Labour protection has largely failed as enterprise contribution to social protection. Much labour legislation does not apply to MSEs; those laws that do apply are complied with and enforced poorly. In consequence, most workers are denied, by state and market, even the core labour rights enunciated in the ILO Declaration of Principles [Declaration]², and hence the minimum labour standards implied in the broader concepts of decent work, also promoted by the ILO.³

In consequence, the very large absolute numbers of deprived and excluded citizens are a potential for much social unrest, and to therefore become a pressing political problem for the state. Reacting to this situation, two main responses are being widely discussed in the making of social and economic policy. As expected, the alternatives echo the broader tension between development and growth (or between human and state security).

One, older, position stresses public action for decent work, which demands at least an equal importance to expanding decent work for development, along with employment creation and economic growth. The alternate, neo-liberal, position is a market approach, which places the priority on employment and growth. If any rights are acknowledged, it is first for employment, secondarily for conditions of work. This position may accommodate concerns for decent work by suggesting that higher growth would allow higher taxes which can be used to fund special measures for labour as part of wider social protection. In contrast, the first approach emphasises the primary responsibility of enterprises, with the judgement that more equitable sharing of enterprise income between capital and labour is possible without jeopardising employment growth.

A third, pragmatic, position attempts to build a consensus around key concerns of both positions - holding the Declaration non-negotiable; but with collective bargaining over additional universal minimum labour standards, as aspects in decent work that are complementary (such as minimum wage) to the core labour rights; and seeking innovative private and public provision towards cost-effectiveness of implementing standards.

This paper reviews official policies.⁴ Since government is highly indebted for advice to the World Bank and Asian Development Bank, a section deals with Bank positions. ILO remains the main counter to Bank policy advice; hence its position is also reviewed.

Government Policy

Two federal ministries will continue to be significant in shaping policy for MSEs. One is Finance, which is naturally responsive to policy directions of major donors, the World Bank and the Asian Development Bank. Its relevant contribution is the Poverty Reduction Strategy Paper. The other Ministry is Industries, where an Industrial Strategy has been prepared with the assistance of the World Bank. Reflecting its responsibility for preparing SME policy, the Small and Medium Enterprise Development Authority [SMEDA] has prepared an issues paper (discussed below). The Planning Commission, and more so the Ministry of Labour, remain largely at the sidelines.⁵

SMEDA

Functioning under the Ministry of Industries, SMEDA published an issues paper, which is likely to inform official policy towards the sector.⁶ Equating social progress with private investment, it's position on labour is straightforward. "The existing plethora of labour laws has made compliance impossible due to their inherent inconsistencies. Numerous labour inspections under these laws are yet another impediment that retards the growth of SMEs."

It is not made clear whether the labour cost constraint is to setting up or expansion of an enterprise, or that it is in fact a binding constraint. There is no specific evidence provided to support either claim.⁷

SMEDA does recognise the need for "labour market security, including protection against arbitrary loss of unemployment, reductions in income and unhealthy work practices." It reminds the need to "comply with international labour standards under the global economic system." Since these standards are not specified, one hopes that they include the Declaration.

SMEDA supports the ongoing process of consolidation and simplification of labour laws. It also supports a new Labour Inspection Policy; the new "hands-off" inspection system in Punjab presumably reflects recommendations of SMEDA.

Ignoring the widespread lack of compliance with labour laws, recommendations of the SMEDA Working Committees were quite simple and specific about their objections to labour legislation.⁸ Blanket exemption was demanded for the Factories Act, and the Employees' Social Security Ordinance. "Rationalisation" was asked for amending inspection powers and procedures under various legislation (including, curiously, the very legislation for which exemption was asked for). Other matters of affirmative discrimination in their favour included reduction in compensation awards by labour judiciary.

The SME issues paper by SMEDA draws upon an earlier Country Study by SMEDA, published by the ILO.⁹ The study cites market demand as the most important factor for enterprise creation and growth - "for increasing or decreasing workers, on improving the quality of employment and on enterprise investment" ¦ government policies, labour regulations and special incentive programmes have only a limited influence on their decision-making. " ¦conditions of work were highly dependent on enterprise performance, linked strongly to market demand" ¦ Market demand for product or services also plays a dominant role in respondents' decisions to invest in expanding or upgrading existing facilities " ¦The micro enterprises display indifference or perceive themselves as uninfluenced by the policy environment and regulatory framework, while small and medium-sized enterprises can be negatively affected, creating impediments to employment growth."

Are labour regulations likely to be significant impediments? The country study recognizes widespread non-compliance, because of exemptions, evasion or indifference.

To its credit, the country study is troubled by the consequent failure to provide fundamental rights for workers. Progress in this regard will have to recognise that "one of the most pressing issues " ¦ is the cost of compliance "" in terms of both time (spent dealing with various compliances issues with various departments) and money. The general consensus is that there are far too many labour laws in Pakistan. Especially for the micro and small sized firms, obligatory compliance would be a considerable problem."

The study frankly acknowledges that the "contributing factors to better job quality in large-scale firms are compliance with government regulations, the right to collective bargaining and, to some extent, stringent monitoring and implementation of laws due to the size and location of the enterprise."

It observes that "many employers consider trade unions as a weakening factor for their enterprise" ¦ and many industrial units are broken into smaller ones so as to avoid the 'critical mass' of workers required for trade unionism." Since a fundamental right is involved, it calls for raising awareness levels among workers and employers in micro and small enterprises, and points out that current fines for violations are not a deterrent. Amendments in law need to cover contract workers.

It recognizes that the "payment of minimum wages contributes to poverty alleviation [but] many workers in Pakistan earn less than the minimum wage " ¦ Many enterprises, especially in the MSME sector, avoid paying social security contributions by remaining in the informal sector.. The low coverage ultimately results in inadequate job quality in the form of underutilized welfare benefits, which should be provided by these [government] institutions" ¦ Steps are desperately required to encompass the formal micro sector, as this sector is the main source of employment."

For the study, "the foremost problem is the entrepreneurs' lack of awareness of existing labour regulations " ¦ Most enterprises on the threshold between 9 and 10 workers do not find it convenient to obtain basic information on compliance requirements. No consolidated effort has been made by government to inculcate a basic understanding of the labour laws, the steps required for compliance, the rights of owners/managers, or the correlation of enforcement with enhanced productivity and improved job quality."

Most interesting is its comment on costs of compliance. "The general consensus is that the costs of compliance with labour levies are too high. Yet they are not excessive: for the average SME entrepreneur the total contributions based on various labour levies for an average size SME are not more than 1.5 to 2 per cent of annual turnover."

Quite rightly, it also observes that "even if these contributions were made, workers would not benefit greatly, due to dilapidated medical facilities and the limited coverage of pension schemes based on labour levies. Moreover, by entering the formal sector, compliance with labour laws will not be the only issue to deal with. Being part of the documented economy, an enterprise can be traced by various other departments such as the tax department. Thus, many enterprises avoid registering and remain in the informal sector."

The study calls for "third-party private-sector compliance auditing " ¦ at least for the regulations on hiring and the standards of engagement. One law could be tried as a pilot case."

Industrial Strategy

The Ministry of Industries has recently made public a draft industrial strategy.¹⁰ Since private investment is its goal, it begins with stating "a consensus" upon the reasons for stagnant private investment - one of which is the "high costs of doing business." Among these latter are those imposed by labour regulations; and the "special problems" of SMEs.

Rapid growth of SMEs would lead to "improved export focus, technology adoption, and efficient clustering." Strategy calls for a new law focused on incentives, to include the removal of regulatory obstacles.

