Report: World Bank's first labour standard is deeply flawed

Abstract

On 4 August 2016 the World Bank concluded its fouryear policy review and adopted a new ‘Environmental and Social Framework’, which will become fully operational in 2018. The Framework replaces the Bank’s ‘safeguard’ policies, and covers a wider spectrum of social issues, including a labour standard for the first time. In the words of one commentator however, ‘the safety net got bigger, and so did the holes’1. This new development is well overdue. The private-sector lending arm of the World Bank group, the International Finance Corporation (IFC) adopted a labour safeguard in 2006. But the new standard adopted by the Bank is deeply flawed – not least with respect to trade union rights. Commenting on the adoption of the new Framework, Sharan Burrow of the ITUC writes: ● Foremost among the flaws is the lack of any reference to the International Labour Organisation’s fundamental rights conventions, which define the core labour standards (CLS) endorsed by the other [development] banks. ● The WB safeguard commits to prohibiting child labour, forced labour and discrimination in Bankfinanced projects, but for the fourth CLS, freedom of association and right to collective bargaining, it adds the qualification that these rights must be respected only ‘in a manner consistent with national law’. ● If freedom of association, the heart of democratic rights and freedoms, is absent or imperfectly protected in the country’s legal framework, the Bank could allow working men and women in WB-financed projects to be at a higher risk of violation of their rights than those working in projects funded by others2. The failure to protect freedom of association and associated rights in all World Bank funded-projects – whether or not they are protected under national law – is fairly typical of the Bank’s historic approach to labour issues. The Bank’s annual Doing Business reports rank countries on the ‘ease’ of establishing investment. For many years, these reports measured labour regulations as a barrier to businesses, without any qualification that labour regulation might have positive social impacts. The major deficit in the Bank’s new labour standard is likely to be exacerbated by the fact that – no matter what the content of these social and environmental safeguarding policies – the enforcement of such standards has long proved lacking. As Sharan Burrow notes, the new safeguard ‘needs strong compliance measures to protect working people from the exploitation of corporate greed’. Experiences of compliance mechanisms within the World Bank group are unlikely to inspire confidence that implementation will be effective. It has been 23 years since the Bank established its Inspection Panel to investigate allegations of non-compliance with the institution’s own policies. According to one recent assessment, the Panel has always operated ‘with one hand tied behind its back’. An attempt in 2013 to trial a new dispute resolution procedure has resulted in re-routing complaints from the Panel and into negotiations, both undermining the Panel’s authority to issue reports on non-compliance and perpetuating ‘the power imbalance that already exists between the Bank, its clients and communities’3. While the IFC has led the way in establishing policies on labour standards for its financing operations, it too has faced serious difficulties in providing adequate remedies. As we report in this edition’s Interventions pages, workers at the Sabah Forest Industries (SFI) company in Malaysia have been fighting for recognition of their union for more than 20 years, but SFI has repeatedly used judicial review processes to prevent them. In 2014, the IFC’s Board approved a $250 million debt and equity investment to SFI and its parent company Bilt Paper. Following a complaint from the Building and Woodworkers International (BWI), the IFC’s Compliance Advisor Ombudsman (CAO) is now investigating whether the IFC’s risk assessment of the investment ‘responded adequately to freedom of association issues identified in the client’s Labor and Working Conditions Audit’4. But a finding of noncompliance by the CAO is just that: it does not necessarily have consequences and the President of the World Bank group retains discretion over disclosure of the CAO’s report and the IFC’s response. Echoing an argument we recently made regarding social compliance in supply chains (see facing...