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GB.276/ESP/4/2
276th Session
Geneva, November 1999


Committee on Employment and Social Policy

ESP


FOURTH ITEM ON THE AGENDA

Economic and financial crises:
ILO policy and activities

Report on the Informal Tripartite Meeting at the Ministerial Level
on Economic and Financial Crises -- ILO Action
(Geneva, 9 June 1999)

Contents

Introduction and summary

Institutions

Policy objectives

Resources

Advice and action programmes


Introduction and summary

1. The Meeting was chaired by Mr. Alhaji Muhammad Mumuni, Minister of Employment and Social Welfare of Ghana and President of the 87th Session (1999) of the International Labour Conference.

2. Mr. Somavia, Director-General of the ILO, introduced the topic of the Meeting and Mr. Hultin, Executive Director of the Employment Sector, summarized the discussions. Twenty-seven ministers and other representatives of governments, as well as workers' and employers' organizations addressed the Meeting.

3. The Meeting was convened to discuss the ILO's work in relation to economic and financial crises and was partly based on the discussions and conclusions of the Governing Body Symposium on the Social Impact of the Asian Financial Crisis held from 19 to 20 March 1999.(1)  Highlights of this Symposium were also discussed in the ILO Director-General's Report to the International Labour Conference, Decent work.(2) 

4. Apart from providing a structured review of key topics and reflecting the views of different participants, this Report aims at identifying issues that need to be elaborated upon in the future work of the ILO.

5. The discussions at the Meeting can be grouped under three themes --

6. A number of Workers' representatives expressed their approval for the establishment of institutions with supranational powers (Economic Security Council (ESC), Tobin tax). Several speakers wanted the ILO to be involved in the decision- making process of international financial institutions, and all speakers supported better coordination between international institutions dealing with various aspects of financial crises. Securing the social aspect in the international institutional set-up was considered crucial by all speakers. It was stressed that women should be better represented in international institutions.

7. Several speakers from Africa urged the ILO to give high priority to the relief and cancellation of international debt in developing countries. They explained how the burden of debt -- originating from colonial times and inherited from non-democratic governments -- had aggravated the democratization and restructuring process, and hence had made societies more vulnerable to political and financial crises. Other speakers also addressed the need for restructuring and democracy to avoid financial crises.

8. Opinions on the promotion of social dialogue varied somewhat from the Workers' and Employers' points of view. Workers' representatives underlined that it was essential for social dialogue to be permanent and not something that suddenly appeared after a crisis: it should be holistic, and cover all aspects of the labour market. The primary purpose of such dialogue was to secure workers' rights, decent working conditions and economic safety for the unemployed. According to Employers' representatives, the primary purpose of social dialogue should be to facilitate the adjustment to changing markets in the world of work in order to remain competitive, instil confidence, and create new jobs and prosperity, resulting in improved social and living conditions.

9. The majority of speakers urged the ILO to initiate the establishment of international guidelines and to act as a forum, or help in the creation of forums, where relevant actors could agree on international frameworks and guidelines concerning debt, employment and social policies.

10. Many Government representatives requested the ILO to go one step further and develop employment strategies, either global or regional strategies or strategies for individual member States. Employers' representatives stressed the importance of enterprise development in these strategies. However, not all participants supported the suggestion on international employment strategies.

11. The ILO's advice on social and employment policies was highly appreciated by participants. However, it was suggested that technical assistance was further needed in the areas of trade union capacity in social dialogue, enterprise management and productivity; the ability of governments and civil services to widen their horizons in social and labour matters; and linkages between the formal and the informal sectors, regional integration, etc.

12. The ILO was also urged to conduct research and analysis to identify the economic causes, effects and moral consequences of economic and financial crises and to develop case studies on the implementation of international labour Conventions and Recommendations and on social safety nets.

13. As a result of the limited time for discussions, comments were kept at a general level. Speakers did not elaborate on the idea of the ESC or the Tobin tax (implementation, administration, collection and distribution of the tax revenue). The Workers' representatives did not elaborate on the questions concerning resources at the international, national and/or enterprise level for social dialogue, or on the desired social architecture that they believed should precede structural adjustment. Employers' representatives, who had argued that wealth created by enterprises must precede the creation of social architecture, did not elaborate on the questions of wealth distribution at the international, national and/or enterprise level. Speakers who had requested ILO studies on the causes and effects of financial crises did not refer to the missing elements of existing research that needed to be elaborated upon.

Institutions

Powers of international financial institutions

14. A difference of opinion emerged on the desirable powers of international financial institutions: some believed that financial institutions could control and change the functioning of financial markets, while others considered the influence of existing international institutions already too powerful.