Obstacles to industrial growth generally are held to include complex labour regulations which "raise the cost of workers, thereby slowing firm growth." Pushed into using contract labour, firms do not have incentives to upgrade skills. Regulations lead to fragmentation, which reduces scale economies, that then "retards firm growth." But the negative linkage between labour legislation and SME growth is qualified by a subsequent acknowledgement of "large-scale evasion and poor coverage."

On strategy, the study mentions the on-going process of consolidation of labour laws, and of self-assessment to replace external inspections. It additionally calls for increased responsiveness of labour welfare institutions through majority membership of employers and employees on governing boards. However, there is no indication that such increased representation would reflect the labour and capital economy of SMEs.

More interesting is the call for private provision of labour welfare - such as health insurance for workers, and quality education vouchers to children of workers, presumably as a substitute for current public provision. One is left to imagine how this can be financed on any significant scale, given the (acknowledged) large-scale evasion of labour levies.

Development Strategy

The Planning Commission has prepared a Medium-Term Development Strategy 2005-2010. With its ambitious targets for SMEs "" to double the share of small and medium industries (SMEs) in the manufacturing sector, the Development Strategy devotes an entire chapter to SME growth for employment generation.

Its point of view is that "low investments in technical and managerial skills, coupled with an unfavourable legal, regulatory, and taxation environment, prevents the SMEs from achieving their actual growth potential for employment, income generation, and poverty reduction."

Ignoring its own observation that "the key ingredient needed to make SMEs competitive is enhanced technical skills and organisational capacity," labour legislation is accorded the usual criticism - as among "complex and unfriendly legislation and implementation procedures, which can encourage official abuse, push up the cost of starting or running an enterprise, and discourage the SMEs from joining the formal economy."

The Commission echoes SMEDA in proposing "less intrusive labour laws, and involvement of trade bodies in the inspection process to minimise harassment." However, it does recognise that issues of social equity are involved, and therefore suggests incentives - such as reduced cost of credit and other inputs "" for increased voluntary compliance with social security (including old age) legislation.

Also of relevance is the chapter on legal & regulatory framework - though more for the lack of serious discussion of labour standards and rights. It is interesting that conflicts between consumers and investors are mentioned but none between labour and capital. This perhaps also indicates the prevailing disinterest in labour rights among the top managers of government as a consequence of embracing the ideology of markets. Hence the chapter merely reproduces its proposals for reforms of labour laws to accelerate SME growth.

Interestingly, a section on economic empowerment of women conveys a serious commitment, or at least proposed, to labour standards, The Strategy includes steps to enforce a minimum wage, conditions of informal work, home-based contracts, and quite radically, for agricultural workers to have "rights to have social security, medical amd old age benefits."

Poverty Reduction Strategy

Guided by the WB and other donors, the Ministry of Finance published a Poverty Reduction Strategy Paper (PRSP) to guide economic management for social policy.¹¹ In general it is stronger on ends than on links between funding, new implementation arrangements and credible monitoring arrangements (and hence less accountable to citizens than what is required).¹²

A special household survey is to track impacts of the strategy.¹³ Curiously, its publication has no information on labour issues, not even on unemployment and real wages; (perhaps to avoid the risk of contradicting assertions of significant poverty reduction).

Support to SME growth is part of the PRSP since SMEs are "expected to significantly impact poverty through: (i) income generating activities in the rural and urban economy; (ii) creating employment opportunities; and (iii) providing forward linkages to the micro-enterprises benefiting from the availability of micro-credit." With donor assistance, government and the private sector will move towards "(a) formulating and implementing SME Policy and Regulatory Policy development; (b) providing SMEs with direct access to services for enhancing competitiveness and employment generation;(iii) improving SMEs' access to finance through SME Business Support Fund; (d) SME Bank restructuring; and (e) disengaging the Government from activities that could be better provided by the private sector."

In view of other official positions, it is curious to find the PRSP wanting to strengthen existing labour welfare arrangements, such as the "Workers Welfare Fund (WWF), Employees Social Security Institutions (ESSI), Employees Old Age Benefit (EOBI)" ¦The Government is also considering the introduction of a defined contribution voluntary pension scheme, to be regulated by the SECP, to provide individuals access to old age security." PRSP repeats the call for rationalization and consolidation of the large number of labour laws, but without coming to grips with its own acknowledgment that SMEs provide "99% of non-agricultural jobs."

In its chapter on Poverty (third in line), PRSP acknowledges that "since the minimum wage is not regulated (?) effectively, access to employment opportunity does not guarantee an end to poverty. A more salient problem is that a vast majority of the poor are employed in the informal economy. A combination of low wages and risks that are inherent in informal employment worsens the prospect of moving out of poverty. Sustained economic growth may induce more investment and hence employment in the formal sector. This will have the effect of reducing the reliance on informal sector on the one hand, and will also likely result in higher wages in the formal and informal sector alike." No indications are given for specific ways of helping the informal economy workers, not even through attempts to implement the minimum wage.

Recognising declines in real wages, PRSP has the standard market-reliance response of increasing labour demand through various schemes for public spending including training, and via emphasis upon labour-intensive sectors for facilitating private investment. Accelerating labour export is seen as another strategy to reduce unemployment.

In the meanwhile, government has gone ahead with a new "Labour Inspection Policy (LIP) to adopt an innovative approach to labour inspection that is flexible, transparent, and fair; encourage enterprise compliance with labour policies and laws; and increased harmony and dispute prevention in enterprises between workers and managers." Again, reports of initial results are not encouraging even if not publicly admitted by government.
On eliminating child and bonded labour, PRSP simply defers to existing National Plans, whose poor implementation has little correspondence towards well-stated goals. A repeat survey of child labour is awaited.¹⁴

Labour Protection Policy

The PRSP promised a "Labour Protection Policy (LPP) by 2004 to ensure protection to workers' rights in all sectors, fair working conditions, enhancing labour productivity, encourage enterprise efficiency and competitiveness."

Funded by the ADB, the Ministry of Finance has asked the Ministry of Labour to propose two policy documents - one on labour protection; and another on labour inspection as implementation. A separate document on "labour market flexibility" is also under preparation; this will balance job security with hire and fire.

Government has begun the usual round of consultative workshops. Reflecting its clout and its goals, SMEDA is organising the workshops rather than the Ministry of Labour which is supposed to prepare the policy. A draft of the Labour Protection Policy was prepared by consultants in February, and now made available selectively; it has not been circulated at the consultations. Our comments may therefore be premature.

The draft Policy considers it to be an elaboration of the Labour Policy 2002, as well as supplementary. Explicit attention to revision of legislation is excluded, except selectively to promote labour flexibility.

The Policy continues in the tradition of a conservative state that privileges capital over labour, and enterprises over workers: hence growth over development.

Five main areas are proposed to be dealt with:

• "Basic rights" that correspond to the Constitution and the Declaration;
• "Working rights" which include minimum wages; work hours and leave; job security
• "Work environment" as health and safety issues
• "Social security" to cover only work related health; unemployment and retirement
• "Living environment" that includes health in "non-working life.

Coverage is to be "progressive" and "selective" for workers and enterprises in different sectors and varying work arrangements. Presumably even minimum wage will be not be the right of all workers. Apparently, government and enterprises will continue to define workers rather than workers themselves.

