Development Issues in Global Governance: Public-Private Partnerships and Market Multilateralism (Warwick Studies in Globalisation)

Development Issues in Global Governance Public–Private Partnerships and Market Multilateralism In order to address key ...

Author: Benedicte Bull | Desmond McNeill

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Development Issues in Global Governance Public–Private Partnerships and Market Multilateralism In order to address key world issues and problems such as health, education, labour rights and water, multilateral organizations, specifically the United Nations organizations and the World Bank, are increasingly working with private actors, including for-profit companies and corporations; business organizations and private foundations. Critics have claimed that increased corporate involvement threatens the legtimacy of multilateral organisations and this book assesses this claim, while providing a comprehensive cross-sector study of public-private partnerships (PPP) and detailed case studies on:

• • • •

The pharmaceutical industry, exploring health initatives such as the Global Alliance for Vaccines and Immunization and the Global Fund to fights AIDS, Tuberculosis and Malaria. The International Labor Organization and the fight against child labour. UNESCO and the partnerships with Intel and Microsoft to develop educational material and community centres for increasing computer literacy in the developing world. The World Bank and PPP efforts to improve water supplies in developing countries, critical for sustainable development, environ mental integrity and the alleviation of poverty and hunger.

Offering theory and case-studies, and making an important contribution to research on the changing role of private authority in international affairs, this book will be of great interest to students and researchers of IPE, IR and development. Benedicte Bull is Senior Researcher at SUM (the Centre for Development and the Environment), University of Oslo, Norway. Desmond McNeill is Research Professor and former Director, also at SUM, University of Oslo, Norway.

Warwick Studies in Globalisation

Edited by Richard Higgott and published in association with the Centre for the Study of Globalisation and Regionalisation, University of Warwick. What is globalisation and does it matter? How can we measure it? What are its policy implications? The Centre for the Study of Globalisation and Regionalisation at the University of Warwick is an international site for the study of key questions such as these in the theory and practice of globalisation and regionalisation. Its agenda is avowedly interdisciplinary. The work of the Centre will be showcased in this new series. This series comprises two strands: Warwick Studies in Globalisation addresses the needs of students and teachers, and the titles will be published in hardback and paperback. Titles include: Globalisation and the AsiaPacific Contested Territories Edited by Kris Olds, Peter Dicken, Philip F. Kelly, Lily Kong and Henry Wai-chung Yeung Regulating the Global Information Society Edited by Christopher Marsden

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Historical Materialism and Globalisation Edited by Hazel Smith and Mark Rupert Civil Society and Global Finance Edited by Jan Aart Scholte with Albrecht Schnabel Towards a Global Polity Edited by Morten Ougaard and Richard Higgott

New Regionalisms in the Global Political Economy Theories and Cases Edited by Shaun Breslin, Christopher W. Hughes, Nicola Phillips and Ben Rosamond Development Issues in Global Governance Public-Private Partnerships and Market Multilateralism Benedicte Bull and Desmond McNeill Globalizing Democracy Political parties in emerging democracies Edited by Peter Burnell Routledge/Warwick Studies in Globalisation is a forum for innovative new research intended for a high-level specialist readership, and the titles will be available in hardback only. Titles include: 1. Non-State Actors and Authority in the Global System Edited by Richard Higgott, Geoffrey Underhill and Andreas Bieler 2. Globalisation and Enlargement of the European Union Austrian and Swedish Social Forces in the Struggle over Membership Andreas Bieler

3. Rethinking Empowerment Gender and Development in a Global/Local World Edited by Jane L. Parpart, Shirin M. Rai and Kathleen Staudt 4. Globalising Intellectual Property Rights The TRIPs Agreement Duncan Matthews 5. Globalisation, Domestic Politics and Regionalism The ASEAN Free Trade Area Helen E. S. Nesadurai 6. Microregionalism and Governance in East Asia Katsuhiro Sasuga 7. Global Knowledge Networks and International Development Edited by Diane Stone and Simon Maxwell 8. Globalisation and Economic Security in East Asia Governance and Institutions Edited by Helen E. S Nesadurai 9. Regional Integration in East Asia and Europe Convergence or Divergence? Edited by Bertrand Fort and Douglas Webber 10. The Group of Seven Finance Ministries, Central Banks and Global Financial Governance Andrew Baker

11. Globalisation and Poverty Channels and Policy Responses Edited by Maurizio Bussolo and Jeffery I Round 12. Democratisation, Governance and Regionalism in East and Southeast Asia A comparative study Edited by Ian Marsh 13. Assessment and Measurement of Regional Integration Edited by Philippe De Lombaerde

14. The World Bank and Governance A decade of reform and reaction Edited by Diane Stone and Christopher Wright 15. Nationalism & Global Solidarities Alternative projections to neoliberal globalization Edited by James Goodman and Paul James

Development Issues in Global Governance Public–Private Partnerships and Market Multilateralism Benedicte Bull and Desmond McNeill

First published 2007 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN Simultaneously published in the USA and Canada by Routledge 270 Madison Ave, New York, NY 10016 Routledge is an imprint of the Taylor & Francis Group, an informa business

This edition published in the Taylor & Francis e-Library, 2007. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.” © 2007 Benedicte Bull and Desmond McNeill All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data A catalog record for this book has been requested

ISBN 0-203-96569-8 Master e-book ISBN

ISBN10 0–415–393915–9 ISBN10 0–415– 39339–6

ISBN13 978–0–415–39315–7 (hbk) ISBN13 978–0–415–39339–3 (pbk)

Contents

List of illustrations Acknowledgements List of Abbreviations

viii ix xi

1

The Rise of Public–Private Partnerships in the Multilateral System

2

Multilateralism and Globalization

23

3

Partnerships in Context

45

4

Global partnerships for Health: health for all, or more ‘Big Pharma’?

65

5

Tripartism meets CSR: the ILO’s partnership experiments to combat child labour

92

6

UNESCO and the Software Companies: bridging the digital divide, or transforming US dominance?

115

7

Water For All: the World Bank and private water companies

135

8

Market Multilateralism: towards a new institutional form?

159

References Notes Index

1

178 193 207

List of Illustrations

List of Figures 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 7.1

External financing: all developing countries, 1998–2004 47 Private net flows as percentage of total flows, 1998–2004 48 Net private inflows to developing countries, 1998–2004 49 Corporate philanthropy of US and UK top 100 companies, 2004 50 Total US foundation giving 1975–2003, US$ billions (2002) 51 International giving by US foundations, 1998–2003 52 Multilateral versus bilateral aid, 1970–2000 53 The growth of TNCs 1975,2003,2000, US$ billions (2002) 56 Growth of TNCs in perspective 1975,2003,2000, US$ billions (2002) 57 Annual investment in infrastructure projects in Latin America with PPI, 1990–2003 143

List of Tables 1.1 1.2 3.1 3.2 3.3

Fundraising activities employed by UN agencies Examples of global public policy networks involving UN bodies and the private sector Major US foundations contributing to international development Net multilateral ODA flows to selected multilateral institutions UNDP: core versus non-core financing

14 18 54 55 58

Acknowledgements

The background for this book is the authors’ long-term interest in the multilateral system. More specifically, the book has its origins in two earlier activities: the project on Creation, Adoption, Negation, and Distortion of Ideas in Development Assistance (CANDID) by Morten Bøås and Desmond McNeill (2000–2003), and a one-day seminar coorganized by Benedicte Bull on behalf of the Norwegian academic network, the North–South Coalition, in December 2000: ‘Partnerships for Development or Privatization of the Multilateral System?’ Together with Morten Bøås, we felt that the new phenomenon of public–private partnerships was not only important in itself, but also offered a valuable opportunity to test out some of the ideas of the CANDID project in a new setting. Our ability to do so depended greatly on support from a number of individuals and institutions. We thank the Norwegian Research Council for financial support under its Programme for Research on Multilateral Aid. We also thank our home institution, the Centre for Development and the Environment (SUM) at the University of Oslo, for continuous support throughout. In terms of individuals who have contributed to the project, our thanks go first and foremost to Morten Bøås. He was with us at the start and, as always, contributed with thought-provoking and wellinformed comments. We very much regret that an excess of competing obligations prevented him from contributing as much as we had all hoped, but we much appreciate his continued friendship. Next we thank Ryan Anderson who, as a student at SUM, wrote the thesis for his Master’s degree which forms a major part of Chapter 7, and who also assisted in the collection of data for Chapter 3. We also thank another Master’s student at SUM, Ellen Camilla Skjelsbæk, who carried out many of the interviews referred to in Chapter 5.

x

Acknowledgements

We would like to thank members of our Reference Group – Kenneth King, Sigrun Møgedal and Jan Aart Scholte – who kindly took the time to attend a workshop in Oslo halfway through the project. We benefited greatly from their comments and suggestions. We would also like to thank all our interviewees, primarily officials of the multilateral organizations. They took time in a stressed work environment to be interviewed by us, carefully explaining technical details of importance to the ‘big picture’, and also in some cases commented on our interview notes. We dedicate this book to the memory of Erik Blytt, a dear colleague who contributed with critical and constructive comments to the research for this book, but who passed away at the age of only 29. With him, the multilateral system has lost a sharp critic and a staunch defender.

List of Abbreviations

AAI ACT ADIP AFL-CIO ARV BAT CCM CGIAR CRC CSR CVI DTP ECLT ECOSOC EFA EPI ESSD FDI FfDI FOSS FPD FPSI GATT GAVI GDF GDP

Accelerated Access to HIV/AIDS care and treatment in developing countries Initiative Artemisin Combination Therapy Accelerated Development and Introduction Plan American Federation of Labor-Congress of Industrial Organizations Antiretroviral British and American Tobacco Country Coordinating Mechanism Consultative Group on International Agricultural Research Convention of the Rights of the Child Corporate Social Responsibility Children’s Vaccines Initiative Diphtheria–Tetanus–Pertussis Eliminating Child Labor in Tobacco Economic and Social Council Education for All Expanded Program on Immunization Environmentally and Socially Sustainable Development Foreign Direct Investment Financing for Development Initiative Free and Open Source Software Finance and Private Sector Development Finance, Private Sector and Infrastructure General Agreement on Tariffs and Trade Global Alliance for Vaccines and Immunization Global TB Drug Facility Gross Domestic Product

xii


GPP GPV GRI Hib HIPC IBRD ICANN ICC ICFTU ICI ICIJ ICSID ICT IDA IFC IFFIm IFI IFPMA IGF IIIC ILC ILO IMF IOE IPEC IPM IPPPH IPR ITGA IUF LDCs MDG MIGA MIT MMV

Global Public Policy Global Programme for Vaccines Global Reporting Initiative Haemophilus influenzae type B Heavily Indebted Poor Countries International Bank for Reconstruction and Development Internet Corporation for Assigned Names and Numbers International Chamber of Commerce International Confederation of Free Trade Unions International Cocoa Initiative International Consortium of Investigative Journalists International Center for the Settlement of Investment Disputes Information and Communication Technology International Development Association International Finance Corporation International Finance Facility for Immunisation International Financial Institution International Federation of Pharmaceutical Manufacturers’ Associations Internet Governance Forum International Institute for Intellectual Cooperation International Labor Conference International Labor Organization International Monetary Fund International Organization of Employers International Program on the Elimination of Child Labor International Partnership for Microbicides Initiative for Public–Private Partnership for Health Intellectual Property Rights International Tobacco Growers’ Association International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers’ Associations Less-Developed Countries Millennium Development Goal Multilateral Investment Guarantee Agency Massachusetts Institute of Technology Medicines for Malaria Venture

List of Abbreviations MNC NAFTA NGO NWICO ODA OED PAD PAHO PPI PPIAF PPP PREM PSD PVD PWIBLF SAI SME TB TNC TRIPs UN UNAIDS UNCED UNCTAD UNCTC UNDP UNEP UNESCO UNF UNFIP UNFPA UNHCR UNICEF UNIDO UNRWA VF VP

xiii

Multinational Company North American Free Trade Agreement Non-Governmental Organization New World Information and Communication Order Official Development Aid Operation and Evaluation Department Project Appraisal Document Pan–American Health Organization Private Participation in Infrastructure Public–Private Infrastructure Advisory Facility Public–Private Partnership Poverty Reduction and Economic Management Private Sector Development Programme for Vaccine Development Prince of Wales International Business Leaders Forum Social Accountability International Small and Medium Size Enterprise Tuberculosis Transnational Corporation Trade-related Aspects of Intellectual Property Rights United Nations Joint United Nations Programme on HIV/AIDS United Nations Conference on Environment and Development United Nations Conference on Trade and Development United Nations Center for Transnational Corporations United Nations Development Program United Nations Environment Program United Nations Educational, Scientific and Cultural Organization United Nations Foundation United Nations Fund for International Partnerships United Nations Fund for Population Activities United Nations High Commissioner for Refugees United Nations Children’s Fund United Nations Industrial Development Organization United Nations Relief and Works Agency Vaccine Fund Vice Presidency

xiv


WACAP WB WBCSD WCF WDR WFTU WHA WHO WIPO WSIS WTO

West Africa Cocoa and Commercial Agriculture Project to Combat Hazardous and Exploitative Child Labor World Bank World Business Council for Sustainable Development World Cocoa Foundation World Development Report World Federation of Trade Unions World Health Assembly World Health Organization World Intellectual Property Rights Organization World Summit on the Information Society World Trade Organization

1

The Rise of Public–Private Partnerships in the Multilateral System

Introduction ‘One day Kofi Annan brought me, Ted Turner, Bill Gates and two other billionaires together and asked each of us to put $1bn into a fund’, recalls Nicolas Hayek, who became a billionaire creating the Swatch watch. He continues: ‘Everyone except Turner refused. The United Nations doesn’t need me; the UN needs to get itself respected.’1 Some years back such an attitude was common among the world’s wealthiest businessmen; but in recent years the UN and other multilateral organizations have succeeded in attracting money and attention not only from individual billionaires but also from companies, foundations and business associations. Through the formation of so-called public–private partnerships (PPPs), the multilateral organizations, whose structure of governance used to be distinctly state-based, have increasingly turned to the private sector for funds, for expertise and for role models. These partnerships are launched with multiple purposes, but for all of them the stated objective is to combine the efforts of states, multilateral organizations and the private sector in pursuit of commonly accepted goals (Tesner with Kell 2000). Critics, however, argue that international organizations are being co-opted by business elites and may no longer act independently of globalizing capitalist forces (Richter 2002, 2003). Moreover, it is claimed, public–private partnerships fragment international cooperation and undermine efforts for cooperation and equity among states (Zammit 2003). Our purpose in this book is not primarily to argue for or against PPPs, but to examine the issue at a systemic level – to assess what are the causes and consequences of this important phenomenon. We will

2

Development Issues in Global Governance

approach the subject from the perspective of multilateralism. In an important book entitled Multilateralism Matters: The Theory and Praxis of an Institutional Form, John Ruggie defined multilateralism as ‘an institutional form that coordinates relations among three or more states on the basis of generalized principles of conduct’ (Ruggie 1993: 11). Multilateralism, he argued, modifies ‘states’ self-serving behavior by specifying appropriate conduct for a class of actions, without regard to the particularistic interests of the parties or the strategic exigencies that may exist in any specific occurrence’ (Ruggie 1993: 11). Since Ruggie wrote his influential book, a number of changes have taken place in global politics. One of the most important is the increasing prevalence of non-state actors – both non-profit, nongovernmental organizations (NGOs), and also global corporations, private-sector organizations and private foundations. In theorizing about global governance, this phenomenon has recently received significant attention. Some argue that it marks the end of a statecentred system of world governance, and its replacement by one which is dominated by loosely coupled networks of governance (Reinecke 1998; Reinecke and Deng 2000; Witte and Reinecke 2005; Slaughter 2004). Others examine the phenomenon of the rise of private authority in international relations (Cutler, Haufler and Porter 1999; Higgott, Underhill and Bieler 2000; Hall and Biersteker 2002), in some cases arguing that non-state actors nevertheless operate within the frames of a stable international system with underlying consensus about the rules of international interaction and the legitimacy of the state units (Josselin and Wallace 2001). Ruggie himself has suggested that the upsurge of global non-state actors has led to the emergence of a new global public domain – and an increasingly institutionalized transnational arena of discourse, contestation, and action concerning the production of global public goods (Ruggie 2004). Little attention is paid, however, to how the very institution of multilateralism is transformed by the presence of non-state actors, which is the main focus of this book. One exception is O’Brian et al. (2000), but this is concerned with the increasing prevalence of social movements in global politics, while we focus on those actors who operate for profit or are closely connected to for-profit organizations. We set out to answer questions such as: What characterizes this form of multilateralism? What are the implications for the multilateral organizations? Will it enhance or undermine their authority and legitimacy? In addition to John Ruggie, our theoretical understanding of multilateralism also owes much to Robert Cox (1992a, 1992b, 2002),

The Rise of Public–Private Partnerships

3

as will be spelled out in further detail in Chapter 2. We analyse the transformation of multilateralism within the context of the changing political-economic world order, including power relationships between states, financial flows and flows of ideas. We understand the present multilateral system as emerging from a specific context, namely the political and economic order negotiated between the victorious powers of World War Two, and characterized by the subordination of non-state actors to states. This political-economic system has been significantly eroded, and the current changes in the operations of the multilateral organizations are a response to that. This is well expressed by the Secretary-General of the United Nations, Kofi Annan, himself: While the post-war multilateral system made it possible for the new globalization to emerge and flourish, globalization in turn has progressively rendered its designs antiquated. Simply put, our post-war institutions were built for an international world, but we now live in a global world. (Annan 2000: 11) Following the early work of Cox (1969) and Cox and Jacobson (1973) we reject the view of multilateral organizations as passive and dependent, viewing them rather as potentially active forces that may significantly change the nature of multilateralism. Indeed, we argue in this book that the strategies adopted by multilateral organizations to seek to engage with the private sector derive not only from pressure from their constituent nation states, but also from the convictions of the organizations’ leaders, and from the desire of the organizations to regain authority and legitimacy in an increasingly market-oriented world. We do not dispute that states are still the potentially most important actors in the global political economy, but we argue that large transnational corporations (TNCs) are also of great significance. Although motivated by profits, their short-term interests are often more complex. Moreover, it is not only states but also large corporations that seek legitimacy, and predictability in their global environment; such considerations, it has been argued, are important motivations for states to operate within a multilateral framework (Ikenberry 2003). States and private actors are increasingly interlinked within what we claim is in effect a new form of multilateralism, which we call ‘market multilateralism’. While multilateralism coordinates relations

4


between states, there is now developing a system composed not only of states, but also of multilateral organizations and private actors – predominantly large transnational corporations. We claim that there are emerging ‘generalized principles of conduct’ in this system – the outcome of interaction between two sets of norms: the classic norms of multilateralism (Ruggie) and the norms of the market. These are influenced by all three parties involved: multilateral organizations and transnational corporations as well as states. In this book we seek to establish what is the nature of this emerging market multilateralism, by examining different examples of public–private partnership, to establish to what extent there are common features between these very diverse cases. Some have already reached a conclusion on this issue. One extreme position is that the interaction between private actors and the multilateral institutions is purely instrumental; in other words that businesses merely use the multilateral institutions to improve their image or contribute to creation of markets, while the multilateral institutions are happy to collaborate on any terms as long as there is funding involved. At the other extreme are those who claim to observe the victory of principles of cooperation over the logic of the market. We do not start with any such preconceptions. On the basis of the empirical material that we examine, we conclude that there are emerging principles of conduct, but that these are not such as to challenge the interests of transnational corporations. In the remainder of this chapter we will first clarify some key concepts that will be employed in the rest of the book. Thereafter we will provide a brief review of the process of increased participation of private actors in the multilateral system. This will be followed by a typology of partnerships and an outline of the rest of the book.

The multilateral system, the private sector and partnerships – some definitions Having defined multilateralism, we find it necessary also to specify how we define three related terms: multilateral organizations, multilateral institutions, and the multilateral system. A multilateral organization is a formal organizational entity, characterized by a permanent location and postal address, distinct headquarters, staff and secretariat.2 A multilateral institution is the organization as thus defined, but more broadly interpreted to include also associated rules and practices. We will speak of the multilateral system when referring to the totality of the multilateral organizations, the rules and principles


5

that govern them, and the actors that participate in their governance or operations. In this book we will focus on those multilateral organizations whose primary mandate is to contribute to development. We will therefore exclude those engaged in broader or different tasks, such as the Security Council and specialized agencies such as the International Telecommunication Union and the International Aviation Union. We include the World Bank, but, as our focus is mainly on global development institutions, we exclude the regional development banks. In political science, the efforts of states to contribute to international development are often viewed as anomalous, and development issues have always been marginal to the debates about multilateralism.3 Our focus on development aid and policy has important implications for the questions that we will discuss. Such apparently altruistic behaviour runs counter to the general assumptions about what motivates states. At most, support for the multilateral development institutions has been viewed as a ‘side activity’, something that states engage in to gain goodwill but that has little to do with their core activities. From this standard perspective, the role of multilateral organizations in development is to distribute the scarce resources that states and private actors dedicate to this purpose, but is not associated with the coordination of behaviour of states (or other actors), which is what is seen as the normal function of such bodies. Bøås and McNeill (2004), however, argue that this standard view does not provide an adequate picture of the multilateral development organizations, which are part and parcel of the international political economy and are embedded in a socio-political system of material interests, norms and beliefs. The motives of states for engaging in the multilateral development system are inherently political: they include altruism, but also for example the desire to create markets and maintain spheres of influence. States may have conflicting goals in promoting development, but joint development efforts are in many cases more efficient than individual efforts. The multilateral development system, therefore, plays a role in coordinating the behaviour of states. Whether it can also serve to coordinate the behaviour of private actors is an open question. This is where the phenomenon of public– private partnerships under the auspices of multilateral organizations comes in. In this book, we adopt the definition of partnerships that is used by the UN: ‘voluntary and collaborative relationships between various parties, both State and non-State, in which all participants

6


agree to work together to achieve a common purpose or undertake a specific task and to share risks and responsibilities, resources and benefits’ (UN General Assembly 2005: 4). This avoids the normative stance of some common definitions, as for example the one employed by Tesner with Kell, who define a PPP as a ‘mutually beneficial agreement between one or more UN bodies and one or more corporate partners to work towards common objectives based on the comparative advantage of each, with a clear understanding of respective responsibilities and the expectation of due credit for every contribution’ (Tesner with Kell 2000: 72). More open to debate, perhaps, is our definition of the private sector and private actors. We will use ‘private actors’ to refer to nonstate individuals and organizations that operate for profit or are closely connected to for-profit organizations. This will include three kinds of actors: for-profit corporations; non-profit private foundations that are closely associated with for-profit corporations; and national and international business associations. This is a diverse set of actors; what they have in common is their close relation to profit-seeking organizations. (This distinguishes them not only from the state but also from other non-state actors, such as NGOs.) This definition of the private sector is not uncontroversial. Whereas the inclusion of profit-seeking corporations is rather unproblematic, the inclusion of private non-profit foundations may be questioned. Some authors even include them in the term public sector (e.g. Ridley 2004). According to Ollila (2003), UN officials distinguish clearly between private foundations and corporations, and view receiving money from corporations as more risky than being funded by foundations.4 However, as Ollila also notes, many foundations do have close ties to corporations (2003: 43). Moreover, as will be discussed in Chapter 3, corporations and private foundations increasingly share a common view as to the proper way to organize the development tasks of multilateral organizations. This is particularly true for a new type of foundation often called ‘venture philanthropist’. The inclusion of business associations as ‘private actors’ may also be questioned. Some authors include business associations within the category ‘civil society’ which may be defined as ‘a political space’ where voluntary associations seek deliberately to shape policies, norms, and deeper social structures (Scholte and Schnabel 2002: 3). However, civil society is often associated with organizations that ‘pursue neither public office nor commercial gain’ (Scholte and Schnabel


7

2002:). We therefore maintain that many business associations and foundations have sufficiently close connections to the for-profit sector to include them in the category ‘private actors’. Having defined our terms, we will now provide a brief review of the rise of public–private partnerships (PPPs) in the multilateral system.

