and other vulnerable groups in society. Such programmes should identify the effects on industrial relations practices, membership of workers' organizations and collective bargaining and compare the effects of different systems of regulation on employment levels, pay and conditions, safety and health, profit margins and rates of return, and levels of price and services to the public.

32. The ILO should conduct research on codes of practice on restructuring and privatization in the utilities sector and refer the research findings to an appropriate tripartite body for further action.

Part 2.
Resolutions

Consideration by the Working Party
on Resolutions of a draft resolution

At its fourth plenary sitting, the Meeting set up a Working Party on Resolutions, in accordance with article 13, paragraph 1, of the Standing Orders.

The Working Party, presided over by the Chairperson of the Meeting, consisted of the Officers of the Meeting and three representatives from each of the groups. The members of the Working Party were:

Officers of the Meeting

Government members

Employer members

Worker members

The Working Party had before it one draft resolution which had been submitted by the Workers' group and which was entitled Draft resolution concerning future ILO activities in managing the privatization and restructuring of public utilities (water, electricity, gas). The Working Party decided by consensus that the draft resolution handed in related to the agenda item and, in accordance with paragraph 2 of article 14 of the Standing Orders for sectoral meetings, referred it to the Meeting for consideration with a view to the possible incorporation of its substance in the record or conclusions on the appropriate section of the agenda item.

Part 3.
Other proceedings

Panel discussions

Public utilities: What kind of regulatory framework?
 

Chairperson:

Mr. S. Mead, Chairperson of the Workers' group

Speakers:

Mr. G. Palast, Utility Regulation Expert, United States
Mr. M. Paddon, Director of the Public Sector Research Centre of the University of New South Wales, Sydney, Australia
Ms. V. Kulacoglu, World Trade Organization, Geneva
Mr. R. Hernández Pulido, International Labour Standards Department, ILO, Geneva
Ms. L. Lennard, National Consumer Council, United Kingdom

Mr. Palast said that there was more agreement than disagreement on the practical aspects of the regulation of public distribution services. Everybody recognized the need for regulations, but what exactly did they mean? Taking the specific examples of electricity distribution enterprises in the United States and in Brazil and of a water supply enterprise in the United Kingdom, Mr. Palast explained that what was important was not the number of people employed or the strategy of the enterprise so much as the way the sector was regulated. The example taken from the United Kingdom showed clearly that reducing the number of employees did not necessarily mean that prices dropped. Good regulation in these sectors needed to be transparent and democratic. Generally speaking, the most successful enterprises were those that provided their services in a transparent regulatory framework where the clients had access to all relevant information. One could not talk about being more or less transparent. There had to be no secrets at all, and it was up to the enterprises themselves to make their files available to the public at large, as in the United States and Canada. But transparent and democratic regulation was the product of a difficult