Workers "outside formal work arrangements" will be provided "extension services in safety and health and some aspects of social protection," rather than be covered by labour laws since provincial labour departments "could never hope to secure compliance." ¹⁵ These extension services are a reflection of a very innovation expression of diluting obligations "" "to protect workers in the informal economy in an informal way."

Initiatives against forced labour and child labour remain confined to the National Plans of Action. Even in that context there is no attempt to respond to systemic failures in implementation, since there may be incomplete understanding of structural issues. For child labour, a concrete target is given of removing children from tanneries and mines by end 2005. These choices may well reflect a fear of trade sanctions.

Equality and non-discrimination remain confined to gender issues. These are important, but this vision suggests the need for a careful re-reading of the conventions underlying the Declaration or even the Constitution in the Ministry of Labour and its consultants.

"Compliance and enforcement is the responsibility of the labour inspection system." There is considerable stress on self-inspection and use of technical experts.¹⁶ It could have been complementary to government efforts in compliance, but collective bargaining is to remain weak by government encouraging "bilateral interactions" at the enterprise level. There is nothing serious ventured about using workers and employers organisations to promote compliance and broaden coverage.

The National Minimum Wage Council is found to be not working, so it should be replaced by a Wage Commission of "eminent" persons. Periodic adjustments would reflect inflation, as well as enterprise and labour productivity, and social security benefits.

Social security in micro enterprises is to be on a voluntary basis. This basis will also be available to self-employed workers, but not to agricultural workers. No government contributions are recommended even though it is recognised that the "vast majority" will remain excluded. Curiously, the only two types of agricultural workers mentioned are those in corporate farming and farmers. The MOU between the Ministry of Agriculture and the Ministry of Labour is mentioned, but without any attempt to remedy its shortcomings, including denial of the national minimum wage even to workers in corporate farming, despite the Declaration.

Unemployment benefits "cannot be seriously considered at this stage" by Bank consultants because it is considered by government to be "beyond the nation's capacity." It would appear that the ADB will not fund any scheme for unemployment benefits, preferring to strengthen market provision of secure jobs (which is a contradiction of its advocacy of flexible labour markets).

The Labour Protection Policy is sketchy on social security, supposedly while government awaits directions from the study on Social Protection, also funded by the ADB.

The Labour Protection Policy is yet another illustration of enterprise lobbies striving to weaken implementation of legislation. The Commission for Consolidation, Simplification and Rationalisation of Labour Laws (2000) was rendered ineffective because the Chair kept waiting for a new labour policy "" ignoring the obvious fact that the Federal Constitution and ILO Conventions already provide comprehensive policy directions. Then, instead of focusing on serious implementation of its own much-delayed (and weak) Labour Policy 2002, government now seeks further postponement through the process of preparing the Labour Protection Policy and Labour Inspection Policy.

Labour Inspection Policy

The objective of the federal Labour Inspection Policy (LIP) is to provide direction for operational strategies of provincial government towards "new approaches to labour inspection and compliance" that change the emphasis from protection and enforcement to "prevention, protection and improvement." These approaches consist of:

• Extension to informal sector
• Self-reporting by enterprises
• Workplace cooperation
• Systems inspection instead of specifics
• Private firms for inspection
• Integrated inspection as 'one enterprise, one inspector.'

The scope of prevention, protection and improvement is essentially limited to:

• Terms of work
• Conditions of work

Note that this fails to cover all aspects of the ILO Declaration of Principles, and inspection is therefore limited to some core labour standards. "Integrated Labour Inspection" may or may not take care of the excluded standards, and complementary standards.

Given scarce resources (and scarcer political will?), inspection arrangements are proposed to be more focused on "work places at risk," and generally diluted as follows:

• Reducing routine inspection and replacing by self-reporting
• Corresponding reduction in follow-up visits
• Replacing government by private firms for special inspections

It acknowledges the ILO Convention 81 as the framework for labour inspection, including the commitment to "secure compliance by enforcement and other measures." However, no analysis is provided for the failure to make genuine progress in implementation during the last 50 years. While "prevention of exploitation" is held out as a central objective of policy, no reference is made to the Constitutional obligation of the state to end exploitation (under Article 3). Naturally then, the goal of enforcement is confused with the means of enforcement, which include but cannot be limited to prevention.

The LIP acknowledges that labour inspection should be directed "at all workers in all work situations" ¦whether self-employed or employees." It is puzzling to then be informed that government should practice discrimination - most workers are held to deserve no more than "inspection services as information and advice." One apt analogy is government acknowledgment of citizen right to potable drinking water accompanied by instructions to disinfect public supply.

"Flagrant abuses of the law as, for example, a total failure to provide safe equipment and premises, a total disregard for child labour laws, and deliberate and intentional under-payment of wages, must always be detected and punished." Left open to interpretation is "total," specially disturbing in view of the bias towards self reporting and private inspections. Loopholes can very quickly become the proverbial eye of the needle through which a camel can pass.

Self-reporting by enterprises is central to the LIP, applied to the majority of enterprises. It envisages a declaration by an enterprise made jointly by managers and workers. Since many if not most workers are not acknowledged as employees by most enterprises, including large enterprises, there cannot be any credible certification by workers.

One way out could be labour associations that extend beyond the enterprise or establishment, but this is not considered by the LIP. In fact this is the only possible mechanism for compliance of micro and small enterprises with universal labour standards. Even more effective would be bilateral labour-employer sectoral associations along with tripartite labour-employer-government committees at the local (say, district) level for monitoring and enforcing compliance with minimum labour standards.

Punjab has had a self-reporting system in place for over a year. It is interesting that the LIP fails to report on results from this exercise. Certainly no independent audit of this experiment has been undertaken to date.

The informal sector, where "the remaining 90%" are employed, will receive "information and advice." Notable is the fact that illustrations of advice do not include minimum wage, working hours, leave, discrimination, debt bondage or even the right to collective bargaining. Local government is to assist the regular cadre of inspector-advisors; interestingly, local government is given no role in inspection or self-reporting.

Enterprises may pay for private firms to replace government inspectors. Left unexplained is why such private provision of public services will be better for workers as compared to the current system of corrupt inspectors assisting enterprises to evade compliance.

Since the LPP fails to seriously acknowledge universal labour rights, it does not make decent work for all to be a priority goal of government. This severely constrains any instruments for implementing a labour policy, including the LIP.

Even when targeting a minority of the labour force for selected aspects of labour protection to them, workers cannot be left largely at the mercy of enterprises or of market forces generally. Acting on behalf of workers, fundamental institutional reforms are required to implement these limited objectives for all such workers. Such reforms are not apparent in the LIP.

Based on a commitment to decent work, an alternate approach is proposed in a recent paper prepared by PILER for the ILO, "Realising Universal Labour Rights: Labour Standards for Small Enterprises in Pakistan." The thrust of the alternative is to begin with universal core labour rights as the goal, which implies legislation for adherence to core labour standards as well as (negotiated) complementary labour standards such as minimum wages.

Realising these standards requires innovative implementation institutions towards: acknowledgment of workers independently of enterprises; contributions to labour protection by all workers and enterprises; delinking contributions to specific employment and enterprises; collective bargaining at a sectoral or industry level; fundamental reforms in existing labour welfare institutions; and the integration of local government into implementation, including labour inspection.

The LIP makes much of limited government resources. That should not be confused with public resources, including the effectiveness of collective action by workers encouraged to mobilise and organise for their rights. Given an appropriate opportunity, the labour movement can help build government capacity.

