Committee on Employment and Social Policy
SIXTH ITEM ON THE AGENDA
Relations with the Bretton Woods institutions
1. The Committee will recall that the last two papers on this subject, which were submitted to it in November 1996 and November 1997,(1) outlined the widening scope and the broad objectives of the ILO's dialogue with the Bretton Woods institutions, and reported on developments in this area prior to November 1997.
2. The impact of the financial turmoil in Asia, which more recently has developed in the Russian Federation, and which is having wide-ranging effects in many other countries, has clearly demonstrated the importance of this wider institutional dialogue between the ILO and the Bretton Woods institutions, going beyond structural adjustment to include broader economic issues relating to globalization, economic growth and related labour market and social issues. It has underlined the importance of the ILO's key role in promoting job-creating economic policies and measures, short- and long-term employment strategies, fundamental labour standards, and tripartite participation.
The United Nations system
3. Ongoing initiatives for United Nations reform, and the serious financial and economic disturbances and social pressures stemming from them, which prevailed in late 1997 and have continued throughout 1998, have brought renewed pressure to bear on the international financial institutions and the UN system and have provided a strong impetus for greater cooperation between the multilateral institutions. This pressure has been felt keenly with respect to the Bretton Woods institutions and the United Nations, and particularly with respect to these institutions and the ILO.
4. In the UN system, a special ECOSOC High-Level Meeting with the Bretton Woods institutions on "Global Financial Integration and Development and Recent Issues", involving senior officials of the United Nations and members of the Development and Interim Committees, was organized in New York in April, with the ILO participating as an observer. There is considerable and continuing interaction between ILO officials and the Bretton Woods institutions in the context of General Assembly, ACC and ECOSOC initiatives in such areas as follow-up on the World Summit for Social Development and other global conferences, human rights, the role of micro-credit in the eradication of poverty, and the "New Agenda for the Development of Africa". In particular, the ILO is continuing to participate actively in ACC efforts to promote cooperation between the Bretton Woods institutions and the UN system.
5. At the ECOSOC High-Level Segment in July, the Director-General, citing the adoption of the Declaration on Fundamental Principles and Rights at Work and its Follow-up, stressed the need for a consistent approach so that dangers inherent in economic progress devoid of any social dimension could be mitigated by respect for fundamental values and principles at work. He appealed to the United Nations system as a whole, and to the World Bank and the International Monetary Fund in particular, "to ensure that we all speak with one voice and incorporate the fundamental values enshrined in the Declaration into our policies and programmes", and emphasized that all the organizations, without seeking to go beyond their mandates, should be aware of the Declaration's emphasis on the promotion of fundamental rights as a crucial factor in broad-based sustainable development, and should avoid doing anything that would impede its implementation.
6. The UN Staff College project at the Turin Centre is also providing a significant forum for discussion of the issues and modalities of coordination and cooperation, as illustrated by the participation of ILO and World Bank staff in its workshop on "Economic reform in developing countries and the role of international institutions", held in Turin in September, as well as a strong delegation from the IMF.
Impact of the financial crisis on policy dialogue
7. With respect to the ILO's direct relations with both the World Bank and the IMF, the main thrust of the institutional dialogue this past year has been to promote acceptance of core ILO standards and established principles concerning social dialogue. The social impact of the financial crisis has inevitably drawn a major focus of attention to these concerns in the context of a coordinated response to the crisis. In accordance with the conclusions of the ILO's Twelfth Asian Regional Meeting (at which the IMF was represented), the two Bretton Woods institutions (as well as the Asian Development Bank) were invited to play an active role in the High-Level Meeting on Social Responses to the Financial Crisis in East and South-East Asian Countries (Bangkok, April 1998).(2) Both institutions sent senior representatives and contributed substantively to the debate. The Meeting was organized in such a way as to provide them and the ILO constituents with an opportunity to engage in a meaningful dialogue on questions of key concern.
