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International Organizations and Us: Where is Armenia Heading?

By Sofia Manukyan

In recent years, Armenian society hears more often about the activities of the World Bank and other international financial institutions particularly thanks to environmental movements.

For example, protests against mine exploitation in Amulsar, or demands for a more sustainable landfill project in Yerevan, always highlight not only the importance of prudent state policies, but also question the involvement of international banks in these projects, such as World Bank, its International Finance Corporation, European Bank for Reconstruction and Development, European Investment Bank, etc.

Moreover, the examination of standards with which these banks finance projects in Armenia and elsewhere allows one to grasp the seriousness of problems that emerge not only for Armenia or other countries, but for the whole planet. But the problem is not just environmental. Looking at other policies with which countries like Armenia are guided, for example in social security sector, makes it clear that the banks serving the international capital have permeated almost all sectors and promote policies the biggest beneficiaries of which are banks themselves.

International capital works for its own interests

In a recent study the representative of Armenia's Ministry of Labour and Social Affairs  mentions that even the model of providing benefits for the poor is dictated by the World Bank: “Like many other countries, having little budget, we follow World Bank’s model and target the poorest among the poor. Is it socially just? I think it is. Of course, this issue can have different viewpoints, but when there is little money, you have to at least target those who need the support most”.

The question is why there is little money? The answer is clear when we once again remember that 1% of the world’s rich own half of the world’s wealth. By serving international capital, the abovementioned banks make business deals with the states which make the rich wealthier, while the rest get a polluted environment and half empty state budgets.

These targeting programs, which allow saving money at the expense of social security benefits, can also not serve its purpose as a result of wrong calculations. It turns out that these targeting programs that are implemented with certain computational modelling (proxy means testing) face great criticism as a result of the high level of inaccuracies in calculations that exclude over half of the intended beneficiaries. For example, in Indonesia, the World Bank found exclusion errors of 93 per cent. The critics of these models mention that these programs cost less, which means less taxation. Therefore, as the critics mention, these programs serve the interests of the rich who want to pay less tax and are hardly concerned with interests of the rest of the population. As a result, the critics mention this as a reason why these targeting programs are especially prevalent in weak democracies.

Armenians need to question the motives of the World Bank

Even an unpublished report of the World Bank mentions that “The historical … evidence suggests that the forces pushing for better targeting are more regularly motivated by cutting entitlement bills and ensuring financial sustainability than by helping the poor.” These policies are therefore considered as exclusive and discriminative, while more universal models such as those implemented in Mongolia allowed the country to be well ahead of World Bank in effectively reaching the poorest children with its universal child benefit, with almost no exclusion.

Therefore, such discriminative, non-social policies of the World Bank should be questioned for solving no problems except for the rich. The modelling systems should also be questioned due to their high level of inaccuracies, whether it is in the field of social security, or in energy and natural resources (which is also planned to be incorporated in Armenia).

Here is another demonstration of social sector suffering from policies of international banks.

In 2013, Armenia’s Labour State Inspection merged with the Ministry of Health. However, there was no justification for this move and there were no consultations with the agents of the inspection. The agents explained this move as an aim by the state to ease supervision in the field of labour rights protection, since there were many in the parliament and government representing interests of the private sector. Yet, the ex-minister of Labour and Social Affairs had mentioned in one of the interviews, that “It was the demand of World Bank in order to suppress the state control and supervision over the business. It was done to ease the state administrative burden for the private sector.” Other experts also spoke about this: “In March-April 2014, World Bank wrote to the government demanding to finish the reforms in the Inspection during the spring session, otherwise it will cut the funds. 3 days later the reform projects were discussed at the government session”.

A similar plan to ease the “administrative burden” for the private sector was attempted in 2017, when the amendments to the Labour Code were circulated. It included such points as introducing oral agreements in labour relations, decrease of overtime and night shift pays, etc. These steps were qualified as a regress by labour rights experts. In 2018 public discontent, however, put an end to these amendments.

Promoting the private sector at the expense of the poor

Taking into account the latest announcement of the World Bank that “Labour, taxation and social welfare policies in countries around Europe and Central Asia must be brought into the 21st century”, also taking into account the program implemented in Armenia by the World Bank since 2013 aimed at modernizing tax administration, we can note that World Bank is indeed transferring Armenia into the 21st century, yet to what extent it “tackles the rising inequality between groups and help workers face increased uncertainty”, remains a questions.

It turns out, however, that it is not just international financial institutions that promote interests of the private sector. In the abovementioned report we also read that one local representative of the government expressing a view that the social security sector is suffering from the absence of private sector in this field. This type of policy, it turns out, is promoted by the UN, aside from the World Bank.

In October 2018, the UN Special Rapporteur on extreme poverty and human rights, Philip Alston, criticized the World Bank, International Monetary Fund (IMF), and the UN for promoting privatization including the field of social protection. According to the expert, with such policies states try to avoid their human rights obligations by privatizing core services and delegating responsibility to the private sector (in such cases, the state has to at least make sure that private entities also respect human rights conventions). On the other hand, “privatization introduces a profit motive to social protections that prioritizes efficiency concerns and transforms rights-holders into clients, marginalizing the poor or troubled and prioritizing those with less needs or who can afford to pay.  This profit motive incentivizes organizations, such as service providers, to minimize the time spent with clients, close cases earlier, generate additional fees where possible, and cater to those who are better-off with easier problems, further marginalizing those with fewer resources or more complex and expensive problems. The Special Rapporteur questions whether any profit-based model for providing core services can adequately protect human rights, including the rights to equality and non-discrimination.” 

Another example where international organizations are criticized for their policies, is the case of waste governance in Lebanon. The World Bank and the UN are criticized for speaking about sustainable development, and yet advising the Lebanese government to build a waste incinerator. The locals do not agree with this policy and demand waste recycling and less harmful policies. The World Bank consulted Armenian government too, in 2009, in matters of waste governance, and in 2015 the Armenian government signed a loan contract with the European banks to construct a new landfill. This project was also criticized for not being sustainable. Moreover, it was considered discriminative, since policies in Europe are aimed at reducing the landfills, while in countries like Armenia they fund landfills that don’t even have recycling components. These banks had even rejected the possibility of making amendments to the project to make it greener.  

Short end-note

And yet, these international bodies are not invincible. States have indeed given these institutions great leverage to make the states dependent on them. This has been done through state foreign debts, as well as financial-economic dependence of these states, where any shake up is prone to lead to revolutions. But there are also numerous revolts in the world against the short-term projects financed by these institutions – from Latin America to Kyrgyzstan, from Lebanon to Armenia.

Therefore, revolutions do not end by substituting political figures. They are continuous, until the interests of nature and public prevail over the interests of the few rich.

Sofia Manukyan is a researcher. Her specialization is in the field of human rights impacted by the private sector. She is particularly interested in how private interests impact the environment and socio-economics. She holds a degree in human rights from the University of Essex. In Armenia, she is mostly engaged in promoting environmental protection and labour rights.

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