Consolidated Legislation

For some years now, the government has been pursuing the "rationalisation and consolidation" of vast labour legislation into a considerably smaller set of laws. The ADB and WB are actively supporting this venture into a friendlier environment for business, with an apparent expectation that it will result in wider compliance through effective regulation.

Table 1. Review of Draft Legislation

Only the Industrial Relations Ordinance 2002 has been promulgated as new legislation, (receiving much criticism for being regressive on labour rights). Other proposed laws still remain in draft shape, in part because it's better for business to continue in violation of existing legislation without fear of penalties from a business-friendly regime.

Additonal new laws that are proposed (as partial or entire replacements of):

• Conditions of Employment (Employment Act 1952; West Pakistan Industrial & Commercial Employment Ordinance 1968; West Pakistan Shops & Establishments Ordinance 1969; Disabled Persons Ordinance 1981; Employment of Children Act 1981)
• Payment of Wages (Payment of Wages Act 1936; Minimum Wages Ordinance 1961; Employment Cost of Living Act 1973)
• Occupational Safety & Health (Factories Act 1934; Mines Act 1923; Dock Labour Act 1934)
• Human Resources Development (Apprenticeship Ordinance 1962; Control of Employment Ordinance 1965)
• Labour Welfare & Social Security (Provincial Employees Social Security Ordinance 1965; Excise Duty on Minerals Labour Welfare Act 1967;
• Workers Welfare Ordinance 1971; Workers Children Education Ordinance 1972; Employees Old Age Benefit Act 1976). Workers Welfare Ordinance 1971; Workers Children Education Ordinance 1972; Employees Old Age Benefit Act 1976).

We examine legislation according to the central theme of universalising labour standards. A detailed review of specific legislation is not attempted until there is agreement on additional aspects of the proposed framework (in the concluding section).¹⁷

Hence legislation is reviewed against the following criteria: discrimination in coverage between workers or between enterprises; autonomy in recognition of workers and enterprises (as opposed to certification by employers and government); local government in implementation.

All laws, separately and together, suffer from discrimination in coverage of workers and enterprises (and hence of the Declaration and the Constitution). Unsurprisingly, agriculture (including, apparently, fisheries and forestry) remains excluded; as does domestic services. Home-based workers, however regular their work for enterprises, remain beyond legal protection. Some laws define coverage by number of employees, and hence invite avoidance, evasion and corruption of officials and labour organisations.¹⁸ There is no move to delete additional exclusions, (but rather to create special laws such as for) Export Processing Zones, and Special Industrial Zones

Workers will remain dependent upon employers (and government) for acknowledgement of their existence, and enterprises will depend upon government for certification of their operations; female workers and child workers fare worse. Neither worker nor employer organisations are assigned significant roles in implementation except through the IRO. Local government is not considered the obvious starting point for implementation of legislation.

Hence the consolidation of innumerable laws into a small set of laws may do some for creating a level field between MSEs and larger enterprises in some sectors. Less obvious are either reduction of discrimination across sectors, or gains to labour, within and across the economy.

Government policies rely much upon advice from the ADB and WB, through technical assistance and subsequent lending programmes. References to Bank advice has been made above; additional policy directions can be found in other country documents, such as the concept paper for the Labour Policy study under preparation for the WB. Broader policy frameworks are available in other documents, such as the Social Protection Strategy of the ADB, and A Better Investment Climate for Everyone at the WB. A review of Bank thinking would help to promote an alternative approach to recast labour protection legislation and administration.

Asian Development Bank

Along with Japan, ADB contributes the major share of external financing to Pakistan. This alone makes it necessary to review its positions and assistance to understand the specific directions of state policy towards labour issues.

Bank policy for interventions in labour issues are spelt out in its Social Protection Strategy. Employment creation is one strategy for poverty reduction; social insurance is another. Employment generation is the priority - as a consequence of the Bank's ideology that rapid market-led growth is a prerequisite to poverty reduction, with redistribution deserving second place.¹⁹ Improving labour remuneration is seen to follow from higher labour and enterprise productivity: i.e., current shares of labour and capital are a given.

The ADB has signed an MOU with the ILO to respect and promote core labour standards. Since then, the Bank calls for promoting decent work, which even for the Bank includes minimum wages, social security, etc "" but generally with the caveat that such aspects of social insurance should not reduce progress towards efficient labour markets which would slow down growth.²⁰ This is perhaps a reason for the Bank not seriously acting upon its own requirement that users of Bank funds must comply comprehensively with core labour standards.²¹

This year, the Bank research group has focused on labour issues in its annual report Key Indicators 2005. ²² Perhaps a few of the less conservative ideas will permeate into Bank operations over the next few years. The report stresses that the goal of full employment must be one of decent work: which requires "time bound, feasible, credible, and measurable strategies [in] development plans."

The Outlook draws attention to the fact that while "countries have achieved very high output and productivity growth rates, corresponding employment growth rates are far lower." Even more radical for the ADB, its research group argues that under a wage-led regime""a regime under which an increase in the share of labour leads to an increase in aggregate demand""wage increases need not lead to decreases in employment" ¦ [hence] the challenge for policy makers is how to translate increases in productivity into higher real wages and aggregate demand." It then cautions against thinking that promoting flexibility is "a panacea for labour markets." A cross-country study leads it to the conclusion that, in general, labour market regulations governing hiring and firing and minimum wage laws are not the binding constraint on employment generation" ¦This conclusion undermines the case for across-the-board labour market reforms " ¦ If labour market reforms represent only one piece""and not the key one""of the problem of creation of productive jobs in DMCs (and in particular for generating rapid growth of "good" jobs), where should policy makers focus their efforts to meet the objectives of full and productive employment?

Being labour intensive, SME growth is supported by the Bank as a general strategy for rapid employment creation in countries with high unemployment and underemployment, such as Pakistan. Hence the ADB has given loans and grants to emphasise SME growth strategies for a situation in which unemployment is very high - as much as 20% (including underemployment?) according to the Bank.²³

These initiatives of the Bank include support to SMEDA for developing a SME Policy that includes a favourable regulatory environment. The emphasis upon "consolidation, simplification and rationalizing of labour laws and regulations" will surely be taken by SMEDA as a signal for diluted labour legislation and even weaker implementation in SMEs, i.e. for the majority of the existing and new jobs in the non-agricultural sectors.

No concrete targets are laid down for progress in decent work goals, not even for job creation in a program loan for SMEs. There is also no serious linkage established between optimistic targets for growth-led poverty reduction targets with weak redistributive policies, including the virtual absence of labour protection. It is therefore likely that the Bank may continue to fail to uphold its public commitment to ILO - despite Bank statements such as that "poverty reduction and labour protection and/or increase in real wage are two sides of the same coin." ²⁴ Or that "ADB in Pakistan is undertaking specific interventions to protect and advance labour rights." ²⁵

In marketing employment creation through minimum regulatory constraints in Pakistan, the Bank does not wish to appear being unconcerned with high (and growing) deficits in decent work. While sleepless nights are not possible, there must be some disquiet at the Bank that head count figures for poverty in Pakistan may continue to be largely unaffected despite accelerated assistance. Hence SME funding includes a Labour Protection Policy and a Labour Inspection Policy, including revisions of the Factory Act.²⁶ SMEDA has begun arranging "consultative workshops" for these policies, but is not sharing the drafts widely. Neither is it seriously engaging with MSE owners and workers.