8. The commitment of both the Bank and the Fund to continuing this dialogue has been clearly demonstrated. Direct contacts by the ILO were made early in 1998 to encourage both the Bank and the Fund to coordinate their efforts with the ILO. A subsequent visit to ILO headquarters in April 1998 by a delegation led by the World Bank's Vice-President for East Asia and the Pacific, which met the Director-General and exchanged views and information with a group of senior ILO staff, concluded with a commitment to the continuing exchange of information, consultations and cooperation. This was followed by further visits to the ILO in June by a senior regional policy adviser (who had represented the Bank at the High-Level Meeting in Bangkok) and by the Director of the Bank's Social Protection Team, for more detailed follow-up. For example, joint planning and preparations are under way for a regional workshop in early 1999 on job creation and related employment issues.
9. With respect to East and South-East Asia, the outreach between the World Bank and the ILO at the headquarters level has been parallelled by other similar initiatives in the region. Bank missions to the Republic of Korea, Indonesia and Thailand, in particular, have consulted the ILO both at headquarters and in the field, and ILO country objectives, action plans and relevant reports have been made available. With respect to the Republic of Korea, the ILO also cooperated in a seminar organized by the Bank in Seoul on labour market issues, and further discussions are planned in Geneva for mid-October. Concerning Indonesia, the ILO participated actively in the Donor Coordination meeting organized by the Bank in Washington in April and, with the cooperation of the Bank, circulated a paper at the Indonesia Consultative Group in Paris in July. The ILO and the Bank are also cooperating in Indonesia in the field of gender and development and are collaborating on a related survey of factory workers laid off as a result of the financial crisis. Other areas of cooperation include labour-based infrastructure works (building on substantial previous ILO-World Bank cooperation in this field in Indonesia), industrial relations and labour law, civil service reform and child labour. The ILO Direct Contacts Mission to Indonesia in August had fruitful consultations on these matters with the World Bank resident office in Jakarta. In Thailand the focus of ILO-Bank discussions is on employment and related issues such as social security, employment services, job creation schemes and small enterprise development, based on the ILO's national action plan designed to address the social and labour consequences of the financial crisis in Thailand.
10. As the financial crisis has spread, similar concerns about coordination have arisen elsewhere.
11. The strengthening of the ILO Area Office in Moscow, and the recent establishment of the Eastern European and Central Asia Multidisciplinary Advisory Team (ILO/EECAT) in Moscow has strengthened the ILO's capacity to respond quickly in relation to the financial crisis situation in the Russian Federation, and the ILO team has worked intensively with the Government and the social partners there. In March, the ILO and the Ministry of Labour and Social Protection, together with representatives of the social partners, agreed on a joint Programme of Cooperation for the period 1998-99 with consolidation of the rule of law, employment promotion and reform of social protection at its core. The World Bank, backed by IMF agreements with the Government, has approved a major portfolio of social sector loans to finance structural reforms which cover employment and labour market issues, a broad range of social protection measures including unemployment insurance and pensions reform, and reforms to the Labour Code. The Ministry of Labour and Social Protection, noting the degree of correspondence between the ILO's and the World Bank's planned programmes of cooperation, has specifically drawn the World Bank's attention to the importance it attached to the need for close cooperation by the ILO and the Russian authorities with other international organizations working in the economic and social fields, and has requested the Bank to explore the possibility of joint activities.
12. For its part, the IMF has regularly consulted the Office and obtained relevant ILO technical studies, reports and data, in preparation for its missions to the affected countries. It also obtained up-to-date status reports from the Office on the fundamental standards situation in each country, for consideration during its country negotiations. In this regard, the executive heads of the two organizations were in direct communication on several occasions. In keeping with the agreed practice since November 1995, the IMF has continued to provide the ILO with the opportunity to comment on its World Economic Outlook, a dominating theme of which during this period has been the Asian financial crisis. The principal author of this key IMF report was part of the IMF's delegation to the High-Level Tripartite Meeting.