The rise of public–private partnerships (PPPs) in the multilateral system There are several different stories to be told about the rise of PPPs in the multilateral system, depending on both the multilateral organization concerned and the perspective of the storyteller. It is important, for example, to distinguish between the UN organizations and the World Bank. And within the UN, the account differs significantly according to whether it is from the perspective of the SecretaryGeneral’s office and the General Assembly, or from that of the specialized agencies. The switch by the former, from a very low level of cooperation with businesses to the active pursuit of partnerships, influenced the different paths towards increasing business cooperation in the UN specialized agencies; but these were equally influenced by their own governing bodies, including annual general assemblies, executive boards and executive directors. In the UN one could arguably trace the story of the rise of PPPs back to the creation of the organization, since there was some business interest in the founding conference in San Francisco in June 1945. As reported by Tesner with Kell (2000), several business associations and union groups made a case in favour of attending, but only one, the International Chamber of Commerce (ICC), asked for (and immediately received) accreditation to the UN under Article 71 of the Charter. According to Tesner, at the inception of the UN there was no notion that it was anti-business; this came later, during the Cold War. One important process that contributed to this image was the (ultimately unsuccessful) attempt to develop binding codes of conduct for multinational enterprises under the UN Conference on Trade and Development (UNCTAD). The closing down of the UN Center on Transnational Corporations (UNCTC) in 19955 is often viewed as a symbol of the weakening of the multilateral system vis-à-vis the private sector (Gjølberg 2003). The major turning point, from anti-business to pro-business, occurred, according to Tesner with Kell, in 1997, with the appointment of Kofi Annan:

8

Development Issues in Global Governance Kofi Annan brought with him an understanding of, and an appreciation for, the private sector that none of his predecessors had ever displayed. His business education constitutes, in and of itself, a radical departure from the traditional government and diplomatic background of every UN secretary-general before him. (Tesner with Kell 2000: 2)

As we will discuss in more detail in Chapter 2, we believe that Kofi Annan’s appointment as UN Secretary-General was a part of a larger picture, and certainly not the sole cause of the rise of PPPs. Nevertheless, he did not waste much time before taking his first steps to include the private sector in the activities of the UN. On 1 February 1997, four weeks after assuming office, he addressed the World Economic Forum in Davos, Switzerland, and declared that there was now ‘a new universal understanding that market forces are essential for sustainable development’ (Tesner with Kell 2000: 32). In the same year, the UN received the historic gift from Time Warner Vice-Chairman Ted Turner which led to the establishment of the United Nations Foundation (UNF), and later its operational arm, the United Nations Fund for International Partnerships (UNFIP).6 The next major milestone in the evolution of the UN–business relationship was the speech given by Kofi Annan to the World Economic Forum in January 1999, where the idea of a ‘global compact of shared values and principles’ was launched. In this speech he outlined nine principles, based on a series of UN conventions that should serve as a frame of reference to stimulate best practices and to bring about convergence around universally shared values.7 Due to the enormous response to the initiative, six months later the United Nations Global Compact was established directly under the Secretary-General, aimed at making businesses voluntarily adhere to the core principles (Gjølberg 2003).8 Later the same year, Kofi Annan issued his report for the millennium session of the General Assembly. In the report called ‘We the peoples: the role of the United Nations in the 21st century’, Annan stressed several times that the challenges faced by the United Nations could not be tackled without close cooperation with the private sector (United Nations 2000a). In the Millennium Declaration that resulted, one of the millennium goals (goal 9) was dedicated explicitly to ‘Develop a global partnership for development’, meaning, among other things, partnerships with the private sector. On 17 July the same year, the Secretary-General issued the UN Guidelines for Cooperation with the Business Community.9 This was


9

the result not only of increasing support for the idea of PPPs, but also increasing concern about the various risks it involved for the UN. Over the course of the following five years, the General Assembly issued three resolutions concerning partnerships with the private sector. Later the same year the General Assembly issued a resolution in which it supported the idea of PPPs, at the same time as it requested the Secretary-General to submit a report on the views by all the member states on this matter to the 56th session of the General Assembly (A/Res/55/215, A/RES/56/76, A/RES/68/129). These resolutions express increasing support for partnerships, and encouragement of their development, but also raise certain concerns regarding their compatibility with UN integrity, their management, and issues of transparency and accountability. The report submitted in 2001 concluded that the general view of the member states was that cooperation between the United Nations system and the private sector offered potential and had already demonstrated some tangible results, but that this was tempered by a variety of strategic and operational challenges (A/56/323). The discussion of this report in the General Assembly resulted in a new resolution (11 December 2001) which requested a new report by the Secretary-General. This should contain modalities for enhanced cooperation with the private sector and should particularly focus on the private sector’s views. Also, at various World Summits, a change towards a focus on partnerships was noticeable. The first important steps were taken at the United Nations Conference on Environment and Development (UNCED, the Earth Summit) in Rio de Janeiro in 1992, when the Conference’s Secretary-General Maurice Strong invited the newly formed World Business Council for Sustainable Development (WBCSD) to write the recommendations on industry and sustainable development. According to Richter (2002) these replaced the recommendations made by the UN Centre for Transnational Corporations (UNCTC). This trend was strengthened during a series of subsequent summits. The report from the International Conference of Financing for Development in Monterey, Mexico, in 2002, stressed that greater cooperation between the public and the private sector was crucial for overcoming the shortcomings of development finance. Resulting from that, the United Nations Economic and Social Council (ECOSOC) launched the Financing for Development Initiative (FfDI) jointly with the World Economic Forum (Witte and Reinecke 2005). The trend was continued at the World Summit on Sustainable Development in Johannesburg in September 2002, where the presence

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of business and industry was, it is claimed, unprecedented in the UN summit context (Bjørkelo 2005). This resulted in the launch of more than 200 partnerships. As argued by Zadek (2004: 3), ‘Just as Rio was as much about legitimizing the role of NGOs in global governance as it was about the environment, Johannesburg was about the legitimacy of the role of business in development.’ The story told from the perspective of the individual multilateral organizations is more diverse. Although signals from the thirty-eighth floor of the UN building in New York, the General Assembly and the world summits are heeded in the headquarters of the various UN organizations spread across Europe and the US, these agencies are formally dependent only on the decisions made by their own annual assemblies and executive boards. The story about the rise of PPPs therefore differs from one organization to another. As will be discussed in the case study chapters, the pace and form of the move towards PPPs depended on a number of factors, such as the power relations between member states (particularly the role of the United States), the executive leadership, and varying traditions for collaboration with the private sector. Experience differs widely across organizations, with the United Nations Children’s Fund (UNICEF) and the International Labor Organization (ILO) often held up as the organizations with most long-standing cooperation with the private sector, and United Nations Educational, Scientific and Cultural Organization (UNESCO) at the other end of the spectrum. But there has been an increase in PPP activity across all the organizations. The case of the World Bank (formally also part of the ‘UN family’) is very different. Interaction with the private sector was from the start a more prevalent feature here than in the UN; indeed the World Bank’s foundation was significantly influenced by the interests of private bankers (Peet 2003), and American business leaders were consulted by the Department of the Treasury and invited to Capitol Hill for Senate hearings on the creation of the IMF and the World Bank. In the 1980s, the Bretton Woods committee was established by bankers and other businessmen in order to lobby the US Congress in the making of policy towards the Bank. The interest of the private bankers in the World Bank results from its structure of funding. It receives only a small portion of its available resources as donations from the member states. The rest is borrowed on private capital markets with ‘callable capital’ from the member states as a guarantee (Bøås and McNeill 2003). The Bank has also always, though to varying extents, tended to argue the merits of the private sector. This was true from its inception,


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and the private-sector focus strengthened over the course of the 1980s. However, the Bank was from the start based on a central contradiction: the Articles of Agreement require that the Bank promote private investment, but prohibit the institution from lending its funds to private-sector firms without government guarantee (Article III, Section 4) (Miller-Adams 1999). In 1956, its subsidiary the International Finance Corperation (IFC) was established to provide loans and equity to the private sector. Moreover, the International Center for the Settlement of Investment Disputes (ICSID) was established in 1966 in order to encourage flows of international investment through the arbitration of disputes between governments and foreign investors, and the Multilateral Investment Guarantee Agency (MIGA) was created to insure private investors against political risk. Nevertheless, both the ‘soft loans’ from the World Bank channelled through the International Development Association (IDA), and the ‘hard loans’ through the International Bank for Reconstruction and Development (IBRD), are given to states. Thus, when neo-liberalism gained a stronghold in the Bank in the mid-1980s, it resulted in the deepening of the contradiction. Ideologically the World Bank favoured private-sector actors, but constitutionally it could lend only to states. The first effect of the neo-liberal orientation was the reduction in funding to state-owned enterprises that the Bank had supported in the 1950s and 1960s and that in many developing countries were very heavily dependent on funding from the multilateral banks. The second main effect was the introduction of conditionalities in exchange for general budget support – conditionalities that often included policies to strengthen the private sector (for example through privatization, deregulation and liberalization). A third outcome was for the Bank to explore different ways to interact directly with private actors and to coordinate its privatesector-related activities with those of its affiliates (Miller-Adams 1999). A concrete result of this strategy was the strengthening of the Private Sector Department within the Bank. A new Vice Presidency for Finance and Private Sector Development (FPD) was established as one of the three thematic Vice Presidencies (VPs) in 1992. By 1998 the FPD VP had a staff of 700 individuals. In 1997 there was a reorganization into networks: FPSI (Finance, Private Sector and Infrastructure), PREM (Poverty Reduction and Economic Management), and ESSD (Environmentally and Socially Sustainable Development). By the end of fiscal 1998, the FPSI network (which does not include IFC or MIGA staff) encompassed 1,700 individuals.

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However, the basic structural limitations of the World Bank persist. Unless its charter is amended, the Bank cannot lend directly to private entities and it cannot become involved in private-sector transactions without encroaching on the turf of the IFC. It also has difficulty competing with private firms as a provider of technical assistance and fee-based services, because its costs are high relative to smaller and more flexible organizations. Therefore, the Bank does not engage in the kind of PPPs that the UN organizations favour; rather, its private-sector development effort ‘focuses mainly on creating a policy environment within which a strong private sector can function . . . loans, guarantees, technical assistance, research, training, and policy dialogue’ (Shihata 1995). The evolution of the World Bank’s policy in relation to the private sector, especially with regard to infrastructure, is outlined in Chapter 7 (and at greater length in Miller-Adams 1999). In summary, it shifted significantly in favour of the private sector in the ‘structural adjustment’ period of the 1980s and early 1990s – the era of Thatcherism and Reaganomics. Since then it has modified its views somewhat, adopting a more balanced view in which both state and market are given an important role. While emphasizing the important role of the private sector, and often encouraging privatization, it is, however, not permitted to enter into public–private partnerships, as such.

Types of partnership As discussed above, PPPs have been much discussed in the multilateral system in recent years. But it is extremely difficult to quantify the extent of the phenomenon. There are no figures on the number of partnerships signed between multilateral institutions and the private sector. And any attempt at estimating such a figure is severely hampered by the lack of an accepted definition of a PPP. In the following, therefore, we will seek only to give a picture of the diversity of PPPs that multilateral institutions are engaged in, and provide examples of different types of PPPs. There exist various typologies of partnerships that emphasize different aspects (see, e.g., Tesner with Kell 2000; UN General Assembly 2003, 2005; Witte and Reinecke 2005). The following fourfold division attempts to include partnerships developed with the UN organizations and the development banks. It should be noted that several partnerships, including those that will be discussed later in this book, straddle more than one category.


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Resource mobilization partnerships The aim of these partnerships is to mobilize funds in order to realize a specific goal (for example, one or more of the Millennium Development Goals). These partnerships seek to mobilize private resources either by direct fundraising, or by promoting and facilitating foreign direct investment (FDI) flows to poorer countries. To these partnerships, the private sector generally brings both large amounts of funding and technical expertise, while the UN contributes on-the-ground expertise and policy networks (typically involving policy dialogue with government officials). These partnerships can be valuable for both partners. For the private sector, they generally provide for much more than an improved image; for example, with regard to FDI, they may reduce investment risk and/or create business opportunities that would have been impossible without the involvement of a UN body.10 For the UN, the vast amount of resources at the disposal of these private actors is seen primarily as a potential solution to its continuing budgetary crisis, whether or not the funds are directly channelled through UN budgets. This form of partnership has two ‘sub-categories’. Multilateral fundraising Direct private sponsoring of multilateral activities is one main type of fundraising partnership, and perhaps the most basic. This is an activity that has been going on for many years, although the total share of the UN budget that is covered directly by the private corporations or foundations is still small.11 As mentioned, UNICEF is the organization with the longest experience and most success in fundraising, and is clearly seen as a leader in the field. It is currently represented worldwide by thirty-seven local committees engaged in fundraising activities. In 2003, local committees secured US$292 million primarily from private sector donors, comprising more that 17 per cent of its total budget. Some of this came from foundations: in 2003, US$31 million was collected from partnerships with the Gates Foundation, UN Foundation, Rotary International and the Hilton Foundation alone.12 But a large share of the budget comes through partnerships with companies. The ‘Change for Good’ programme13 was conducted in partnership with various airlines, ‘Check out for Children’14 in partnership with Sheraton Hotels, and ‘Trick or Treat for UNICEF’15 in partnership with Procter and Gamble, IKEA and Coinstar, among others.

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Many organizations are attempting to follow UNICEF’s example, with varying degrees of success. Agencies wanting to follow UNICEF’s lead include United Nations High Commissioner for Refugees (UNHCR), UNESCO and United Nations Environment Program (UNEP). In 2003, UNHCR attracted over US$15 million from large private donors.16 Like UNICEF, UNHCR has set up national representations worldwide which engage in fundraising activities and actively solicit private donations on their websites. The UNHCR has also partnered with eBay and the toy company Hasbro MB for special fundraising events.17 Similarly, UNEP is stepping up efforts to encourage national committees to engage in fundraising activities, particularly targeting corporations and foundations.18 Examples of many different methods employed by these agencies to attract private funding are shown in Table 1.1. Other UN agencies actively involved in fundraising include United Nations Fund for Population Activities (UNFPA), Joint United Nations Programme on HIV/AIDS (UNAIDS) and the World Health Organization (WHO), with the last-named particularly relying on cash and in-kind (for example, vaccines) donations. In addition, goodwill ambassadors have sprung up in many UN agencies in an attempt to give a face to their fundraising efforts. Even the World Bank’s World Bank Institute has benefited from funding from, among others, the Rockefeller Foundation and DaimlerChrysler. However, fundraising is by many viewed as an ‘old-fashioned’ form of partnership. Increasingly, the multilateral organizations want not only money from the private sector, but also access to their expertise, management skills, and networks. Similarly, many private companies want to participate actively in implementation, not simply to donate funds. Resource mobilization is therefore increasingly combined with one or more of the types of partnerships discussed below. Table 1.1 Fundraising methods employed by UN agencies • • • • • • • •

Direct mail (thematic – emergencies, or for specific countries) Special events, goodwill ambassadors Special products (greeting cards, and other saleable items carrying messages and symbols) Cause-related marketing (credit cards, pledges – stop orders etc.) Legacies and bequests (wills, foundation commitments) Corporate sponsorships Airline in-flight collection programmes (on the model of UNICEF’s Change for Good) Internet fund-raising


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Channelling private funds A second type of partnership aims to mobilize resources through channelling private investments to specific projects. Several multilateral organizations have positioned themselves so as to leverage FDI flows to those countries and regions where the money is needed most. As discussed, the World Bank encourages FDI directly through the IFC and MIGA, and indirectly through policy dialogue and its lending priorities and conditions. Other agencies seen as supporting this effort include the UNDP and UNCTAD. The UNDP’s Money Matters Institute (in partnership with private banks and financial institutions), and its Growing Sustainable Business initiative, both aim to encourage FDI to emerging markets. UNCTAD also seeks to promote FDI flows to poorer countries through its partnership with the International Chamber of Commerce (ICC) and its annual World Investment Report. Multilateral agencies are now making a special effort to channel credit to small and medium sized enterprises (SMEs) in developing countries, whether in response to criticism of partnerships with large TNCs or as a matter of good development policy. United Nations Industrial Development Organization (UNIDO) is taking a lead role on this front with its Business Partnership Programme, which encourages the integration of SMEs into the so-called ‘global value chain’.19 Deutsche Bank’s Microcredit Development Fund, in partnership with UNEP, offers loans to local microfinance institutions.20 The United Nations Capital Development Fund, in cooperation with the UNDP and partners such as the Ford Foundation, aims to provide microfinance to poorer countries.21 And the IFC provides a ‘tool-kit’ for helping develop SMEs, with particular emphasis on developing financial markets in poorer countries. In this book, it is primarily Chapter 7 which discusses ‘resource mobilization’. Advocacy partnerships A second main type is advocacy partnerships. The primary and immediate aim of these partnerships is to raise awareness concerning the global issues addressed by the UN, or to add a further issue to the global agenda. These partnerships typically seek to combine the expertise of the private sector, the legitimacy of the UN, and the resources of both partners. Advocacy partnerships may take various different forms. One is the large, internet-based campaigns aimed to mobilize both awareness and

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resources. An example of this is NetAid, an ‘online community’ with the mission of informing people about poverty issues and providing them with a means to contribute through online volunteering or donations. This was launched in 1999 as a collaboration between UNDP and Cisco systems. Currently it boasts a network of more than 80,000 people.22 Other advocacy partnerships focus more on the local level and use other forms of communications. One example is the Health in Your Hands partnership to promote hand-washing with soap. This was initiated by the World Bank and UNICEF, but uses the private sector to target audiences in country-based programmes in order to promote improved hygiene. One popular way to contribute to awareness-raising is the creation of prizes and ‘international days’, jointly between private actors and the UN. There is currently a plethora of prizes and international days, years and decades which promote UN activities. The year 2004 was the UN’s Year of Microcredit, with partners including Citigroup, ING and Visa.23 With regard to prizes, the private sector has taken a lead role in partnership with, and in support of, UN agencies. Examples include Walt Disney and McDonald’s Millennium Dreamers initiative,24 L’ORÉAL’s Women in Science prize,25 DaimlerChrysler’s Mondialogo School Contest26 and Alacan Inc.’s Prize for Sustainable Development,27 all in cooperation with UNESCO. The aims of other awards are to promote the partnerships themselves. UNEP’s International Seed Award recognizes partnerships for their entrepreneurship and contribution to sustainable development.28 In 2004, UNDP’s World Business Awards recognized the contribution of business to the Millennium Development Goals. Winners in 2004 included Suez and De Beers.29 Multilateral organizations also form partnerships with companies to promote their own activities. For example, UNDP co-sponsors a TV series, The Business of Development, produced by CNBC and promoting the private sector as a partner in development.30 UNESCO has been particularly active in utilizing TV in promoting its World Heritage sites. Examples include a program entitled The World Heritage, broadcast in Japan, an information campaign in cooperation with the History Channel, and a documentary series of approximately 200 episodes entitled Treasures of the World produced by the German TV channel Sudwesttrundfunk.31 Both the UNDP and UNHCR have on occasion utilized the New York Times to promote their respective activities. The UNHCR has also formed a partnership with Walden Media to promote the production of a film


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(and related educational material) which tells the story of a young refugee in post-World War Two Bulgaria.32 Furthermore, multilateral organizations may form partnerships with advertising firms that contribute their time and expertise in advocacy campaigns. Examples include UNESCO’s ‘Engaging the Advertising Industry to Help Communicate Sustainability Around the World’ and UNEP’s ‘Advertising and Communication Initiative’, both in cooperation with some of the world’s leading advertising companies.33 In this book, examples of advocacy partnerships are to be found in Chapters 4 and 5. Policy partnerships These partnerships typically establish both formal and informal dialogue and knowledge sharing between the UN and the private sector with the aim to have an impact upon policy, be it the policy of international organizations, governments or corporations. In some instances the partners can be seen as largely promoting the same agenda; in others the partnerships are attempts to reconcile ideological differences regarding policies. One main function of such networks is the development of norms and standards. The aforementioned Global Compact is perhaps the most important example of such a partnership. Now numbering more than 2,400 affiliated companies and local networks in more than 50 countries, the Global Compact is based on learning and mutual exchange of experience in order to ensure voluntary adoption of the standards included in the (now ten) core principles. Another function is to engage in multi-stakeholder public policy networks. These typically address complex cross-border issues by influencing the priorities of the global agenda, facilitating negotiations, setting global standards, gathering and disseminating information (Nelson 2002). Examples of these networks are provided in Table 1.2. The majority of partnerships devoted to establishing and/or influencing global policies are limited to a few UN bodies: the Secretary-General’s office, UNCTAD and UNDP are principal among them. Though large business associations have proved to be the most significant partners to the UN in this network, some agencies, such as UNDP, UNESCO, UNIDO and WHO, have also partnered with TNCs and/or private foundations on the policy front. These partnerships vary greatly in scale, ranging from global to local, and addressing issues such as human rights, private-sector development, intellectual property rights, global health issues and the brain drain

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Table 1.2 Examples of global public policy networks involving UN bodies and the private sector • • • • • • • • • • • •

Global Compact Global Development Network Global Public Goods Network Global Public Policy Project The Anti-Corruption Network for Transition Economies Safe Injection Global Network The Investment Advisory Council Global Reporting Initiative Public–Private Partnerships for the Urban Development The World Water Council The Consultative Group on International Agricultural Research Culture Link Network (Research and Cooperation in Cultural Development)

in Eastern Europe. The private partners include, among many others, AOL–Time Warner, Sun Microsystems, Fidelity, Soros Foundation, the Bill and Melinda Gates Foundation and the Ford Foundation. In these partnerships, UN bodies generally bring with them a degree of authority and expertise to policy debates while providing a ‘neutral platform’ for convening civil society, government officials and business. The private sector, on the other hand, can offer a great deal of leverage in favour of policy change in the form of entrepreneurship, investment, and products. As a result, both partners may benefit from policy changes (at an international, national or corporate level) that otherwise may not have been possible to achieve. The private sector may benefit from an enhanced image, and a more enabling policy framework, potentially opening up new business opportunities and reducing investment risk. In this book, examples of policy partnerships are to be found in Chapters 4 and 5. Operational partnerships At one end of the spectrum, these partnerships simply involve the sale of goods and services to UN agencies by the private sector. At the other end, they are forged in order to compensate for what is viewed as market and/or government failure. The functioning of the partnerships in the latter case has been referred to as ‘harnessing markets for development’ (UN General Assembly 2005; Witte and Reinecke 2005).


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The UN and its agencies contract out an estimated US$3 billion to suppliers of all types of goods and services. Combined with expenditures by governments, the annual value of business opportunities emanating from UN and Development Bank activities is nearly US$30 billion. Many of these contracts are small (US$20,000 on average) and, with more than 130,000 contracts and purchase orders annually, procurement represents the UN’s most common form of interaction with the private sector. But these are characterized by a pure buyer–seller relationship and are thus unlike the partnerships of interest to this study (Nelson 2002). On the other hand, there are partnerships aimed at overcoming market imperfections, information failures and political hurdles to provide essential goods and services, and these represent a significant degree of interaction and dialogue between multilateral agencies and the private sector. In some cases, there may be a tremendous need for a product (for example, AIDS treatment) but an inability to pay. In other cases, there may be inadequate information regarding the investment risk of a particular project or the likely impact of a project on a group of people (for example, the indigenous population). In still other cases, there may exist insufficiently developed markets (for example, micro-credit markets), or insufficiently competitive and/or regulated markets, leading to high prices. Finally, political instability may lead to a risk of rapidly changing policy regimes that can deter otherwise beneficial investment. In order to overcome these challenges, and provide essential goods and services, multilateral agencies and the private sector have forged innovative and sometimes complex partnerships. As we will see in Chapter 4, in the health sector these partnerships may involve establishment of markets to encourage long-term and costly research and development efforts. In the water supply sector, as will be discussed in Chapter 7, the World Bank Group finances willingness-to-pay studies, provides information regarding country risk (for example, its Investment Climate Surveys), and often provides investors with loans (through the IFC), risk guarantees (MIGA) and services for investment dispute settlement (ICSID). UNCTAD, UNIDO, UNDP and ILO have all forged partnerships with SMEs in less-developed countries in order to provide these businesses with otherwise scarce capital. In order to assess the impact of an oil pipeline in China, the UNDP has recently partnered with Shell to conduct a costly social impact study. In order to overcome political resistance to infrastructure reform, corporations have partnered with the World Bank to provide technical assistance, particularly regarding competition, regulation and corruption.

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Finally, many UN agencies also engage in knowledge and staff exchange partnerships with the private sector. The World Bank has taken the lead on this front, promoting the use of knowledge networks through its Global Development Network and the sharing of expertise through its Staff Exchange Program. Another example is the fellowship programme that allows secondment of staff from the pharmaceutical industry to the World Bank, organized through the International Federation of Pharmaceutical Manufacturers’ Associations (IFPMA).

Outline of the book The main intention of this book is to critically examine, in theoretical and practical terms, the emergence of market multilateralism. The next chapter reviews literature on PPPs and provides a theoretical discussion of the phenomenon of market multilateralism, drawing both on Ruggie and on Cox’s historical materialist framework. We contrast two main approaches to multilateralism. One, the actororiented approach, focuses on how the multilateral organizations are becoming important players in global governance networks through, among other developments, the creation of PPPs. The other is more structural, and focuses on how the structural power of global capital may be used to outmanoeuvre other participants in the PPPs, and thereby alter the very nature of multilateralism. We draw on both these perspectives; while clearly recognizing the existence of policy networks, we embed them in a structural context, and attempt to identify the principles upon which the resulting ‘market-multilateralism’ is based. Chapter 3 situates the partnerships in context, discussing changes in the material and ideational environment that have forged the innovations that we observe. The first such change is in the nature and extent of financial flows to developing countries, where there has been a substantial but very unevenly distributed increase in private funds, and a general stagnation in public funds. We discuss changes among private-sector actors that may impact on their willingness to take the multilateral route. We also discuss major changes in the formal global rules governing trade and investments that impact on the policy space for multilateral organizations and partnerships. Finally, we review some wide-ranging changes in ideas and ideology over the last twenty years. Chapters 4 to 7 provide detailed empirical case studies. Each takes as a starting point one of the development challenges that the multilateral community has committed itself to address: a commitment


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that is captured in the Millennium Goals, as well as in a series of more specific declarations and conventions. These include the commitment to: (i) reduce the pervasiveness of disease among the world’s poor (captured in, among other things, the declaration Health for All); (ii) combat child labour (in two core ILO conventions); (iii) breach the digital divide; and (iv) provide clean water for the whole world population (captured in the declaration Water For All). Chapter 4 deals with the challenges in the health sector and focuses mainly on two major partnerships – the Global Alliance for Vaccines and Immunization (GAVI) and the Global Fund to Fight Aids, Malaria and Tuberculosis (the Global Fund) – but also refers to some of the less-highly profiled ones. These partnerships all contain an operational component (mostly focusing on encouraging research and product development), but many also have fund mobilizing, advocacy and policy components. The main partners are pharmaceutical companies and a handful of private foundations, with the Bill & Melinda Gates Foundation currently the most important. The main conclusion from the health sector is that here we have seen some of the most successful partnerships in terms of mobilizing funds from foundations, conducting global advocacy work and harnessing markets for development. There are also signals that point to the increased development of norms and rules that govern the work of the foundations, as well as the business organizations and pharmaceutical companies, in their interaction with the multilateral organizations under the partnerships. However, the collaboration of the pharmaceutical companies is in most instances based on their calculated benefit, and little is done to alter the (skewed) incentives of the market in any fundamental way. Chapter 5 examines forms of advocacy and/or policy partnerships that have emerged out of collaboration between the ILO and the cocoa and tobacco industries to combat child labour. Although the ILO is formally constrained from collaborating with individual companies, informally ILO officials have carved out a new role for themselves as advisors to various initiatives focused on improving companies’ conduct related to child labour. The ILO is here responding to a demand for expertise, created primarily due to NGO and media focus on the use of child labour in cocoa and tobacco production. A main conclusion is that, although the ILO has indeed gained influence in these partnerships, they remain relatively marginal activities for the organization. Moreover, the direct impact on the industries is hindered by the extremely complex supply-chains involved.

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Chapter 6 is concerned with the formation of partnerships between UNESCO and information technology companies, particularly Microsoft. As with the health partnerships, these can hardly be understood without placing them in the context of the TRIPs agreement (Trade-related Aspects of Intellectual Property Rights). The chapter focuses on the interplay between technological factors, the funding crisis of UNESCO, and the re-entry of the United States into UNESCO – and how these have impacted on the change of attitude of the organization. The main conclusion here is that the form of multilateralism that emerges is one that strengthens powerful market actors. Chapter 7 addresses the case of the World Bank and its encouragement of private investment by major international companies in water supplies in Latin America. It is found that the hoped for ‘winwin’ situation – whereby services for the poor are improved as a result of increased private-sector involvement – has not generally materialized. The drain on the public budget is reduced as a result of privatization; but in most cases the provision of better services to the poor is not, in practice, given priority.

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Introduction Among researchers, debate about multilateralism began as one between realists (who saw the world existing essentially of states acting in the pursuit of self-interest and in constant competition with other states), and a diverse set of opponents that, although not necessarily challenging state-centredness or the assumption of self-interest, argued that world politics was also characterized by the existence of norms and institutions, and that principles of behaviour could take precedence over self-interest in some circumstances. Recently, most of the academic discussion on multilateralism has been concerned with the role of the United States; and much of the debate has focused on security. Development has not been a central issue. Perhaps this is because this is viewed as a weak case for testing multilateralism; that international aid is the nearest example one may find of altruism in global politics, and hence states have little to lose by adopting a multilateral approach to development issues. We would challenge such an argument; aid policy and development issues, from the very establishment of an aid system after World War Two, have been influenced by ‘grand strategy’, including both long-term economic and security goals. We therefore claim that valuable conclusions about multilateralism can be drawn based on observations of multilateral action in the field of development. But we limit ourselves to claims relating to what Ikenberry (2003) calls the ‘intermediate’ level of multilateralism. (Ikenberry distinguishes between the basic level of multilateralism, which relates to the deep organization of the units and their mutual recognition and interaction, and the intermediate, which refers to the political-economic organization of regional or international orders.)

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Our interest is in the norms and principles that underpin the dayto-day work of the multilateral organizations. This is, of course, strongly influenced by formal negotiations between the representatives of states in the governing bodies of the organizations, notably at their Annual Meetings. However, as the following case studies will show, there is considerable scope for action by others – not only the executive heads and other senior members of the international bureaucracies, but also private-sector representatives. We will argue that multilateralism is manifested also at the operational level, and that it is therefore appropriate to study it here also.

