SAPRIN_00 prelims 9/12/03 4:24 pm Page i ABOUT THIS BOOK A Report on a Joint Participatory Investigation by Civil Society and the World Bank on the Impact of Structural Adjustment Policies One factor, more than any other, has crippled national economies, increased poverty and inequality, and made many millions of people hungry. It is a set of policies, called structural adjustment, that has been forced on developing countries for more than 20 years by the World Bank, the International Monetary Fund and Western aid agencies. Country after country has been compelled, regardless of circumstances, to adopt this ‘one size fits all’ economic strategy that exposes the world’s most vulnerable peoples and weakest economies to the full force of the global market place dominated by the most powerful and richest economies and corporations. Born of a unique five-year collaboration among citizens’ groups, developing country governments, and the World Bank, this book represents the most comprehensive, real-life assessment of the actual impacts of the liberalization, deregulation, privatization and austerity policies that con- stitute structural adjustment programmes. Its authors, the members of the Structural Adjustment Participatory Review International Network (SAPRIN) that engaged the World Bank’s president in this ambitious and highly participatory endeavour, present the concrete consequences of these policies. The stark conclusion emerges: if there is to be any hope for meaningful development in the countries of the South and for the sustained reduction of poverty and inequality, the Western-inspired and imposed doctrines of structural adjustment and neoliberal economics must go. SAPRIN_00 prelims 9/12/03 4:24 pm Page ii SAPRIN is a global network established to expand and legitimize the role of civil society in economic policymaking and to strengthen the organized challenge to structural adjustment programmes by citizens around the globe. It is composed of broad-based civil society networks in Argentina, Bangla- desh, Ecuador, El Salvador, Ghana, Hungary, Mexico, the Philippines, Uganda and Zimbabwe, which along with non-governmental organizations based in Europe, Canada and the United States comprise SAPRIN’s Steering Committee. The network has brought together trade unions, small business and farmers’ associations, environmental and indigenous peoples’ organizations, women’s and community groups, religious and human rights organizations, development and research institutes, NGOs, and associations of youth, pensioners and the disabled. SAPRIN’s diverse programme has included extensive citizen mobilization, local workshops and national public fora, participatory field research, economic literacy training, and the development and promotion of alternative economic policy proposals at the country level on four continents. At the global level, SAPRIN’s advocacy work vis-à-vis the World Bank, United Nations agencies and national governments has focused on the elimination of adjustment conditionality and on the democratization of the economic policymaking process and on opening it to new policy options. The SAPRIN Secretariat is based at The Development GAP in Washington, DC. SAPRIN_00 prelims 9/12/03 4:24 pm Page iii : STRUCTURAL ADJUSTMENT SAPRI THE REPORT The Policy Roots of Economic Crisis, Poverty and Inequality by The Structural Adjustment Participatory Review International Network (SAPRIN) A Report on a Joint Participatory Investigation by Civil Society and the World Bank of the Impact of Structural Adjustment Policies Zed Books LONDON & NEW YORK TWN MALAYSIA Books for Change INDIA IBON PHILIPPINES SAPRIN_00 prelims 9/12/03 4:24 pm Page iv Structural Adjustment: The SAPRIReport was first published in 2004 Malaysia: Third World Network, 121-S Jalan Utama, Penang 10450 Philippines: IBON Foundation, 3rd Floor, SCC Building, 4427 International Old Station, Mesa, Manila India: Books for Change, 139 Richmond Road, Bangalore 560 025 Rest of the World: Zed Books Ltd 7 Cynthia Street, London N1 9JF, UK and Room 400, 175 Fifth Avenue, New York, NY 10010, USA. www.zedbooks.co.uk Copyright © The Structural Adjustment Participatory Review International Network (SAPRIN) 2003 The right of SAPRINto be identified as the author of this work has been asserted by it in accordance with the Copyright, Designs and Patents Act, 1988. Cover design by Andrew Corbett Designed and set in 10/12 pt Bembo XT by Long House, Cumbria, UK Printed and bound in Malta