Structural Adjustment, Poverty and Inequality

197 Pages·2002·1.12 MB·English

by  World Bank Group

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-- First Edition, April 2002 --
THE POLICY ROOTS OF
ECONOMIC CRISIS
AND POVERTY

A Multi-Country Participatory Assessment
of Structural Adjustment

Based on Results of the Joint World Bank/Civil Society/Government
Structural Adjustment Participatory Review Initiative (SAPRI)
and the Citizens’ Assessment of Structural Adjustment (CASA)

Prepared by
the Structural Adjustment Participatory Review International Network
(SAPRIN)

Supported at the global level by
the Governments of Norway, Sweden, the Netherlands, Belgium and Germany;
the European Union; the United Nations Development Programme;
the African Development, Charles Stewart Mott,
Rockefeller and W.K. Kellogg Foundations;
and various other NGOs, foundations and agencies at the country level

First Edition
©Structural Participatory Review International Network (SAPRIN), April 2002

SAPRIN Secretariat; 927 Fifteenth Street, NW, 4th floor, Washington, DC 20005 USA
Tel: [phone]; Fax: [phone]; E-Mail: [email protected]; Web Site: www.saprin.org
Table of Contents

Acknowledgements.................................................................................................................i

SAPRIN and World Bank Global Steering Committee Members...............................................v

List of Acronyms...................................................................................................................vi

Chapter 1:
The SAPRI/CASA Experience..........................................................................................1

Chapter 2:
Trade Liberalization Policies and Their Impact on the Manufacturing Sector...............27
Bangladesh, Ecuador, Ghana, Hungary, Mexico, the Philippines and Zimbabwe

Chapter 3:
Financial Sector Liberalization, Effects on Production
and the Small Enterprise Sector..................................................................................57
Bangladesh, Ecuador, El Salvador and Zimbabwe

Chapter 4:
Employment under Adjustment and the Effects of Labor Market Reform
on Working People .....................................................................................................71
Ecuador, El Salvador, Mexico and Zimbabwe

Chapter 5:
The Economic and Social Impact of Privatization Programs..........................................91
Bangladesh, El Salvador, Hungary and Uganda

Chapter 6:
The Impact of Agricultural Sector Adjustment Policies
on Small Farmers and Food Security.........................................................................111
Bangladesh, Mexico, the Philippines, Uganda and Zimbabwe

Chapter 7:
The Socioeconomic and Environmental Impact of Mining Sector Reform....................129
Ghana and the Philippines

Chapter 8:
The Effects of Public Expenditure Policies on Education
and Health Care under Structural Adjustment........................................................147
Ecuador, Ghana, Hungary, Mexico, the Philippines, Uganda and Zimbabwe

Chapter 9:
Structural Adjustment, Poverty and Inequality............................................................173
Acknowledgements

This report is the result of a four-year process of consultation and research in nine
countries across four continents. There are countless people and organizations that have
contributed to this colossal work, and we could not hope to name them all here. We do,
however, wish to acknowledge the principal authors of each policy-related chapter, as
well as those who were responsible for the national research and reports and the groups
that organized the full participatory process in each country. This paper owes everything
to their efforts and to the efforts of the many people who worked with them to record and
interpret the knowledge and experiences of civil society regarding the impact of structural
adjustment policies on their lives.

Chapter 2, Trade Liberalization Policies and Their Impact on the
Manufacturing Sector - principal author: Debapriya Bhattacharya (Bangladesh). The
chapter draws on papers in each country whose primary authors are the following.
Bangladesh: Mohammed Ali Rashid. Ecuador: Simón Ordóñez Cordero (Center for
Latin American Studies, CELA, of the Catholic University of Ecuador, PUCE). Ghana:
Dr. Romanus Dinye (Housing & Planning Research Department, Faculty of Environment
and Development Studies - Kwame Nkrumah University of Science and Technology
Kumasi); Clement Nyaaba (Ministry of Trade and Industry, Accra). Hungary: NGO
team - László Fodor, Károly Boór, Csaba Gombár, Éva Voszka; World Bank team -
Gábor Obláth. Mexico: Manuel Pérez Rocha Loyo. Philippines: Marie Lopez.
Zimbabwe: Moses Tekere (Trade and Development Studies Center, University of
Zimbabwe).