Multilateralism in the context of embedded liberalism John Ruggie’s famous definition of multilateralism is ‘an institutional form that coordinates relations among three or more states on the basis of generalized principles of conduct’ (Ruggie 1993: 11). According to Ruggie: ‘Multilateralism is a generic institutional form of modern international life, and as such it has been present from the start’ (Ruggie 1993: 7). Although not stated explicitly, it is clear that here ‘the start’ means the creation of the Westphalian system of national states, and the institutionalization of sovereignty as a basic principle; Ruggie is thus referring to what is defined above as ‘the basic level’ of multilateralism, and he rejects the view that this was invented after World War Two. According to him, the organizing principles of multilateralism – indivisibility, generalized principles of conduct, and diffuse reciprocity – were also found in much earlier historical periods.1 We would argue, however, that the present multilateral system grew out of a specific international order, namely that which emerged from the agreement between the victorious powers of World War Two, and which was fundamentally influenced by an interest in sustaining a liberal international infrastructure of global economic management. To establish the defining features of post-war multilateralism it is necessary to identify the specific content of its ‘generalized norms and principles of conduct’. According to Ruggie: [T]he postwar international economic order rested on a grand domestic bargain: societies were asked to embrace the change and dislocation attending international liberalization, but the state promised to cushion those effects by means of its newly acquired domestic economic and social policy roles. Unlike the economic nationalism of the thirties, then, the postwar international economic order was designed to be multilateral in


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character. But unlike the laissez-faire liberalism of the gold standard and free trade, its multilateralism was predicated on the interventionist character of the modern capitalist state. (Ruggie 1997: 5) Ruggie referred to this as ‘embedded liberalism’. He was strongly influenced by the work of Karl Polanyi (1944) and his notion of the inseparability of economic and social systems in society. According to Polanyi, the resurgence of domestic social control of the market in late-nineteenth-century Europe resulted in a re-embedding of the economic system that gave the state a new role in mediating between market and society. According to Ruggie, the reason for the failure of attempts at establishing a liberal international regime in the inter-war period was that such a regime would be fundamentally in contradiction to the domestic order of increasing social protection. The post-war economic regimes differed fundamentally from those that were sought to be established in the inter-war period in that they accommodated both international liberalism and domestic interventionism. ‘This was the essence of the embedded liberalism compromise: unlike the economic nationalism of the thirties, it would be multilateral in character; unlike the liberalism of the gold standard and free trade, its multilateralism would be predicated upon domestic interventionism’ (Ruggie 1982: 393). This view also led Ruggie to reject the argument of orthodox liberals that many problems of the post-war regime emerged out of the inconsistent application of liberal norms; rather, this was inherent in the ‘embedded liberal compromise’: [T]hat a multilateral order gained acceptance reflected the extraordinary power and perseverance of the United States. But that multilateralism and the quest for domestic stability were coupled and even conditioned by one another reflected the shared legitimacy of a set of social objectives to which the industrial world had moved, unevenly but ‘as a single entity’. Therefore, the common tendency to view the postwar regimes as liberal regimes, but with lots of cheating taking place on the domestic side, fails to capture the full complexity of the embedded liberalism. (Ruggie 1982: 398) In order to understand this quotation, it is important to place it in the context of the contemporary debate in international relations.

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The main target for Ruggie’s argument was the then dominant theory of hegemonic stability. This posited that if economic capabilities are so concentrated that a hegemon exists, as in the case of Great Britain in the late nineteenth century and the USA after World War Two, then an ‘open’ or ‘liberal’ international economic order will come into being (that is, an order in which pride of place is given to market rationality) (Kindleberger 1973). The corollary was that if the hegemon were to decline – as it was widely thought was about to happen in the late 1970s – this would pose a threat to the liberal order. Based on this theory, the alleged decline in US power in the 1970s was used to explain the collapse of the Bretton Woods system, and this provoked concerns that this would cause the entire multilateral order to collapse and throw the world into a headlong rush into mercantilism. The theory of hegemonic stability had two implications. The first was that ‘for the world economy to be stabilized, there has to be a stabilizer, one stabilizer’ (Kindleberger 1973: 305). In other words, cooperation and order necessitated a hegemonic leader. This argument was rejected in a series of contributions that maintained that a state’s desire to cooperate could be attributed to causes other than the presence of a hegemon, and that there therefore existed sources of stability other than hegemony. These counter-arguments have often emphasized the role of institutions in encouraging cooperation and fostering stability. A direct response to hegemonic stability theory was provided by Keohane (1989), who argued that, once institutions had been built up, cooperation could continue well after the decline of a hegemon. Other writers developed more general institutional arguments about multilateralism and international regimes.2 The second implication of the hegemonic stability theory was that to specify the form of power (more specifically, hegemony) was sufficient to determine the content of an economic order (more specifically, the liberal order). In other words, whoever the hegemon may be, the outcome will be a liberal order. Against this, Ruggie argued that in order to say anything sensible about the content of an economic order it is ‘necessary to look at how power and legitimate social purpose become fused to project political authority into the international system’ (Ruggie 1982: 282). Thus, the existence of a liberal multilateral order was posited to depend on the specific norms that the actual hegemon promoted. Consequently, Ruggie argued that the changes observed in the 1970s were not the inevitable result of hegemonic decline, but rather norm-governed changes in the instruments of multilateralism.


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In sum, Ruggie equated post-war multilateralism with the quest for a sustained framework for the operation of a global market. The interventions for social protection he found exclusively at the domestic level. This was the compromise which he called embedded liberalism.

Post-war multilateralism and the limits of embedded liberalism A major limitation of Ruggie’s account of the post-war compromise is that it describes the situation only in part of the world. As Ruggie himself notes, the benefits of embedded liberalism were never fully extended to developing countries, since they were exposed to the demands of openness towards international markets but ill-equipped to provide buffers against the negative effects. This resulted in various attempts at forging a compromise at the international level. In analysing this compromise, Cox (1992a) describes multilateralism as ‘in part the institutionalization and regulation of existing order, and in part the site of struggle between conservative and transformative forces’ (Cox 1992a: 514). The first of these Cox refers to as ‘economic multilateralism’, the second ‘political multilateralism’, although he does not consistently maintain this distinction – which is therefore somewhat unclear. In broad terms, ‘economic multilateralism’ is associated with the ‘embedded liberalism’ discussed by Ruggie. ‘Political multilateralism’ is symbolically located in the UN General Assembly (perceived by powerful states as harbouring an unfriendly Third World majority), and existed to correct the inequities in the world economy; it led, among other things, to the demand for the institutionalization of a New International Economic Order. Cox thus agrees with Ruggie about the necessity of understanding multilateralism within the context of a specific world order, but he has a different interpretation – due to his different theoretical underpinnings, different view of hegemony, and different political purpose. Although clearly inspired by Gramsci and other Marxist writers, Cox prefers not to be classified as a Marxist, but as a historical materialist (Cox 2002). His focus is on the dialectic relationship between the material foundations of life, institutions and ideas. He differs from more ‘mainstream’ theorists of international relations and organization (including Ruggie) by privileging forces of production, although never ‘decoupling’ them from power and authority (Cox 1987). Cox’s interpretation of multilateral institutions is clearly related to his view of hegemony, which differs from the one discussed above.

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His concept of hegemony is based on Gramsci and should not be understood in the sense of the domination of one state over others (as in hegemonic stability theory), but as an order within the world economy, with a dominant mode of production which penetrates all countries and links into other subordinate modes of production. Underlying this concept of hegemony is a structural concept of power. Structural power concerns the determination of social capacities and interests; it shapes the self-understanding and subjective interests of actors. Steven Lukes defined it as the ability to shape people’s desires and interests through ‘influencing, shaping and determining [their] very wants’ (Lukes 1974: 23). Through constituting subjects, structural power shapes relationships of super- and subordination that work to the advantage of those structurally empowered, and to the disadvantage of the socially weak. In summary, according to Cox, the multilateral organizations function as expressions of structural power. The features of multilateral organizations supporting this order are the following: (i) the institutions embody the rules which facilitate the expansion of hegemonic world orders; (ii) they are themselves the product of the hegemonic world order; (iii) they ideologically legitimate the norms of the world order; (iv) they co-opt the elites from peripheral countries; and (v) they absorb counter-hegemonic ideas (Cox 1983: 62). Thus, Cox clearly distinguishes between multilateralism, which he sees as a potential transformative force, and the existing multilateral organizations, which in his view generally serve to extend the historic bloc of production forces and their authority. As regards the question of political purpose, we may conclude that Ruggie can be seen as a defender of domestic social intervention as an appropriate and potentially effective complement to an organized liberal economic order. Cox, by contrast, can be read as more sceptical, seeing international social interventionism as a necessary response to the limitations of the multilateral system. As we will see below, Cox and Ruggie also have significantly different views concerning the gradual deterioration of the conditions underpinning post-war multilateralism, and hence the validity of the term itself. Ruggie has argued that multilateralism, as he outlined it, is no longer a useful concept, as it is too state-oriented to capture what is occurring in the global polity today. Cox’s concept of multilateralism is more open-ended, and therefore more easily adjustable to changing conditions. According to Cox, to provide a definition of multilateralism adequate for today and tomorrow, we must begin with an assessment of the present and emerging condition of the


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world system, and especially the power relationships that will give contextual meaning to the term.

Globalization and the multilateral system The compromise of embedded liberalism has been gradually undermined by a combination of factors: the introduction of neo-liberal policies at the domestic level; economic globalization that has increased the speed and volume of flows of goods, money, knowledge and information across the world; and the related rise of transnational actors. This has led to serious concerns about the future of the multilateral system, and more specifically the embedded liberalism model of Ruggie. We will here briefly examine these, before (in the next chapter) addressing more specifically those changes that we consider most important for the topic of this book. The first concern is that the weakening of state protection of vulnerable sectors, and states’ reduced ability to absorb surplus labour, lead to increased inequality, and possibly to social conflict, across the globe. This is closely linked to the alleged weakening of the national state in the context of globalization. We cannot do justice here to the debate about the relationship between globalization and the weakening of the state, but we suggest that the early warnings about the ‘retreat of the state’ have been somewhat misplaced.3 Rather than a retreat, there has been a transformation of the role of the state. The extent to which Keynesian policies and the welfare state protect citizens from the detrimental effects of global capitalism has, in most parts of the world, been reduced (although this has not always resulted in a downsizing of the state).4 Almost everywhere, however, there has occurred a transformation of the state, involving internal restructuring along the lines of ‘new public management’5 and, most importantly, a changing role of the state towards the economy. The jury is still out on whether the transformation has resulted in states being increasingly geared regarding supporting transnational capital as opposed to domestic-oriented capital (Robinson 2001), or whether we see the emergence of new forms of regulation also of transnational capital (Ayres and Braithwaite 1992; Jayasuriya 2004; Jordana and Levi-Faur 2004). But it is beyond doubt that states are increasingly open to crossborder flows of capital, goods and services. Such cross-border flows have contributed actively to the undermining of the compromise of embedded liberalism through weakening the bargaining power of geographically bounded labour

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vis-à-vis mobile capital. Together with the removal of social protection of vulnerable groups, this calls for a new response by the multilateral system, according to Ruggie. What is needed instead – for the sake of America and the world – is a new embedded liberalism compromise, a new formula for combining the twin objectives of international and domestic stability, one that is appropriate for an international context in which the organization of production and exchange has become globalized, and a domestic context in which past modalities of state intervention lack efficacy or legitimacy (Ruggie 1997: 10). But it is unclear how such a formula may emerge; whether the multilateral system will be able to establish a new global order. Indeed, a second major concern is the weakened willingness and ability of the multilateral system to govern economic actors. It is a trend that the market-augmenting institutions of the multilateral system – the WTO, the IMF and (perhaps) the World Bank – have been strengthened over the last years, in spite of periodical crises. Certainly the World Trade Organization (WTO) is in many respects stronger than its predecessor, the General Agreement on Tariffs and Trade (GATT) (Gagné 2000). At the same time, parts of the multilateral system that have attempted to regulate global capitalism have been weakened. As Cox’s account of multilateral organization, discussed above, reveals, the multilateral institutions have never been particularly effective regulators of global capitalism. Indeed Ruggie’s argument was that a part of the embedded liberalism compromise was that they should not be. Nevertheless, in the past some attempts were made to regulate global capitalism in order to make it more compatible with other social goals. The way multilateral organizations traditionally have attempted to do this is through the negotiation and adoption of resolutions and conventions to be ratified and implemented at state level.6 After a series of setbacks in the negotiation of such conventions, there is a distinct sense that the traditional multilateral fora cannot effectively serve as platforms for regulation of global capitalism.7 In Cox’s terminology, there is a decreasing faith in ‘political multilateralism’, or, in other words, in the ability of the multilateral system to provide the arena for negotiating an alternative to the capitalist world order. An additional concern relates to the democratic deficits of the multilateral system – an issue which has been highlighted as a result of increased transnational civil society political activism. Keohane and Nye (2001) have described the governing pattern of multilateral institutions as a club model: ‘Beginning with the Bretton Woods


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conference of 1944, key regimes for governance operated like clubs. Cabinet ministers or the equivalent, working in the same issue-area, initially from a relatively small number of relatively rich countries, got together to make rules . . . They negotiated in secret, then reported their agreements to national legislatures and publics’ (Keohane and Nye 2001: 220). This lack of transparency, they argue, is a key to understanding the public protests against the multilateral institutions – at a series of events starting in Seattle in 1999. Writing about the same phenomenon, Michael Zürn (2004) uses the concept executive multilateralism: ‘a decision making mode in which governmental representatives (mainly cabinet ministers) from different countries coordinate their policies internationally, but with little national parliamentary control and away from public scrutiny’ (Zürn 2004: 264). According to some, this practice undermines the democratic legitimacy of the multilateral system. Others disagree. Legitimacy of any institution is based on the normative belief held by an actor that the rule of this institution ought to be obeyed. It is a subjective quality, relational between actor and institution, and defined by the actor’s perception of the institution in question (Hurd 1999: 5). Traditionally, the legitimacy of the multilateral organization rests on its democratic governing structure and its legal dependence on legitimate states. Its democratic legitimacy depends on the governance structure that, at least in the case of the United Nations, was designed to partially correct the discrepancy of power between the large and powerful countries and the smaller, less powerful ones, and could therefore be interpreted as more democratic. The formal-legal legitimacy of the multilateral system is based on a traditional view of the distinction between the domestic and the international sphere in international politics. Following a Weberian logic, the state – defined by its monopoly of the legitimate use of physical force within a given territory – is the exclusive locus of legitimacy in international politics. According to this view, the multilateral organizations are legitimate because they were established by legitimate states, and are run according to rules made and interpreted by legitimate states. The international bureaucracies of the multilateral organizations are viewed as little more than formal implementing agencies for the collective decisions of states. Mouritzen (1991, quoted in Jönsson 1995: 5) expresses this view very well, describing the international bureaucracies as the ‘twining plants of international cooperation’: they are too weak to keep upright without support; they look beautiful and often serve to hide ugly walls, and they are almost impossible to get rid of. According to

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this view, should these ‘twining plants’ ever gain any real influence this would pose a threat to the legitimacy of the organization. According to such a view, also the involvement of non-state actors – including NGOs, firms, business associations and foundations – may threaten the legitimacy of the multilateral organizations. They have no independent source of legitimacy and authority; and if they gain influence in the multilateral system, this signifies a weakening of the legitimacy of that system. We regard this as a too narrow account of the authority and legitimacy of the multilateral organizations; not least because we claim that non-state actors may enjoy an independent source of legitimacy – a view that is supported by a growing body of literature on the emergence of private authority in international politics.

The transformation of legitimacy and authority in the context of globalization At the same time as concerns have been raised about the legitimacy of multilateral organizations, increasing attention has been paid to the rise of private authority in international relations. Authority may be defined as the legitimate exercise of power and is thus closely linked to order. In one of the first studies of the phenomenon of private authority, Cutler, Haufler and Porter (1999) argued that a significant degree of global order is provided by individual firms that agree to cooperate, either formally or informally, in establishing an international framework for their economic activity. They argued that private authority may be exercised within a private group, but it may also be extended beyond the members of a group, association, industry or sector to influence society more generally. In this way, private authority begins to merge into the public realm, both domestically and at the international level. Consequently, one should not associate activities that are public and authoritative solely with the state, but rather view private international authority also as an element in global governance. If one accepts this argument, one might further claim that the rise of private authority marks the demise of legal-formal legitimacy, and hence of the major source of legitimacy enjoyed by international organizations. But we would argue that it was never the case that international organizations are legitimate solely by virtue of being composed of legitimate states; the high degree of legitimacy that the United Nations enjoyed in the immediate post-war era was as much related to the high expectations that people had for its ability to


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create and sustain world peace and economic development, as to its legal-formal legitimacy. But just as it is not enough for states to base their legitimacy solely on the Weberian form, or for international institutions to point to their relationship to legitimate states, it is – we would argue – not enough for firms to base their legitimacy solely on the production of profit. Large transnational companies, in particular, are increasingly faced with public demands to show that their enterprise not only yields profits, but also benefits to society as a whole. This has led to increased business attention to corporate social responsibility (CSR). The field of CSR is indeed one in which private authority is important. CSR is not only an issue for individual companies; there are a number of agencies and institutions – most of them private – that attempt to encourage businesses to take CSR seriously through the setting of standards, publication of rankings, and development of methods and ‘best practices’. One example of this is Social Accountability International (SAI), an international NGO that has developed the SA8000, a common standard for measuring corporate social responsibility. Another example is the Global Reporting Initiative (GRI) that has developed a common framework for sustainability reporting. Thus, although these are private initiatives, and good examples of the emergence of private authority that may also be beneficial for development, it is important to note that they do not emerge in a ‘closed’ private sector context. The volume edited by Higgott, Underhill and Bieler (2000), which examines the emergence of private authority, emphasizes the need for analysing the relationship between state and non-state actors. Our focus is particularly on private non-state actors, and we would emphasize that many of the private regimes and institutions that have come to exercise authority in the global economy derive much of their authority from norms developed in the multilateral system. The SA8000 is, for example, based on ILO standards and UN Human Rights Conventions, while GRI boasts its status as an official collaborating centre of UNEP and the UN Secretary-General’s office. Thus, the high profile UN initiative to establish a set of norms for the private sector – the Global Compact – is only one example of UN’s influence on private actors’ conduct; it is manifested in a multiplicity of forms of direct collaboration and relationships of authority. In addition to democratic legitimacy (including transparency and accountability) and legal-formal legitimacy, discussed above, we suggest that there are three other sources of legitimacy in global politics. The first of these is expertise. The significance of knowledge and expertise as a source of authority within the multilateral system has

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long been acknowledged (E. Haas 1990; P. Haas 1989, 1992), and there has been an upsurge of research on the topic in recent years (Stone 2000; Wade 2002; Bøås and McNeill 2004; Stone and Maxwell 2005), perhaps because the construction of expertise-based authority has been a conscious strategy of several multilateral institutions, particularly the World Bank, which since 1996 has attempted to purvey the image of being a ‘knowledge bank’ (Wolfensohn 1996). Expertise is also highlighted by Cutler, Haufler and Porter as a major source of private authority. According to them, ‘Private authority can evoke a sense of legitimacy and achieve a high degree of acceptance through recognition by others of specific knowledge, expertise, and representational skills’ (Cutler, Haufler and Porter 1999: 18). We argue that expertise is a possible source of legitimacy of any actor in global politics, including private actors. The second additional source of authority and legitimacy is moral standing. Moral standing is particularly emphasized as a source of legitimacy of non-governmental organizations in global politics (Hall and Biersteker 2002). Their emancipatory and normatively progressive social agendas, and their ostensible objectivity or neutrality as non-state actors, make them legitimate participants in global governance in spite of their having weak formal authority. Although such a view of NGOs is highly contested (Scholte 2004), there is no doubt that moral standing can be an important source of authority in global politics. It is this which the United Nations has traditionally enjoyed, based on its stated aims to work for impartial pursuit of peace and development; and polls show that it still enjoys much support and legitimacy (notwithstanding the introductory quote to this book). The third additional source of legitimacy is goal achievement. Quite irrespective of their expertise and moral standing, actors may gain legitimacy if they actually manage to achieve what are considered to be legitimate goals. A similar point has been emphasized by Anne-Marie Slaughter in her discussion of the power and legitimacy of government networks (2004). According to her, the more effective these networks are at delivering satisfactory outcomes to the greatest number of people, the more legitimate they are. Only if they fail to deliver on their promises will questions be raised about their accountability, transparency, and legitimacy. We suggest that the same is true for multilateral organizations themselves, not only for the networks that they engage in. It should, however, be noted that legitimacy and authority can be context-dependent; and what gives an organization legitimacy among


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one group may detract from its legitimacy in another. What is considered knowledge and expertise is highly contested, particularly, perhaps, in the field of development (Stone 2000; Bøås and McNeill 2004; Keeley and Scoones 2003; King and McGrath 2004). Similarly, a group or organization that enjoys moral authority in one context may be devoid of any such authority in another; consider, as an extreme example, the moral authority of Al-Qa’eda among extremist Muslim groups and among US conservatives. Hall and Biersteker (2002) identify a specific category which they call market authority: the authority of firms and private marketgoverning institutions (such as rating agencies). We do not see this as a separate source of authority, but rather one which is based on a combination of goal achievement and moral standing. Despite the fact that the market has been markedly unsuccessful in some respects, there is a widespread belief in its merits, so much so that it has, among certain groups, come to enjoy a sort of moral authority; and an organization that mimics the efficient market actor gains, thereby, authority and legitimacy. We will not speak of ‘market authority’ as a specific form of authority, but will nevertheless recognize that the market enjoys legitimacy in some circles for the reasons just outlined. Different forms of authority and legitimacy may be interrelated, and sometimes mutually reinforcing. For example, it has been argued that multilateral organizations are particularly fit for the task of knowledge dissemination due to their moral standing as institutions endowed with the tasks of promoting the common good, and their legitimacy as ‘disinterested institutions’ with well-recognized research departments (Gilbert and Vines 2000: 29). Here, the argument is that their moral authority enhances the authority of their expertise. Multilateral organizations may possibly enjoy all the forms of legitimacy discussed above. However, we argue that they will increasingly be judged on the degree to which they attain their stated goals. But this will depend on the complex international economic and political environment. To what extent can they influence this in order to reach the goals set for them?

The influence of multilateral organizations in the context of globalization The goals of multilateral organizations are set in global fora with state, and increasingly non-state, participation, and are often lofty and wide-ranging. But, as we will show in the following chapter, the material means they possess for reaching them are often very modest.

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What forms of influence can they then exert in order to achieve their stated goals? Multilateral organizations may exert influence through what may be termed relational power. This is based on the Weberian definition of power as the ‘probability that one actor within a social relationship will be in a position to carry out his own will despite resistance, regardless of the basis on which this probability exists’ (Weber 1947: 52). The same idea underlies Robert Dahl’s much-quoted ‘pluralist’ concept of power: defined as the ability of A to get B to do what B would otherwise not do (Dahl 1957). In both cases, power is a feature of a relationship of dominance. With regard to the multilateral system, the clearest manifestation of influence through dominance is by strong states within the organizations; indeed, much of the classical debate about multilateralism concerned how the United States exercised its dominance through multilateral institutions. Multilateral organizations themselves have very limited ‘relational power’. The many failures of conventions and resolutions to produce actual change in the behaviour of states bear witness that their ability to influence through dominance is more the exception than the rule. The multilateral organizations that have most generally been assumed to have relational power are the World Bank and the IMF, which have influenced domestic economic policy in many countries through structural adjustment programmes. However, even in this case it is highly questionable whether the multilateral organizations can really be said to have made countries do what they otherwise would not (Mosley, Harrigan and Toye 1991; Killick 1998; Bull 2005; Easterly 2005). Multilateral organizations have therefore pursued their agendas mostly through two other ways. The first of these is the production and dissemination of knowledge. This may be thought of as a form of institutional power, which differs from relational power since ‘ . . . A does not “possess” the resources of power, but because A stands in a particular relation to the relevant institutional arrangements, its actions exercise power over B’ (Barnett and Duvall 2005: 52). The actual influence exerted by multilateral organizations based on their production of knowledge is a topic that has stimulated much debate. Based on case studies of various international organizations Finnemore (1996, 1997) argues that international organizations act as ‘teachers’ and contribute to policy change through changing policymakers’ beliefs about appropriate policy. Others warn that, although it is easy to point to examples of policy ideas that originate with the international financial institutions (IFIs) being adopted by


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various countries, it is not easy to establish a causal connection. As Goldstein and Keohane warn: ‘Ideas are always present in policy discussions since they are a condition for reasoned discourse; but if many ideas are available for use, analysts should not assume that the sole intrinsic property of an idea explains its choice by policy makers’ (Goldstein and Keohane 1993: 11). But the production and dissemination of ideas may also be thought of as a form of structural power. As discussed above, the concept of structural power includes influencing, shaping and determining actors’ very wants. Within such a structural concept, the multilateral institutions are not seen as independent and autonomous producers of knowledge. Their knowledge production is viewed as an important element in sustaining a Gramscian hegemony, and can therefore not be understood in isolation from the general context of power. One function of their activities is that of framing: [P]owerful states (notably the USA), powerful organizations (such as the IMF) and even, perhaps, powerful disciplines (economics) exercise their power largely by framing: which serves to limit the power of potentially radical ideas to achieve change. A successful framing exercise will both cause an issue to be seen by those who matter, and ensure that they see it in a specific way. And this is achieved with the minimum of conflict or pressure. For the ideas appear to be ‘natural’ and ‘common sense’. (Bøås and McNeill 2004: 220) The second way in which multilateral organizations may pursue their agendas is through the formation of networks. The power of networks, and the significance of this mode of governance, is currently much discussed; it has been presented as a major way in which multilateral organizations can enhance their influence in a post-hierarchical world. The term ‘policy network’ is frequently used in the literature on national politics to emphasize the inter-organizational and informal aspects of policymaking (Jönsson 1995). The theoretical interest in policy networks in international relations originates (as do many other concepts in transnational governance) from research on the European Union. In their study of policy networks in the EU, Jordan and Schubert (1992) refer to three defining features of a policy network: its actors, their linkages, and its boundary. And they note that the boundary of a given policy network is not primarily determined by formal institutions, but is the outcome of a

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process of mutual recognition. Correspondingly, many types of organization – both private and public, both national and international – can participate in, and thereby constitute, transnational policy networks. Theoretical approaches to transnational policy networks differ in the degree to which they include not only governmental actors but also non-governmental – NGOs, the private sector and multilateral organizations – as autonomous actors. Slaughter (2004) argues that a complex global web of government networks forms an important part of the infrastructure of global governance that is often overlooked. These are networks of national government officials who come together on a regular basis to exchange information, coordinate activity, and adopt policies to address common problems on a global scale. Nevertheless, government networks make up only a very limited part of the whole picture. More relevant for our case are so-called ‘multi-stakeholder’ networks, or what Reinecke and Deng (2000) call ‘global public policy networks’. According to them, ‘a typical network (if there is such a thing) combines the voluntary energy and legitimacy of the civil-society sector with the financial muscle and interest of businesses and the enforcement and rule-making power and coordination and capacity building skills of states and international organization’ (Reinecke and Deng 2000: 29). GPP networks engage in agenda-setting, negotiation, implementation and policy reformulation and institutional learning, and will, according to Reinecke and Deng, become a major challenge to deeply entrenched political, economic and bureaucratic interests. Multilateral organizations have engaged in a variety of such networks, which may be defined so broadly as to include, for example, the World Commission on Dams and the Consultative Group on International Agricultural Research (CGIAR), as well as several of the partnerships that will be discussed later in this book. Through engaging in such networks, multilateral organizations aim to mobilize complementary resources including financial resources, expertise and influence. But what determines their influence in such networks, and thus their ability to use them to reach their own goals? The burgeoning literature on networks in global politics is concerned mainly with their external influence. Much less attention has been paid to internal issues of power; here, what is relevant is the ability of one actor to enroll others into their own project. According to Latour:


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‘Those who are powerful are not those who “hold” power in principle, but those who practically define or redefine what “holds” everyone together’. (Latour 1986: 273) What, then, is it that keeps everyone together? This may be theorized in both ‘positive’ and ‘negative’ terms. On the one hand, one may look at domination within networks. Domination may be achieved through the use of material sticks and carrots, or through persuasion. The ability to persuade is not independent of the standing of a person or the relations between his or her ideas and the dominant ideas of the time. In understanding power within networks, therefore, both the institutional and the structural concepts of power referred to above have relevance. On the other hand, one may understand power within networks in a more positive sense. The term productive power is often associated with Foucault. Productive power concerns the social processes and the systems of knowledge through which meaning is produced, fixed, lived, experienced, and transformed (Foucault 1971). According to Barnett and Duvall (2005), in contrast to the concept of structural power, this allows us to focus on subjectivity and action on the part of the disadvantaged as well as the advantaged. However, in empirical analyses, this essentially Foucauldian concept is primarily used to draw attention to subtle aspects of the power of multilateral institutions – for example, how they fix meaning through naming or labeling, and establish boundaries for acceptable action (Barnett and Finnemore 1999). While the fixing of meanings and categories is certainly an important source of influence in networks, we would – on the basis of lessons from our case studies – draw attention also to influence arising from more personal traits of the actors involved. Networks are characterized by being based on more face-to-face, informal relations than traditional hierarchical ones. Two personal characteristics seem of particular importance in this context: enthusiasm and experience. Enthusiasm can be a powerful force in ‘enrolling other actors into one’s own project’. This is especially so if the enthusiasm is displayed by a person with significant material resources and experience in the actual field, and/or a senior formal position. However, there may also be certain contradictions between enthusiasm and experience, since a person that is very experienced in a field may find it difficult to become overly enthusiastic about new proposals, ideas and solutions. This was already noted by David Hume in the eighteenth century, when he argued that ‘Hope, pride, presumption, a warm imagination, together with ignorance, are, therefore, the true

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sources of enthusiasm’ (‘On Superstition and Enthusiasm’, p. 1, in Essays Moral, Political and Literary 1742–54; emphasis added). Although networks are often informal and personal, the people that participate are usually also members of formal organizations. Networks can therefore also be understood as forms of inter-organizational activity. Some organizations within such networks may gain particular influence by acting as “linking-pin organizations”, understood as ‘the nodes through which a network is loosely joined’ (Jönsson 1995: 2). These occupy central positions in terms of being reachable from, and able to reach, most other organizations in the network. We would add that one may, similarly, speak about linkingpin actors. Jönsson also speaks of boundary-role occupants, referring to activist brokers between their own organization and its environment; they not only represent the organization to its environment, but also represent the environment to their constituents. Jönsson portrays the boundary-role occupants as actors frequently finding themselves in the crossfire between incompatible expectations. One example of such a boundary-role occupant may be the person responsible for CSR in a big firm, who is constantly exposed to the expectations of the press, environmental and human rights activists, etc., while at the same time having to pursue the company’s narrow commercial goals and be subject to the company’s career criteria. According to the logic of networks, to occupy a role at the interface between networks may be as much a resource as a source of problems from conflicting pressures. Being relatively informal, networks are not bound by the strict set of norms and demands for loyalty of formal organizations. Participation in one network by no means excludes participation in another. Indeed, a person with multiple memberships may bring to a network additional information, knowledge and contacts; in other words ‘know-who’ in addition to ‘know-how’. Thus, through engaging in multiple and often overlapping networks, a multilateral organization may complement its other forms of authority and legitimacy by showing knowledge and enthusiasm, and thus ‘enroll’ other actors into its own project and make them contribute to its own goals. So too, however, may any other actor that the organization engages with, including companies, NGOs, foundations and business associations. This brief discussion of networks may exaggerate their potential, implying significant scope for agency and influence independent of structural constraints. Many of the PPPs we will discuss may be understood as forms of networks; but some critics would argue that


41

these are simply means to reinforce a global neo-liberal order. In order to assess this view, we return to Cox and Ruggie.

Multilateralism as a transformative force or as a marketaugmenting exercise? We have described the current global context as one in which traditional forms of authority and sources of legitimacy are challenged by the emergence of a variety of non-state actors, and the prevalence of alternative sources of legitimacy, authority and influence. What kind of multilateralism is possible within this kind of global context? Is it primarily one that will cement a global neo-liberal order (that is, what Cox called economic multilateralism), or is there also scope for multilateralism as a transformative force? Should PPPs be interpreted as a part of the ‘institutionalization and regulation of existing order’, or as ‘the site of struggle between conservative and transformative forces’? To address this question, we return to the views of Ruggie and Cox. In discussing the emergence of non-state activism, including activism by business, NGOs and other actors, and various forms of private governance and rule-making, Ruggie argues that this may result in the opening of a global public domain which brings potential also for the provision of global common goods: I want to suggest that this development potentially also may provide a historically progressive platform by creating a more inclusive institutional arena in which, and sites from which, other social actors, including civil society organizations, international organizations and even states, can graft their pursuit of broader social agendas onto the global reach and capacity of TNCs. (Ruggie 2004: 503) Ruggie does not discuss PPPs explicitly, and his rather cautious suggestion of the emergence of a global public space, in which TNCs as well as other social actors participate, does not of course mean that TNCs have become a force in a transformative multilateralism. However, it does suggest that the interaction between TNCs and other actors may lead to the production of outcomes that are beneficial for global democracy and development. Cox, by contrast, is less optimistic about the role of TNCs and other private actors, and pins his hopes on the transformative power

42


of social movements and civil society organizations. He believes that the multilateral system can provide sites for a ‘war of position’ of civil society organizations: a strategy for the long-term construction of self-conscious social groups into a concerted emancipatory bloc within society (Cox 1999). These will be the seeds of a new multilateralism which is built from the bottom up. At the same time, according to Cox, other parts of the multilateral system will continue to be part of the unofficial and official transnational structure, working towards the formulation of a policy consensus for global capitalism. This is what he has called a nébuleuse: . . . something that has no fixed and authoritative institutional structure, but which has emerged out of discussions in bodies like the Trilateral Commission, the World Economic Forum meetings in Davos, the regular meetings of central bankers, of the OECD, IMF, World Bank and WTO, and the G7 and G8 summit conferences and their preparatory meetings. (Cox 2002: 33) In formulating our understanding of market multilateralism as an emerging form, associated with the PPPs, we acknowledge the structural inequalities of the partners involved, and the overall frame of the neo-liberal ideology. Our task, however, is to assess, on the basis of our empirical case studies, whether the PPPs may nevertheless promote ‘generalized principles of conduct’ (‘multilateralism’) in that they assist in a process of mutual adjustment of policies and practices between the multilateral organizations and the private actors. PPPs are mostly focused on achieving specific goals, and at the end of the day both the partners and the PPPs will be evaluated based on the degree to which they reach those goals. Yet, we will argue that the implications of PPPs go beyond the achievement of specific set targets, for better or worse. We will argue that PPPs may modify the practice of multilateral organizations, as their critics argue. They may divert attention away from issues that are of crucial importance but that may not be of interest for the private partners – including issues that are particularly intractable: less ‘measurable’ and less easy to address with the instruments and approaches of private-sector actors. However, we will also argue that PPPs may, in certain circumstances, modify the practice of the private partners. Private firms do not, in practice, behave according to the laws of neo-classical economics, but as socially embedded organizations (Granovetter


43

1992). Transnational corporations are increasingly dependent on other transnational actors, including the media and civil society organizations. Their long-term survival may therefore be dependent on concern with issues other than profit, including maintaining a good image, and securing markets and workforces. This may require attention to broader social goals. Nevertheless, there is a limit to the transformative force of market multilateralism; at no time does it challenge the legitimacy of the market. It may contribute to correcting various forms of market failures, it may contribute to mediating risk and to softening the consequences of the global market for particular groups. But it does not challenge the basic underpinnings of the global liberal order. In brief, to anticipate our findings: we are not witnessing a dramatic transformation of the multilateral system in which transnational corporations subordinate their interests to the global good. But nor is this simply the subordination of (to use Cox’s terms) ‘political multilateralism’ to the ‘economic multilateralism’ of the neo-liberal global order. Rather, we are witnessing an incremental process in which private actors and multilateral organizations come, to very varying extents, to converge around a series of common goals. The multilateral organizations bring expertise and moral authority; the private actors bring financial resources and expertise, and to some, a form of ‘moral authority’ due to their association with business culture and the global market.

Conclusion In recent years, several writers have attempted to reinterpret multilateralism in the context of globalization. Among the more optimistic accounts is the concept of ‘cosmopolitan multilateralism’ suggested by David Held as a means to construct a new, more or less utopian, state-led global, democratic and accountable governance system (Held 2003). A more sober view is that we see the emergence of a ‘complex multilateralism’ in which civil society takes an important part and which has incrementally pluralized global governing structures (O’Brian et al. 2000). Our primary focus in this book is on the part played by private actors. We argue that the concrete collaboration between them and multilateral organizations, through public–private partnerships, may indeed result in the coordination of relations between several actors (state and non-state) based on generalized principles of conduct, but that these will not challenge the basic interests of the private actors

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concerned. The effect of these partnerships at the systemic level will not necessarily be either to enhance or to weaken the legitimacy and authority of the multilateral organization concerned; either is possible. The outcome in any specific context depends, to a large extent, on the effective use of agency by the multilateral organizations themselves, and not least their leadership. To cite an older quotation from Cox: ‘the quality of executive leadership may prove to be the most critical single determinant of the growth in scope and authority of an international organization’ (Cox 1969 [1996]: 317). According to Cox, the executive head of a multilateral organization is faced with multiple constraints: some within his/her own organization, some involving relations with other top officials and with the member states, and some related to the international system; he/she may nevertheless gain a certain degree of autonomy – exercising ‘sailor’s skill’ in using available winds and currents to advance in a chosen direction. The increasing globalization of the world adds further constraints to the context, but also several new opportunities. In the following chapters we will investigate how different multilateral organizations have navigated in this complex new environment in the pursuit of their development goals. But first we give some further information about the empirical context within which the drive for partnerships has developed.

3


Introduction The phenomenon of public–private partnerships (PPPs), such as those examined in this book, may be seen as one of the many outcomes of what is commonly, but loosely, referred to as ‘globalization’. Since globalization has many different dimensions, it is necessary to specify which of these are of relevance. The first, and perhaps most significant for PPPs, is changes in the scale and pattern of international capital flows: the increase in flows of private capital, and the relative decline in ‘official’ flows. Partly related to this is a significant increase in philanthropic donations to developing countries. A second dimension is the dramatic advances in communications technology which (in addition to having an effect on other dimensions of globalization) have made PPPs more feasible. The ICT revolution, and other major technological advances, especially in biotechnology, have contributed to a third dimension of globalization – the concentration of power and resources in fewer and fewer giant TNCs. A fourth, and related, dimension concerns the strengthening of those multilateral institutions concerned with globalization, notably the WTO (which has promoted intellectual property rights, but paid little attention to issues such as the environment and labour rights). The final dimension that we will point to is a shift in global interest representation and the increasing number and influence of NGOs. All these changes have, as we shall show with empirical examples in the following chapters, shaped the development of PPPs. And they are closely bound up with a more general phenomenon associated with globalization, the weakening power and authority of the national state, which has led to a greater need for the provision of global public goods.1 In this situation, multilateral organizations concerned with development may respond in two ways: to try to

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resist globalization, or to seek to mitigate its negative effects. The former is unfeasible, since it would set the organizations against other, more powerful, multilateral organizations whose purpose is to promote globalization. The latter alternative is that which is being followed; but even here, multilateral development organizations lack the financial resources to do the job alone, and some countries (most notably the USA) are resistant to allowing them to increase their power, and resistant more generally to institutions of global governance. Partnerships of the kind we are examining in this book are the outcome: a compromise between the high aspirations of multilateral organizations and their limited power in the face of globalization and market forces.

Changes in development finance Private capital flows The first, and for PPPs perhaps most significant, manifestation of globalization is the striking change in the pattern of capital flows to developing countries in recent years: the marked increase in private capital by comparison with ‘official flows’ (that is, funding from public-sector bodies). A number of factors may account for this, including the reduction of barriers to the movement of capital, new technological developments in communications and information, and changes in both the national and global policy context. As shown in Figure 3.1, private flows have increased significantly since 1998, in spite of a temporary fall in 2000–2001. Net private flows are now thirteen times higher than net official flows. The main reason for this difference is not a fall in Official Development Aid (ODA) (as shown in Figure 3.1, this has increased significantly in recent years). Rather, it is a combination of an increase in debt-repayment (which has rendered net official flows from the major lenders to developing countries negative), and a steep increase in private flows. The rapid increase in workers’ remittances is also very important; whereas these were roughly equal to official flows in 1998, they now exceed official flows by a ratio of 5:1. It is, however, necessary to further disaggregate the statistics, since the significance of private flows varies considerably between developing regions. As shown in Figure 3.2, there has been a reduction in private flows as a percentage of total net flows in Sub-Saharan Africa in the period, but an increase in other regions. (The percentage depends on both the inflow of private funds, the availability of


47

ODA, and the relation between repayment of loans and the outflow of new loans from development banks. Where the percentage of private flows is more than 100, it means that official flows have been negative.) It is also significant to note the changing composition of private flows. As shown in Figure 3.3, FDI inflow is the major source of private funds for developing countries; but it is debt which is increasing most rapidly. Two notes of caution should be added here. First, we are discussing net flows, and the extent to which the totals are affected by the outflows may differ between the different types of flow. For example, for FDI there is a relatively limited outflow except from a few countries in East Asia, Latin America, Central and

Figure 3.1 External financing: all developing countries, 1998–2004, Current US$ billions Source: Own elaboration based on data from World Bank (2005a). Note: Net private flows = debt + equity (net foreign direct investment + net portfolio equity). Net official flows = aid + debt.

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Figure 3.2 Private net flows as percentage of total flows, 1998–2004 Source: Own elaboration based on data from World Bank (2005a).

Eastern Europe and the Middle East. But there may be significant portfolio equity outflows since this includes what may loosely be called ‘capital flight’. Second, interpreting the steep growth in East Asia, one should remember that 1998, the first year shown, was immediately after the Asian Financial crisis, and the subsequent growth can be interpreted as recuperation after the crisis. One component of the flows of money that is of increasing significance, although still comparatively modest, is increased corporate philanthropy and gifts from foundations. According to the World Economic Forum, the Fortune Global 500 companies alone contribute US$12 billion in cash donations and somewhere between US$10 billion and US$15 billion in in-kind donations every year (see Figure 3.4). It is estimated that about 10–15 per cent of this, or US$2–4 billion, is contributed to activities in low-income countries. This may be


49

Figure 3.3 Net private inflows to developing countries, 1998–2004, Current US$ billions Source: Own elaboration based on data from World Bank (2005a).

compared to the net FDI inflow to the forty-eight least-developed countries, which was US$5 billion in 2002 (World Economic Forum 2005). Another aspect is gifts from private foundations. These have been important actors in global development for a long time. Large, mostly US-based, foundations such as the MacArthur Foundation, the Rockefeller Foundation and the Ford Foundation have provided very substantial funding for development research and projects. Moreover, they have been important in bringing together actors to work for a common purpose. Health has always been a main focus of the international work of US foundations (Dowie 2001), but they have played important roles in issues as varied as the Green Revolution, population policy and infectious diseases control (OECD-DAC

50


Figure 3.4 Corporate philanthropy of US and UK top 100 companies, 2004, US$ millions Source: World Economic Forum (2005).

2003). In these activities, foundations have worked within the confines of the multilateral system, but also closely cooperated with NGOs and other actors. However, there have been important changes among the private foundations in recent years that have made them increasingly important in forging partnerships. The first is a general upwards trend in donations by foundations, since the late 1990s. This is most evident in the United States, which is the home of the majority of the large foundations in the world. As seen in Figure 3.5, the strong upward trend in the late 1990s levelled out after 2001, but 7 per cent growth was registered in 2004 and modest growth was expected for 2005 (The Foundation Center 2005). Foundation giving in the United States is strongly associated with the growth of the economy. Most of the funds from US foundations are channelled to domestic purposes. However, there was a significant growth also in international grant-giving in the late 1990s, which again levelled out by 2001 (see Figure 3.6). A second major feature is the emergence of a series of new, wellfunded foundations. The most important of these is without doubt


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Figure 3.5 Total US foundation giving 1975–2003, US$ billions (2002) Source: The Foundation Centre (2003, 2004, 2005).

the Bill & Melinda Gates Foundation. As seen in Table 3.1, both in terms of funding and assets, they dwarf the second on the list which is the Ford Foundation. A third and related change (that was much discussed in the US a few years back) is the rise of so-called ‘venture philanthropy’. This phenomenon is closely related to the emergence of entrepreneurs who have created fortunes within a very short period of time, primarily from the information technology boom. Giving money to private foundations, they seek to apply some of their experience from running a business to the world of charity. As explained by Gingold (2000): The venture philanthropist, like the venture capitalist, is willing to make an investment of time and expertise and take risks – including the risk of failure. In return, venture philanthropists want increased hands-on involvement, and they want the organization in which they invest to become self-sustaining and have increased organization capacity . . . For many in the non-profit world, who prefer traditional arm-chair philanthropists, whose involvement is limited to writing checks and attending board meetings and social events, this new way of doing business will take some adjustment. (Gingold 2000: 3–4) This poses major challenges to recipients of funds, as argued by Edward Skloot:2 ‘In my view, if [organizations] want the new money,

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Figure 3.6 International giving by US foundations, 1998–2003, US$ billions (2002) Source: The Foundation Center (2004).

they need to better understand and use the market and its mechanisms’ (Skloot 2000: 4). In summary, foundations are characterized by both increasing financial clout and an increasing desire to provide hands-on management to the projects that they support. The relative decline of multilateral development aid The increased private flows gain increasing relevance when compared to ODA. The overall trend is that this also has increased over the last thirty years. However, although ODA channelled through the multilateral organizations has not diminished, it has not kept pace with bilateral aid flows (see Figure 3.7). Moreover, there has been a significant decline in funding to most of the development-oriented UN organizations. Indeed, all the UN organizations that are discussed in depth in the following chapters have experienced a decline in funding (or at best stagnation) over the last years (see Table 3.2). The World Bank Group (WB) has a different funding structure from the UN organizations. Only a small portion of WB funds is actually paid-in capital (5–12 per cent), the rest is guarantee capital, that is, capital used to back WB borrowing on the private market. It is also necessary to distinguish between funding of ‘hard’ loans through the IBRD and the soft loans and grants provided by the IDA, which counts as ODA. Focusing on the latter, we see that the total


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Figure 3.7 Multilateral versus bilateral aid, 1970–2000 Source: Addison, McGillivray and Odedokun (2003).

(paid-in and callable) capital and fund subscription increased slightly in the same period that the UN agencies experienced a decline in funding. However, in order to gain an accurate impression of the activities by the WB, we have to look at total lending. Here it is misleading to look only at net flows. Indeed, net flows from the World Bank to developing countries have been negative for the last three years, due to the repayment of debt from developing countries (see Table 3.2). A further important aspect to take into account when discussing funding to UN organizations is the distinction between core financing and non-core financing. Core financing is the basic, assessed financing for the organization, whereas non-core financing is funds assigned to specific projects or programmes. Table 3.3 shows how core financing has developed in relation to non-core financing for the UNDP. A similar pattern – of increased significance of non-core funding – can be found also for other UN organizations. Even the WHO, which is one of the organizations that has been least hit by the UN financial crisis, has seen its core funding stagnate since the early 1990s at approximately US$800 million, while the non-core funding has risen from being at about the same level in 1994 to more than twice as much in 2004 (WHO 2005). This is important, because it means that the UN organizations have far less autonomy than they used to have in the allocation of their funds.

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Table 3.1 Major US foundations contributing to international development* Rank Name

Assets (US$)

1

26,810,517,770 1,182,791,982

2 6 11 15 25

Bill & Melinda Gates Foundation The Ford Foundation W. K. Kellogg Foundation John D. and Catherine T. McArthur Foundation The Rockefeller Foundation Carnegie Corporation of New York

Grant-giving (US$)

10,685,961,044 522,872,210 6,801,844,315 195,007,421 4,530,410,640 195,114,644 3,210,090,000 1,956,023,878

128,327,026 84,345,200

* Of all US foundations, based on assets. Source: The Foundation Center (2005).

In sum, we would highlight three tendencies in financial flows to developing countries in recent years. First, private flows, including loans and equity, have increased much faster and are, in total, much more important for developing countries than official flows. Private flows are primarily made up of debt and equity, but private charity is also increasing and the nature of it is changing. Second, there has been an increase in ODA, but this is predominantly in bilateral and not multilateral ODA. And third, if we look at total flows to developing countries, multilateral flows are negative, since repayment of debt outstrips provision of new loans and grants. Although, as noted above, there are vast differences between the different regions, we may in general conclude that private finance has become more important for developing countries over the last years.

The revolution in information and communication technology A second aspect of globalization is the dramatic advances in information and communication technology (ICT), which, in addition to having an effect on other dimensions of globalization, have also made PPPs more feasible. This ‘ICT revolution’ has had an impact upon almost every aspect of life for a large proportion of the world’s population – ranging from means of personal communication and entertainment to industrial production processes, immigration control, medical treatment, and the organization of libraries, to name only a very few. At the same time, many people in the world are effectively excluded from these changes due to lack of access to necessary hardware, software, telecommunication infras-


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Table 3.2 Net multilateral ODA flows to selected multilateral institutions, € million Grants of contributions to UN organizations and funds

1999

2000 2001 2002 2003

United Nations Development Program (UNDP) United Nations Children’s Fund (UNICEF) World Health Organization (WHO) United Nations Educational, Scientific and Cultural Organization (UNESCO) Capital and fund subscription World Bank Group: International Development Association (IDA)

43.5

21.7

24.0

25.1

25.7

5.5

4.4

4.4

5.1

5.1

29.4 9.6

35.0 10.4

37.3 10.4

33.4 10.3

27.0 10.7

390.9 416.4 419.7 423.7 436.6

Source: BMZ/Division 304 – Statistics and reporting.

tructure, and expertise. This was the background for the establishment, in 2001, of the United Nations’ ICT task force that was charged with providing a platform for encouraging dialogue and partnerships between public, private, civil-society, profit and non-profit, and multilateral stakeholders in order to find ways to bridge the digital divide (UN Information and Communication Technology Task Force 2003). A second effect of the ICT revolution has been to dramatically reduce the cost of communication and coordination, which has facilitated bottom-up organizing processes that in turn have strengthened non-state actors, primarily various non-governmental organizations (Reinecke and Deng 2000). Equally important, it has facilitated global awareness campaigns. This is particularly relevant since the fear of such campaigns has been an important motivation for many businesses to enter into partnerships (see particularly Chapter 5 in this book). Moreover, ICT is an important tool for the organization of partnerships; the internet now provides the primary medium for UN advocacy initiatives. One example is NetAid, discussed in Chapter 1, which has demonstrated the power of a well-organized campaign which relies primarily on the internet.3 Not only do most partnerships boast an accompanying website, but nearly every UN agency is scrambling to harness the World Wide Web in their outreach efforts to the private sector. The UN and Business and the Global Compact websites provide virtual meeting places for UN agencies and their potential corporate partners, while the UNFIP

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Figure 3.8 The growth of TNCs 1990, 1995, 2000, US$ billions (2002) Source: UNCTAD (1991, 1997, 2004).

website offers a ‘one-stop’ service for partnerships with the UN family.4 Nearly every agency presents a series of success stories with corporate partners and a ‘how-to’ guide for forging partnerships on their websites.

Concentration of wealth among TNCs While the ICT revolution has been a driving force behind partnerships in general, the biotechnology revolution has been particularly important for the upsurge of partnerships in the health sector. As discussed at greater length in Chapter 4, the biotechnology revolution had several effects on the promotion of health in developing countries. Although it has led to an improvement in the quality of medicines and vaccines, it has also increased the cost of development from prototype to final product, and, consequently, the cost of the final product. Research and development funds have been concentrated on products for markets in developed countries, while much less has been done to bring the benefits of biotechnology to developing countries. The product divergence between developing and developed country markets has dramatically increased prices for the former. And, as a side effect, developing countries have no longer been able to purchase cheaply the developed countries’ surplus stock of, for example, vaccines. However, also in the health sector, technology has facilitated partnerships. The ICT revolution has enabled virtual research and


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Figure 3.9 Growth of TNCs in perspective 1990, 1995, 2000, US$ billions (2002). Source: UNCTAD (1991, 1997, 2004); IMF World Economic Outlook Database.

product development teams from different types of organization to work together in partnerships on, for example, biotechnology. Development, in both biotechnology and ICT, requires significant investment, and there has been a clear tendency towards the development of oligopolies within these industries. In general, the resources of TNCs increased significantly in the last century. Figure 3.8 shows the growth in total sales and assets of the top ten TNCs. The resulting concentration of power in a few TNCs has been considerable. This has contributed to the well-known phenomenon that the largest TNCs are now of a size (in economic terms) that exceeds that of many countries. As mentioned in Chapter 1, the total sales of the ten largest transnational companies in 1990 amounted roughly to the combined GDP of all the African countries. By 2002, the relationship was 2:1 (UNCTAD 1991, 1997, 2004, IMF 2004). Figure 3.9 provides further comparisons between companies and countries in economic terms.

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Table 3.3 UNDP: core versus non-core financing Core financing Non-core financing

1975

1990

2002

97% 3%

51% 49%

24% 76%

Source: Elaboration based on Hüfner (undated).

These numbers illustrate how the financial strength of private corporations is increasing compared to poor countries. However, although the numbers are striking,5 it is equally important to note the huge variations between the financially strongest countries and the weakest. On the one hand, two companies (WalMart Stores and BP) have combined annual sales higher (at $570 billion) than the GDP of all the countries in Sub-Saharan Africa combined ($439 billion). But it is also true that the largest economy (USA) has a higher GDP than the combined sales of the 100 largest companies (based on numbers from Forbes 2005 and World Bank 2005b).