The Bank will also fund a separate study for developing a "comprehensive and coordinated plan for social protection development," including a feasibility study for health insurance (to begin with Punjab).²⁷

A very recent study of LUMS for the ADB does not support the Bank's position of labour regulations being a serious constraint upon growth of small enterprises.²⁸ As would be expected, other constraints, including credit, are the ones that worry enterprise owners the most.
In summary, the most intriguing thing about the ADB is its coming together of a perceptive description of the problem with advocacy for neo-liberal solutions.²⁹

The World Bank

Lagging behind the ADB in funding, the World Bank nevertheless remains a significant (and for some the key) influence upon economic and social policy in Pakistan.

Relative to the ILO and even the ADB, Bank position on labour reforms remains conservative - efficiency of markets should take precedence over (or is the route to) social justice for people. Hence, worker remuneration and working conditions are the economic price that impedes or facilitates existing labour markets.³⁰

Its annual World Development Report sets out Bank policy. Illustrations of policy prescriptions are drawn from a selection of these publications.³¹

Lucid in its understanding, the Bank recognises that "all institutional structures affect the distribution of assets, incomes and costs," or that "institutions determine how resources are allocated and who has rights over resources." But what is then important for the Bank (and hence its clients) is primarily the impacts upon "the incentive of market participants and the efficiency of market transactions." Hence the limited policy prescription: "by distributing rights to the most efficient agent, institutions can enhance productivity and growth." Much is written about the "governance of firms," but workers figure in this analysis rarely and then only negatively.³²

For the Bank, labour regulations mostly impede adjustments in labour markets, when flexibility is made necessary by increased competition in product markets. Most regulations are then seen to result in larger unemployment or higher employment in the informal economy where regulations are weaker. But that may be okay when "employment in the informal sector is better than no unemployment at all." So the Bank asks for a focus on successful implementation of "quality rather than the quantity of regulations." Being so bland, could anyone disagree?

For the Bank, reforms can produce "a vibrant and dynamic private sector " ¦ for new job creation, technological change that raises labour productivity and wages " ¦ especially when labour market regulations are not onerous and do not inhibit adjustment." One way is through "lifting the heavy hand of regulation, especially on the small businesses that often provide the poor with employment." But the Bank also cautions: "the benefits of deregulating labour markets should not be overstated. Often labour market regulations are not well enforced, especially in the informal sector, so relaxing them would have little effect on employment opportunities for poor people."

Quite unlike the Bank is its suggestion for "promoting core labour standards" as a way of sharing the benefits of general economic reforms with poor people; or proposing that "core labour standards [are the] minimum framework for a sound labour market. This becomes explicable with the qualification that while "these standards are important, worthy targets for economic development " ¦ there is no consensus regarding the best way to achieve the labour conditions envisaged by these core standards." Furthermore, if countries want the blessings of the Bank for doing nothing, they can refer to the Washington prescription: "simply adopting core labour standards will not guarantee their realization."

The thrust of Bank information, analysis and advice is "that labour regulations can be a major or severe constraint on firm operations" ¦Some curtailment of incentives can be justified by social goals. But ill-conceived approaches can exacerbate poverty by contributing to unemployment and swelling the size of the informal and unprotected economy." Governments should "encourage wage adaptability, ensure workplace regulations reflect a good institutional fit, [and] balance workers' preference for employment stability with firms' need to adjust the workforce." ³³

Only grudgingly is attention given to the informal economy - and not by extending legislative protection but rather by special schemes. Such as workfare, where praise for countries that offer public work for less than official minimum wage; social funds and special transfers.

Most puzzling is the analysis that "in developing countries problems meeting these standards may be a consequence of poverty." As if mass and persistent poverty was itself not a reflection of state failure to realize standards.³⁴ The Bank often states that it respects and promotes 'voices of the poor.' And even that "labour markets can also be made more effective by improving relationships among labour market partners " ¦ by strengthening collective bargaining and contracting." Yet, it offers little operational support to expanding freedom of association and collective bargaining for labour.³⁵

Since the Bank does not care for rights-based development, it cannot but prescribe that core labour standards should not be "enforced through sanctions," but promoted "as part of a broad-based development strategy through information, technical assistance, capacity building, and complementary initiative.³⁶ Naturally, "deserving close attention, are interesting new ideas about complementing public standards with private (market-driven) standards that encourage employers to adopt desirable labour practices." ³⁷

"Reducing labour market restrictions that limit job creation and stifle competition while promoting core labour standards remains a key challenge." As with the ADB, labour standards should come last when public policy requires tradeoffs.³⁸

The Bank agrees that government can take steps to reduce and mitigate risk and soften impacts for the vulnerable. A broad conception of the public safety net requires both macroeconomic interventions for an adequate number of decently paid jobs, as well as provision of "health insurance, old age assistance and pensions, unemployment insurance and assistance, workfare programs, social funds, microfinance programs, and cash transfers."

It is hardly illuminating to be told that a poverty reduction "strategy should include formal and informal mechanisms, provided by both the public and the private sector." Or that "relative cost-effectiveness, trust, and sustainability thus all need to be considered in deciding on government intervention."

The Bank agrees that "where there is a strong concern for the poor, especially the very poor, the formal-informal, public-private balance generally shifts in favour of public provision." ³⁹ Public action is left unspecified even in reference to an "automatic compensatory mechanism for the unwanted distributional effects of policy reforms."

The Bank recommends public policies to build assets for and by the poor to cope with their risks, but (direct) redistribution of assets (e.g. land reforms) is not considered. ⁴⁰ This is in line with the Bank's reticence on redistribution of power, as can be seen from the following. "The state may well be the best agent to provide insurance, but lack the necessary institutional strength, financial resources, or management capacity" ¦The political support to allocate resources may also be lacking, since it requires getting the rich to support a program that does not benefit them." Building political support through the poor is an obvious alternative, but the idea has inconvenient implications for Bank policies and operations.

The Bank recognises the issue that "even a well-functioning labour market will not fully eliminate the risk of unemployment or underemployment " ¦Displaced workers will need unemployment benefits to protect them from large income losses." Yet, the Bank then goes on with the conservative operational prescription that "unemployment insurance, the traditional means of mitigating the risk of job loss, is not appropriate for most developing countries because of their low administrative capacity and large informal sectors. The irregular and unpredictable earnings typical of the informal sector make it hard for workers to participate in a contributory insurance program."

A decent minimum wage is a specially bad idea at the Bank. Not only because it is not enforced across the economy but also because it "makes firms and jobs with low productivity levels unviable." Similar concern for such small firms is not in evidence when the Bank talks about full cost recovery for, say, energy use.

In summary, the position is that regulations may be good social goals, and may even be necessary in the absence of other social safety nets. But compliance is the exception for existing regulations. Voluntary compliance will increase unemployment. Anyway, government is incapable or unwilling to implement these regulations. Hence "local realities" and "tradeoffs" require that governments drop regulations seen as "onerous requirements" by employers.

Agreeing that SME growth will be a major contributor to growth and employment creation, the World Bank funds specific projects to facilitate SME growth.⁴¹

The Country Assistance Strategy confirms continuing encouragement to the government for pursuing modernization of labour regulations as part of the Private Sector Strategy in support of the PRSP.⁴²

Support to SMEDA includes collaborative studies, to establish that labour regulations have impeded productivity and growth.⁴³ Broader funding given in support of PRSP has apparently addressed issues of labour protection only indirectly, in line with Bank preference for excluding labour institutions from safety nets.⁴⁴

A Labour Policy study is under preparation, but drafts are yet to be available for public review. The concept paper for funding the study is illuminating.⁴⁵ The paper begins with the conclusion that "Labour market (LM) regulations and practices in Pakistan appear to be stringent, contributing to undesirable labour market outcomes and poverty, and hindering overall growth" ¦ strict employment protection is counterproductive not only for efficiency but equity reasons: it reduces employment and labour market flows, hinders technological innovations, pushes workers into informal sector, and hurts vulnerable groups by depriving them of job opportunities."