Chapter 3, Financial Sector Liberalization, Effects on Production and the
Small Enterprise Sector - principal authors: Theresa Moyo (Zimbabwe) and Juan
Fernando Terán (Ecuador). The chapter draws on papers in each country whose primary
authors are the following. Bangladesh: Toufic Ahmad Choudhury; Ananya Raihan.
Ecuador: Simón Ordóñez Cordero (Center for Latin American Studies, CELA, of the
Catholic University of Ecuador, PUCE). El Salvador: Oscar Dada Hutt. Zimbabwe:
Theresa Moyo (SAMCAF).

Chapter 4, Employment under Adjustment and the Effects of Labor Market
Reform on Working People - principal authors: Luis Ignacio Román Morales (Mexico)
and Manuel Cantú Rodríguez (Mexico). The chapter draws on papers in each country
whose primary authors are the following. Ecuador: Simón Ordóñez Cordero (Center for
Latin American Studies, CELA, of the Catholic University of Ecuador, PUCE). El
Salvador: Mario Montecinos. Mexico: Manuel Pérez Rocha Loyo. Zimbabwe: Blesing
Chiripanhura and T. Makwavarara (Zimbabwe Congress of Trade Unions, ZCTU).

i
Chapter 5, The Economic and Social Impact of Privatization Programs -
principal author: Károly Lóránt (Hungary). The chapter draws on papers in each country
whose primary authors are the following. Bangladesh: Debapriya Bhattacharya; Rashed
A.M. Titumir. El Salvador: María Eugenia Ochoa. Hungary: NGO team - Károly
Lóránt, János Hoós, Sándor Bessenyei, Erzsébet Hanti, Zoltán Kárpáti, Rezsõ Gál, Józseg
Kozma, Károly Mayer; World Bank - Márton Vági, László Szakadát. Uganda: J.
Ddumba-Ssentamu and Adam Mugume (Makerere University Institute of Economics).

Chapter 6, The Impact of Agricultural Sector Adjustment Policies on Small
Farmers and Food Security - principal authors: Yao Graham (Ghana), Kwasi
Anyemedu (Ghana) and Kevin Akoyi Makokha (Uganda). The chapter draws on papers
in each country whose primary authors are the following. Bangladesh: Sajjad Zohir
(Bangladesh Institute of Development Studies, BIDS); K.A.S. Murshid (BIDS). Mexico:
Carlos Cortez Ruíz. Philippines: Tambuyog Development Center; Center for
Empowerment and Resource Development; Philippine Network of Rural Development
Initiatives; Pablo Medina. Uganda: Nyangabyaki Bazaara (Centre for Basic Research).
Zimbabwe: John Makamure; James Jowa; Hilda Muzuva.

Chapter 7, The Socioeconomic and Environmental Impact of Mining Sector
Reform - principal author: John Mihevc (Canada). The chapter draws on papers in each
country whose primary authors are the following. Ghana: Mr. Thomas Akabzaa
(Department of Geology - University of Ghana Legon); Alhaji Abdulai Darimani (Third
World Network-Africa). Philippines: J.J. Josef; Jean Enriquez; Rowil Aguillon; Ian
Rivera; Jenny Llaguno.