Global institutions: the role of the WTO In addition, and largely in response to these various changes, have come changes in the institutions of global governance and the global policy context. The long process towards global financial integration, and the series of governmental decisions and non-decisions that produced it, has been well described by Strange (1986, 1998). Here we will highlight two of the more significant developments that are of immediate importance for the cases that will follow. Both have occurred during negotiations under the framework of the WTO. The first is the decision to negotiate and adopt the Trade-Related Aspects of Intellectual Property Rights (TRIPs) agreement, and the second is the decision not to adopt rules regarding human rights, environmental responsibility and labour protection. The TRIPs agreement The TRIPs agreement was a part of the final declaration of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) which led to the creation of the WTO in 1994. It entered into effect in 1995 for developed countries, and for all the developing countries in 2000. The stated objective of TRIPs was to reduce political tensions that had been arising from the widely varying standards in the protection and enforcement of intellectual property rights


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around the world. The agreement requires the member states to adopt legislation that supports the protection of rights in the realm of intellectual property, as laid out in the agreement. If they fail to do so, they may be subject to the dispute settlement mechanism and associated sanctions established under the WTO. The TRIPs agreement essentially covers three forms of protection of intellectual property: patents, copyright and trademarks.6 The requirement of protection of this kind of property from the holder’s point of view is well explained by May: The most important aspect of IPRs is their formal construction of scarcity where none necessarily exists. Knowledge and information, unlike material things, are not necessarily rivalrous; co-incident usage does not detract from utility . . . generally speaking it is difficult to extract a price for the use of non-rival, knowledge goods, so a legal form of scarcity (IPRs) is introduced to ensure a price can be obtained for use (May 2005: 166–7) The most cited argument in favour of, particularly, patents is that they encourage research and innovation: by rewarding the individuals or companies that invest money and time in the creation of new products, society as a whole will ultimately benefit. However, the TRIPs agreement has been among the most controversial of the agreements under the WTO framework. Public attention has been caught, especially by the incompatibility between, on the one hand, efforts to protect the intellectual property rights of the large pharmaceutical companies, and, on the other, the desire to give the rapidly increasing numbers of victims of the AIDS epidemic access to reasonably priced drugs.7 This resulted in the Doha declaration, which reaffirmed that Article 8 of the TRIPs agreement would allow for compulsory licensing, meaning that firms may be allowed to produce generic versions of a patented drug in the case of health emergency. As discussed in Chapter 4, other amendments have also been made in order to make the TRIPs agreement more compatible with key development goals. However, there remain many unresolved issues. Although formally allowed under health emergencies, compulsory licensing is frequently challenged by companies. A more general point is that TRIPs hinders technology transfer to developing countries (Correa 2005). This is seen as a valid criticism even by institutions and scholars who are generally in favour of multilateral

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liberalization of trade (World Bank 2005c; Sachs 2005); and it is a major issue treated in Chapter 5 of this book, which deals with the conflict between Microsoft and the producers of Free and Open Source Software (FOSS). A series of proposals have been made, and are under discussion in the WTO, to alleviate this and other problems. However, the United States has tended to block most reforms that may in any way weaken the protection of intellectual property rights. Several of the public– private partnerships that have been formed may be interpreted as attempts to achieve important development goals without challenging the principles laid down in the TRIPs agreement. Rejection of the linking of trade and social issues A second important backdrop to the development of partnerships is the debate about whether to include social issues in discussions under the framework of the WTO. The GATT did not involve any such provisions, but, due to increasing concerns in the 1990s about the detrimental impact of trade liberalization on the environment, labour standards and human rights, these issues came to be discussed during the Uruguay Round. As a result, the term ‘sustainable development’ appears in the preamble to the agreement that established the WTO; and there are a number of provisions in the agreement that can be used to justify, on environmental grounds, actions that are against the general principles of a liberalized trade. The degree of significance attached to trade-related environmental concerns has been tested in a series of high-profile cases. Whereas the cases prior to the establishment of WTO in effect ruled in favour of trade, the so-called ‘shrimp–turtle’ dispute8 was decided in favour of the US and the environmental concern (Newell 2005). Also the declaration from the Doha ministerial meeting (2001), calling for further emphasis on the environment and the establishment of a Special Committee on Trade and the Environment, was a sign that environmental considerations would not always be outweighed by the principles of free trade. Nevertheless, there still exists a deep cleavage between environmentalists and the advocates of liberal trade that dominate the WTO. With regard to social clauses, rejection has been more explicit. Inspired partly by the inclusion of labour issues in a side agreement to the North American Free Trade Agreement (NAFTA), powerful groups – including the United States, France, the International Confederation of Free Trade Unions (ICFTU) and several large


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NGOs9 – sought also to link labour issues with trade in the multilateral negotiations. This attempt was, however, rejected at the Ministerial Meeting in Singapore in 1996 that stated that the ILO is the appropriate forum for the discussion of labour issues (see Chapter 6 for further discussion of this). But the ILO does not have the same power as the WTO. This rejection therefore prompted the search for new mechanisms to induce companies to respect labour standards at the global level. Moreover, it necessitated a new division of labour between the UN agencies. According to Tesner with Kell, this was an important part of the background for the creation of the Global Compact: The Compact cannot be segregated from a new UN attitude toward the multilateral trade regime . . . It is precisely because the WTO cannot be seen as the appropriate mechanism for the enforcement of such values as human rights and environmental responsibility that the United Nations provides an alternative venue for the proper inclusion of these values in global exchanges. (Tesner with Kell 2000: 53) However, the strategies chosen by the United Nations cannot be understood without reference to another factor loosely related to globalization, namely changes in patterns of interest representation at the global level.

New forms of global interest representation As discussed in Chapter 1, few non-governmental actors were consulted when the multilateral organizations were founded. This was due to the perspectives of the state leaders at the time, but also, of course, to the fact that there were then not as many non-governmental organizations to consult as there are today. Moreover, the nongovernmental actors that did exist were generally of a different character. The only multilateral organization that was created with a tripartite structure – the ILO – was a partnership between trade unions, employers and the state. Thus, the interest representation was based on the world of work: either you were an employee, an employer or a government. To the extent that non-governmental actors were consulted in the creation of the other organizations, this was generally as professionals: for example, academics were involved in the creation of UNESCO, medical doctors in the creation of the WHO, and bankers in the creation of the World Bank.

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If we were to imagine the creation of a new multilateral organization occurring today, it would probably involve consultation with a wide array of international NGOs. According to one estimate, by 2000, some 25,000 groups qualified as international NGOs (with programmes and affiliates in a number of countries) – by contrast with less than 400 a century earlier (Paul 2000). By March 2005, about 2,613 NGOs had consultative status with ECOSOC, and many thousands more had official arrangements with other organs of the UN system and other intergovernmental bodies.10 The Earth Summit in Rio in 1992 set the pace for intense NGO participation in world conferences, with 17,000 NGO representatives participating in the NGO parallel forum and 1,400 directly involved in the intergovernmental negotiations (Paul 2000). In the summits organized subsequently, the number of NGOs participating has increased steadily. These NGOs may advocate a range of different issues, from the more general such as human rights, environmental protection, or development, to specific or local issues such as the rights of specific indigenous groups. Many international NGOs, and networks of such non-governmental groups, have evolved into significant political players. Their direct influence on the multilateral organizations has been well documented (see, e.g., Scholte and Schnabel 2002; Martens 2005). However, equally important for our topic here is their influence on global corporations exercised through the media and through their ability to mobilize consumers. As will be discussed in Chapter 4 (on issues of access to vaccines and life-saving medicines) and particularly in Chapter 5 (on the abolition of child labour), NGO pressure has been a vital factor in motivating companies to become involved with multilateral organizations. A related phenomenon is the rise of international business associations, some of which have a broader mandate than to promote narrowly defined business interests. These are not viewed merely as employers but as advocates of a specific view on global governance. In many cases, this is serving the business interests directly, but in some cases they also advocate a more comprehensive view of development. An example is the World Business Council for Sustainable Development (WBCSD) that has been active in global environmental politics since its foundation in the early 1990s. Perhaps the most significant factor in the success of the UN’s engagement with the private sector was the early endorsement by large business associations such as the International Chamber of Commerce (ICC) and the World Economic Forum. On the one hand,


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these associations have been active in policy debates, pushing for more business-friendly global governance, particularly related to international trade and investment. On the other hand, they have proven to be crucial partners in promoting UN initiatives such as the Global Compact to their members. More than 200 business associations enjoy consultative status within ECOSOC (Nelson 2002). Some associations also enjoy consultative status in other UN bodies, participate in advisory bodies, commissions and committees, and on occasion participate in General Assembly proceedings. Informally, these associations engage in consultations, dialogues and workshops with multilateral agencies and often organize events in parallel with official multilateral conferences. Those business associations with global representation are generally seen as the most active and influential private-sector partners of the UN. The ICC represents more than 7,000 companies and has enjoyed consultative status since 1946. The ICC refers to itself as the voice of world business, and remains the UN’s leading policy partner (Tesner with Kell 2000). The World Economic Forum represents 1,200 of the world’s largest companies, and Kofi Annan regularly takes the opportunity of the World Economic Forum’s annual meeting in Davos to articulate the UN’s evolving stance vis-à-vis the private sector. Both the ICC and the World Economic Forum also have initiatives in place to encourage business practices which conform to the Global Compact’s ten principles. The London-based Prince of Wales International Business Leaders Forum (PWIBLF) was essential to the UN’s early efforts in promoting the Global Compact to business leaders. Later joined by the ICC, the PWIBLF took a number of steps to encourage private-sector approval of the compact and facilitate its implementation in business practices. These efforts eventually led to the creation of the CSR Forum,11 which promotes and facilitates the adoption of the Global Compact by corporations. Through such partnerships, these organizations can be seen as influencing the policies and practices of both UN agencies and their own members in an effort to establish a middle ground and to facilitate cooperation. The relative power and significance of TNCs and business associations is a matter of debate. On the one hand, large TNCs may have increasing stakes in global governance and therefore an increasing need for professional groups that may represent them in multilateral institutions and other forums. One the other hand, many TNCs are themselves so large and powerful that being represented through

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business associations is superfluous. A clear manifestation of this is the increasing use of arenas such as the World Economic Forum, rather than classical business associations, for meeting governmental and other actors.

Conclusion In this chapter, we have discussed major changes in the context of the multilateral organizations that we consider important for understanding their interest in partnerships with the private sector. All of these may be loosely related with the phenomenon of globalization, in several of its different dimensions. Perhaps the most important of these is changes in global flows of money; but this in turn is related to changing technology, the concentration of wealth and power in a relatively small number of large TNCs, some key developments in the global regulatory framework for trade and investments, and changing patterns of interest representation. Some would argue that multilateral organizations have had little choice but to engage directly with the private sector. Indeed, one line of criticism of PPPs in the multilateral system is implicitly based on the view that the turn towards the private sector by the multilateral organizations is structurally determined by the changes described above, and more specifically by the changing pattern of financial flows. Based on our empirical evidence, we reject such an extreme view. Rather, in the chapters that follow, we will emphasize how the approach to PPPs (or lack of such), the form they take, and their success or failure, is significantly influenced by the specific history of the different organizations – including internal conflict dimensions, but also organizational leadership and initiatives taken by individual ‘entrepreneurs’. The upsurge in PPPs cannot be explained merely as a search for scarce funding; and the outcome is not determined only by the relative wealth and power of the actors that participate. How partnerships operate in practice, and the extent to which they may evolve into a new form of multilateralism, is the topic of the chapters that follow.

4

Global Partnerships for Health Health for all, or more ‘Big Pharma’?

Introduction There can be little doubt that it is in the health sector that public– private partnerships have played the largest role in recent years. In 2004, there were 92 health partnerships registered in the Initiative for Public – Private Partnership for Health (IPPPH) database,1 and multilateral organizations were involved in 35 of them. The World Health Organization (WHO) is, naturally, a partner in many of these, but also UNICEF, UNFPA, the World Bank, and UNAIDS are active players. In addition, the partnerships have representatives from the private sector (largely from the pharmaceutical industry), private foundations, governments, and NGOs. This chapter asks the following questions. To what extent does this PPP activity constitute a new form of public–private multilateralism? Have the PPPs resulted in new norms for collaboration between public and private actors? Have they resulted in a change of behaviour and attitude by the different parties? The chapter will focus particularly on the development, production and distribution of vaccines and drugs for neglected diseases or non-profitable markets, which is a main aspect of many PPPs in health. It is quite apparent that the market alone will not provide adequate drugs to poor people, or ensure the development of drugs for diseases primarily affecting the poor. But the public sector – whether national or international – has never had the capacity to develop and produce vaccines and drugs. Thus, the scope for partnership is substantial. However, partnerships aimed to develop and produce drugs and vaccines require significant commitment by the industry. We are not simply talking about one-time donations or projects, but activities that may require large, long-term investments and changes in production strategies. In this sense, it is a ‘hard case’ for the emergence of a public–private multilateralism.

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The rise of global public–private partnerships in health At the global level, it is the WHO that has the main responsibility for public health. According to its constitution, the WHO shall strive for the attainment by all peoples of the highest possible level of health, defined as a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity. However, the WHO has always been dependent on a number of other actors in order to achieve its goals. In the 1981 strategy ‘Health for all by 2000’, national states, the international community and local communities were identified as the main actors for achieving the goal. By contrast, in the updated version of the strategy – ‘Health for all in the 21st century’ – which was endorsed by the highest governing body of The WHO, the World Health Assembly (WHA), in May 1998, it was public–private partnerships that constituted the WHO’s main policy response (Thomas and Weber 2004). This decision was a reflection of the changing global context, and the position of the WHO within it; and the strategy adopted became increasingly important in the years to come. Of the partnerships registered in the IPPPH database, 80 per cent were established after 1996 (see http://www.ippph.org), and the peak years were between 1999 and 2001. According to the IPPPH, public–private health partnerships refer to ‘arrangements that innovatively combine different skills and resources from institutions in the public and private sectors to address persistent global health problems’. Caines et al. (2004) distinguish between four types of health partnership. The first type is research and development partnerships. These are involved in product discovery and development of new diagnostics, drugs and vaccines. Of the global partnerships referred to above, twenty-five have a main focus on product development partnerships, and these have attracted more than US$1.1 billion of donor money (Sander and Widdus 2004). Projects of the second type – technical assistance/service support partnerships – support improved service access, may involve discounted or donated drugs, and give technical assistance. Traditionally, this has consisted of schemes in which the pharmaceutical industry has donated drugs to developing countries. However, recently the private sector has increasingly also participated in the implementation of projects at the country level. Those of the third type – advocacy partnerships – seek to raise the profile of a disease and advocate an increased international and/or national response and resource mobilization. Finally, financing partnerships provide funds for specific disease programmes.

Global Partnerships for Health

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Partnerships as defined above are not entirely new for the WHO. The WHO has always collaborated with the pharmaceutical industry in the discovery, development and distribution of drugs. One may distinguish between three main ways in which the WHO has affected the operation of the pharmaceutical industry: standard setting, ‘push mechanisms’, and ‘pull mechanisms’. First, the WHO sets quality and safety standards that the products must adhere to; this also includes publishing recommendations on optimal treatment or prevention of diseases, which in turn will affect the market for pharmaceutical products. Second, the WHO employs ‘push mechanisms’ to accelerate research on priority diseases, consisting of collaboration with research institutes, universities, etc., on research and development. The WHO also mobilizes and channels funds to specific research projects. Third, the WHO employs ‘pull mechanisms’ to create or enhance the market for certain medicines. This is done through channelling funds to public programmes that will purchase large amounts of specific drugs or vaccines. This in turn may have consequences for industry’s decisions on research, development and production strategies. Procurement by multilateral organizations of drugs is also important, particularly of drugs such as vaccines for which there is a limited private market. The WHO procures some drugs and vaccines; but of the multilateral organizations it is UNICEF that has the main responsibility for vaccine procurement. UNICEF purchased more than $700 million globally in supplies and services in 2003; approximately half of this ($347 million) was for vaccines, and $101 million was for other medical equipment and medicines. That meant that UNICEF purchased 40 per cent of the total global volume of vaccine doses, although in terms of value it amounted to only 5 per cent (UNICEF 2004a). In all these activities there is a need for a close interaction between the multilateral organizations and the pharmaceutical industry. Some specific partnerships were established long ago: for example, the Special Program for Research and Training in Tropical Diseases (TDR) was established in 1975, co-sponsored by the WHO, UNDP and the World Bank (and, since 2003, UNICEF). Although it is not itself a PPP, it has resulted in a series of partnerships with the pharmaceutical industry aimed at accelerating research and development of drugs for ‘orphan diseases’ – that is, diseases for which commercial incentives are insufficient to trigger private-sector investment in R&D.2 Between 1980 and 2003 it accomplished the registration of seven new or improved drugs for neglected diseases resulting from partnerships with Merck, Bayer, Artecef, Zentaris, NeXstar, MarionMerill Dow and GlaxoSmithKline (Nwaka and Ridley 2003).

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However, the recent partnerships differ from the old partnerships in several ways: they generally involve more money, including large donations from private foundations; the private sector is more deeply engaged in their governance structures; and they are often multifaceted, spanning two or more of the partnership types listed above. What is the reason for the emergence of these new partnerships?

The background for PPPHs The background for the emergence of PPPHs is complex and involves a number of factors: technological advances, developments in the organization of the pharmaceutical industry, changes in the global framework for health governance, and changes in the multilateral system. In combination, these have created conditions that have increased the need for partnerships, and have improved their feasibility. The first important factor is technological change, more specifically the biotechnological revolution starting in the 1970s. This has had several consequences. With regard to vaccines, it enabled the production of a set of new vaccines with great potential to improve child immunization in the Third World. However, whereas public funding (at both national and international level) went into basic research, leading to development of proto-vaccines, and into the process of delivering vaccines to users, only private companies invested in the extremely expensive process of developing products from protos to usable vaccines. And in order to gain high returns on their investments, private companies focused on the commercially interesting markets of the developed world and did little to improve vaccines directed towards resolving the problems of developing countries. The result was that two categories of vaccine fell behind in terms of research and development: ‘impeded vaccines’ and ‘developing market vaccines’. Impeded vaccines are ‘candidate vaccines’ (in other words, prospective vaccines) that would almost certainly have substantial markets in industrialized countries but are not given high priority by the vaccine industry because of possible scientific, ethical or public perception obstacles. Developing market vaccines are those that lack substantial demand in industrialized countries but have potentially large demand in developing countries (Batson and Levine 2000). The industry has little incentive to make the large investments necessary to finance the clinical development of these vaccines unless a PPP can ensure a market for them.


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The biotech revolution also had an effect on vaccine prices. The new and improved vaccines have a higher price than the old ones and are therefore less affordable in the Third World. It was noted in the mid-1990s that the take-up of a series of new vaccines was much slower than expected (this included Hib, Hepatitis B and Yellow Fever vaccines), partly because of the cost. This problem of pricing of new vaccines was aggravated by the way the technological developments affected UNICEF’s procurement system. Until recently, vaccines used in developing countries were the same as those used in industrialized countries, and UNICEF bought the surplus stock from the pharmaceutical industry at a low cost. However, in the 1990s, wealthier nations began using newer, more expensive vaccines, and many manufacturers stopped producing the less profitable ones that were used most in developing countries. This product divergence has affected both availability and price of vaccines for the Third World, as UNICEF could no longer get the same kinds of favourable deals as before (WHO/UNICEF 2003). Thus, partnerships were required in order to modify the market mechanism and/or make explicit deals with the industry. The biotech revolution has also affected how drugs are discovered and developed. Before the biotech era, drug discovery and development was performed mainly by units within integrated multinational pharmaceutical companies, but the development of biotech has encouraged specialization according to stages in the R&D cycle of drug products. This has provided a lot of flexibility within the industry, as pharmaceutical companies have increasingly sought deals with others to co-develop products and/or commercialize them. This in turn has provided increasing opportunity for R&D PPPs (Nwaka and Ridley 2003). Largely as a result of these technological developments, there has been a rapid change in the structure of the pharmaceutical industry which has had considerable significance for the overall context for public–private partnerships. Three main changes have occurred. The first is a series of horizontal mergers and acquisitions between the multinational research-based pharmaceutical companies. This has contributed to the current situation where only four companies (Avantis, Merck, GlaxoSmithKline and Wyeth Vaccines) produce 75 per cent of the world’s supply of vaccines. The second is a process of vertical concentration resulting from the takeover of biotechnology companies by the major research-based pharmaceuticals. The combined effect of these two processes is that the pharmaceutical industry has evolved into what Mytelka and Delapierre (1999) call a

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‘global networked, knowledge-based biopharmaceutical oligopoly’. The oligopoly is partially a result of, but also a problem for, the practices of the multilateral institutions. In the case of vaccines, due to the limited number of buyers in the market, producers who have failed to win the bids of UNICEF/WHO have decided to stop producing vaccines. However, the decline in the number of producers has reduced competition, making it more difficult to drive prices down. A third notable development in the pharmaceutical industry, which should in theory reduce prices, is that many drugs and vaccines have become off-patented, resulting in the emergence of a number of non-research-based producers of generic vaccines.3 Many of these companies are based in the larger developing countries, such as India, South Africa and Brazil.4 These produce many generic drugs at a fraction of the price of the original product. However, UNICEF is reluctant to purchase all their vaccines from such companies, as it is important for future R&D of Third World vaccines that researchbased pharma is involved in vaccine production too. The combined effect of technological development, industry restructuring and multilateral procurement practices has been a supply crisis in vaccines, and this has been a major factor leading to the creation of PPPs in this area. The number of doses of basic vaccines offered to UNICEF dropped very significantly between 1994 and 2003.5 However, the drive towards PPP is also a result of changes in the disease burden and the nature of diseases in developing countries. The major factor here has been the AIDS epidemic, but also important are the re-emergence of (often HIV/AIDS-related) tuberculosis and the growth of chloroquine-resistant malaria parasites. These developments have occurred in parallel with the strengthening of the international patent regime under the Trade-related aspects of Intellectual Property Rights (TRIPs) agreement under the WTO. Let us take the case of malaria first. The problem is that in the last ten years the malaria parasite has grown increasingly resistant to the most common treatment drug, chloroquine. A combination of a Chinese herb derivative (known as artemether) and lumefantrine has demonstrated cure rates above 95 per cent, even in areas of multidrug resistance. However, there is a significant underproduction of this so-called Artemisin combination therapy (ACT). A part of the reason for this is that Covartem®, produced by Novartis, is currently the only approved ACT, and Novartis holds a patent, which means that no other producers can enter the market.


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The relationship between retro viral drugs for the HIV/AIDS epidemic and TRIPs is even more controversial and certainly better known. The evolution of AIDS as a disease of the Third World6 occurred at the same time that an increasing number of countries adopted patent regimes under the TRIPs agreement. In the 1990s a series of anti-retroviral, life-sustaining drugs for HIV/AIDS patients were developed,7 but they are patent protected for twenty to twentyfive years. This permits pharmaceutical companies to charge higher prices for the drugs. Moreover, the prices differ significantly between countries, and in many cases they are more expensive in the developing countries than in the developed world. Médecins Sans Frontières estimated, for example, that ten of thirteen commonly used drugs were more expensive in Tanzania than in Canada. Moreover, due to income disparities, a Tanzanian would have to work 215 days to buy these thirteen drugs, whereas a Canadian would only have to work eight days (referenced in Poku 2002). However, the gravity of the AIDS epidemic – in terms of both scale and duration – has also been a major impetus for the private sector to contribute to projects that can help reduce its effects. And this applies not only to the pharmaceutical companies; the impact of the epidemic on the supply of labour in Africa south of the Sahara has been a shock for major parts of the private sector.8 In summary, there emerged both new demands for partnerships and some signs of increased willingness on the part of the private sector to participate. However, the outcome was necessarily dependent on the nature of the existing multilateralism. How ready was that system to respond?

The limitations of the existing multilateral system in responding to the challenges The WHO is the UN organization with the primary responsibility for immunization work and the eradication of disease.9 Historically, the WHO has had some of its main victories in this field, particularly the Smallpox Eradication Program and the Polio Eradication Initiative; but it has nevertheless been considered to face serious constraints in its ambition to provide ‘health for all’. One such limitation stems from political differences between the member countries. There is both a tension between the headquarters in Geneva and the regional organizations, and a tension between donor countries (the United States on the one hand, and the European countries on the other). The tension between the regional

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organizations and the headquarters has been a feature of the organization since its inception. The main argument for creating the WHO as a decentralized structure was that it would be close to the people that it serves, and that it would facilitate cooperative relations with subordinate governmental units (Siddiqui 1995: 62). However, making the WHO decentralized was also a way to solve the problem that the Pan-American Health Organization (PAHO) already existed prior to the creation of the WHO. While the regional structure is seen to have several advantages, it has also contributed to the establishment of regional blocs within the WHO which on many occasions has hampered the efficiency of the organization (Siddiqui 1995: 77–82). However, the creation of blocs does not end with the division between the five regional organizations of the WHO. Donor countries have also formed blocs. The most persistent division has been between the European countries (particularly the Nordic countries and the Netherlands, that have been significant donors to the WHO) and the US. Finally, there has at times been a division between the North and the South – a division which, as we will see, has also been used as leverage in conflicts between the European countries and the US. Furthermore, there has for a long time been a division between those who focus on healthcare delivery and those who focus on research. As mentioned, although the WHO does not undertake much research in its own right, it plays an important role through setting strategic research goals and devising mechanisms for attaining them through global coordination, encouraging training and institution-strengthening for research in developing countries, and funding appropriate research. However, this focus of the WHO’s activities is not supported by everyone in the organization. According to Sir Gustav Nossal, one of the most important personalities in WHO immunization work: There are many good public health officials who believe the WHO’s central goal must be to catalyze the delivery of today’s health technologies to as many countries and people as possible. There are many, equally good, who believe that some diseases will be conquered only when new and sharper tools are available to fight them. (Nossal 1998: 369) In WHO parlance, these two groups are sometimes referred to as the ‘bush guys’ and the ‘bench guys’. In the vaccine area, the fault line


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between them has resulted in recurring conflicts over whether the focus should be on basic research, development of new vaccines, improvement of existing vaccines (for example, by making them more heat-stable and reducing the number of doses needed), or making existing vaccines available to all through improving delivery systems (for example, by improving the ‘cold chain’ – to keep vaccines cool in tropical climates). The ‘bush guys’ and the ‘bench guys’ used to be situated in two separate units of the WHO. The Expanded Program on Immunization (EPI) provides an illustration of the problems that may result. This programme has been one of the WHO’s main flagships and has been given credit for many of the WHO’s successes in immunization work. Its main task has been to promote equitable access to a limited number of essential vaccines. It currently focuses on six vaccines, attempting to minimize their cost of production and improve the health services necessary for their delivery. In 1984, the Programme for Vaccine Development (PVD) was developed within the WHO, with the mandate to encourage vaccine research and product development. Although the intention was to promote joint efforts, the EPI and PVD ended up working in isolation from each other. Indeed, to quote an interview with ‘one of the most far-sighted and talented members of the EPI’: ‘When asked a question about the Programme for Vaccine Development, [he] said that even though EPI and PVD shared the same building, he was embarrassed to admit that he never spoke to them in the six years he had been stationed in Geneva!’ (Muraskin 1998: 70). For most of its history, the WHO has sought to distinguish between technical issues and politics, and to preserve an image of a purely technical organization. However, not all in the organization have shared this view. Rather, the strength of the belief in technical solutions has created divisions among staff and at the head of the organization. In recent decades, the WHO has had two presidents who have been classified as ‘politicians’, in that they did not shy away from politically contentious issues. The first of these was Halfden Mahler (1977–88), who was considered a visionary, espousing ideas of equity and justice in health. He challenged transnational companies on the issue of breast-milk substitutes, and through his encouragement of developing countries to produce their own medicines. As a result, ‘[s]uddenly the WHO was out of the shelter of technical consensus and firmly inside the political arena . . .’ (Goodlee 1994: 1492). The ‘technician’, Dr Hiroshi Nakajima, succeeded Mahler as the director of the WHO in 1988. A highly qualified medical doctor, he