15. The issue of an Economic Security Council (ESC) was raised by Mr. Jonsson, Workers' adviser of Sweden.

16. Mr. Duron, Workers' representative of Honduras, called for "a new international financial architecture which can control or radically change the behaviour of worldwide financial markets" and suggested "the Tobin tax on short-term capital flows and speculative money operations". He added that it was "fundamental to confront all market players with the cost and consequences of their actions".

17. Mr. Duron referred to the Merill Lynch and Cap Gemini report which explained that "despite the financial crises, the richest countries increased their wealth by 12 per cent last year and the rich countries of Asia and Latin America, or rich people living there, had protected their capital by exporting it and had then reimported it by means of fixed-income securities".

18. Mr. Hultin noted that the lack of transparency was one problem that contributed to crises, and that global governance resulted logically from this lack of transparency.

19. A number of participants considered the powers of the IMF and the World Bank to be too extensive. Mr. Adu-Amankwah, Workers' representative of Ghana, argued that "the international financial institutions have become international ministries of finance and economic planning for many African countries". According to Mr. Karani, Government representative of Papua New Guinea, "the IMF and the World Bank appear to promote agendas which have no considerations of a given time or locality". He added that "the IMF and World Bank have been pushing for reforms and changes and other terms and conditions which we know have the potential for high social costs".

20. Even those participants who advocated a consolidation of powers between international institutions expressed dissatisfaction with the current policy of such institutions. Mr. Duron argued that "nearly all of the financial shocks of an international nature have occurred following an irrational movement by, or on the part of, the Bretton Woods system, whose main characteristic is the irrational behaviour of deregulated financial markets". "To put it more clearly" he added, "we cannot accept that speculation is rewarded by high interest rates and that capital (for this speculation) is guaranteed by means of the aid plans of the Bretton Woods institutions, while social dialogue and social policy have to clear up the debris which is left after searches for a quick profit".

21. Many participants seemed to share the belief that involving the ILO in financial decision-making at the international level would correct the perceived defects of both structural adjustment and coping with financial crises. Mr. Jonsson argued that the ILO had a central role in securing a social dimension both in policies relating to international financial institutions and governments.

22. Mr. Somavia explained the means available to the ILO to assist national authorities and organizations to reach adjustment programmes which correspond to national aspirations and preferences:

Coordination between international institutions

23. There was wide support for Mr. Somavia's view on the need for --

24. Mr. Somavia described current and future arrangements between the ILO, the IMF and the World Bank:

25. Participants referred to their recent experience with technical cooperation and financial aid received from the various international institutions and hoped that better coordination would eliminate the perceived shortcomings, which were incompatibility, inconsistency, sluggishness and imbalance.

26. According to Mr. Jatiya, Minister of Labour of India, the Asian crisis revealed that multilateral agencies dealing with social and economic issues were acting independently and were giving different policy prescriptions to national governments, without trying to harmonize the conflicting positions. He hoped that the ILO would "have a view of the design of the macroeconomic policies at the international level" and welcomed "the efforts of the ILO to have continuous dialogue and cooperation with the multilateral agencies promoting investment and trade".

27. Mr. Ahmed, Minister of Labour, Manpower and Overseas Pakistanis, stated that the international response to the Asian crisis was:

28. Apart from the imbalance between economic and social aspects, international action was also criticized for favouring the interests of rich countries. Mr. Zahran, Government representative of Egypt, insisted that international financial institutions should review the manner in which they promoted economic reforms in developing countries, which were vulnerable to rapid capital flows. He reminded participants that although industrialized countries spoke of the need for market economy, the liberalization of markets and privatization etc., they also spoke of imposing new conditions on their economic and social relations with the developing world in order to protect their own interests. Mr. Zahran urged for coordination between the ILO and other UN agencies to promote an integrated and global vision of the development process in conformity with the Declaration and Programme of Action adopted by the Copenhagen Summit.

Composition of international institutions

29. Women participants stressed the need to involve more women in international forums dealing with economic and financial crises, as women were more vulnerable than men to the social consequences of crises.

30. Ms. Dovydeniene, Workers' representative of Lithuania and Ms. Mayombo, Government representative of Gabon, pointed out that in Eastern Europe and Africa more women than men were affected by the social outcomes of financial crises, such as unemployment, atypical forms of work and poverty.

31. Ms. Kasungu, Workers' representative of the United Republic of Tanzania, requested the ILO to support women participation in ILO conferences. She stated that "Since participation of women is as important as capacitating women, we are requesting the ILO to initiate programmes to support the participation of women delegates in ILO conferences, because currently quite a number of women are left outside under the pretext that governments cannot pay for the delegates to come to these conferences."

32. A number of other participants focused on the need to strengthen international structures and organizations that supported female membership in society. Mr. Owuor, Employers' representative of Kenya, requested the ILO to consider strengthening rural organizations to assist women who comprised the majority of the population in rural areas in Africa. He suggested that forming cooperatives was one way to strengthen women's ability to survive in a hostile environment.