Chapter 8, The Effects of Public Expenditure Policies on Education and
Health Care under Structural Adjustment - principal authors: Lidy Nacpil
(Philippines) and John Mihevc (Canada). The chapter draws on papers in each country
whose primary authors are the following. Ecuador: Enrique Santos (University of
Cuenca, Ecuador). Ghana: Mr. S.K. Avle (Department of Community Health -
University of Ghana Medical School, Accra); Mr. Francis Ekey (Human Resource
Development Division, Ministry of Health); Professor D.K. Agyeman (Department of
Sociology - University of Cape Coast); Mr. William Boateng (Department of Sociology -
University of Cape Coast); Mr. Akinyoade Akinyinka (Department of Sociology -
University of Cape Coast). Hungary: NGO team - Zsuzsa Ferge, Tamás Morva, István
Sziklai, Noémi Wells; World Bank team - István György Tóth. Philippines: Professor
Nymia P. Simbulan; Professor Carol Almeda, Merwin Salazar. Uganda: MSE
Consultants Ltd. Zimbabwe: Rogers Dhliwayo (University of Zimbabwe).

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In addition to the works cited above, many country reports and background
papers contributed to this body of work, for which we would like to acknowledge their
primary authors or editors. Bangladesh: Assessment Using Participatory Techniques -
Atiur Rahman, M.M. Shafuqur Rahman, Abul Quashem, Zulfiqar Ali, Arifur Rahman;
Impact on the Poor - Rushidan Islam Rahman (Bangladesh Institute of Development
Studies, BIDS); Impact on the Environment - Kazi Ali Toufique (BIDS); Impact on
Women - Nasreen Khundker; Governance and Corruption - Muzaffer Ahmad; Country
Report - Debapriya Bhattacharya, Rashed A.M. Titumir (Centre for Policy Dialogue).
Ecuador: Country Report - Alex Zapatta and Iván Cisneros (IEDECA); Marcelo Romero
(World Bank). El Salvador: Country Report - Roberto Rubio (FUNDE). Ghana:
Country Report - Akua Britwum, Kwesi Jonah, Ferdinand D. Tay. Hungary: Country
Report - János Hoós, Károly Lóránt, Thomas Morva. Mexico: Theory and Design of
SAPs - Luis Ignacio Román Morales (ITESO); Implementation of SAPs - Luis Ignacio
Román Morales and Mónica Unda Gutiérrez (ITESO); Evolution of Economic and Social
Indicators - Jean Yves Chamboux-Leroux (ITESO); Sample Household Survey - Tanya
Yadira Pérez Hernández and Luis Vallejo Narvaez (ITESO); Impact on Micro, Small and
Medium-Scale Enterprises - Manuel Pérez Rocha Loyo; Impact in Rural Areas - Carlos
Cortez Ruíz; Impact on Children - Rodolfo Aguirre Reveles; Participatory Assessment -
Marusia López Cruz; Constructing Alternatives - María Isabel Verduzco; Country Report
- Nina Torres, María Cecilia Oviedo, Susana Cruickshank. Philippines: WB-IMF/ADB
at work on the Philippine Privatization Program - Violeta Perez-Corral; case studies on
water, power and oil by Nerissa Tuñgol-Esguerra, Mae Dolleton and Jolet Fajardo,
respectively (Freedom from Debt Coalition, FDC). Country Report - Maria Teresa
Diokno-Pascual, Clarence Pascual, Lidy B. Nacpil, Frances Lo, Viola G. Torres (FDC).
Uganda: Differences in Perceptions of Poverty - Nansozi K. Muwanga (Makerere
University Department of Political Science and Public Administration); Country Report -
Kevin Akoyi Makokha. Zimbabwe: Role of the State - Arnold Sibanda (Institute of
Development Studies); Country Report - Godfrey Kanyenze (Zimbabwe Congress of
Trade Unions), Muriel Mafico (Poverty Reduction Forum).

In each country, a Lead Organization was responsible for coordinating the full
participatory process, the results of which are summarized in this paper. This effort
would not have been possible without the extensive work and resources invested in this
process by the following organizations over more than four years. Bangladesh:
PROSHIKA (Training, Education and Action); Ecuador: IEDECA (Institute for the
Ecology and Development of Andean Communities); El Salvador: FUNDE (National
Foundation for Development); Ghana: ISODEC (Integrated Social Development Centre);
Hungary: ASA (Alliance of Social Associations); Mexico: Equipo Pueblo; Philippines:
FDC (Freedom from Debt Coalition); Uganda: Uganda National NGO Forum;
Zimbabwe: Poverty Reduction Forum, Institute of Development Studies. In addition,
three regional centers facilitated coordination of this work: Third World Network-Africa;
FUNDE in Latin America; and Focus on the Global South in Asia.