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was widely considered to have contributed to the WHO’s retreating into its technical and bio-medical shell, and losing influence. The technical focus of Nakajima’s regime led to severe criticism of his leadership. Perhaps most extreme was the Washington Post’s claim that ‘it is hard to think of any single person in the United Nations constellation who has done more harm to the effectiveness and reputation of the world organizations’ (Editorial, Washington Post, 3 June 1997). The influence of technically focused medical doctors reverberated throughout the organization. By 1998, when Dr Nakajima was succeeded by Dr Gro Harlem Brundtland, the organization was, according to one of my informants, run by ‘a male, medical mafia’.10 In spite of being a medical doctor herself, Brundtland was widely considered as a ‘politician’. Familiar with global politics from her time as Prime Minister of Norway and leader of the World Commission on the Environment and Development, her main goal was to place health issues higher on the global political agenda.11 As a politician she did not have such a close relationship with the global pharmaceutical industry as Nakajima, who was the former research director of Hoffman-La Roche, one of the world’s largest pharmaceutical companies (Nielsen 2001; Van Meurs 1989). Although she soon confronted the global tobacco and sugar industries, she also placed strong emphasis on building a relationship with the private sector and, as we shall see, she attempted to make the WHO take the lead in the forging of partnerships. She saw this as a natural continuation of the process of change in international development that started with the Brundtland Report, and also as a complement to changes at the national level: The process related to my report was important here. Here we emphasized that all sectors have a role to play and a responsibility. We were concerned with the development of democracies and that the private sector would have to take a greater responsibility and get more involved.12 Another factor to consider when judging the nature of multilateralism in the health sector is the relationship between the WHO and the other organizations, especially UNICEF. In the early 1980s, UNICEF declared the ‘Children’s Revolution’ and directly engaged itself in the promotion of children’s health. Although it does not have a mandate to support research or vaccine development, it has worked on the delivery side with concrete projects and at country level. In


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1984, UNICEF became a partner in the WHO’s Expanded Program on Immunization, which has been considered a fairly successful collaborative effort. In this area, the main activity of UNICEF since then has been to conduct centralized procurement of developing countries’ vaccines for the EPI (Buse and Walt 2002). But there had been turf wars between the two organizations, and the collaboration between UNICEF and the WHO in the EPI did not bring these wars to an end. The conflict has been exacerbated by their unequal funding. While UNICEF has enjoyed relatively solid finances over the last twenty years, partly due to an early adoption of commercial strategies and partnerships with private actors, this was not the case for the WHO, as we shall see. Although UNICEF was a partner that would have to be considered in collaborative efforts in the vaccine area, it had little leverage in the research community. Indeed, it had a policy of focusing on activities that could give direct benefit to children and mothers around the world, and hence, quite explicitly, not funding research. The strained financial situation of the WHO is an important factor in understanding the context of multilateralism in this sector. Although the major multilateral organizations engaged in health have not been as hard-hit as many others by cutbacks of funding to the UN organizations, one cannot discount the stimulus to partnerships resulting from the major discrepancy between the need for, and availability of, funding. The limited budgets of the multilateral organizations stand in stark contrast to the resources available to the two major private actors in the health sector: pharmaceutical companies and private foundations. The largest pharmaceutical company, Pfizer, has more staff in its marketing department than are employed in the whole of the WHO (Koivusalo 1999, quoted in Thomas 2002). While the total budget of the WHO in 2000 was US$1,800 million, the total operating profits of the largest pharmaceutical company in the world the same year were almost four times as much (Hüfner undated, Scripps Reports 2000). And the pharmaceutical industry is the most profitable business sector, with an average 16.2 per cent profit, ahead of financial companies (11.6 per cent) and beverages (10 per cent).13 The limited funds available to the WHO stand in stark contrast also to those of some key private foundations. Private foundations have long been major players in global health. The Rockefeller Foundation was, for example, instrumental in the Tropical Disease Research Program – one of the WHO’s most successful immunization programmes – in the early 1970s (Nossal 1998), and it was a key

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player in the start of the CVI in the late 1980s (Muraskin 1998). It has also been important for the establishment of some new partnerships, including the Global Alliance for Tuberculosis Drug Development (TB Alliance) (2000), the International Partnership for Microbicides (IPM) (2001) and the Pediatric Dengue Vaccine Initiative (2001) (Widdus and White 2004). However, it is the Bill & Melinda Gates Foundation that has had by far the most high profile of the new partnerships, due to its financial muscle and operating philosophy. In 2004 it had a total endowment of approximately US$27 billion, and in 2003 it gave grants worth US$1,182 million for different purposes – roughly equivalent to the entire WHO budget in 2000.14 In sum, in the late 1990s there were a number of problems that multilateral organizations were unable to deal with on their own and that industry was unwilling to take on: slow take-up of new vaccines in developing countries, lack of R&D for ‘orphan drugs’, vaccine shortages, and high or even rising prices of essential drugs. But at the same time, there was funding available (from private foundations) and increasing political will to collaborate (due to leadership changes in the multilateral organizations and the rise of the CSR agenda among the companies). As a result, a series of new partnerships were formed, some of the most important of which we will present in the next section.

Examples of the new partnerships The Global Alliance for Vaccines and Immunization (GAVI) The GAVI is without doubt the most high-profile of the new partnerships. The history of GAVI, however, goes further back than the much publicized announcement of its creation at the World Economic Forum in Davos in 2000. One can, perhaps, trace the lines back to the creation of the Children’s Vaccines Initiative (CVI) established in February 1991. This was a separate entity of the WHO, co-sponsored by UNDP, UNICEF, World Bank, the WHO and the Rockefeller Foundation. CVI was the first large-scale attempt to bring together the public and private sectors, and to bridge divides between different multilateral organizations in order to work together towards a common goal in the health sector. It was intended to be an R&D partnership, aiming to harness the discoveries of biotechnology for the purpose of developing new and improved vaccines for the children of the Third World. The initial purpose of the CVI was to create a mech-


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anism for overseeing the whole vaccine process, from conception at the laboratory bench to its development by industry and its incorporation into vaccine programmes. The long-term goal was the creation of a ‘magic bullet’ vaccine that would immunize against a dozen or more diseases with a single application. However, the functioning of CVI as a form of a partnership between several multilateral organizations was hampered by many of the problems outlined in the previous section (Muraskin 1998). As a consequence, in 1994 the CVI was incorporated into the WHO structure, and the focus was changed – from the lofty ambition of creating a ‘magic bullet’ vaccine towards the introduction of existing vaccines for developing countries (most importantly Haemophilus influenzae type b (Hib)). Later it turned into being primarily an advocacy partnership, whose role was to increase the awareness and commitment of individuals, society and national decision-makers to immunization (CVI 1998). The relationship of the CVI to the private sector had been severely damaged by the many political problems and turf battles between the different UN organizations, and by its inability to remain independent of the WHO, in which the private sector had little trust. CVI therefore had had little success in raising funds for the product development phase. The appointment of Gro Harlem Brundtland as the new Director-General of the WHO in 1998 spurred hopes within the private sector of better relations with the WHO. However, she took everyone by surprise by closing down the initiative. The head of the Director’s Office, Jonas Gahr Støre, expressed in an interview with William Muraskin that Brundtland understood that CVI had been established as a response to the failure of the WHO, and she intended to make the WHO an organization which was able to work directly with the private sector towards the achievement of practical goals. She therefore wanted to strengthen the Global Programme for Vaccines (GPV) – that by this point had been created to include both EPI and PVD and had joint leadership with CVI – rather than the CVI (Muraskin 2002). Moreover Brundtland, jointly with World Bank President James Wolfensohn and then UNICEF director Carol Bellamy, took the initiative to form a new public–private partnership, the GAVI. This was launched in Davos during the Thirtieth World Economic Forum, with five objectives: (i) to improve access to sustainable immunization services; (ii) to expand the use of all existing cost-effective vaccines; (iii) to accelerate the development and introduction of new vaccines (focusing on Hep B, Hib and Yellow Fever); (iv) to accelerate

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research and development efforts towards vaccines and related products specifically needed by developing countries; and (v) to make immunization coverage an integral part of the design and assessment of health systems and international development efforts (WHO 2000). GAVI thus ranges over several of the types of partnership listed in Chapter 1. It also differs from the old partnerships by being comparatively generously funded. Parallel to GAVI there was established a Global Fund for Children’s Vaccines (later renamed the Vaccine Fund) to finance GAVI’s activities, and at the Davos meeting a $750 million donation to the Fund by the Bill & Melinda Gates Foundation was announced. Later, other donors have come on board, most of which are governments – beginning with the government of Norway.15 In total, the Fund had raised US$1 billion by 2004. In 2005, the United Kingdom, France, Italy, Spain and Sweden jointly committed nearly US$4 billion over ten years to the International Finance Facility for Immunisation (IFFIm) that would finance GAVI’s work. This came on top of the announcement of the Bill & Melinda Gates Foundation to contribute another US$750 million over ten years to the Vaccine Fund. Thus, by 2005, GAVI was by far and away the most well-funded global public–private partnership. Another difference from the old partnerships was that in GAVI the private sector had an important role in the governance structure. The pharmaceutical industry has two seats on the Executive Board – one for the multinational R&D-based companies and one for developing country industry; and the Bill & Melinda Gates Foundation has a renewable (permanent) seat on the board (GAVI 2000). The industry also has one seat in the Working Group set up to implement the board’s decisions, and it has also been represented in the various task forces set up to elaborate specific issues. There are three major ways in which GAVI was intended to affect the R&D, and the price, of vaccines. The first and most important was to create a market for new, underused vaccines. The strategy of GAVI is to channel support based on multi-year plans at country level, which are technically and financially supported by an InterAgency Coordination Committee which includes governmental representatives and vaccine suppliers. The funding was initially allocated according to ‘performance criteria’ – designed to pay a ‘reward’ of US$20 for each additional child immunized against the three ‘new vaccines’ that are the focus of GAVI in addition to the traditional three (DTP3).16 Through expanding the use of these vaccines, it was expected that new producers would enter the market, and that competition would ensure a gradual fall in prices.


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The second way in which GAVI was supposed to affect industry strategies was through supporting R&D. As a result of the work of the R&D task force set up soon after the creation of GAVI, it was decided that support should be given to research efforts to develop vaccines for three diseases and three technologies (GAVI 2004).17 In terms of achievements, the GAVI/Vaccine Fund had by 2004 contributed to the immunization of 71.9 million children with Hepatitis B vaccine, 9.3 million with Hib vaccine, and 10.9 million with Yellow Fever vaccine (GAVI/VF 2004). It had thus significantly accelerated the take-up of the new vaccines. However, it had not quite reached its goal. Soon after GAVI was founded, the board endorsed the 80/80 target set by UNGASS (United Nations General Assembly Special Session): that 80 per cent of the children in 80 per cent of the districts in Vaccine Fund-eligible countries18 should be vaccinated by 2005. In 2001 (that is, after the target was set) the figure of actual coverage was officially estimated at 65 rather than 76 per cent. Nevertheless, findings suggest that 80 per cent of VF-eligible countries were on their way to exceed the 80 per cent coverage in every district by 2007–8 (McKinsey and Company 2003). The Global Fund to Fight Aids, Malaria and Tuberculosis (the Global Fund) The background for the establishment of the Global Fund was also a crisis (the AIDS epidemic) and the perceived failure of existing multilateral institutions to respond adequately to it (Poku 2002). It was launched by Kofi Annan in 2001 to mobilize new resources in the struggle against HIV/AIDS. The battle against tuberculosis and malaria was also included in its mandate, due to pressure from the EU.19 In May 2001, donors pledged initial capital, and in January 2002 the fund was established. It is governed by a twenty-three-member board – including donor and recipient governments, non-governmental organizations, corporations, foundations, multilateral partners and affected communities. Its mode of operations is to channel funds to so-called Country Coordinating Mechanisms (CCMs), consisting of local partnerships between public and private actors. Proposals for funding falling within the Global Fund Mandate are submitted by the CCMs to the Technical Review Panel and the Board. The Global Fund supports projects falling within the mandate of prevention, care and treatment for the three diseases. The Geneva-based Global Fund was not intended to be a regular multilateral organization, but was set up with a more flexible organizational structure. However, in 2004, the Global

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Fund signed an agreement with the government of Switzerland which gave it privileges and immunities similar to those of other international organizations (Global Fund 2004). The Global Fund both encourages partnerships at the local level (through the CCMs) and seeks private sources of funds. However, it has had problems mobilizing private funding. The only significant private source is the Bill & Melinda Gates Foundation, which granted US$150 million over three years. This is equivalent to only 4.7 per cent of the total amount paid to the fund. Ninety-five per cent of the grants paid to the Global Fund as of October 2004 (total US$3.3 billion) thus comes from national governments (Global Fund 2004).20 Although it does not focus on the R&D aspect of partnerships (this is rather the task of the International Aids Vaccine Initiative, which will be described later), the Global Fund could affect the operations of pharmaceutical companies through providing larger markets for drugs. Purchase of drugs and commodities consumed 46 per cent of the funds in 2002/3 (Global Fund 2003). The Global Fund does not dictate treatment regimes, but generally encourages countries to adopt the WHO’s recommendations. It is estimated that the Global Fund now finances 50 per cent of AIDS-related interventions, 40 per cent of TB treatment, and 50–60 per cent of malaria treatment in developing countries.21 Thus, it has the potential to significantly affect the demand for the products of pharmaceutical companies and therefore possibly their production strategies. Already it has significantly affected markets for Artemisin combination therapy (ACT) treatment of malaria and antiretroviral (ARV) treatment of HIV patients. According to Global Fund representatives it has contributed to reducing the transition period to the new treatment – from up to fifteen years to only three–four years – by recommending and supporting the introduction of ACT treatment (Nantulya and Liden 2004).22 It is projected that 1.6 million people will receive ARV treatment funded by the Global Fund within the present round of funding. This represents a six-fold increase over current coverage in developing countries (Global Fund 2004). It is still only a fraction of the approximately 43 million people living with AIDS in developing countries. On the other hand, it is a significant achievement on the way to the ‘three by five’ goal set by the WHO (that three million people living with HIV/AIDS in resource-constrained communities should be on ARV treatment by the end of 2005). In 2004 it was projected that 1.6 million people would receive ARV treatment funded by the Global Fund within the present round


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of funding. This would represent a six-fold increase over current coverage in developing countries (Global Fund 2004), which is still only a fraction of the approximately 43 million people living with AIDS in developing countries. However, by 2005, funding provided by the Global Fund alone provided treatment to no more than 384,000, whereas an additional 214,000 patients were reached through programmes jointly funded with the United States emergency plan for AIDS relief. Yet, it was not only the Global Fund that failed to reach its ambitious goals. By 2005, only a total of 1.3 million AIDS patients in developing countries were receiving ARV treatment, far below the goal of the WHO’s ‘three by five’: three million on ARV treatment by 2005 (WHO UNAIDS 2006). Other partnerships aiming to improve access to drugs The Global Fund is far from the only partnership involved in HIV/ AIDS, malaria and tuberculosis. Caines et al. (2004) identify fortyfive partnerships involved in these diseases. However, not all of them fit the criteria of ‘new partnership’ set out above: for example, some do not have private-sector representatives in their governing structure, or they receive little funding from private sources. Among those that may be called ‘new partnerships’, the following are particularly of relevance for us. Accelerated Access to HIV/AIDS care and treatment in developing countries Initiative The (AAI), established in 2000, is a partnership involving UNAIDS, WHO, World Bank, UNFPA, UNICEF and six research-based pharmaceutical companies. The goal was to increase the proportion of those people living with HIV/AIDS in the developing world who have safe, equitable, sustained and affordable access to care and treatment. Unlike most of the others, the initiative for establishing this partnership came from the industry. Through the six companies involved, it has so far contributed to providing ARV treatment to 150,000 AIDS patients. The two important partnerships that are most directly involved in R&D are the MMV and the GATB. The MMV was established in 1999 as an independent non-profit foundation, with the goal to discover, develop and deliver one new anti-malarial drug every five years through public–private partnership. It is, in other words, directly focused on R&D, and most of its (currently twenty-one) projects are aimed at improving ACT drugs: to make them better suited for

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children, more efficient, etc. It has industry representatives on the board and on the expert scientific advisory board reviewing projects. Drug discovery is managed in ‘virtual product development teams’.23 GATB is also a non-profit foundation, established in 2000, whose aim is to accelerate and ensure the development of new, faster-acting and affordable TB medicine. Its board is dominated by industry and private foundations, but the WHO is also represented. GATB has a two-fold goal: to accelerate R&D, and to ensure the affordability of the drugs developed, especially in more poor countries with a high burden of TB.

Towards a public–private multilateralism? A number of studies and commissioned evaluations of the current PPPs are beginning to emerge. Most of these address the very important issue of the consequences for national health systems of the many partnerships, and whether the efforts initiated under partnerships are sustainable.24 However, we are concerned mainly with the possible implications at the level of the multilateral system; whether there have been significant changes in behaviour on the part of the companies (or the multilateral organizations). In the following, we will primarily concentrate on the multinational R&D firms, since these are the most active partners at this point.25 Have the companies taken actions that appear to run counter to their interests – for example, entered into deals that would drive down prices on their products – or undertaken research and development on ‘orphan drugs’? Or have they used their position to act opportunistically, attempting to secure deals that are to their own benefit? Commodity prices and drug security Have the PPPs managed to drive down prices on essential drugs, and contributed to drug security – defined as the uninterrupted, sustainable supply of affordable commodities of accepted quality standards (Caines et al. 2004: 24)? One strategy to achieve this is to secure sustained funding for such drugs, and thereby create a long-term market, which will induce more producers to enter, thus encouraging competition and driving prices down. Given the close collaboration with the pharmaceutical industry, there were high hopes attached to GAVI’s potential to drive down vaccine prices. But although the prices of some vaccines have fallen, the GAVI vaccines have, in general, risen. This is partly because mature products tend to fall in price, and since, as we have seen, the


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strategy of GAVI has been to focus on new vaccines, they are almost by definition not mature.26 But what has really driven up the cost of the vaccines procured under GAVI is the decision to purchase combination vaccines rather than monovalent vaccines. This was a response to the views expressed by the receiving countries; to give the new vaccines in combination with the traditional DTP vaccine would minimize the extra burden on the health systems.27 As a result, the total cost of immunizing a child has risen. A study of the cost per fully vaccinated child in Kenya, Lao PDR and Mali concluded that this increased from an average of US$10 to US$16 (Kaddar et al. 2004). Another important reason for the price increase of GAVI vaccines is that GlaxoSmithKline holds a patent on the two combination vaccines. A number of new producers have pre-qualified for the production of similar vaccines, and GAVI staff expect that new producers will enter the market and prices will drop from 2006. In other cases where competition is limited due to patents, it is necessary to make agreements with industry in order to secure reduced prices. In the case of anti retroviral drugs, one much debated solution has been to allow for the production of generic drugs to compete with the patent-protected drugs. As production of generic drugs is a real possibility only for a few, relatively powerful developing countries (notably India, Brazil, and South Africa), it would also be necessary to ensure that permission is given to those countries without capacity to produce generic drugs to import them from third countries. The TRIPs agreement under the WTO does allow for production of generic drugs using compulsory licensing under conditions of health emergencies. An August 2003 agreement also opened for export pharmaceutical products made under compulsory licences (WTO News Press/350(Rev.1)). Although all WTO member countries could, in principle, be eligible to import under this rule, twenty-three developed countries have voluntarily announced that they will not do so. There are some examples of big pharmaceutical companies entering into relatively large and wide-ranging deals with the multilateral organizations. In May 2001, an agreement was signed between the WHO and Novartis, under which Novartis committed to provide Coartem® at cost price for ten years for purchases under the global programmes. A second – often cited, but perhaps less spectacular – example is the one announced by UNAIDS in May 2001: that in the previous two months, five of the largest global pharmaceutical companies had agreed to slash the price of the cost of AIDS treatment in the

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developing world. Motivated by pressure from stakeholders in the US, and threats by developing-country producers of generic versions of the drugs, this was nevertheless held up as a major achievement of UNAIDS (Davey 2001). However, it was later revealed that the companies had agreed to negotiate price reductions bilaterally with individual developing countries, not to slash prices across the board, so that the achievement was not so great in practical terms (Poku 2002). Indeed, as the companies all practise tiered pricing anyway, the agreement was later found to have relatively little significance. However, neither of these deals was made as a result of a PPP, but rather as a result of the work of a joint UN organization (UNAIDS) and a specialized agency (WHO). Although, in general, the prices of antiretroviral drugs (ARVs) have dropped significantly over the last years (UNICEF/UNAIDS/ WHO/MSF 2004), the Accelerated Access Initiative (AAI) has largely failed to provide cheaper ARVs. The ARVs offered through the six AAI participating companies remain more expensive than those offered by generic companies, and the cost of ARV treatment still exceeds the average annual income in many LDCs (Caines et al. 2004). Experts forecast that, in future, generic competition will emerge on the market for old ARVs, whereas the market for newer ARVs is likely to become less competitive over time, due to the TRIPs agreement. Thus, what we will see is a bifurcation of the market for ARVs, with single-sourced newer products and competitively supplied older products (Caines et al. 2004). Thus, although Third World patients will not be supplied with the most modern medicines, they will get better access to ARVs. Also with regard to TB medication, evaluations showed that the TB Global Drug Facility (GDF) had made substantial achievements. According to an evaluation by McKinsey & Co (referenced in Caines et al. 2004) the GDF had achieved a 40–50 per cent decrease in prices compared to that of the world market.28 In summary, there are some examples of behaviour by the big pharmaceutical companies which appear to be altruistic, but also many cases in which the companies have enjoyed the benefits of an expanded market without contributing to bringing the prices down. For example, it is relatively clear that the pharmaceutical companies have benefited greatly from the expansion of the market due to the increased funding for vaccination resulting from GAVI’s activities; but prices still reflect supply and demand and the limitations of the current patent system, rather than any form of corporate philanthropy.


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However, it is clear that reducing prices is not the only solution to the problem of providing drugs and vaccines for the world’s poor. Moreover, the industry, with the support of several other actors, warns that if prices are cut too far this may impede R&D efforts. We therefore turn to the issue of whether the partnerships have contributed to the discovery and development of new products. Discovery and development of new or improved products For the private sector, R&D partnership with multilateral institutions is one of the most demanding ways in which to participate in PPPs. However, this depends on the form of contribution by the private sector, and the degree of risk involved in the project.29 As we have seen, the more traditional partnership, Special Program for Research and Training in Tropical Diseases (TDR), has had several successes in R&D partnerships. Of the 1,223 new chemical entities that were commercialized between 1975 and 1996, only thirteen were developed specifically for tropical diseases (Pécoul et al. 1999), but TDR was involved in about half of them (Ridley 2003). With regard to the new partnerships, however, there are not yet many successes to report. It is interesting to note that, although GAVI emphasizes partnerships with industry in most of its operations, the R&D efforts undertaken under GAVI do not involve industry directly. Moreover GAVI’s efforts are focused, not on discovery, but on the less demanding and less risky process of making already available drugs suitable for the Third World. After finalizing the work of the R&D task force in 2003, the board decided to open the window of the Vaccine Fund for R&D on two of the selected disease organisms: rotavirus and pneumococcus.30 The strategy is to work with multinational firms that already hold late-stage products (‘picking the low-hanging fruits’), through implementing the Accelerated Development and Introduction Plan (ADIP) – a comprehensive plan to speed up the introduction of an almost finished product.31 The aim has been to avoid what happened with, for example, the HepB vaccine, which took ten years to bring from development to common use. The board gave US$30 million over five years to support the development of these vaccines.32 Although GAVI cannot yet point to any major scientific breakthrough resulting from its activities, this would be too much to expect after such a short time of operation. Among the PPPs focusing on R&D it is perhaps MMV and GATB that apply the most innovative system of drug discovery – in ‘virtual research teams’ including

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scientists from both public and private sectors. MMV can so far claim one success, resulting from the work of publicly employed scientists in three continents, collaborating with Hoffman La Roche and coordinated by an MMV team; a candidate antimalarial for preclinical development has been submitted and will be co-developed with MMV and Ranbaxy (Nwaka and Ridley 2003). Recently, several compounds have been discovered that may be developed into new tuberculosis drugs, one of which is a result of the partnership between GATB, Novartis and Johns Hopkins University (PA-824). This promises also to be effective against TB that has become resistant to the old antibiotic treatment, and to make the cure shorter and simpler. It is the first time in forty years that new drugs have become available for this disease. Thus, there are some examples of fruitful collaboration on R&D as a result of PPPs. However, in general it is fair to say that the new PPPs demand relatively little of the companies; they are expected to participate in information exchange, and discuss the feasibility of new projects, but they are not required to alter major strategic decisions. Can one claim, on the basis of such examples, that private-sector actors ‘coordinate their behaviour according to general principles of conduct emerging in the multilateral system’ (see Chapter 2)? In order to examine the possible evolution of shared norms and principles, it may be instructive to report how the involved parties experience the interaction between the different actors – around the boardroom table or in task forces. This we do in the following section. New norms of collaboration From interviews with officials – in both public and private organizations – we received mixed messages concerning how experience from partnerships had changed the attitude of private industry and contributed to the evolution of norms for collaboration. On the one hand, it is emphasized that the big pharmaceutical companies have not changed much in terms of their basic interests. As the following extract indicates, the bottom line is profit: The industry wants two things: predictable demand, and funding for research. But of those two things, predictable demand is the most important. My experience is that they will not spend one dollar if they don’t see that there is something in it for them in the end. (interview, mid-level WHO official, December 2004)


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On the other hand it is emphasized that there has been a significant degree of learning on the part of the private companies. They have contributed constructively on the boards of various initiatives and have coordinated efficiently among themselves. Furthermore, they have improved their understanding of the constraints faced by the multilateral institutions in their work – for example, the weaknesses of developing country health systems that constitute a major impediment to effectiveness in disease prevention, cure and care. The multilateral institutions, too, have learnt from these partnerships. They have gained a better understanding of the internal dynamics of the pharmaceutical companies: for example, that vaccine departments (representing approximately 2 per cent of the annual profits from drugs), and departments producing drugs for developing country diseases, must continuously struggle with more profitable departments for resources and production capacity. As argued by one partnership leader with long WHO experience: [T]here has been a learning curve. Now there is a much greater ease of communication between private persons and organizations and public persons and organizations. Now there is a great deal of understanding. Often naively the public sector has thought that pharma has had this big bag of money and they can just dish out millions. On the other hand, pharma has often believed that they can just come to the WHO and do a deal, make a market. But we don’t have that level of control over policy. (interview, partnership leader, December 2004) Thus, the long-standing scepticism of WHO staff towards working with the private sector appears to be reduced. There are differences in attitude between PPP staff (viewed as highly private-sector oriented) and staff of the UN organizations, but here there are also changes. As argued by another partnership leader: One example of the different relationship between the WHO and the pharmas is that in the recent big meeting of the pharmaceutical industry in Barcelona several people from the WHO were invited. They gave speeches on different topics. That would never have happened a few years ago. People would have been suspicious, thinking ‘what do they want from us?’ So the levels of trust are increasing and there is an enhanced understanding. (interview, partnership leader, December 2004)

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However, a degree of scepticism still remains. It is, for example, asserted that the changing behaviour of the pharmaceutical companies does not so much result from a fundamental change in attitude, but rather from the actions of specific leaders, or simply from attempts to improve the company’s image: In all cases there has been one person close to the top that has had a personal interest in it, and thought that it would be a good thing to do. Then of course it can be useful from a corporate perspective. It is circumventing a problem. They might face pressure at a later point if it were discovered that they had this technology without putting it to use. (interview, partnership leader, December 2004) Their attitude has changed due to visibility and image. It is difficult to say ‘we are not with you’ to the UN organizations or partnerships. You can’t say that because this is about things such as children’s health. Entering into a partnership is a way for them to have a better role. (interview, mid-level WHO official, December 2004) Nevertheless, it is clear that big pharmaceutical companies are more eager to enter into partnerships now than they were some years ago. Why is this so? Apart from the reasons listed earlier in this chapter, many of the interviewed officials pointed to increased funding from private foundations as one of the major reasons for the increased interest.

