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ECONOMY: World Bank “Reforms” Leave Labour Group Cold

Emad Mekay

WASHINGTON, Sep 6 2006 (IPS) - The World Bank’s flagship publication, which rates countries according to their adherence to its own economic prescriptions, has drawn fire from a major international labour group for promoting policies that it says primarily benefit rich nations and large corporations.

The Bank’s highest-circulation publication, “Doing Business”, which came out Tuesday days ahead of the Bank’s joint annual meetings in Singapore with its sister institution, the International Monetary Fund, praises countries that have agreed to liberalise their economies, end protection of local industries and create a safe legal framework for local and foreign investors.

Devised by the victors of World War II, the Bank’s staff and board is dominated by industrialised countries and it has often been viewed in developing nations as a foreign policy tool for the United States, the most powerful member with 17 percent of the shares in the Washington-based institution.

Recently, however, many of the Bank’s recommendations have been questioned by a growing number of civil society groups and some independent economists in developing nations who say poor countries should put their own interests first and resist pressure from outside, especially from public lenders like the Bank and the IMF.

Facing growing criticism from their client countries, both the IMF and the World Bank are now attempting to reshape themselves as knowledge hubs, issuing a huge number of studies backing their traditional economic advice.

The “Doing Business” publication, by the World Bank and the International Finance Corporation (IFC), is one such report. This year, it found that Africa is reforming most quickly and ranks the region’s progress ahead of Asia, Latin America and the Middle East.

“Reformers”, in the World Bank’s view, are governments that simplified business regulations, strengthened property rights, eased tax burdens, increased access to credit, and reduced the costs of exporting and importing goods – all staple demands of foreign investors.

The Bank says that the top 10 reformers on the ease of doing business, in order, are Georgia, Romania, Mexico, China, Peru, France, Croatia, Guatemala, Ghana and Tanzania.

It compliments Georgia for reducing the minimum capital required to start a business, speeding up customs, licensing, and court procedures, and making labour laws more flexible. New business registrations rose by 55 percent between 2005 and 2006, the study reported.

Thirteen other nations – Armenia, Australia, Bulgaria, Czech Republic, El Salvador, India, Israel, Latvia, Lithuania, Morocco, Nicaragua, Nigeria and Rwanda – also won high marks.

The study found that the most popular reform in 2005-06 was easing the regulations to start a business. Forty-three countries simplified their requirements, reducing costs and delays. The second most popular policy change, the Bank says, was implemented in 31 countries and involved cutting tax rates and streamlining filing procedures.

“The report is a critical tool for developing countries to determine where more reforms are needed,” said Paul Wolfowitz, president of the World Bank Group.

But some independent groups criticised the study for ignoring workers’ rights. The Brussels-based International Confederation of Free Trade Unions singled out recommendations that governments should do away with labour market regulations and model themselves after countries that have almost no worker protections and are not members of the International Labour Organisation (ILO).

“The 2007 edition of Doing Business, prepared by the Bank’s private sector development department, has declared the Marshall Islands to be the world’s ‘Best Performer’ for its almost total absence of labour regulation, displacing last year’s champion, Palau,” noted the group, which has a membership of 155 million workers on all five continents.

“Both Marshall Islands and Palau have in common that they are tiny Pacific island nations that have no labour code and are not members of the ILO.”

Among other “exemplary” features, those countries allow workers to be forced to work up to 24 hours per day and up to seven days per week and require no vacations or advance notice for dismissal.

“The World Bank should get its message straight. If the Bank truly believes that the ILO’s core labour standards are good for development, it can’t turn around and praise countries that don’t join the ILO and don’t respect the core standards as the world’s ‘Best Performer’ for their labour standards,” said ICFTU general secretary Guy Ryder.

The rankings and recommendations in reports like “Doing Business” can weigh heavily on how the Bank and the IMF themselves do business. In its loans to Colombia, for example, the Bank made it a condition that the government make hiring and firing decisions more flexible.

And in changes that would have required doing away with affirmative action rules, the IMF recommended to South Africa in a recent policy report that the government improve its “Doing Business” indicators by “streamlining” its hiring and dismissal procedures.