by Gutenberg Ltd Distributed exclusively in the USA by Palgrave Macmillan, a division of St Martin’s Press, LLC, 175 Fifth Avenue, New York, NY 10010. All rights reserved A catalogue record for this book is available from the British Library US Cataloging-in-Publication Data is available from the Library of Congress ISBN 1 84277 388 7 hb 1 84277 389 5 pb IBON ISBN 971-0325-09-4 CONTACT DETAILS FOR SAPRIN Saprin Secretariat 927 Fifteenth Street, NW, 4th Floor Washington,DC 20005 USA Tel: 202/898-1566 Fax: 202/898-1612 Email: [email protected] Website: www.saprin.org SAPRIN_00 prelims 9/12/03 4:24 pm Page v Contents List of Tables, Boxes and Figures viii List of Acronyms ix Acknowledgements x SAPRIN and World Bank Global Steering Committee Members xiv 1 Structural Adjustment and the SAPRI/CASA Experience 1 The Origins of Structural Adjustment 1 The Genesis of SAPRI 5 Forging a Joint Initiative with the World Bank while Maintaining Civil Society Independence 7 Civil Society Mobilization and Participation 12 National Public Fora: Infusing the Economic Policy Debate with Local Knowledge 21 Joint Research to Deepen Local Civil Society Assessments of Adjustment Policies 24 World Bank Distances Itself from the Emerging SAPRI Findings 31 Elaborating the Results of the Global Policy Assessment 33 2 Trade Liberalization Policies and Their Impact on the Manufacturing Sector 36 Bangladesh, Ecuador, Ghana, Hungary, Mexico, the Philippines and Zimbabwe Design of Trade Policy Reforms 39 Macro and Sectoral Outcomes of Trade Policy Reforms 48 Distributional Impacts of Trade Policy Reforms 62 Conclusion 69 3 Financial Sector Liberalization: Effects on Production and the Small Enterprise Sector 72 Bangladesh, Ecuador, El Salvador and Zimbabwe Background and Process of Financial Sector Liberalization 73 Impact of Financial Sector Reforms 75 Conclusion 83 SAPRIN_00 prelims 9/12/03 4:24 pm Page vi 4 Employment under Adjustment and the Effects of Labour Market Reform on Working People 87 Ecuador, El Salvador, Mexico and Zimbabwe Country Characteristics 88 Adjustment Programmes, Employment and Poverty 91 Labour Market Reforms and Flexibilization 101 Wages and Working Conditions 104 Conclusion 107 5 The Economic and Social Impact of Privatization Programmes 110 Bangladesh, El Salvador, Hungary and Uganda Reasons for Privatization 111 Privatization Programmes and Processes 113 Economic Results of Privatization 114 Social Impact of Privatization 122 Transparency 126 Conclusion 127 6 The Impact of Agricultural Sector Adjustment Policies on Small Farmers and Food Security 132 Bangladesh, Mexico, the Philippines, Uganda and Zimbabwe Objectives, Policies, Strategies and Design of Agricultural Reform 133 Economic Impact of the Reform Policies 135 Social and Environmental Impacts 143 Conclusion 149 7 The Socioeconomic and Environmental Impact of Mining Sector Reform 153 Ghana and the Philippines Background 153 Adjustment Policies, Legislation and Actions Affecting the Sector 155 Economic Impacts: Foreign Exchange, Government Revenue Generation and Employment 157 Social and Community Impacts 160 Environmental Impacts 165 Conclusion 170 SAPRIN_00 prelims 9/12/03 4:24 pm Page vii 8 The Effects of Public Expenditure Policies on Education and Healthcare under Structural Adjustment 174 Ecuador, Ghana, Hungary, Mexico, the Philippines, Uganda and Zimbabwe Adjustment Policies Addressed 176 The Impact of Adjustment Reforms on Public Spending for Education and Healthcare 177 The Impact of Reforms on Access to, and Quality of, Education and Healthcare Services 185 The Impact on the Poor of the Elimination of Basic Subsidies 197 Conclusion 199 9 Structural Adjustment, Poverty and Inequality 203 The Impact of Trade and Financial Sector Reforms on Manufacturing, Employment and Small and Poor Producers 204 The Impact of Agricultural, Trade and Mining Reforms on Agricultural Production, Small Farms, Food Security and Poor Communities 207 The Impact of Labour Market Reform and Privatization on Wages, Employment, and Poverty 211 The Impact of the Privatization of Public Utilities and Public Expenditure Reform on the Availability of Affordable Services and on Poverty 213 Weak Macroeconomic Performance under Adjustment 217 Shaping a Different Future 220 SAPRIN National Steering Committees 226 Bibliography of SAPRI/CASA National Reports 231 Index 236 SAPRIN_00 prelims 9/12/03 4:24 pm Page viii Tables, Boxes and Figures Tables 2.1 SAPRI/CASA Countries: Profile by Selected