The role of the private foundations The most important change in the landscape of private foundations and health PPPs has been the establishment of the Bill & Melinda Gates Foundation, donating massive grants to the partnerships. The most immediate effect the Gates Foundation has on the willingness of the companies to participate is that it ensures predictable, long-term funding of programmes under which significant amounts of drugs will be purchased. In comparison, governmental funding is often much smaller, it is more short-term, and it is subject to politically motivated changes.33 This is extremely important for the companies’ willingness to make the kind of long-term commitment that is necessary in order to develop or produce medicines for the poor.34


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However, the Gates Foundation has also played a key role in shaping the partnerships in a way that makes them more attractive partners for the private companies. This is especially the case with GAVI, which has been deeply affected by the ideas of the Gates Foundation, which has been the driving force behind major strategic decisions and changes in governance structure – for example the 2004 organizational merging of the Vaccine Fund and GAVI, and the decision to focus on three new vaccines rather than older ones. In general, the Gates Foundation has differed in two ways from other foundations: it has been less bureaucratic, being significantly affected by the ‘hands on’ management style of the Gates family (Bill, Melinda, and Bill Gates Sr); and it has had a technology bias – being specifically concerned to bring new technology to developing countries. While the former (the management style) is changing as the Foundation becomes consolidated, the latter is still a feature that significantly affects the partnerships where it contributes. This also makes the PPPs more attractive to the big R&D-based pharmaceutical companies that are the main proprietors of new technology in the health sector. The impact on the governance structure and organization of the PPPs by the Gates Foundation – focusing on streamlining, performance criteria and efficiency – has been important also for other private-sector partners, such as NGOs. According to a representative of a major business association: Gates has definitely had an effect. We want efficiency. When our companies go into organizations with money, they are obliged to ensure that their money is used efficiently. Previously, we have seen proposals from NGOs wanting to work with companies that are just not good enough. Many of the projects have been really good ideas. The problem is that we could not present the proposals to the companies. They were simply too badly written to present them; they did not have specified output, a well thought through plan, etc. Gates has worked with applicants, helping to professionalize them. That helps us too. (interview, December 2004) Another major function of the private foundations that is emphasized by various partners is that they bring the different parties together. They create meeting places and bring people to the table. However, this is not unique to the Gates Foundation but a role that the Rockefeller and other foundations have also played.

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Thus it is clear that, although the goals and operating logics of private foundations and companies differ, their grounds for participating in PPPs with the multilateral institutions are interlinked: the companies are attracted to partnerships by solid, long-term and predictable funding, a business-like attitude on the part of the organizations, and the promise of meeting places with the multilateral organizations. The foundations, on the other hand, and particularly the Gates Foundation, strongly encourage private-sector participation, and emphasize the application of technologies that require bringing the private sector into the discussions.

Conclusion: convergence What does our analysis of PPPs in the health sector reveal regarding the behaviour of private companies? We do not find a shift from crude ‘profit seeking’ to the altruistic promotion of ‘health for all’; but nor are the PPPs simply assemblies of self-interested actors seeking maximum benefit. Rather, we are witnessing a process in which some mutual learning does occur, and where some shared norms of collaborative behaviour are emerging. This process involves a degree of convergence: the multilateral system (including PPPs) is increasingly operating according to market-oriented principles, while in the pharmaceutical companies there are instances of non-marketprincipled behaviour. The basic rules of the game are still set by profit motives and the logic of the market, but the PPPs do modify the market mechanisms in certain areas, and concerning certain issues where the market has been shown to be an extraordinarily bad mechanism for fulfilling basic rights to health. The outcome of the new PPPs is thus not simply thirty-five partnerships in which multilateral organizations participate; it is a reshaping of the entire multilateral system in health to work according to a modified market logic. This has implications for the legitimacy and authority of the multilateral system in the health sector which may be briefly outlined. The legitimacy of the multilateral system in health no longer hinges on the WHO. Due partly to increasing involvement by other multilateral organizations, but more recently to the establishment of multi-stakeholder PPPs, the multilateral system in health is much broader than it was twenty years ago. The legitimacy of this system is now more dependent on its ‘ability to deliver’ than on its relation to democratically elected governments or its legal status; in other words, it is judged on the extent to which it really provides health for all. But the judgement as to whether the


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system has delivered is necessarily subjective – influenced by personal experience and values and, not least, by media coverage. We may expect that multilateral negotiations in the future will be influenced by global media as well as by debates in the WHA or other multilateral forums. The main concern of the critics of partnerships has been the issue of sustainability; to what extent will the partnerships be sustained when the money from the foundations runs out or the interests of the companies move elsewhere? Recent experience from GAVI and the Vaccine Fund with renewed funding from both the Bill & Melinda Gates Foundation and a joint effort by European countries may calm those critics. However, this also illustrates the important point that partnerships with the private sector cannot work without continued commitment by states. Although there are changes to be observed in the attitude of the private companies towards collaborating with the multilateral system, this always depends on the sustained effort by states to secure funding and continued enthusiasm.

5

Tripartism meets CSR The ILO’S partnership experiments to combat child labour

Introduction Since the nineteenth century, child labour has been a matter of international concern. In recent years, the issue has become an increasingly important topic in international policy-making and multilateral fora – for two reasons, both associated with globalization. On the one hand, production in many sectors is increasingly ‘globalized’, and dominated by a small number of large transnational companies. On the other, global media and advocacy campaigns have been active in attracting public attention. Shocking pictures of children toiling in cocoa plantations, tobacco farms and carpet factories have made consumers, politicians and business leaders all over the world aware of this issue. The traditional multilateral approach to handling the issue of labour standards has been the elaboration and adoption of conventions, which in turn have been adopted by national legislatures. Most of this work has been undertaken under the auspices of the International Labor Organization (ILO) that has adopted two conventions against child labour. However, the increasing strength and global reach of multinational corporations, their increased activities in countries in which national legislation is weak or weakly enforced, and the increased awareness among the (largely Western) public of their activities have led to a search for means other than national legislation to combat child labour. Rather than pressuring only governments, global campaigns have put pressure directly on the companies. And companies have, in many cases, responded by developing standards and engaging in projects, in order to demonstrate their corporate social responsibility (CSR). This new situation constitutes both a challenge and an opportunity for the ILO. Unlike most other multilateral organizations, the

Tripartism meets CSR

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ILO has from the start included the private sector in its governance. The so-called ‘tripartite structure’ of the ILO ensures representation of employers and workers, along with states. However, whereas ILO has worked with employers’ organizations, CSR relates to individual firms. Moreover, whereas the tripartite structure includes only labour unions among civil society actors, a variety of NGOs – including environmental groups and human rights groups – claim a role in the search for new ways of making companies take their corporate social responsibility seriously by, among other things, rejecting the use of child labour. Thus, the CSR agenda poses a significant challenge to the ILO’s normal way of operation. However, CSR is also a major opportunity for the ILO. As we shall see, the ILO has for years been criticized for being an overly bureaucratic organization, split by political divisions and segmented alliances during the Cold War. But the WTO declared in 1996 that the ILO was the most relevant body for discussing the link between trade and labour standards; and three years later the Global Compact was launched, depending heavily on standards developed within the ILO framework. Many saw these events as providing a golden opportunity for the ILO to make itself relevant – to emerge from the politicized and bureaucratic ‘quagmire’ in which, like UNESCO, it had been trapped. In brief: ‘the ILO’s historic hour had finally arrived’.1 How has the ILO made use of this opportunity? One response has been to experiment with new forms of partnership. In this chapter we examine the engagement of the ILO in two particularly high-profile examples of partnerships to combat child labour: the Eliminating Child Labor in Tobacco (ECLT) initiative and the International Cocoa Initiative (ICI). These partnerships have been established by industry, NGOs and trade unions with the ILO in an advisory role. They are set up as foundations; governments are directly involved only through projects at the local level. Thus, they are not as clear-cut examples of PPPs as, say, the health partnerships discussed in the previous chapter. Nevertheless, they are very relevant for our study of the emergence of international norms of behaviour; the ILO’s engagement aims to guide the companies in their conduct on child labour, in pursuit of what they perceive as a common goal. In this chapter we will ask to what extent the ILO has been able to affect the conduct of global business through the mentioned initiatives. Have the global tobacco and chocolate companies adopted new norms for their operations through their engagement with the ILO? We will begin with an introduction to how multilateral

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institutions have dealt with labour issues, and child labour in particular, in the past. Next, we will discuss the changes related to globalization and the new challenges for the ILO, before describing the two specific initiatives and examining their implications for ‘market multilateralism’.

Multilateral institutions and labour issues The attempt to construct a multilateral framework for labour issues started almost two centuries ago. Soon after the first industrialists introduced social reforms (including reduction of working hours for children) in Great Britain in the early nineteenth century, it was argued that such reforms could give a comparative advantage to other countries that did not follow suit.2 Thus, already by the midnineteenth century the possibility of international industrial treaties was discussed in the British parliament. The late nineteenth century was characterized by a series of attempts to create international labour legislation. These were unsuccessful, but the ideas had gained momentum, particularly among trade unions, leftist political parties and social reformers (Christian and/or socialist). A series of international conferences were held on various topics related to labour reform (among them child labour) between 1904 and 1914, but European governments remained sceptical before World War One. What changed the attitude of many governmental representatives was that the wartime economy necessitated a close working relationship between the government and employers’ and workers’ associations. This not only increased understanding of the need to develop international labour codes, but also that the peace agreement would have to have a labour component (Stokke 1997). This was the background for the creation of the ILO along with the League of Nations during the making of the Versailles Treaty in 1919, with the guiding principle of ‘peace through social justice’. In 1944, the ILO adopted the Declaration of Philadelphia, which, annexed to the Constitution, still constitutes the Charter of the aims and objectives of the ILO. This outlined a set of principles upon which the work of the ILO should be based,3 and a number of goals for its work.4 Together they laid out a broad vision for ensuring social justice through dialogue and social guarantees. After the creation of the United Nations, the ILO was incorporated into this as the first specialized agency in 1946. The ILO was from the start created with a tripartite structure to allow for the participation of governments, labour and employers. Its


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highest governing body is the International Labor Conference (ILC) that meets once a year. At the ILC, two government delegates, one employer delegate and one worker delegate, represent each member country. On a day-to-day basis, umbrella associations represent the different parties: the International Organization of Employers (IOE), and the main umbrella labour association (ICFTU). These have been parts of the ILO structure from the start. Indeed, the IOE was created in 1920 with a significant part of its mission to defend business interests in the ILO.5 The tripartite structure is also encouraged at national level, where the ILO promotes social dialogue between trade unions, governments and states. Thus one could say that, as opposed to the other state-oriented UN institutions, the ILO has always been a partnership. That does not mean that the ILO has been less affected by conflicts between states than other institutions. On the contrary, its very creation was viewed as a response by the victorious powers to the menace of Bolshevism, and it was deeply affected by superpower rivalry during the Cold War. The creation of the ILO offered organized labour participation in social and industrial reform within an ‘accepted’ framework of capitalism. The US rejection of the Versailles Treaty initially precluded US membership of the ILO, but it joined in 1934. During much of the Cold War period, the US government used the main labour associations – the American Federation of Labor (AFL) and the Congress of Industrial Organizations (CIO), later combined as AFL–CIO – as an instrument in its anti-communist strategy (Cox 1977). Thus, in many instances the division between countries (the concern of realists) was more important than the division between actors with different relations to the means of production (the concern of neo-Gramscians). This Cold War divide was institutionalized in the form of two peak international labour unions, the Soviet-sponsored World Federation of Trade Unions (WFTU) and the US-dominated ICFTU; it influenced the resignation of an ILO Director-General; and led to the withdrawal of US funds to the ILO (Hughes 2002). As noted by Ronaldo Munck (2002: 29), from the 1950s to the 1970s ‘Corporatism at the international level shifted from an understanding that the class struggle needed to be institutionalized to a quite non-conflictual version of tripartism in which managerial ideologies of production would exist unchallenged’. Furthermore, although the ILO was partly an expression of the internationalism of the trade unions, the work of the ILO has always been state-oriented in the sense that its main modus operandi has

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been to formulate, and make the ILC adopt, conventions and recommendations to be ratified by nation states and included in national legislation. These now cover most issues related to the world of work (including certain basic human rights, labour administration, industrial relations, employment policy, working conditions, social security, etc.). In the period after World War Two there was also a drift towards a more ‘nation-statist’ perspective by most Northern unions and labour movements (Munck 2002: 135), which reinforced the statist character of the ILO against the internationalist socialist vision. As a result of this in-fighting and power-politics, and the increasingly pre-determined alliances in the ILC, ‘[f]or many, the ILO became an irrelevance, detached from the lives of ordinary workers it was set up to serve, and important only to those whose agendas were determined by the imperatives of the Cold War’ (Hughes 2002: 166). However, a number of changes have occurred in the environment of the ILO that have challenged the ILO’s traditional way of operating, while at the same time, arguably, making its mission even more important.

Globalization, the ‘social clause’ and corporate social responsibility The end of the Cold War marked the resurgence of the issues that had motivated the creation of the ILO, namely the possible threat to labour conditions resulting from the internationalization of business. Topics such as the emergence of increasingly ‘footloose’ companies moving production to areas of cheap labour, and the possibly detrimental impact of this on jobs, wages and working conditions in the North, became the major cause of concern. One major expression of this was the renewed tension over trade and labour standards related to the issue of the ‘social clause’ – a shorthand for linking trade concessions to compliance with labour standards in multilateral trade agreements. This was brought up during the Uruguay Round negotiations of the General Agreement on Tariffs and Trade (GATT) that predated the WTO. The social clause proposal was rejected at the Ministerial Meeting of the WTO in Singapore in 1996. The declaration that was issued from this meeting reaffirmed at the same time that the ILO was the appropriate body for handling labour issues and that the WTO and the ILO should continue collaboration.6 This declaration constituted a historical opportunity as well as a significant challenge to the ILO. It was asked to reconfirm its role as


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the main defender of labour, but to do so in a context that was significantly changed from when the ILO was created; a context which had rendered the ILO’s mode of operation increasingly obsolete. Already in 1977, Cox had pointed out that the tendency to design the production processes of modern industry so as to use increasing proportions of cheaper, more malleable, less effectively unionized, semi-skilled labour, and the increasing masses of ‘looming marginals’ (particularly among the urban poor) that are not represented through the formal structure of the ILO, posed a threat to its very governing structure (Cox 1977). The organization of production in large, complex and increasingly global production chains has made the workforce more geographically spread, more diverse and less easily organized. Many, perhaps the majority, of the workers are not the Northern, male, full-time, urban, industrial employees who traditionally formed the core of the trade union movement; rather, they are increasingly Southern, female, often part-time employees – sometimes working from their homes or in small units. This has contributed to the sense that trade unions no longer adequately represent the global poor, and a number of new social movements compete for their attention. A further issue is the massive expansion of corporate power and the increased mobility of transnational corporations (TNCs), as discussed in Chapter 3. This has had several implications for the ILO and its governing structure. First, the move of TNCs to search for cheap labour in poorer countries has put the solidarity between Northern and Southern trade unions to the test. Although improved labour standards in the South are desirable to all, to make this a prerequisite for trade and investments is often considered to be ‘hidden protectionism’. As a result, many Northern trade unions have changed strategy. The AFL–CIO was forced to confront this challenge during the process leading up to NAFTA, and has come to place renewed emphasis on internationalism. Another example is the ICFTU that collaborates with NGOs on a number of different issues of concern to workers in the South (Munck 2002). Nevertheless, there are several examples of less satisfactory collaboration between different parts of the labour movement, which have threatened to delegitimize the movement as such. Second, the increasing power of individual companies and conglomerates has weakened the position of employers’ organizations. Although the pharmaceutical industry, discussed in Chapter 4, represents an extreme case, TNCs in general operate in markets that are becoming more and more oligopolist. This means that individual companies may possess so much power

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that to be represented by an umbrella association or a sectoral organization – as is a requirement in the ILO – may not be a very attractive strategy. A final change that has occurred is in the relationship between nation states and TNCs. Although the thesis of the declining power of the states is highly controversial (see Chapter 2), there is no doubt that nation states in some parts of the world are little willing or able to control the operations of the multinational companies. The inclusion of ILO conventions in national legislation may therefore be a rather ineffective means to ensure that these companies respect basic labour, or human, rights. The first post-Cold War Director-General of the ILO, Belgian Michael Hansenne, responded to the challenges by renewing the ILO’s commitment to its tripartite roots and calling for a greater role in international structures concerned with economic and social development. It was, however, important that the issue of core labour standards should not only be addressed in the context of trade distortion; important also to promote a more encompassing approach to the social costs of globalization. The most visible outcome of Hansenne’s strategy was the ILO’s Declaration on Fundamental Principles and Rights at Work and its Follow-up, adopted 18 June 1998 (Haworth, Hughes and Wilkinson 2004). This Declaration was signed only a few months before the launching of the Global Compact; and of the nine original principles of the Compact, four were taken from the ILO Declaration. The Global Compact has been interpreted as an attempt by the UN Secretary-General Kofi Annan to resist some of the increased pressure for social issues to be dealt with by the WTO, and to reinforce the shift away from a social clause towards a focus on core labour standards (Haworth, Hughes and Wilkinson 2004). As such, it could be interpreted as support for the agenda of the ILO. Nevertheless, the preferred mode of governance of the Global Compact is partnerships and dialogue with individual companies, and this sits uneasily with the tripartite structure of the ILO. Moreover, although also the ILO traditionally has emphasized voluntarism and moral suasion (Haworth and Hughes 1997), it was generally aimed towards states and encouraged them to adopt binding laws and regulations. The kind of voluntarism proposed by the Global Compact was of a wholly different kind, with its attempt to make business itself take on a social responsibility. The Global Compact gave a major impetus to the CSR agenda that had gained international attention since the Rio Summit in 1992,


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particularly with reference to environmental issues (Schmidheiny 1992). Although in design very different from the ILO’s mode of operation, the CSR agenda provided a host of opportunities for the ILO. Although it left a major part of the responsibility for adopting environmental, social, and labour standards to the companies themselves, it also created a potentially huge demand for expertise on how best to apply such standards. And although many criticized the inefficiency of the ILO, its expertise on labour standards was widely acknowledged. However, the ILO was restricted in its ability to provide such expertise to individual companies – due to its formal tripartite structure. This structure had also generated some ‘vested interests’; and trade unions were generally sceptical towards the involvement of NGOs, that were given a significant role in CSR work, and in the Global Compact more specifically. Although appreciating its principles, the trade unions criticized the Global Compact for the limited role it gave them, and the fact that the market orientation of the Global Compact meant that it was the concerns of consumers that were to be addressed, not those of the affected workers. Nevertheless, the ICFTU entered into an agreement with the Global Compact in 2000, agreeing to participate in discussions and consultations, and gaining a seat on the board (Baker 2004). The IOE that represented employers in the ILO was also given a seat on the Global Compact board, but was often no less sceptical than the trade unions about dealing directly with individual companies, arguing that it would lead to an over-representation of large TNCs at the expense of smaller companies. In spite of these constraints, the ILO has entered into several nontraditional partnerships with transnational corporations and business associations. An obvious place to start was partnerships to combat child labour, since this had been a core issue in the global labour standard agenda almost since the birth of an international trade union movement, and, at the same time, a hotly debated CSR issue.

Approaches to the abolition of child labour As early as 1866, the International Workers’ Congress called for an international campaign against child labour (Myrstad 1999), and the Labour Charter included in the Peace Treaty of Versailles included the abolition of child labour as one of its ten principles.7 The ILC has since then adopted two conventions of importance for child labour: the Minimum Age Convention (No. 138) adopted in 1973, and the

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Worst Forms of Child Labor Convention (No. 182) adopted in 1999. The first of these aims at the abolition of child labour, and stipulates that the minimum working age shall not be less than the age of completion of compulsory schooling. Child labour is defined as any economic activity performed by a person under the age of 15 years. However, the Convention also provides for flexibility, as Article 3 states that the minimum age should be 18 years for work which is likely to be harmful to children’s health, safety or moral welfare, whereas 13 or even 12 years may be an acceptable age for ‘light work’, that is work which is not likely to be harmful to children’s health and development, and does not prevent their school attendance (ILO 1973). Thus, not all work is considered harmful to, or exploitative of, a child. ILO Convention 182 calls for immediate and effective measures to secure the prohibition and elimination of the worst forms of child labour, which include slavery and similar practices, forced recruitment for use in armed conflict, use in prostitution and pornography and illicit activity, as well as work which is likely to harm the health, safety and morals of children. However, as a result of interventions against child labour that had actually resulted in worse situations for children, Convention 182 also calls for the provision of alternatives for children and families to ensure that the children truly benefit as a consequence of child labour interventions and do not end up in worse situations (ILO undated). By the year 2004, over 80 states had ratified the Conventions. However, adoption of conventions is not the only way in which the ILO has attempted to combat child labour. In 1992, the International Program on the Elimination of Child Labor (IPEC) was established within the framework of the ILO and with the overall goal of the progressive elimination of child labour. IPEC uses technical assistance and policy-oriented work in order to assist partners in combating the worst forms of child labour. The partners in this case include governments, workers and employers’ organizations, as IPEC is not formally mandated to work directly with individual companies. IPEC has evolved into one of the largest programmes in the ILO, and by 2005 it managed over 1,000 ILO-sponsored initiatives worldwide to promote alternatives to child labour (Hughes 2005). The ILO has traditionally followed an ‘abolition line’ towards child labour, meaning it has worked against any form of child labour, including domestic labour. The strategy has been modified, after campaigns to abolish child labour in the early 1990s were revealed to


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have resulted in wholesale firing of children from relatively safe work in export-related industries and their subsequent employment in more hazardous jobs such as brick-chipping, rickshaw pulling and even prostitution.8 As a result, the approach of the ILO/IPEC has been to add to the abolition line a focus on finding alternative income sources for child workers as well as to ensure education possibilities for the children. Moreover, they have strongly encouraged governments to introduce so-called ‘income transfer programmes’ to compensate families for lost earnings when their children leave work in order to get an education. The ILO is not the only multilateral institution that has been engaged in work to abolish child labour. This issue area also falls within the mandate of UNICEF. UNICEF’s work is primarily guided, not by the ILO Conventions, but rather by the Convention of the Rights of the Child (CRC). The article relevant for work on child labour – Article 32 (1) – states that: ‘States Parties recognize the right of the child to be protected from economic exploitation and from performing any work that is likely to be hazardous or to interfere with the child’s education, or to be harmful to the child’s physical, mental, spiritual, moral or social development’. The adoption of the CRC wrought profound changes in UNICEF, as it shifted its approach from an emphasis on children’s needs to children’s rights. With the rights-based approach, UNICEF argued that it was society as such that had the responsibility of providing children with protection (Bjerkan and Gironde 2004). UNICEF also could not follow the abolition line, but works against the most hazardous forms of child labour, and has also, in certain cases, promoted schemes combining work and education. This is the main line of difference in the international debate: On the one hand, there are those supportive of a gradualist, step-by-step approach to regulation, arguing in favour of the ‘worst-forms first’ approach as a way of removing the most intolerable forms of child labour; and, on the other hand, are those who argue that focusing on the worst forms of child labour would not lead to further elaboration of child labour norms and that there is a great risk that many forms of child labour would be neglected if the worst forms were defined too narrowly, too soon. The ILO and trade unions have tended to argue for the latter approach, whereas UNICEF and NGOs such as Save the Children tend to argue in favour of the gradualist approach. What kind of approaches may then be suggested in order to combat child labour, and what is the role of the companies? This will be discussed in the following section.

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Child labour: issues and solutions The ILO has estimated that, in the year 2000, 171 million children between the ages of 5 and 17 were engaged in hazardous work inappropriate for their age. Another 8.4 million were involved in the worst forms of child labour (including slave labour) (ILO/IPEC/ SIMPOC 2002). Such statistics include a huge variety of forms of labour, with complex causes, that also call for complex responses. Estimates show that 85 per cent of working children are engaged in agricultural activities; the next heaviest users of child labour have much smaller shares, including manufacturing (8.3 per cent), and personal services (6.5 per cent) (Ashagrie 1997). There are several reasons why children work. A survey by UNICEF (2005b) points to factors on both the supply and the demand side. On the supply side, the overwhelmingly most important factor is, simply, poverty. Some adult workers are not paid enough to support their families, and even the wages from two parents’ incomes may not be sufficient to keep their family housed, clothed and fed. In other cases, one or both parents is not earning anything, maybe because a parent has died or left home, or because adults are unable to obtain work. Related to this is family breakdown caused by divorce, or the death of a parent, especially (in recent decades) from HIV/AIDS. This may create more ‘children-headed households’, or it may give relatives yet another mouth to feed on a meagre wage. In addition to poverty, UNICEF points to attitudes to girls (finding it more appropriate for them to work than to go to school), and discrimination against minority groups, as reasons why children are sent to work. In other cases, lack of education possibilities and the nature of the parents’ work provide push factors.9 Parents’ illiteracy – which is strongly related to poverty – also explains much of the prevalence of child labour in some countries (Gunnarson, Orazem and Sedlacek 2005). There are also significant pull factors affecting the demand for child labour. UNICEF (2005b) argues that children are often considered cheap and obedient labour, and in some industries the ‘nimble fingers’ of children are sought after to perform certain tasks. Inadequate laws, poor infrastructure, and lack of education possibilities exacerbate the problems. The reasons for child labour also have a bearing on the choice of approach and solutions to the issue. In a sense, the use of child labour may be regarded as simply a function of what is generally termed ‘underdevelopment’. A cross-country survey of child labour since the 1950s points to rising household income levels as the most


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important cause of the reduction in the use of child labour, but notes that this has an effect primarily if it is accompanied by increased literacy levels of the parents and a reduced importance of agriculture in the economy (Gunnarson, Orazem and Sedlacek 2005). Moreover, the typical pattern for developing countries is to have a high proportion of children under the age of 15. This leads to a high ‘dependency ratio’, that is a high proportion of economically inactive versus active populations, which also is related to a high incidence of child labour (Tørres and Tsoka 2000). If child labour is primarily the result of lack of development, seeking to abolish it may seem to be attacking the symptoms rather than the root cause. But it is well documented that the use of child labour has the long-term effect of reducing literacy levels and incomes. Children who work spend less (or no) time at school, and, depending on the sector, the availability of cheap child labour may also press down wages for adults. Thus, intervening to stop child labour in order to break this vicious circle does indeed make sense. With the rise of CSR, child labour abolition received renewed attention. The extent to which a company contributes to the effective elimination of child labour is among the criteria applied by many socially responsible investors or ethical investors,10 and it is an important element in the process of approval of companies for various consumer-driven initiatives, including the Ethical Trade Initiative. As mentioned, this is also one of Global Compact’s ten principles. But what is really the most effective way in which a company can contribute to the abolition of child labour? The easy answer to this is of course ‘not to hire children’. However, it would be of little benefit to the world’s child workers if, for example, the transnational companies that take part in Global Compact were prevented from hiring children. First, few transnational companies hire child workers, though they may purchase the products that they contribute to producing. Children are employed on the farms producing the cocoa purchased by the transnational chocolate companies, and on the estates where the tobacco leaves for cigarettes are grown; relations between TNCs and child workers may thus be quite indirect – through a long ‘supply chain’. Second, as we have seen, simply to stop purchasing products that children have contributed to producing would be of little benefit for the children, and this has been shown in many cases to be counterproductive. A more comprehensive approach would be to increase the wages of the adult workers so that they would not have to send their children to work, or to compensate parents for taking their children out of work

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and sending them to school. But some of these solutions would be at odds with the logic of the market: global firms are facing global competition, and this means searching for the cheapest sources of supply, and resisting wage rises that might increase the price of inputs in the final product. To what extent may partnerships change this logic and the behaviour of the transnational companies? This issue will be investigated through studying two partnerships in which the ILO has been engaged.