Policy objectives

Debt relief and debt cancellation

33. Speakers from Africa urged the ILO to give high priority to the relief and cancellation of international debt in developing countries. They explained how the burden of debt -- originating from colonial times and inherited from non-democratic governments -- had aggravated the democratization and restructuring process, and hence, had made society more vulnerable to political and financial crises. Other speakers also addressed the need for restructuring and democracy to avoid financial crises.

34. Ms. Missambo, Government representative of Gabon, pointed out that her country was still very dependent on two raw materials -- petroleum and wood. Although Gabon needed to invest in the production of refined goods, the reimbursement of debt reduced investment capacity and hence reduced the capacity to create jobs, which in turn had led to unemployment (especially youth unemployment) and poverty.

35. Mr. Machungwa, Government representative of Zambia, used his country as an example to demonstrate why many programmes in Africa were failing to achieve anything:

36. Mr. Adu-Amankwah, Workers' representative of Ghana, reminded developed countries that their past and present policies predisposed African countries to economic and financial crises:

37. Mr. Duron, Workers' representative of Honduras, and Ms. Kasungu, Workers' representative of the United Republic of Tanzania, elaborated on the issue of debt relief and cancellation. Mr. Duron spoke on procedure:

38. Ms. Kasungu urged the ILO to work within the international community to cancel international debt in Africa and to ensure that the funds accrued from this cancellation were used for:

Promotion of social dialogue and its outcomes

39. Opinions on the promotion of social dialogue varied somewhat from the Workers' and Employers' points of view.

40. Mr. Cho, Employers' representative of the Republic of Korea, expressed dissatisfaction with the insufficient cooperation of trade unions in efforts to implement a structural adjustment programme. He pointed to the labour-related matters, which partly caused the financial crisis, the positive employment measures established by the Government in the aftermath of the crises, and the fact that without jobs created by enterprises, there would be no solution to the unemployment problem. Mr. Cho argued that:

41. Mr. Brett, Workers' representative of the United Kingdom, challenged the Employers' view, arguing that "it is fine to have social dialogue in response to a crisis, but maybe people do not want a dialogue when you did not talk to them for all the years you did not have to. Social dialogue is therefore not something that comes along after the crisis. It has to precede it".

42. Mr. Rampak, Workers' representative of Malaysia, confirmed Mr. Cho's statement that "enterprises create jobs" but added that "this does not mean a passport for enterprises to exploit workers ... Employers must accept workers as social partners, they must accept workers as partners in the enterprise". Mr. Rampak also stressed that social dialogue between the social partners should take a holistic approach and consider prevailing national labour legislation, core labour standards, labour market mobility, labour force participation, training policies, the informal sector, women workers, child labour, migrant workers, labour competitiveness, wages systems, wage disparities, safety nets, productivity assessment, occupational safety and health, and labour flexibility, in order to successfully adapt to the continuous technological change brought about by globalization.

43. Ms. Dovydeniene, Workers' representative of Lithuania, suggested extending the dialogue between workers and management to a transnational level, since crises are international and enterprises are multinational. She explained that:

44. Mr. Jonsson, Workers' representative of Sweden, wondered how one could expect workers to accept structural adjustments when they did not even have unemployment protection.

45. Mr. Riesco Salvo, Employers' representative of Chile, considered all economic players including "employers, financiers, investors and workers" to be responsible for enhancing confidence in the economy and assured that "the top priority in this restoration of confidence must be given to social dialogue which will enable working conditions to adapt to a crisis".

46. In his synthesis, Mr. Hultin described two aspects of employment creation: "One is the enterprise, and especially in rural areas, the cooperative development aspect of employment creation. The other is the human skills development aspect of employment creation. Human capital and individuals need to be equipped with appropriate skills."

Resources

Forums and initiatives for building international guidelines

47. The majority of speakers urged the ILO to initiate the establishment of international guidelines and to act as a forum, or help in the creation of forums, where relevant actors could agree on international frameworks and guidelines concerning debt, employment and social policies.

48. Mr. Neykov, Minister of Labour of Bulgaria, expressed his desire that the ILO initiate a conference on the restoration and development of the Balkan region:

49. Mr. Somavia assured that "ILO was present from the very start in the efforts of the international community to support reconstruction in the Balkan region".

50. Mr. Nordmann, Government representative of Switzerland, called for the elaboration of common principles for social policies, applicable by all international agencies, to be adopted at the special session of the General Assembly concerning follow-up on the World Summit for Social Development.

51. Mr. Pityana, Government representative of South Africa, considered the development of a common international approach as the main challenge facing the multilateral system:

Strategy formation

52. Several Government representatives requested the ILO to take one step further and develop employment strategies, either global or regional strategies or strategies for individual member States. Employers' representatives stressed the importance of enterprise development in these strategies. However, not all participants supported the suggestion on international employment strategies.