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The global SAPRIN Secretariat -- Stephanie Weinberg, Doug Hellinger, Steve
Hellinger and Kathleen Sugar at The Development GAP -- was responsible for editing
this report, in consultation with the SAPRIN global Steering Committee.

The global SAPRIN network is grateful for the generous financial contributions
from several governments, international agencies, foundations and NGOs, without whose
support this colossal effort could not have come to fruition. Special thanks are given to:
the governments of Norway, Sweden, the Netherlands and Belgium; the European
Commission; the United Nations Development Programme (UNDP); the African
Development Foundation (U.S.); the GTZ of Germany; the Charles Stewart Mott
Foundation; NOVIB; the Rockefeller Foundation; the American Center for International
Labor Solidarity; and USA for Africa. In addition, thanks are owed to the following
foundations that provided support for the work of SAPRIN’s Secretariat: the Charles
Stewart Mott Foundation; Kellogg Foundation; Rockefeller Foundation; Wallace Global
Fund; Moriah Fund; Public Welfare Foundation; CarEth Foundation; Cohen Foundation;
Funding Exchange; General Service Foundation; Stewart Mott Charitable Foundation;
Three Sigma Fund; and Tortuga Foundation. Finally, thanks are due to UNICEF, the
Heinrich Boell Foundation, Oxfam, Save the Children, the government of Denmark and
many other agencies and foundations that provided support directly to SAPRIN networks
at the country level.

iv
SAPRIN and World Bank Global Steering Committee Members
Current SAPRIN Global Steering Committee Members (as of March 2002)
Gemma Adaba/Peter Bakvis, ICFTU, International
Jorge Carpio, IDEMI, Argentina
Joy Chavez/Walden Bello, Focus on the Global South, Asia
Ivan Cisneros/Alex Zapatta, IEDECA, Ecuador
Kelly Currah, World Vision, International
Yao Graham/Charles Abugre, Third World Network-Africa/ISODEC, Ghana
Doug Hellinger, The Development GAP, USA
John Jones, Norwegian Forum for Environment and Development, Norway
Godfrey Kanyenze/Muriel Mafico, ZCTU/Poverty Reduction Forum, Zimbabwe
Mahbubul Karim/Md. Shahabuddin, PROSHIKA, Bangladesh
Karoly Lorant, SAPRIN/Hungary
Kevin Akoyi Makokha/Warren Nyamugasira, Uganda National NGO Forum, Uganda
John Mihevc/Pam Foster, Inter-Church Coalition on Africa & Halifax Initiative, Canada
Lidy Nacpil/Maria Teresa Diokno-Pascual, Freedom from Debt Coalition, The Philippines
Roberto Rubio, FUNDE, El Salvador
Marijke Torfs, Friends of the Earth, International
Nina Torres/Susana Cruickshank, Equipo Pueblo, Mexico
Barbara Unmuessig/Ted van Hees, WEED/Eurodad, Europe
Hellen Wangusa, African Women's Economic Policy Network, Uganda
Former SAPRIN Global Steering Committee Members
Peggy Antrobus, DAWN, International
Manuel Chiriboga, ALOP, Latin America
Steve Commins/Jaisankar Sarma, World Vision, International
Carlos Heredia/Victor Quintana, Equipo Pueblo, Mexico
Judy Kamanyi, ACFODE, Uganda
Kamal Malhotra, Focus on the Global South, Asia
Atherton Martin, Conservation Association of Dominica
Fatima Mello/Aurelio Vianna, Rede sobre Institucoes Financeiras Multilaterais, Brazil
Gita Sen, External Gender Consultative Group, International
Veena Siddharth, Oxfam International
Aminata Sidibe/Mamadou Sekou Toure, CCA-ONG, Mali
Former World Bank SAPRI Steering Committee Members
Caio Koch-Weser
Joanne Salop
Lyn Squire
Jo Ritzen
Lionel Demery
Emmanuel Jimenez
Jacques van der Gaag
Branko Milanovic
John Clark
Alex Rondos
Constance Newman
John Randa