Indicators 38 2.2 General Objectives of the Trade and Industrial Policy Reforms as Outlined in the Policy Framework Papers 39 2.3 SAPRI/CASA Countries: Scenario of Trade Liberalization 41 4.1 Selected Countries: Population, Territory and GDP 88 4.2 Proportion (%) of Men and Women Employed by Sector, 1980 and 1990–97 (Most Recent Data) 97 4.3 Ecuador: Average Monthly Salaries (in 1998 US$) in Urban Areas by Economic Sector and Gender 105 7.1 International Institution Credit Provided to the Resource Extractive Sector, 1995–99 154 7.2 Ghana: Percentage of Export Value Retained Off-shore 156 7.3 Performance of Ghana’s Mineral Industry under the Structural Adjustment Programme (1987–98) 158 7.4 Mining Companies Operating in Tarkwa Mining District, Ghana 162 8.1 Timeline of Structural Adjustment Programmes in SAPRI/CASA Countries 175 8.2 Annual Earnings per Employee (in US$) in Healthcare and Education in Zimbabwe 179 8.3 Hungary: Spending on Education as a Percentage of GDP (1991–2002) 180 8.4 Uganda: Share of Total Government Expenditures Allocated to Healthcare and Education (1988–98) 181 8.5 Zimbabwe Infant Mortality Rate and Child Mortality Rate per 1,000 Live Births (1978–97) 193 Figures 7.1 Mineral Production in Ghana (1987–98) 158 Boxes 2.1 Impact of Trade Liberalization: Voices of the People of Bangladesh 59 8.1 Indicators of Trends in Budget Allocation and Spending 178 viii SAPRIN_00 prelims 9/12/03 4:24 pm Page ix Acronyms ADB Asian Development Bank IFC International Finance Corporation ALOP Asociación Latinamericana de organiza- IFIs International Financial Institutions ciones de promocion (Latin America) ILO International Labour Organization ASA Alliance of Social Associations (Hungary) IMF International Monetary Fund AWEPON African Women’s Economic Policy ISODEC Integrated Social Development Network (Uganda) Centre (Ghana) BIDS Bangladesh Institute of Development ITESO Instituto Technologicó de Estudias Studies Superiores de Occidento BMI Multisectoral Investment Bank (El MERP Millennium Economic Recovery Salvador) Programme BRAC Bangladesh Rural Advancement NAFTA North American Free Trade Committee Agreement CAS Country Assistance Strategy NGO Non-governmental organization CAMC Climax-Arimco Mining Corporation NOVIB Nederlandse Organisatie voor (Philippines) Internationale Bijstand CASA Citizens’ Assessments of Structural P Peso Adjustment PAR Participatory Action Research CELA Centre for Latin American Studies PERD Public Enterprise Reform and COMECON Council for Mutual Economic Divestiture Assistance (Eastern Bloc) PRA Participatory Rural Appraisal COMESA Common Market for Eastern and PRONASOL National Solidarity Programme Southern Africa PROGRESA Education, Health and Nutrition DAWN Development Alternatives for Women Programme in a New Era PROSHIKA Training, Education and Action DEC Development Economics Vice (Bangladesh) Presidency (World Bank) PRSP Poverty Reduction Strategy Paper ECA Export credit agency PUCE Catholic University of Ecuador EIA Environmental impact assessment RMG Ready-made garments EPZ Export processing zone SADC Southern African Development ERP Economic Recovery Programme Community ESAF Extended Structural Adjustment Facility SAL Structural adjustment loan ESAP Economic Structural Adjustment SAMCAF Southern Africa Microfinance Programme Capacity Building Facility FDC Freedom from Debt Coalition SAP Structural adjustment programme (Philippines) SAPRI Structural Adjustment Participatory FOSAFI Fund for Financial Restructuring and Review Initiative Strengthening (El Salvador) SAPRIN Structural Adjustment Participatory FTAAs Financial and Technical Assistance Review International Network Agreements SDA Social Dimensions of Adjustment FUNDE National Foundation for Development SMEs Small and medium-scale enterprises (El Salvador) TORs Terms of reference GATT General Agreement on Tariffs and Trade UNCTAD United Nations Conference on GDP Gross domestic product Trade and Development GNP Gross national product UNDP United Nations Development GTZ Gesellschaft für Technische Programme Zusammenarbeit (Germany) UNICEF United Nations Children’s Fund HIPC Heavily Indebted Poor Country WRI World Resources Institute HMC Hinatuan Mining Corporation WTO World Trade Organization (Philippines) ZCTU Zimbabwe Congress of Trade IDB Inter-American Development Bank Unions IEDECA Institute for the Ecology and Develop- ZIMPREST Zimbabwe Programme for ment of Andean Communities Economic and Social (Ecuador) Transformation ix