International Trade Union Confederation denounces

Doing Business 2010: World Bank Discourages Extension of Social Protection

10 September 2009 by ITUC-CSI


Brussels, 9 September 2009: Even though the World Bank World Bank
WB
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

has endorsed improved social safety nets to protect the millions of workers who have lost their jobs due to the global economic crisis, the latest edition of the Bank’s highest circulation publication discourages countries from adopting social protection schemes by designating governments that do so as anti-business. Doing Business 2010, launched today by the World Bank, also recommends that countries should reduce severance pay for dismissed workers and reduce or eliminate requirements for prior notice about job cuts.

In April 2009, the Bank announced that the Doing Business labour market flexibility indicator, which encourages the reduction of workers’ protection, “does not constitute World Bank policy and should not be used as a basis for policy advice or in any country program documents”, and that the indicator would be removed from the Bank’s conditionality framework (known as CPIA: Country Policy and Institutional Assessment). The Bank also stated, “Doing Business 2010 will include a commentary explaining these steps”, but the new edition of the publication issued today ignores this commitment posted on the Bank’s web site in April

“If the president of the World Bank truly believes that countries should improve social protection in order to mitigate the impact of the global recession, as he has said on numerous occasions, then it is high time for the Bank’s highest circulation publication to stop promoting the elimination of social and workers’ protection,” said Guy Ryder, general secretary of the International Trade Union Confederation.

The ITUC called attention to the fact that Doing Business 2010 puts Cambodia in the category of countries that are “making it more difficult to do business” because it introduced a social security contribution. Conversely, Georgia is praised and given a better ranking by Doing Business because it abolished its social tax.

Doing Business 2010 criticizes the democratic government of Honduras, whose president was expelled after a coup d’état in June, because it increased severance pay and advance notice requirements in response to the economic crisis (Honduras has no unemployment insurance). Similarly, Doing Business downgrades Portugal for increasing the dismissal notice period by two weeks.

On the other hand, the authoritarian regime of Belarus, which lost its preferential trade status with the European Union for violating fundamental conventions of the International Labour Organization (ILO), obtains high marks from Doing Business 2010 for making it easier to eliminate jobs. Rwanda wins this year’s Doing Business “top reformer” prize because “employers are no longer required to consult beforehand [about job cuts] with the employees’ representatives or notify the labor inspector”. The Bank’s publication also praises Macedonia for getting rid of measures to retrain redundant workers, and Mauritius for eliminating mandatory severance pay.

Guy Ryder noted that the World Bank intends to consult the ILO, trade unions and employers on developing a new workers’ protection indicator that would encourage compliance with core labour standards and improved social protection. However, the new indicator would only be developed next year.

Ryder declared: “It makes no sense for the Bank, which has recognized the need to revise its one-sided deregulatory approach on labour issues, to continue promoting weaker social and workers’ protection through Doing Business while working people are feeling the brunt of the worst economic crisis since the 1930s.” He furthermore asked the World Bank to make public its guidance note specifying that the Doing Business labour indicator is not Bank policy and that its staff should promote “adequate safeguards for employees’ rights”. The Bank had promised to produce this guidance note in April.

The ITUC represents 170 million workers in 157 countries and has 312 national affiliates. http://www.youtube.com/ITUCCSI

For more information, please contact the ITUC Press Department on: +32 2 224 0204 or +32 476 621 018.



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