v
List of Acronyms

ADB Asia Development Bank
BMI Multisectoral Investment Bank
CASA Citizens’ Assessment of Structural Adjustment
COMESA Common Market for Eastern and Southern Africa
DEC World Bank Development Economics Vice Presidency
EIA Environmental Impact Assessment
EPZ export processing zone
ERP Economic Recovery Programme
ESAP Economic Structural Adjustment Programme
FOSAFI Fund for Financial Restructuring and Strengthening
FTAAs Financial and Technical Assistance Agreements
GATT General Agreement on Trade and Tariffs
GDP gross domestic product
GNP gross national product
HIPC Heavily Indebted Poor Country
IDB Inter-American Development Bank
IFC International Finance Corporation
IFIs International Financial Institutions
ILO International Labour Organization
IMF International Monetary Fund
MERP Millennium Economic Recovery Programme
NAFTA North American Free Trade Agreement
NGO Non-Governmental Organization
PERD Public Enterprise Reform and Divestiture
PRSP Poverty Reduction Strategy Paper
RMG ready-made garments
SADC Southern African Development Community
SAL structural adjustment loan
SAP structural adjustment program
SAPRI Structural Adjustment Participatory Review Initiative
SAPRIN Structural Adjustment Participatory Review International Network
SDA Social Dimensions of Adjustment
SMEs small and medium-scale enterprises
TOR terms of reference
UNCTAD United Nations Conference on Trade and Development
UNDP United Nations Development Programme
UNICEF United Nations Children’s Fund
WTO World Trade Organization
ZCTU Zimbabwe Congress of Trade Unions
ZIMPREST Zimbabwe Programme for Economic and Social Transformation

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Chapter 1

The SAPRI/CASA Experience

In the mid-1990s, before the Seattle, Prague, Washington and other
demonstrations in the North against the World Trade Organization (WTO), the World
Bank and the International Monetary Fund (IMF), the world had already witnessed
almost two decades of strikes, mobilizations and other forms of popular protest across the
countries of the South in reaction to the economic policies of these institutions. The
people most affected by those policies were seen by the international financial institutions
(IFIs) as having neither the wisdom nor the right, and certainly not the leverage, to
contribute to the economic-policy debates in their own countries. Their continued
exclusion from the economic-decisionmaking process both at the national and global
levels guaranteed that economic-policy programs would not be changed to reflect their
growing needs and priorities.

It was within this context that a number of non-governmental organizations
(NGOs) engaged in the “50 Years Is Enough” campaign challenged the new Bank
president, Jim Wolfensohn, to involve his staff in an exercise with civil-society
organizations in the South in order to bring critically important knowledge, perspectives
and analysis into the formulation of Bank economic advice and policymaking.
Wolfensohn accepted the challenge and requested that a mechanism be proposed by these
and other organizations for carrying out such an initiative.

In a letter dated 9 April 1996 to the global civil-society network organized for this
purpose, he noted that, “Policy reform has had a mixed track record... Adjustment has
been a much slower, more difficult and more painful process than the Bank recognized at
the outset.” He went on to address the proposed initiative: “What I am looking for -- and
inviting your help in -- is a different way of doing business in the future. My objective is
to ensure that economic reform programs make maximum contribution to poverty
reduction, that we fully appreciate the impact of reform on disparate population groups,
that we promote measures which narrow income differentials, and that we encourage
governments to consult and debate with civil society on policy reforms.”

Thus was born the Structural Adjustment Participatory Review Initiative
(SAPRI), a joint four-year, multi-country participatory investigation into the effects of
specific structural adjustment policies on a broad range of economic and social sectors

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