Policy dialogue: Ongoing priorities for cooperation
13. The more general priorities for cooperation with the World Bank which were established during the ILO high-level mission to the Bank in 1997,(3) and which were reinforced by President Wolfensohn's visit to the International Labour Conference in June 1997, have served as the basis for a series of policy initiatives in the area of core labour standards and social dialogue. A one-day technical meeting on core labour standards was organized by the ILO for Bank staff in Washington in May with the objective of improving their understanding of the core standards and the operation of the ILO standards system, and thereby encouraging enhanced consistency between Bank operations and policy advice and these standards. The ILO team delivered a presentation on the seven fundamental standards supplemented by a special emphasis on social dialogue. The presentation emphasized that, as fundamental rights, these standards did not require an economic justification. Bank staff gained a clearer understanding of the content, role and relevance of ILO core standards and of the tripartite process, but continued to stress the legal interpretation of its economic mandate, stressing the overriding need for an economic justification for its actions. For these reasons the Bank found it easier to accommodate aspects of standards related to child labour, forced labour and gender on the basis of an economic rationale, but had more difficulty with regard to discrimination issues on grounds other than gender, and in relation to freedom of association and collective bargaining.
14. One should note that some important practical progress with respect to fundamental labour standards has already been made within the World Bank group where, in a decision last April related to the approval of the Multilateral Investment Guarantee Agency (MIGA) capital increase, the Board of Directors adopted a common policy for MIGA and the International Finance Corporation (IFC), which required that MIGA and IFC may not support projects that use forced labour or harmful child labour, and also that projects should comply with the national laws of the host countries, including those that protect core labour standards and related treaties ratified by the host countries.
15. A similar ILO presentation on core standards and social dialogue was also organized in Washington at the IMF. This was a well-attended session where the Fund spokesperson strongly endorsed the ILO core standards. The objective of this technical mission was somewhat different: it was intended to establish a better understanding of the standards and how they are interpreted in the ILO framework, in order to facilitate a consistent approach by the Fund in its readiness to support all of the core ILO standards.
16. In order to broaden the policy dialogue at the highest institutional levels, a high-level event at the World Bank is being planned for late October. This will involve the personal participation of the Director-General, the President of the Bank and senior staff from both institutions. The adoption of the ILO Declaration on Fundamental Principles and Rights at Work and its Follow-up by the Conference in June will provide a strong foundation for this event, but issues related to employment and social dialogue will be covered as well. The IMF is expected to participate in parts of this event as well.
17. The importance of social dialogue and tripartite participation has been consistently stressed by the ILO in its interactions with the Bretton Woods institutions. The World Bank has over the past year clearly strengthened its efforts to engage in a dialogue with the international trade union secretariats, and appears to have consulted trade unions more frequently during country missions; this was evident during its recent missions to South-East and East Asia. Furthermore, the Bank, the IMF and the ILO all sent senior representatives to the ICFTU-APRO Economic Forum for East and South-East Asia. This Forum provided an excellent opportunity for a relevant exchange of views. With respect to Africa, the tripartite seminar on labour law reform in French-speaking West African countries, which was jointly organized by the ILO and the Economic Development Institute (EDI) of the World Bank, and was reported to the Committee last year,(4) was followed up in March by a seminar for labour leaders from French-speaking West African countries. This was organized by the EDI and the IMF, together with the ICFTU, but the ILO was not present. The Bank has also strengthened its dialogue with trade union representatives as part of its dialogue with civil society under the Structural Adjustment Participatory Review Initiative (SAPRI). An ILO representative participated in the SAPRI Opening National Forum in Esztergom, Hungary in June 1998, and is likely to participate in a number of other national forums under the SAPRI programme. ILO offices in the field have been requested to keep in touch with ILO constituents concerning SAPRI activities in countries where this programme is active.