53. Mr. Zahran, Government representative of Egypt, reminded participants that "the February 1999 meeting of the Group of Fifteen had called on the International Labour Organization to adopt a global employment strategy". Mr. Idris, Minister of Manpower of Indonesia, stated that it was time "for the ILO to formulate and initiate a comprehensive employment strategy within its mandate".

54. Mr. Cho, Employers' representative of the Republic of Korea, considered that "the ILO's activities should be focused on promoting productive employment through sound enterprise development strategies".

55. Mr. Jatiya, Minister of Labour of India, viewed the ILO's role as both international and national in the formation of strategies:

56. Mr. Anand, Employers' representative of India, expressed reservations on international strategies: "We have had the experience in my own country, following the crises in other areas, that the social safety nets cannot be of a universal character, one net for a global world."

Advice and action programmes

57. The ILO's advice on social and employment policies was highly appreciated by participants. However, it was suggested that technical assistance was further needed in the areas of: trade union capacity in social dialogue, enterprise management and productivity, the ability of governments and civil services to widen their horizons in social and labour matters, and linkages between the formal and the informal sectors, regional integration, etc.

58. Mr. Pityana, Government representative of South Africa, called for "qualitative advice on employment and social policy". Mr. Li, Government representative of China, listed the following key areas of consultancy: "improvement of employment services and the social security system, employment creation and strengthening training".

59. Mr. Adu-Amankwah, Workers' representative of Ghana, urged ILO technical cooperation to strengthen trade union capacity to engage in social dialogue with other social partners and international financial institutions; to support trade unions in their efforts to organize the informal sector, both urban and rural; and to position trade unions so that they could secure social protection.

60. Employers' representatives also focused on the informal sector in their requests for technical cooperation. According to Mr. Owuor, Employers' representative of Kenya, "the ILO can assist its constituents in organizing programmes of action to promote linkages between the formal and informal sectors through retraining, subcontracting arrangements and providing micro-credit schemes, together with other donors". Mr. Owuor also encouraged the ILO to continue its efforts on regional integration: "In this respect, I take cognizance of the ILO's assistance to the three East African countries of Kenya, Uganda and the United Republic of Tanzania in sponsoring the East African Economic and Social Forum, at which consideration is being given to the harmonization of social and economic policies in the three East African countries."

61. Many speakers agreed that training was of the utmost importance for ILO action programmes. Employers' representatives requested additional training for management, especially in small and medium-sized enterprises (SMEs), labour ministers, officials in labour departments, and workers who were most vulnerable to economic and financial crises.

62. Mr. Owuor stated that "the ILO should continue to provide its expertise to employers' organizations in the areas of management training and productivity in order to promote the competitiveness of our industries". Referring to the Job Creation in Small and Medium-Sized Enterprises Recommendation, 1998 (No. 189), Mr. Salvo, Employers' representative of Chile, stressed the need for technical cooperation and technical assistance for SMEs, which would create most jobs. Mr. Anand, Employers' representative of India, was concerned about the narrow perspective of labour ministers and officials towards the world of work:

63. Mr. Somavia stated that the Office intended to develop and apply its capabilities to respond rapidly as well as effectively in order to be in control of events, and that this was the reason for proposing InFocus programmes on capacities of the ILO.

Research

64. The ILO was also urged to conduct research and analysis to identify the economic causes, effects and moral consequences of economic and financial crises and to develop case studies on the implementation of ILO Conventions and Recommendations and on social safety nets.

65. Mr. Dahlan, Employers' representative of Saudi Arabia, hoped that the ILO could play an important role in conducting studies and research "so that we can define the causes and the reasons for these crises and to have a direct vantage-point view of the situation We must also direct employers' organizations' activities into this field so that they can develop productivity and increase incomes".

66. Mr. Neykov, Minister of Labour of Bulgaria, underlined that the moral effects of a financial crisis should be as important as the economic effects:

67. Mr. Brett, Workers' representative of the United Kingdom, stressed the role of research in the attempts to prevent crises:

68. Mr. Somavia assured that "as a first step towards enhanced ILO capacity, I intend to review the impact of the ILO's efforts to mitigate the social consequences of crises of all kinds in recent years, whether in Central America, sub-Saharan Africa or Cambodia, as well as through our follow-up on the Asian financial crisis".

69. Finally, Mr. Somavia listed a number of questions on which this review should bring answers:

Geneva, 24 September 1999.


1. http://www.ilo.org/public/english/20gb/docs/gb274/symposi.htm;
http://www.ilo.org/public/english/20gb/docs/gb274/gb-4-4.htm

2. http://www.ilo.org/public/english/10ilc/ilc87/rep-i.htm


Updated by VC. Approved by NdW. Last update: 26 January 2000.