Lessons for Effective Governance: An Examination of the Better Work Program.

Author:Alois, Paul
Position:Report
 
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IT HAS BECOME CLICHE TO SAY THAT GLOBAL INSTITUTIONS ARE INCAPABLE OF tackling global problems--a pessimism that is not entirely unwarranted. "Problems without passports," such as genocide, climate change, terrorism, and financial shenanigans, have all made a mockery of the international institutions that are supposed to address them.' But alongside this long list of failures, there are reasons to be optimistic.

In recent years, creative responses to these problems have emerged that pull together international organizations, governments, the private sector, and civil society from across the developed and developing world. These global multistakeholder initiatives (Mis) should be of keen interest to policymakers and students of world order because they challenge conventional problem solving, offer novel institutional forms, and promise a way forward on intractable global problems. (2) These global Mis, despite their importance, have not been adequately researched. There are few studies looking at individual Mis and even fewer that address these initiatives as a group.

My purpose in this article is to examine a particularly effective global MI, the Better Work program, to extract lessons for other initiatives. Better Work aims to improve labor standards and productivity in the garment industry in seven developing countries (two more countries will join later in 2018). It is jointly run by the International Labour Organization (ILO) and the International Finance Corporation (IFC), and it is funded from two sources: donor governments and fees from the private sector. Better Work is successful politically and practically. The program involves a large number of stakeholders, each with different interests, and is able to satisfy them without sacrificing its mission. Better Work has also achieved significant sustainable improvements to labor standards in an industry where previous Mis have achieved little. (3)

The research that informs this article comes from interviews and document analysis. I conducted interviews with over fifty people at a number of locations, including the ILO in Geneva, the IFC in Washington, DC, and Better Work offices in Ho Chi Minh City and Jakarta. I also conducted dozens of phone interviews with stakeholders and issue experts in other parts of the world. I reviewed all publicly available documents as well as a number of internal documents generously provided by Better Work staff in Geneva. In this article, I cover Better Work's history, governance, and operations. I conclude by outlining key lessons from Better Work that can be applied to other Mis.

Better Work's History and Development

Better Work is built on an earlier program, Better Factories Cambodia (BFC). BFC began in 2001 with an agreement between the US and Cambodian governments that linked labor standards in Cambodia's apparel industry with US market access. Under BFC, the US government would increase access to US markets if monitors found that Cambodia's abysmal labor standards were improving; (4) the ILO was brought in to provide credible monitoring. BFC succeeded in both expanding Cambodia's industry and raising working conditions. (5)

The expiration of the Multi-Fiber Arrangement (MFA) in 2005 threatened BFC. Without the MFA, BFC could not use market access to incentivize labor standards. Even worse, industry analysts assumed that production would leave Cambodia for China. (6) The program was saved by multinational corporations (MNCs) that committed to continue buying from Cambodia if the government and employers' association ensured the industry's compliance with BFC. The ILO remained as a monitor and produced factory reports directly for MNCs.

In 2006, BFC's director wanted to replicate BFC in more countries, albeit with some modifications. The new program, called Better Work, was designed to correct four weaknesses in BFC. First, Better Work would emphasize fixing labor violations, instead of simply monitoring and reporting violations. It had become clear that factory owners often violated labor laws out of ignorance or habit, and monitoring alone would not change behavior. Second, Better Work was designed to demonstrate a "business case" for compliance. This meant demonstrating that improvements in labor conditions would be good for businesses by improving worker efficiency, reducing turnover, increasing safety, and attracting more orders. Third, Better Work would have voluntary participation by factories. Factories would join the program because they wanted to improve compliance, they believed in the business case, or they were pressured by MNCs. Finally, Better Work would more explicitly work with unions and government agencies to develop comprehensive solutions to labor issues.

The ILO and the US government were not interested in funding this expansion, so the IFC gave a large grant on the condition that it become an equal partner with the ILO. Formal operations began in 2009 in Haiti, Jordan, and Vietnam. Programs began in Lesotho in 2010, Indonesia and Nicaragua in 2011, and Bangladesh in 2014. In 2016, the Lesotho program closed because the industry was so small; in 2018, programs will begin in Egypt and Ethiopia. Table 1 contains key information about each country's Better Work program. It shows the number of factories in each program. There are four large programs (Bangladesh, Cambodia, Indonesia, and Vietnam) and three small ones (Haiti, Jordan, and Nicaragua). There is room for expansion in Bangladesh, Indonesia, and Vietnam, but little room for growth in the other countries. The middle columns of Table 1 show the share of global apparel exports that each country's industry holds and the donors for each country. Taken together, they show that smaller programs are supported exclusively by the United States while larger programs are able to attract a wider base of donors. Table 1 also shows which countries have mandatory participation and which have voluntary participation. In Cambodia and Jordan, national law mandates participation. In Haiti, participation is made mandatory by US legislation. The country's industry is competitive only because it receives preferential trade access, and this access is conditional on compliance with Better Work. In Bangladesh, Indonesia, Nicaragua, and Vietnam, participation is voluntary.

Better Work's Governance

The Management Group

The Management Group determines Better Work's long-term strategy, deciding which countries to enter, whether or not to enter new industries, and other significant policies. It has two representatives from the ILO and two from the IFC. This arrangement works smoothly because the Management Group members are senior enough to make decisions without excessive oversight and because these international organizations (IOs) have markedly different competencies, so they complement each other instead of competing.

The ILO supports Better Work because the program demonstrates its relevance in the modern globalized economy. The modern supply chain, in which multinational corporations oversee production across dozens of countries, has challenged the ILO's country-based model. (7) In my discussions with ILO staff, Better Work was cited as evidence that the ILO can influence a highly globalized industry. Further, Better Work is a response to the ILO's critics who claim that the organization is interested only in abstract international conventions.

The IFC is the wing of the World Bank that invests in private firms in developing countries. One department of the IFC, Advisory Services, provides advice to firms on how to promote investment and trade. Better Work sits within this department. IFC staff reported that the organization remains invested in Better Work because the program provides access to the apparel industry. The IFC wants a larger presence in the apparel industry because the organization is prioritizing job creation and economic development for women, and the industry is both labor intensive and a major source of employment for women. (8)

Although the ILO and IFC are equals in the Management Group, almost all of Better Work's staff, including its director, are ILO employees. Further, Better Work is far more important to the ILO than to the IFC. It has become one of the ILO's flagship programs, but it is a minor program within the IFC. This is partly because the IFC's core mission is lending money and partly because the World Bank's chaotic restructuring has prevented the IFC from effectively making long-term plans. (9)

The Global Advisory Committee

The Global Advisory Committee (GAC) is a forum through which stakeholders provide input. Its members include donor governments, multinational corporations, international labor unions, and international employers' associations. (10) The GAC does not have formal power, but the input of its members is taken seriously. Dan Rees, Better Work's director, reported that he would not promote a policy if a member of the GAC was dead set against it, but he does not need strong support from every member on every issue.

The donors are probably the strongest voices in the GAC because Better Work still relies on donor funding in all countries. Smaller programs are almost totally reliant on donor funds while larger programs get most of their revenue from fees paid by the private sector. Officials from Australia, Denmark, the Netherlands, Switzerland, and the United States represent donor governments in the GAC; other donors include Canada, France, Germany, Korea, and the United Kingdom. These donors fund Better Work for similar reasons: they believe the program is effective, they like its multistakeholder approach, and they appreciate that the program aims to become financially self-sufficient. The biggest difference among them is that the United States focuses on its preferential trade partners while other donors focus on countries with large industries.

The GAC has two MNC representatives, one from Europe and...

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