18. As part of its efforts to reach out to civil society, the World Bank has also endeavoured to engage in a dialogue with employers and representatives of business. Its contacts with the IOE were initiated in relation to the tripartite seminar in Washington on promoting a policy dialogue on labour issues which had been organized by the EDI in cooperation with the ILO in 1996.(5) The Bank also works with the private sector through the activities of the Multilateral Investment Guarantee Agency (MIGA) and International Finance Corporation (IFC), as well as through its Private Sector Development Department and related network. A dialogue has been initiated with the Bank on its cooperation with business, and in particular the Bank's "Business Partners for Development" programme.
19. The World Bank's dialogue with trade unions and employers is one part of its newly emphasized dialogue with representatives of civil society, including non-governmental organizations. In a related action the ILO was consulted and provided comments on a draft World Bank Handbook on Good Practices for Laws Relating to Non-Governmental Organizations. The pattern is similar with the IMF, which has been making an effort to engage in a dialogue with trade union representatives. The ILO will continue to maintain close liaison with its social partners with respect to their dialogue with the Bretton Woods institutions, and will continue to promote the appreciation and acceptance by both the Bank and the Fund of the fundamental concepts in relation to tripartite participation and social dialogue, in accordance with ILO standards and established practice.
20. Child labour ranks high among the other agreed priority areas for cooperation with the World Bank. The release of the Bank's internal position paper Child labor: Issues and directions for the World Bank in November 1997 opened the door to more open dialogue. ILO officials, including IPEC staff participated in a round table and a seminar on child labour organized in Washington by the Bank in January and in March respectively; the Bank has supplemented this by technical consultations and information sharing. Agreement has also been reached on a joint ILO-World Bank-UNICEF research project on "Child Labour and Globalization". The ILO-World Bank dialogue on child labour will continue, and there is expected to be greater emphasis on mutual support at the country level.
21. As regards gender issues, progress is being made in two specific areas, as reported to the Committee last year.(6) Effective cooperation between the ILO and the World Bank contributed to the development of the ILO's Action Plan on Social Funds: Employment and Gender Dimension. This constructive cooperation, with particular reference to gender and employment, is continuing with the evolution and development of social funds as a mechanism to combat poverty, and with the possibility of developing joint guidelines. The joint ILO-World Bank study on globalization, economic reforms, labour market legislation and women's employment in the context of export processing zones, which had encountered financing problems, is making progress. One of the Bank's two country studies, on Mauritius, has been completed and the two ILO country studies on Malaysia and Sri Lanka are now under way. The Bank also actively participated in the ILO Tripartite Meeting on Export Processing Zones-Operating Countries (Geneva, 28 September-2 October 1998).
22. The joint ILO-World Bank study on current issues in vocational education and training,(7) work on which was completed in 1997, was published by the Bank as a set of joint country studies and a synthesis report. This will also be published in book form in due course.
23. Institutional dialogue on social security and pension systems reform is continuing both at headquarters and in the field. The World Bank and the IMF participated in the ILO-OECD meeting in Paris on pension reform in December 1997. The World Bank also participated in ILO regional consultations concerning the pensions policy publication to be published by the ILO later this biennium. At the working level, the ILO and World Bank modelling experts are in constant contact.
24. There has been sustained dialogue and cooperation with the Bank in the areas of small enterprise development and micro-credit. The ILO continues to play an active role, along with the Bank, in the Consultative Group for Assistance to the Poorest (CGAP), and in both the Committee of Donor Agencies for Small Enterprise Development and the Donors' Working Group on Financial Sector Development, as well as in an inter-agency meeting organized to follow up on the Micro-Credit Summit. Under the Committee of Donor Agencies, the World Bank and the ILO have collaborated closely in the publication of a set of guidelines for donor-funded interventions in business development services for small and medium enterprises, and the World Bank, the Inter-American Development Bank and the ILO are working together in preparing a conference on best practices in small business development, to be held in Brazil in March 1999. Technical field programmes in small enterprise development and in social finance have enabled effective field-level collaboration with the World Bank in the field testing of innovative programmes in small business development, and in relation to social funds, the impact of financial liberalization on the poor, and the development of mutual finance systems.