Authors are therefore directed to "focus upon (i) the most binding elements in existing labour policies and institutions including laws, regulations, practices, and their impact on firm behaviour; (ii) economic costs associated with provision of protection - i.e. the costs on employers that could actually reduce employment and even compromise growth; and (iii) analysis of the costs and effectiveness of existing labour market programs, particularly the training schemes intended to create job opportunities." They should presumably ignore the Bank's own finding, or see it as an example of labour market distortions, that "real wages in 1996-2002 declined for both salaried and casual workers. This decline contributed to the increase of poverty."

As of the ADB, the central critique of the World Bank can be posed as a simple question: why should labour have to bear all, or even the main, costs of adjustments to reforms? If governance is democratic, how should the Pakistan government obtain the consent of labour, uncoerced by the threat of destitution and debt bondage? ⁴⁶

The ILO

Many in the labour movement obviously agree with government on the need for changes in labour legislation and administration, but only partially on the proposed directions of change.⁴⁷ Hence there is a need to propose an agenda for tripartite discussions "" whose core is that the Declaration is to be implemented universally and no less rapidly than that advocated by economy managers for employment and economic growth.

This section begins with drawing upon ILO work in two directions. One, for its analysis of the realisation of labour rights. Two, as setting out the framework of labour rights within which reforms of labour regulations should take place.

Analysis and Advice

A section of the ILO is dedicated to small enterprises.⁴⁸ Through collaboration on country studies, it has influenced the preparation of the SMEDA policy papers. An initial review paper set the tone for the country studies. "Overall economic policies [favour] large enterprises over smaller ones. Small enterprises often have to incur unnecessarily high costs to comply with laws and regulations. To create a level playing field for enterprises of different size classes, regulations should be clear and the process of implementation transparent and fair. The evidence on the impact of laws and regulations on employment in small enterprises is still very incomplete." The review does not support a blanket exemption of SMEs from labour regulations, including minimum wages. It warns against a simplification that SME growth necessarily reflects the net generation of decent work, i.e. SME growth can reflect evasion strategies of larger enterprises.

ILO efforts to link decent work with SME growth are illustrated by a recent study.⁴⁹ "The challenge is to find ways to link productivity improvements with decent work in a virtuous cycle. In this cycle, enhanced productivity would lead to better wages, benefits and working conditions, while better working conditions, achieved through effective labour-management cooperation, social institutions and a broader process of social dialogue, would support higher productivity.

The study calls for a broad approach to poverty for its reduction through small enterprises. "Along with the availability of remunerated, productive work, decent work includes rights at work, social dialogue and social protection." Hence, the focus on adequate income would expand to include "collective bargaining on the conditions of work" ¦For workers, security derives in large part from access to social protection against illness, disability, unemployment, old age and the death of a main income earner."

A set of case studies analyse the productivity challenge by focusing on improvements in work practices - job quality. It concludes that there are a "variety of ways in which a more cooperative, empowered and contented workforce can help to increase productivity. It is also clear that market demand is an important aspect of productivity and critical for the smallest firms."

Reflecting international commitment to eradicate child labour, an ILO study emphasises the positive impact of higher adult wages and social security benefits upon reducing child labour in MSEs.⁵⁰ Better worker remuneration can be made possible by higher enterprise productivity, through steps that include higher job quality, i.e. better working conditions. Decent work - i.e. rights at work "" can therefore be seen as a productive factor. Hence the study calls for "technical assistance, including micro-finance, and other programmes [to] link assistance to a ban on the use of child labourers in family-run and other small enterprises."

It is appropriate to stress that Pakistan has ratified many conventions that define labour standards, of which the Declaration has prioritised some as core standards. Their significance is that all countries must acknowledge in law and ensure their compliance in administration by all employers - public or private, small or large "" as the rights of all workers - adults and children, male and female, citizen or migrant. Asserted as human rights, the core labour rights deserve reiteration:

• Freedom of association and the right to collective bargaining
• The elimination of forced and compulsory labour
• The abolition of child labour
• The elimination of discrimination

In addition to the abolition of forced labour, the text of other standards makes it clear that both rights at work as well as rights to work are covered. One implication needs emphasis: these are rights that cannot be revoked, rather than being entitlements that depend upon recognition of being a worker by state or employer. Hence no exclusions can be defended on any basis, including efficient discrimination between workers under different work arrangements.

Since the Declaration flows from the Universal Declaration of Rights, no state may deny these labour rights even if its government is unable (or unwilling) to fulfill these rights. Many in Pakistan, including the Shariat Court, believe that enforcement of these rights is also a part of the constitutional obligations of the state.⁵¹

Furthermore, the core labour rights are to be seen as a whole: when one of them is ignored or weakly applied then it imperils the realisation of other rights. Hence, specific conventions of the ILO refer to additional standards as defining decent work "" articulations of the core rights themselves, and as instrumental to realising core rights.

The UN Covenant on Economic, Social and Cultural Rights is of special relevance in this regard because rights at work cannot be independent of rights to work.⁵² The Covenant also asserts the right to choose work freely, including opportunities to access these choices. It is quite clear in asserting universal rights at work. As just and favourable for all, these include, fair wages for a decent life; safe and healthy working conditions; reasonable working hours; paid holidays; social security and social insurance, working mothers; protection against child labour; and collective bargaining to improve upon minimum legal standards. These are part of the right to "adequate food, clothing and housing, and to the continuous improvement of living conditions," which are necessary (though insufficient) conditions for realising the right to a decent life that includes dignity.⁵³

Concrete content for follow-up to the Declaration is given by country projects and country studies. As they must, all publications reaffirm the Declaration in its entirety, especially through annual Global Reports for each core right.⁵⁴ The constant refrain is illustrated by the Message of the Director General at the launch of the 2005 report. Violations of rights are "a challenge to virtually every country in the world." Realisation of rights is feasible through "a global alliance, mobilization of political will, the enforcement of existing or strong laws and policies, and the linkage of such efforts" with other development strategies. Broad articulations of realising labour standards and rights in development are also to be found in other ILO publications.⁵⁵

Social Security

Enterprise responsibility for social security can be a specially contentious issue between workers on the one hand, and enterprises and government (and the Banks) on the other hand. A recent ILO study, Economic Security for a Better World, particularly deserves a review. The study distinguishes seven forms of (related and complementary) economic security: labour market, employment, job, work, skill, income, and representation. Distributive justice requires priority to "basic security, with negotiable entitlements to other forms." Basic economic security depends upon basic income security as a fundamental objective of social, economic, and political policy, and upon voice representation security towards social and individual bargaining, collective and individual representation.

The study constructs indices for country performance. As would be expected, Pakistan comes out poorly. In the income security index, it occupies a place along with India as "much-to-be-done countries" with low scores on outcome, input and process. This assessment does not alter on indices for other forms of (in)security, and the same ranking for the combined economic security index. One conclusion from inter-country comparisons is that "strong employment protection may enhance, and is certainly no impediment to, economic growth." Inequality e.g. between wage and salaried workers, combines with average low levels of security to intensify adverse conditions of compensation and coping for most workers.