Policy dialogue through meetings and related events
25. Both the Bank and the Fund sent representatives to the International Labour Conference in June. The plenary statement by the Bank's representative dwelt on the position of that institution in relation to fundamental labour standards and more broadly to the issue of human rights in general. For its part, the Office again sent an observer delegation to the 1998 Annual Meetings of the Boards of Governors of the Bank and Fund. At the invitation of both the Bank and the Fund the ILO participated in seminars on "Labor standards: Who really benefits?" and "Economic policy and equity", which formed part of the series of seminars organized in conjunction with the Annual Meetings.
26. The ILO's participation in the World Bank-Canada Conference on Knowledge for Development in the Information Age, Global Knowledge '97, was reported to the Committee last year.(8) Subsequently, the ILO sent a representative to the Global Knowledge Partners follow-up meeting in New York in November 1997; from April to June, together with the International Institute for Labour Studies and in cooperation with the EDI, the ILO successfully organized and convened, through the Internet, a Virtual Conference on the impact of information technology on jobs and work. The ILO also acted as moderator for this Conference, which concluded at the end of June, and which attracted widespread participation. The ILO Virtual Conference team also participated in the June Global Knowledge Partnership meeting organized by the EDI in London, reporting on the progress of the Virtual Conference and participating in the planning for Global Knowledge II, which is planned to be held in Malaysia in late 1999 or 2000.
27. The ILO actively participated in a number of other meetings organized by the Bank. Several ILO staff participated as panellists in the Bank's Human Development Week seminars in Washington in March, on the subjects of vocational training, disabled workers and child labour. The Bank also invited the participation of an ILO official in a seminar in Washington on "Lessons from Privatization" following previous cooperation on this subject. Other World Bank meetings where ILO staff have actively participated during the past year included the World Bank-Asian Development Bank Asia Development Forum entitled "East Asia: The Unfinished Agenda" which was held in Manila; an international conference on "Active Labor Programs: Design and Impact" organized in Antalya, Turkey, by the EDI in cooperation with the Government of Turkey; a conference on "Financing Health Care and Old Age Security", organized by the World Bank and the Institute of Policy Studies in Singapore; and three World Bank workshops in Washington, including a preparatory workshop on labour market issues in Latin America and the Caribbean, a workshop on "Gender in the Millennium", a workshop on foreign direct investment and poverty alleviation organized by the World Bank with the United Nations Development Programme and Harvard University, and a workshop on social exclusion.
28. ILO staff also participated in an IMF meeting on "Economic Policy and Equity" in Washington, and the Worker Vice-Chairperson of the Governing Body participated as a panellist in an IMF meeting in Washington entitled "Trade liberalization: How should the agenda read?".
Cooperation at the country level
29. New World Bank-financed project activities are in preparation or active in a number of countries in Africa, in Cameroon (social security), Mali (training), Lesotho and Sierra Leone (infrastructure development), and there is continuing active cooperation in the development of the small enterprise development, employment promotion in infrastructure, and micro-credit subprogrammes of the Social Transformation Fund in Uzbekistan. The ILO has also participated in a World Bank project preparation mission to Argentina on labour reform in the teaching profession, a mission to India on credit cooperatives in the context of a review of financial system reform, and a mission to Jordan on cooperative sector restructuring.