It calls for recognition of "systemic risks" that are not easily covered by traditional social security, social insurance or other selective measures that focus on the older types of "contingency risks." ⁵⁶ The proposed criteria for reforms are also a practical way to promote social justice: policies must improve the lot of the worst-off, and they must not deny freedoms available to others.

To conclude this discussion of national and international approaches to labour standards, it is appropriate to recall the Director General of the ILO.

Decent work expresses the basic aspiration of people everywhere for work that allows them and their families to live in dignity. The decent work agenda is a universal agenda. This is the spirit of our campaign on social security and coverage for all. Given the deficit in decent employment, it is hardly surprising that little progress has been made to reduce poverty. Nationally, regionally and globally, opting for solidarity and supporting the extension of social protection to all is to open the door to a dignified exit from poverty, to real choice, to freedom and ultimately, development.

Juan Somavia 2003

This paper is based on a study prepared for the ILO, as part of the Research, Education & Training program supported by EU, NOVIB, FNV, Stichting De Zaaire and Frere des Hommes. None of these organisations are responsible for the positions taken in the paper. Comments are invited at piler@cyber.net.pk.

ENDNOTES

¹ See e.g. Medium Term Development Framework; which estimates poverty around 40% of the population, and a Gini coefficient that rose from 0.40 to 0.44 (as estimates prepared at the Social Policy & Development Centre.

² Measured by the Declaration, Pakistan remains a country where performance does not match promise - see Normalised and Disaggregated Gaps in Workers Rights. Curiously, both adherence and implementation are considered good in non-discrimination despite the pervasive discrimination in legislation itself, most notably against agricultural workers. Clearly the author also ignores rights to work for females, whose absence from paid employment is so vivid in labour force data.

³ For those unfamiliar, the concept of decent work encompasses both (current and future) rights to work as well as rights at work, of employees as well as the self-employed; it is also expanding to cover all forms of work, including "care" work. Some would consider these as "luxuries" for developing countries, but curiously include themselves among the minority deserving of First World lives and livelihoods.

⁴ A companion paper concludes that empirical evidence is weak for considering labour regulation as a binding constraint to small enterprise growth.

⁵ In recent functioning, the Ministry of Labour is forced to consider the needs of investors but the Ministries of Industry and of Commerce give little thought to workers, except as a factor of production. The Ministry of Labour is financed by the ADB to develop a Labour Protection Policy but it is SMEDA which is organising consultations and the Ministry of Finance remains the executing agency for the ADB project. Seriousness is evidenced by e.g. the absence of an Urdu draft at consultative workshops and nominal presence of informal economy workers.

⁶ Developing SME Policy in Pakistan: SME Issues Paper. The draft paper was presumably vetted by the Task Force for SME Policy, discussed in its Working Committees, and apparently presented at consultative workshops. There is no resulting report for public discussion. The Task Force is headed by the Secretary Ministry of Industries, and "is composed of diverse sectors and levels of Government and includes major stakeholders of the private sector, and SME in particular." Labour is represented only through the federal Ministry of Labour.

⁷ If compliance is largely absent (as market or government failure or both), then labour legislation is unlikely to be an effective constraint upon growth. Unless evasion is costlier than compliance for some laws but compliance will acknowledge other obligations which threaten the existing imbalance of power between privileges of capital and rights of workers, such as collective bargaining. The idea of transaction costs may also help explain the inertia of moving from evasion to compliance.

⁸ Recommendations made by the Working Committees of the SME Task Force.

⁹ Creating a Conducive Policy Environment for Micro, Small and Medium-Sized Enterprises in Pakistan. Based on more rigorous analysis, the country study is more circumspect than the SME issues paper. This country study was influenced by another SME issues paper of the ILO, which is discussed below.

¹⁰ Towards a Prosperous Pakistan: A Strategy for Rapid Industrial Growth. Led by (loaned) staff from the World Bank, the study team had an advisory group that notably excludes any labour representatives, private or public. Long association with senior members of the group suggests that mature pragmatism won over youthful idealism. The report is said to have been reviewed by "senior government officials and leading private sector representatives."

¹¹ Accelerating Economic Growth and Reducing Poverty: The Road Ahead. Quite telling is the absence of any federal or provincial ministries, departments or agencies for labour from the PRSP Implementation Committee. The ILO assisted the government in improving the Interim PRSP towards an "employment policy to generate decent work." Its contribution was received so grudgingly, or conservative to suit Islamabad, that the final document does not have a single mention of the Declaration or of core labour standards or even of decent work.

¹² As Professor Muhammad Yunus of Grameen Bank wrote about the Bangladesh IPRSP, no strategy is meaningful unless one can hold administrators at all levels responsible for what they should do and what should not do, since business as usual cannot accomplish the admirable targets of a PRSP.

¹³ Pakistan Social and Living Standard Measurement Survey.

¹⁴ The wait may be long. Among other reasons, high-level policy makers are reputed to remain annoyed with the Federal Bureau of Statistics which dared publish data that contradict government claims to reduction in poverty in recent years. It would also be embarrassing if the front-line ally in the global alliance against terror were to be a back-bencher in the global alliance for eradication of child labour.

¹⁵ This logic would suggest abolishing most laws, and even the constitution, and hence discarding much of government. Furthermore, laws are seen more as a nuisance of being called to account, rather than acknowledging rights around which discourse and hence social struggles can take place. The more perceptive elites, of course, recognise this force of law. Interesting discussions are to be found in Globalisation and decent work policy: Reflections upon a new legal approach; and in Making Law Matter, and Developing Rights.

¹⁶ Self-regulation and third-party monitoring by private firms can be a na ƒÆ’ ¯ve suggestion unless Enron is kept in mind - a useful reminder by the ILO in Economic Security for a Better World.

¹⁷ Many previous reviews are available, including those done during the tenure of Omar Asghar Khan as Minister for Labour. Experience with the draft IRO was disheartening for not just PILER but also WEBCOP when the whole process was hijacked by the Ministries of Finance, Commerce & Industry in the interests of crony capitalists. Reviews of existing legislation are instructive for examining new legislation; see e.g. Labour Market Policies and Institutions: A Framework for Social Dialogue; Labour Legislation & Trade Unions in Pakistan.

¹⁸ Some laws contain absurd penalties, such as Rs 4000 "" just slightly higher than the current monthly minimum wage "" for the death of a worker due to inadequate safety provisions at work.

¹⁹ The emphasis on job creation also goes down well with state elites as well as the political managers of the Bank in Tokyo and Washington. After 9/11, large project loans with international procurement and rapid disbursements have acquired additional importance in Bank operations, notwithstanding the rhetoric and narrowness of calls for governance reforms.

²⁰ Besides privileging efficiency over effectiveness, the Bank shies away from grappling with real issues of efficiency in use of resources - the enormous and growing budgeted military expenditures is the most obvious example.

²¹ If willing, serious leverage is possible. For example, Bank funding for infrastructure involves brick kilns as suppliers. These kilns (even around Islamabad) remain a major site for child labour and debt bondage; denial of minimum wages; refusal to recognise any but a handful as workers and any women as workers. The concept note of (a proposed loan for) the Punjab Local Justice Support Program expects "reaffirming core labour standards in the refinement and strengthening of policy and legal framework." It will be interesting to see the concrete measures even asked for by the Bank, and the extent to which these are seriously monitored by staff at the Pakistan resident mission. Reluctance in Manila is understandable since the US itself does not respect all provisions of the ILO Declaration of Principles, most notably of collective bargaining by insisting that freedom of association includes the freedom to deny trade union activities.

²² Labour Markets in Asia: Promoting Full, Productive, and Decent Employment .

²³ Consulted documents are listed at the end of the paper.

²⁴ The government is advised by the Bank that SME policy should take into account high labour costs and low productivity where the comparison is made with Bangladesh. Instead of working to reduce exploitation in Bangladesh, the Bank encourages a race to the bottom. Most citizens of South Asia would demand that this strategy of equalisation should start with military expenditures.

²⁵ Other illustrations include statements such as "exporters will be required to certify that they are in compliance with Pakistan labour laws in order to be eligible for financing" from a Bank-created Fund. Since the scope of compliance is not spelt out, eligibility would be no problem for an exporter who relies upon semi-finished materials produced elsewhere under conditions of work that violate each of the core labour standards. As another example, reliance on schemes for self-assessment for social security and virtually no labour inspections is part of a loan to Punjab. The results so far offer no grounds to believe that reduction in unethical officials has led to more ethical employers.

²⁶ Curiously the loan "assumptions" of programme success make no reference to workers or even of government inclination towards labour rights. Of course there is an explicit reference to "effective representation of private sector" in policy and implementation.

²⁷ Preparing The Social Protection Strategy; Developing Social Health Insurance Project. Between 2003 and 2004 the Country Strategy And Program Update appears to have reclassified projects with the theme of "social protection" or "human development" into "inclusive social development."

²⁸ SME Development in Pakistan: Analysing the Constraints to Growth.

²⁹ Deficits in thinking through issues are present across the board - e.g. see ADB: Case study of Access to Justice Programme. Some very competent analysts seem to suspend their conscience rather easily in going from politics of the economy today to an alternative politics of the economy tomorrow "" e.g. the concept note in the Country Assistance Strategy for a proposed TA loan towards Social Protection Capacity Building in Pakistan.

³⁰ Rather than, say, as a social arrangement between labour and capital to share in the surplus generated by collective efforts of workers and owners.

³¹ These are A Better Investment Climate for Everyone; Building Institutions for Markets; Attacking Poverty; and Workers in an Integrating World. Much research by prominent economists is funded by the Bank to illustrate the negative impacts of labour legislation on growth and poverty; some has recently ended up in academically prestigious publications such as the US-based Quarterly Journal of Economics; other anti-labour work is being popularised through columnists for international news websites, such as the BBC. Comments on such work are best left for another occasion.

³² Could one imagine a discussion of governance in states where the focus is on government alone, according citizens a negative role as the restless natives?

³³ Note the clever reversal of the usual juxtaposition of labour needs and capital privileges.

³⁴ The Bank flogs the usual illustration of child labour supply by households in extreme poverty, where no questions are asked about the economic and social exclusions that create such poverty in the first place.

³⁵ Consider the statement that "the state's most important task in fostering poor people's organizations is to remove legal and other barriers to forming associations and to provide an administrative and judicial framework supportive of such associations." Or that "strong civil society organizations can promote the political empowerment of poor people." What then of the regressive IRO in Pakistan, if labour associations are part of civil society? Elsewhere SEWA (of India) is praised - perhaps to support the retreat of the (Indian) state from its obligations?

³⁶ Is it coincidental that much assistance, including international expertise, is offered for adoption of this approach by Pakistan? Some would say that labour gets run over twice "" first by its employers in the fast track of inequitable growth and then again by the state for these 'public services.'

³⁷ For the Bank, social policy must mimic the market as much as possible, disregarding the fact that only government can be held responsible, however responsive are markets. If the poor face risks of prolonged unemployment or fluctuating wages, then it is credit markets that must be made more responsive to the need for "smoothing consumption," rather than making the state responsible for safeguarding livelihoods. But then, the Bank's conception of a developmental (rather than predatory) state is "skilled technocrats and close collaboration with the business community." Enveloped in the jargon of `idiosyncratic and covariant risks', or `dysfunctional labour markets,' Washington finds it inconvenient to illuminate the role of the state in the generation of insecure livelihoods.

³⁸ The Bank now asserts that "market-friendly reforms have been promoted by developing country governments, especially those democratically elected." Few in Pakistan would agree.

³⁹ What then shall we infer from Bank operations in Pakistan?

⁴⁰ As an ILO study - Economic Security for a Better World - puts it diplomatically: "some have criticised the World Bank for failing to appreciate the nature of chronic risk due to inequality and concentrations of unaccountable power." Getting by is not getting on, as can be specially seen in child labour and debt bondage for survival.

⁴¹ For a sceptical view of the preference for SMEs, see a note published by the Bank itself: SMEs, Growth and Poverty.

⁴² Country Assistance Strategy Progress Report. A government Committee on Reforms in Regulatory Legal and Policy Environment under the Minister of Industries & Production has been funded by the World Bank since 2002. The Bank believes that consolidation and modernization of laws has and will be done "under the auspices of this Committee."

⁴³ Investment Climate Assessment.

⁴⁴ Poverty Reduction Support Credit Project: Simplified Implementation Report.

⁴⁵ Generating Investment and Employment Opportunities In Pakistan through Labour Market Reforms.

⁴⁶ Specially in view of the Bank's observation that "the core of the poor governance problem in Pakistan is the leadership's abuse of state institutions, widespread corruption, and disregard for the separation of powers and respect for the rule of law."

⁴⁷ See, for example, reports of the Task Forces set up due to the efforts of Omar Asghar Khan as Minister for Labour; another example is the drafts of IRO and Labour Policy, proposed through WEBCOP.

⁴⁸ The Infocus Programme on Boosting Employment through SEED "" Small Enterprise Development - is located in the Job Creation & Enterprise Department; it specially reflects ILO work for Convention 189. Small Enterprises, Big Challenges: A Literature Review on the Impact of the Policy Environment was published in 2002.

Unfortunately, its analytical rigour is only partially captured in the subsequent country study for Pakistan, no doubt because of lack of data.

⁴⁹ Productivity, decent employment and poverty: Conceptual and practical issues related to small enterprises.

⁵⁰ Using Small Enterprise Development to Reduce Child Labour.

⁵¹ For the Shariat Court judgement in 1983, see Debt Bondage in Pakistan: Making Law Matter. A recent Shariat Court judgement has upheld the law against bonded labour as protection to labour that is intrinsic to Islam, rejecting petitions filed by brick kiln owners to declare debt bondage as a voluntary contract consistent with Shariah.

⁵² Keeping company with Saudi Arabia and Indonesia, Pakistan has yet to ratify the Covenant. But this is immaterial for the international obligation to comply with the Convention.

⁵³ "To be treated with dignity" was the first demand made of employers in recent protests of Faisalabad workers in power looms.

⁵⁴ The most recent report is A Global Alliance against Forced Labour. Earlier themes were Organising for Social Justice; Time for Equality at Work; A Future without Child Labour; Stopping Forced Labour; beginning with Your Voice at Work.

⁵⁵ For example, Social Protection: A Life Cycle Continuum Investment For Social Justice, Poverty Reduction and Sustainable Development, ILO; Equality at work; Work and rights.

⁵⁶ Worsening the plight of both currently employed and unemployed are recurring and long duration spells of unemployment, dimensions not recorded in survey data. Such "churning" of unemployment is pointed out as a special concern of contemporary globalisation in A Fair Globalisation: Creating Opportunities for All. A study on unemployment in Pakistan - Labour Market Dynamics in Pakistan "" records transitory and short-term unemployment at 85% of the unemployed, with the remaining as chronically unemployed. This excludes those who left the labour force upon being discouraged by unemployment that lasted beyond a year.

Materials Consulted

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