30. As regards job creation through infrastructure development, the ILO's technical programme of advisory support, information services and training for labour-based infrastructure planning, construction and maintenance (ASIST), which is operational in South-East Africa and Asia, is providing a solid framework for effective cooperation with the Bank in optimizing sustainable employment in the construction and infrastructure sectors in Africa and Asia. An ILO technical programme in the same field in Latin America is providing a basis for similar effective cooperation in the Andean countries. Strong cooperation with the Bank is also taking place in relation to the ILO's project to provide advisory support to infrastructure works and training for employment promotion and enterprise development in Africa (ACTIF), working in cooperation with the AFRICATIP programme (Agences d'Exécution de Travaux d'Intérêt Public pour l'Emploi), which operates in Benin, Burkina Faso, Mali, Mauritania, Niger, Senegal and Togo.
31. Country-level dialogue with the Bretton Woods institutions has therefore continued to be stressed. This is by definition a highly decentralized activity, where a significant effort is required to maintain momentum. There has been continued improvement with respect to the IMF, since the executive heads of the IMF and ILO each issued instructions on mutual institutional cooperation to their respective staffs in early 1996 following the Director-General's meeting with the Interim Committee in October 1995. Discussions cover social dialogue, employment, labour market, wage and social security issues. Both institutions are monitoring progress at the headquarters level and reinforcing field initiatives.
32. With respect to the World Bank, experience has not been so consistent, with the degree of cooperation varying more substantially from place to place. This is in part attributable to the different function of the World Bank as compared to the IMF: where the IMF focuses on ensuring the financial stability of a globalizing economy, the Bank's mandate is to provide financing for economic and social development. It is both larger and more decentralized than the IMF, and therefore ILO relations with the Bank are more numerous and diverse. The nature of the development agenda in each country should greatly influence where cooperation is most essential, and a proactive effort by both the ILO field staff and ILO constituents continues to be important with respect to both the Bank and the Fund, but with particular emphasis in the field on development initiatives involving the Bank.
33. Finally, opportunities for dialogue with both Bretton Woods institutions have been strengthened by the greatly increased availability of information as a result of new information disclosure policies and their growing use of the Internet to publish and disseminate information. The ILO is closely monitoring this information and sharing it with the field structure.
34. The IMF is now publishing information concerning its Article IV consultations with governments, and the approval of Extended Structural Adjustment Facility (ESAF) loans, as well as other financing arrangements. The IMF, with the agreement of governments, is also making available with increasing frequency its ESAF Policy Framework Papers, Memoranda of Agreement and Letters of Intent, which previously had been unavailable. The availability of such information permits the ILO to see the outcome of the IMF's negotiations and policy dialogue with governments, including the structural reform agenda, which often includes planned reforms related to labour markets and employment policies, labour codes, social security and pension systems, in a context where traditionally the implementation of such reforms has been closely linked to World Bank operations. The availability of this information strengthens awareness of the role that the ILO should play in the policy formulation and reform implementation processes. It also provides the opportunity for the ILO, in consultation with its constituents at the country level, to play a more proactive role.
35. Timely and comprehensive publishing by the World Bank of information on regional and country-level activities and new project data is also providing a basis for improved dialogue, coordination and cooperation. The Bank's lending for structural reform is linked closely to a government's IMF-based reform agenda. Experience has demonstrated that when such lending has significant implications for employment or involves the design and implementation of reforms in areas such as employment and labour market systems, labour codes, labour administration, social security and pensions, the involvement the ILO cannot be taken for granted, even on the key issue of labour code reform. The decentralized structure of the Bank and the broad range of sectors in which it operates require the ILO to be active at the field level to reinforce the institutional commitments to enhanced cooperation. It is the priority of ILO staff to bring the influence of the ILO to bear in such situations, but the positive support of the ILO constituents in the field is an essential prerequisite.
Geneva, 8 October 1998.
3. GB.270/ESP/3, paras. 6-9.
4. GB.270/ESP/3, para. 27.
5. GB.267/ESP/2, para. 27 and GB.270/ESP/3, para. 16.
6. GB.270/ESP/3, paras. 14 and 18.
7. GB.270/ESP.3, para. 17.
8. GB.270/ESP/3, para. 14.