Partnerships to combat child labour in cocoa and tobacco The International Cocoa Initiative (ICI) For most people (at least those not thinking about sugar and calories), chocolate enjoys a very positive image; and the production of chocolate was until recently certainly not associated with oppression and hardship. However, this image was seriously damaged when, early in this century, there was a sudden media focus on the use of child labour on cocoa farms in West Africa, the region producing the major share of the world’s cocoa.11 In September 2000, the British television channel, Channel 4, broadcast a documentary entitled ‘Premier of Slavery: A Global Investigation’, which raised concerns about slavery in carpet-making, domestic service and cocoa production. Then, in April 2001, news came out about a Nigerian-registered ship – NV Etireno – believed to be trafficking children along the West African coast to work in the cocoa plantations. This drew attention not only to the fact that children were put to work on the cocoa farms, but also that they were sold more or less as slaves, and often had to work far away from their families. This disturbing news led to debate about a consumer chocolate boycott and the possibility that West African cocoa would suffer the same pariah status as the region’s ‘blood diamonds’. A further blow came with the publication of a number of articles on child labour in the cocoa industry in all the thirty-two newspapers of the powerful Knight Ridders newspaper chain in the US, including the New York Times and the Miami Herald. The main headline was ‘A Taste of Slavery: How Your Chocolate May be Tainted’, and the articles focused on the bonded child labour used in the production of cocoa in West Africa.12 These provoked a number of reactions, among them a proposal by US Senator Tom Harkin and Congress representative Elliot Engel to amend the FY 02 Agriculture


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Appropriations Bill to provide the US Food and Drug Administration with funding to create a ‘no-child slavery label’ for chocolate products, which was passed overwhelmingly by the House of Representatives (291–115). The chocolate business is a complex one, and the big Western chocolate companies operate at arm’s length from the cocoa farms where children work. The 60 per cent of world production which originates from West Africa is planted by approximately 1.5 million smallholders, often in remote areas. The domestic chain from planter to export company is at the root of the complexity, involving a series of intermediaries (for example, in Côte d’Ivoire, cooperatives, pisteurs, traitants, etc.). Many chocolate companies do not even buy cocoa beans directly from the African countries, but rather they purchase cocoa mass from sub-contractors. Nevertheless, in December 2000, the same year as the child labour reports came out, the chocolate industry established the World Cocoa Foundation (WCF) that counted among its members most of the world’s largest chocolate manufacturers (including Mars, Hershey Foods, Kraft Foods and Nestlé), exporters (including Cargill and ADM Chocolate), retailers (such as Starbucks Coffee Company), and associations (such as the US National Confectioners Association and the European Union’s Association of Chocolate Biscuit and Confectionery Industries).13 The stated aim is to work for sustainable cocoa production, and it links its work not only to securing the cocoa supply, but also to supporting training and education for cocoa farmers and promoting projects to grow cocoa in a sustainable and ethical manner.14 Thus, it could be understood as a substantive attempt at collective action with the aim of creating a public good. This response by the chocolate industry to the strong criticisms that had emerged was in many ways a tacit acknowledgement that it had long benefited from the hardships experienced by West African cocoa farmers. Its efforts were less aimed at denying the problem than at trying to ensure that it was not presented as a slavery scandal (Bøås and Huser 2005). And it willingly entered into discussions about initiatives to combat the use of child labour in cocoa production. In September 2001, a protocol ‘for the growing and processing of cocoa beans and their derivative products in a manner that complies with ILO Convention 182’ was signed in Geneva by all the major involved parties, witnessed by the ILO, NGOs and labour activists. This protocol came to be known as the Harkin–Engel protocol, and it established 1 July 2005 as the deadline for multinational companies to develop and implement a credible certification

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programme to show that their cocoa had been grown or produced without using any of ‘the worst forms of child labor’.15 The signatories also agreed to a subsequent joint statement, issued in November 2001, that recognized ‘the urgent need to identify and eliminate child labour in violation of International Labor Organization (“ILO”) Convention 182 with respect to the growing and processing of cocoa beans and their derivative products’. The 2001 protocol included a commitment to establish a joint international foundation ‘to oversee and sustain efforts to eliminate the worst forms of child labour in the growing and processing of cocoa beans and their derivative products’. As promised in this protocol, a foundation based on the partnership of industry and NGOs was established with the same objective in 2002, and it started its operations in 2003. Named the International Cocoa Initiative (ICI), it was created with equal board representation of industry and non-industry (NGOs).16 The ILO played a key role in the setting up of the ICI, and, together with UNICEF, it has an advisory position. The ILO was viewed as a particularly valuable partner since it already had significant experience with sector-specific programmes and had initiated research that would underpin a programme on child labour in West African agriculture. This West Africa Cocoa and Commercial Agriculture Project to Combat Hazardous and Exploitative Child Labor (WACAP) was set up in January 2003 with support from the US Department of Labor. The ICI has worked to create partnerships with various actors, including NGOs, trade unions and governments. The main approach has been to search for ‘holistic’, community-based solutions, and its work so far has been concentrated on two pilot projects, one in Ghana and one in Côte d’Ivoire, ‘harnessing local knowledge and capabilities for positive and sustainable change’. This has included work to sensitize communities and leaders about issues involved in child labour. The ICI is also assisting the government of Ghana, together with UNICEF, to elaborate a system for social protection. Its project in Côte d’Ivoire has experienced problems due to the war. The ICI is funded by the industry, and in 2004 the total budget available to the foundation was Swiss Francs 1,523,055 (about US$1.3 million). This was the first full operating year of the foundation. Thus, the operations by the ICI, alone or jointly with UNICEF and the ILO, may seem quite modest compared, for example, to the health partnerships discussed in the previous chapter. But can they contribute to significant changes in attitude by the


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partners involved? We will discuss this question after first presenting a second initiative. Eliminating Child Labor in Tobacco (ECLT) While the public image of chocolate production was suddenly and severely damaged by the recent revelation of the abysmal situation of the child workers producing cocoa in West Africa, the image of the tobacco industry was already quite negative. This was partly the result of the Tobacco Free Initiative introduced by WHO DirectorGeneral Gro Harlem Brundtland; but the revelation that there were many children involved in hazardous work in the production of the deadly commodity provoked further public outrage.17 While in the case of cocoa it was primarily the global press that drew attention to the child labour issue, in the growing of tobacco it was largely the result of efforts by developing country trade unions and accompanying research institutes. In the late 1990s, attention was drawn to the conditions of the children on tobacco estates in Malawi by the country’s Tobacco Tenants and Allied Workers Union. The Malawi unions went through the IUF, and with ILO support they attempted to reach an agreement with the International Tobacco Growers Association (ITGA) to improve working conditions and reduce the use of child labour. Soon afterwards, the first transnational company became interested – British and American Tobacco (BAT), one of the world’s largest tobacco companies. BAT, the IUF and the ITGA together held a conference in Nairobi in 2000 in order to discuss the matter and to show the world that they were interested in the issue. For this purpose, the Norwegian research institute FAFO prepared a report based on 1,200 interviews with tobacco tenants in Malawi revealing various aspects of their lives, among them the prevalence of child workers on the estates (Tørres 2000). The ILO was present at the Nairobi conference, and attempted to make the efforts more general, not only limited to Malawi. This was the occasion that led to the establishment of the ECLT, as a partnership between the Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers Associations (IUF), the ITGA, and various TNCs. By 2005, the ECLT could count on the membership of eleven TNCs.18 This meant that 90 per cent of the tobacco companies had become members of the ECLT (the only two global players that refused were Renault American and Swedish Match). The industry pays 95 per cent of the expenses of the ECLT,

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but has refrained from having the board presidency, which is left to the IUF’s Ron Oswald. Although both the ICI and the ECLT are foundations, and both are set up to work against child labour in a specific agricultural sector, there are in fact significant differences between them. First, the trade union representation is more significant in the ECLT than in the ICI, which includes also several NGOs on the board. Furthermore, as we have seen, the chocolate industry is under heavy pressure from the US government and puts a lot of effort into publicizing what it does. The ECLT, on the other hand, has chosen to keep a low profile, recognizing that as tobacco producers they will never really be able to acquire a good image.19 Finally, whereas the ICI on its website mentions the ILO only as one among several partners, the ECLT prides itself in having ILO support, and presents the ILO as an advisor. The ILO did indeed play a more important role in the setting up of the ECLT than the ICI, and is substantially involved in several of the projects conducted by the ECLT. By 2005, the ECLT had commissioned six research reports on the conditions of child workers – in the Dominican Republic, Uganda, Fiji, the Philippines, Indonesia, and one study that covered all the African countries. Two of these were conducted by the ILO/IPEC. Moreover, it had projects in six countries (Malawi, Philippines, Uganda, Tanzania, Zambia, and Kyrgyzstan), two of which were based on ILO/IPEC studies and one (Tanzania) that was conducted by the ILO/IPEC. Although varying significantly in content, the projects generally included awarenessraising among tobacco growers about the hazards of child labour, provision of schooling possibilities for the children (sometimes including provision of scholarships), and different forms of poverty alleviation and income-generating efforts. These included, for example, the establishment of micro credit unions and development of cooperatives (as in the case of Kyrgyzstan), or vocational training and support of alternative small-scale production (as in the case of Zambia). Several thousands of child workers and their families have been reached by the ECLT projects. However, this is no doubt small in relation to the total number of child workers in the tobacco industry. Does this initiative nevertheless have broader ramifications? In the following we will consider the extent to which engagement in these partnerships may have changed the ILO, or the conduct of the companies; whether they may have fostered the emergence of new attitudes and norms, and how the authority and legitimacy of the ILO is affected.


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The ILO and partnerships: marginal activity or the beginning of a new era? The involvement of the ILO in the above-mentioned partnerships was, in general, demand-driven rather than resulting from a strategic choice by the ILO to adopt a new mode of working. According to several ILO officials interviewed, the demand for the ILO’s services has exploded as a result of the CSR initiative. Companies now regularly contact the ILO to ask its advice, and to invite it to participate in initiatives to promote labour standards. The formal position of the ILO is to not work directly with companies; this is a result of the tripartite structure, but also, as mentioned above, of the IOE’s jealous guarding of its position. Moreover, the ILO is institutionally constrained from receiving funding from any company, and therefore the engagement in partnerships such as the above depends on the goodwill of individual ILO officials, and may be at the expense of other activities. A final indication of the ILO’s lack of emphasis on partnerships with companies is that none are included in the list of partnerships on the ILO’s official website, and so far no official guidelines exist for collaborating with companies. This does not mean, of course, that the ILO has worked less with the private sector than have other organizations. Indeed many would argue that the ILO is, in and of itself, a partnership. As one ILO official argued: We have just used another word, tripartism, for partnerships before. Some of the other agencies are so smart. UNICEF, for example, they are much smarter than us, they calculate. ECLT and ICI have gotten a lot that they didn’t pay for. But the ILO should do more to make ourselves visible to our constituents. We are too shy, too modest.20 However, this does not mean that the ILO never engages with private companies. Interviews revealed that there were at least three different ways that this could come about. First, some work with private companies is ‘underground’; people work directly with private companies but do not say so publicly. This is more prevalent in the field offices than in the Geneva headquarters, as the activities of field officers are less easily controllable than those of headquarters staff. Second, companies themselves may find ways to go around the rules. According to one informant, a main reason why the tobacco

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industry decided to set up the ECLT was to avoid the restrictions against working directly with private companies: With regard to child labor, some sectors have been very successful in working with the ILO. For example, the tobacco alliance, the ECLT. That actually started during a meeting here in the ILO. [A tobacco company] said to us, we want to work with you. I said, I can’t, but come back as a sector alliance and I’ll see what I can do. A week later they had formed an alliance. Business can be highly organized sometimes. They are now trying to take different routes than working with the IOE.21 In this case, then, the formation of a partnership – between the tobacco growers, industry, and the unions – was a result of the industry’s desire to make use of the ILO’s acknowledged expertise, without having to go through the official institutional structure. However, this is also encouraged by the creativity of some of the ILO’s own officials. Also ILO staff have explored non-traditional ways of working that do not run counter to the internal regulations of the ILO but nevertheless enable them to have a more direct impact on companies. This is particularly so in the case of IPEC, which under the leadership of Frans Roselaers pioneered work on partnerships. Thus, IPEC may be said to have occupied a ‘boundary role’, as defined in Chapter 2, through its close contact with various external actors. To what extent is the ILO able to impact on the conduct of business through their participation in partnerships? There are several aspects to this question. The ILO attempts to make a significant contribution to the industry’s approach to child labour. First, it is crucial for them to ensure that the industry does not just pick one item from the whole agenda of core labour standards. Child labour is the issue that most easily attracts donor and business attention, but the ILO insists it is just one of several items on the agenda for decent work, that should be viewed in relation to the others. Second, the ILO tries to make industry bring in governments and unions. In one sense, then, the ILO engages with the private sector in order to try and ‘restore’ the traditional division of labour between the government and the companies. Although most officials included in our research agreed that private companies could play an important role, they were eager to make them collaborate with governments. I would like to set up more alliances. In the case of child labour, they could help in every way. But there are voices in the ILO


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saying that partnerships are not balanced enough. We get offers from the private sector all the time. If we don’t strongly enough emphasize that governments and trade unions should be involved, we have not fulfilled our mandate.22 But do they succeed? On this, opinions differ. On the one hand, there is a widely held view that the industry could never have come as far as it has in working to reduce child labour had it not been for the advisory services of the ILO and its ability to serve as a ‘linking pin’ organization. The ILO has been particularly instrumental in bringing together the unions and the companies to work together in the ECLT, a ‘marriage’ that might well not have taken place without them. On the other hand, there is great caution in the ILO against drawing conclusions about the ILO’s role in a new form of self- or co-regulation of global industry. While most of the ILO officials interviewed agreed that they contributed crucial expertise, they generally did not view themselves as having any regulatory role: Regulatory role? Well, one does of course wish to influence positively and I suppose that is a kind of regulation. But we have no sanctions. The ILO is a toothless tiger. It has a too big bureaucracy and too little sanctions.23 It is also clear that, although the ILO has contributed advice to the partnerships, the partnerships in no way challenge the basic profit logic of the companies. A simple solution to the problem of child workers is, of course, to increase the wages of the parents. It is true that it would not be easy for a transnational cocoa or tobacco company to achieve this since there are typically several links in the commodity chain between them and the growers. Nevertheless, the industry has not opened up even for discussing such a solution. According to one ILO official: It is no goal of itself for ILO that the price of chocolate should not increase in the United States: if the price increased 5 percent and one could ensure that the increase would benefit children, this would have been a great solution. The industry does not want to discuss such proposals.24 In sum, the ILO sees itself as having an important advisory function. However, although in recent literature on regulation it has been suggested that this could amount to an ‘informal regulatory role’

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(Utting 2005), ILO employees do not regard themselves as having that sort of clout. But they have changed to some extent, and so too has the private sector’s view of the ILO. Could the outcome be described as a new form of multilateralism?

A new multilateralism in the global cocoa and tobacco industry? The issue of child labour and the ILO illustrates very well how the political context for partnerships has changed over nearly a century. Nevertheless, it would be too much to draw conclusions about the emergence of a new multilateralism, based only on the case of child labour. As shown above, the salience of child labour as a development issue has been driven primarily by global media attention and advocacy groups, and to some extent by labour activism. Thus, companies have to a significant extent been pushed into taking the issues seriously. But have their attitudes changed in the process? There are some signs that they have. The impetus for doing something clearly comes from their customers, through media pressure and NGO-orchestrated advocacy campaigns; but the ILO plays a role in determining what exactly is to be done. Through its participation, formally and informally, in the initiatives, it has become widely respected for its knowledge of the issues and, as a result, it has come to influence the decisions made. According to a representitive from one of the partnerships: The ILO plays an informal role. If we were doing things that are not best practice, they would raise it formally and informally and their advice would be taken seriously. They are a serious and experienced partner and they have moral authority. So, they influence, but they don’t play a regulatory role. It is informal; I would meet ILO officials regularly and they do have an influence on decisions.25 An industry representitive in the other partnership argues in the same way: ILO has a lot of value added, especially in the way they can advise us. They have moral authority. Knowledge is power. Money is power as well, but they [the ILO representatives] get respected on the board. They are experienced.26


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Among industry representatives who were not on the board, but were members of the partnerships through associations, it is clear that the expertise of the ILO is respected, but that the knowledge of their involvement in the partnerships is limited, and that they still view the ILO with significant scepticism. As one ILO official recalled: We are so bureaucratic. [A tobacco company] told me in this very room: ‘We don’t want to work with you; we just want your knowledge’. They want our expertise but they know that our way of working does not suit the business community.27 This view seems also to be prevalent after the initiation of the partnerships. People that are not involved directly at board level tend to view the ILO’s role as rather minimal, and certainly much less important than the role of those who work directly for the partnerships. As one representative for the tobacco industry argued: The industry is not involved with the ILO, we are only involved in the ECLT that has the ILO as an advisor. I don’t know who brought in the ILO. The tobacco industry does not have close relations to the ILO.28 Ultimately, the question is whether the ILO, through these partnerships, has really contributed to a change in the companies involved On the one hand, there is a clear recognition that child labour is a problem, and that the companies can contribute to alleviating it. On the other hand, there is no admission on the part of the companies that they are a part of the global production structure that contributes to sustaining the conditions that make child labour a desirable solution for employers and parents. As the same tobacco industry representative quoted above continues: We do not have any formal responsibility. We don’t own any plantations down there. We pay the same price for the tobacco from all countries in the world. The problem is that they don’t utilize the land efficiently enough, and that there are too many people that depend on it. ECLT may teach them to use their land better.29

Conclusion The ILO has for decades been seen as one of the least efficient and ‘attractive’ of the multilateral organizations. With a large bureaucracy,

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decisions bogged down in political rivalries, and a structure reminiscent of a long-gone corporatism, the organization has not been well thought of in a world increasingly run according to the ideals of agile organizations, goal achievements, impacts and outputs. Yet, as shown in this chapter, such a structure may nevertheless give rise to new forms of multilateralism conducted between a multitude of actors, including private companies and foundations. We have examined two partnerships that may bear promise of such changes emerging. We do not claim that these are necessarily representative of how the ILO has responded to the challenges and opportunities opened by, among other things, the increasing awareness of corporate social responsibility (CSR). Indeed some of our informants argued that the ILO had missed the golden opportunity it was given through the CSR agenda, the 1996 WTO decision and the Global Compact, and that it had failed to place itself centre-stage in the global debate about the social consequences of the global operations of TNCs. We wish, however, to point to these, perhaps small but nevertheless important, new initiatives in working directly with companies or global-sector alliances. These expose the ILO to new groups that may form an opinion of it that is based less on stereotypical views and more on actual experiences of working with the organization. As pointed out above, in partnerships such as those discussed here, expertise is everything; and for all its limitations, the expertise of the ILO is widely acknowledged. The challenge for the ILO is to be able to capitalize on the work that it is doing and continue exploring new forms of working. In this way it may finally be rid of its image as one of the most persistent and notorious ‘twining plants’ of the multilateral organizations.

6

UNESCO and the Software Companies Bridging the digital divide, or transforming US dominance?

Introduction The revolution that has occurred in information and communications technology (ICT) has brought great benefits to one part of the world but left the rest out, leading to a so-called ‘digital divide’. The resulting situation is in many ways similar to that described in the chapter on health issues (Chapter 4). Moreover, like the pharmaceutical industry, the software industry also is dominated by a ‘networked oligopoly’ (Mytelka and Delapierre 1999). Multilateral organizations could therefore have an equally important role to play here as in the health sector, in order to ensure that the new technological developments benefit the entire world. However, the attempts of the United Nations Educational, Scientific and Cultural Organization (UNESCO) to bring this about through partnerships with ICT companies (notably Intel and Microsoft) have been highly controversial. This is the subject of this chapter. We find that the new partnerships enter right into some of the most divisive issues in UNESCO’s history: the tension between cultural relativism and universalism; local versus global media dominance; local versus global producers of communication technology; and, perhaps most importantly, tensions between the dominant USA and the rest of the member countries. In the view of the critics, Microsoft may achieve what the United States historically never quite managed, to make UNESCO an organization that supports the universal, liberal values of the United States, and at the same time the global capitalist system which it dominates. This chapter will assess whether this view is accurate, and these partnerships mark the final defeat of UNESCO as a truly multilateral institution; or the reverse, whether the PPPs exemplify the willingness of major ICT corporations to contribute to goals negotiated

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within the frame of a multilateral institution. The chapter starts with an introduction to UNESCO. The second part discusses the new challenges it faces related to the ICT revolution. The third part discusses the rise of private-sector partnerships in UNESCO, with a particular emphasis on the partnerships with Intel and Microsoft. The last part discusses broader systemic issues related to the new partnerships.

UNESCO: between controversy and neglect UNESCO from the start has had multiple functions and a rather unclear mandate, resulting from the many competing forces and different motivations involved in its creation. The forerunner to UNESCO was the International Institute for Intellectual Cooperation (IIIC) of the League of Nations. In the period after World War Two the scientific community hoped that a separate organization for science cooperation would be established under the aegis of the United Nations. The French government, whose international role was weakened by the War, supported the claims of the scientists in a bid for renewed intellectual and cultural leadership.1 However, at the same time, the Council of Allied Ministers of Education pressed for international cooperation on education, envisaged as an instrument not only for reconstruction in war-devastated countries but also for international understanding and peace (Ascher 1950). A third force was the United States that insisted that communication should also be part of its mandate (Coate 1992). Originally this meant that the global media should also fall within the area of UNESCO’s responsibility; it later also came to include information and communication technologies (ICTs). While different groups pressed for different functions to be included, significant sections of the international community did not view education, science and culture as worthy topics of multilateral activity at all, notably the USA – largely because, in that country, these are not the responsibility of the federal government. Indeed, federal involvement in education is generally viewed with a great deal of suspicion (Coate 1992). The main justification used for establishing an organization with this mandate was therefore functional; collaboration in education, science and cultural activities was presented as important for the promotion of understanding between peoples and countries and – in turn – to peace building. UNESCO, it was agreed, should perform largely technical tasks, but its overall purpose was to facilitate peace and understanding between nations,

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based on the philosophy that ‘Since war begins in the minds of men it is in the minds of men that the defenses of peace must be constructed’ (American poet Archibald MacLeish, quoted in the preamble to the UNESCO constitution). The first article of its constitution therefore states: ‘The purpose of the Organization is to contribute to peace and security by promoting collaboration among the nations through education, science and culture’ (Article 1, section 2). The constitution further calls on members to ‘collaborate in the work of advancing the mutual knowledge and understanding of people through all means of mass communication and to that end, recommend such international agreements as may be necessary to promote the free flow of ideas by work or image’ (Article 1, section 2). The focus on peace and security as the final goal of UNESCO was met with criticism from two sides. Communities of scientists argued that ‘international scientific cooperation was an end in itself and would always be so’, and it should not be considered simply a means to a higher goal (Ascher 1950: 14). From a different perspective, Reinhold Niebuhr, one of the grand old men of classical realism, argued that UNESCO was ‘in the paradoxical position of performing most useful and necessary functions in the nascent world community but of giving very implausible reasons for the performance of its functions’ (Niebuhr 1950: 3). According to him, the belief that cultural understanding and education would create peace was naïve and historically unfounded, and UNESCO would be better to base its justification on the contributions that it could make to the integration of the emergent world community. As a result of these differing forces, UNESCO was established as an institution with built-in tensions. And it was increasingly affected by US attempts to make it an instrument for its strategy to combat communism, and by opposition from the Soviet Union and, later, Third World countries. This ‘Cold-War’ conflict surfaced on a number of occasions. The US did not always get its way. An example is the 1946 attempt to use UNESCO to legitimize a US initiative to establish a worldwide radio network as a tool in the struggle against communism. Another example is the US attempt to mobilize UNESCO as a propaganda instrument in what became known as the ‘Korean campaign of truth’ in 1950 (Coate 1992). However, in many other cases the US prevailed. One example is the Non-Aligned Movement’s proposal for a ‘new world information and communication order’ (NWICO) in the mid-1970s,2 which was rejected by UNESCO due to opposition from the US, and from major international news agencies most of them based in the United States

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(Wells 1987). Other examples are the proposal to make universal the revision of textbooks designed to ‘re-educate’ the German people in the post-war period, and a proposal for the revision of textbooks to be used in Palestinian refugee camps. Both caused great controversy – over whether education for peace could be universally defined or was a disguise for the spread of liberal, anti-communist ideas; but the US got its way in both cases.3 Underlying all these issues were three closely intertwined conflicts that have continued to divide UNESCO: relativism versus universalism; regulation versus laissez faire in mass media, education and culture; and independence – particularly of Third World countries – versus integration into global (Western dominated) economic and communication systems. In many cases, these issues created a division between the United States and the rest of the member countries. Over the course of the 1970s and 1980s, US criticism of UNESCO increased. This had several different aspects. First, UNESCO was increasingly attacked – not only by the US government, but also by European intellectuals – for being influenced by relativist ideas about culture.4 Second, the US viewed UNESCO as a hotbed of left-wing thought, espousing ideas of state intervention in the press and other areas of communication. The United States characterized its attitude as ‘hostility towards a free society, especially a free market and free press’.5 Third, the US viewed UNESCO as an overly bureaucratic and inefficient organization. As a result of these criticisms, the US withdrew from the organization in 1984, which contributed to a slump in funding and no growth in the regular budget between the mid-1980s and the present day (see Table 3.2).6 It also strengthened the rationale for seeking partnerships with the private sector. However, whereas UNESCO had strong traditions for collaborating with academics and NGOs, it had little experience with collaborating with the private sector. It had from the start a double constituency: it was created as an organization of member states, supported by contributions voted by national parliaments from public treasuries; at the same time, it has always cooperated closely with nongovernmental organizations and individuals. The policy of close cooperation with civil society groups was supported primarily by the French government, and had been a cornerstone in their draft proposal for the UNESCO structure (Coate 1992).7 The private sector was absent from this picture; but from the mid-1990s this was to change.


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The move towards partnerships in UNESCO The first initiative to approach the private sector was the creation of the Private Funding Section within the Bureau for Relations with Extrabudgetary Funding Sources in 1993. As the name of the section indicates, the aim was to raise funds from the private sector. The source of inspiration was UNICEF, which for many years had raised significant amounts from private sources. However, the section was not given much priority in the organization, and the efforts to copy UNICEF’s methods had little success – partly because education, science, culture and communication do not ‘sell’ as easily as children; and partly because the two organizations were so different. Being set up as a fund in the first place, UNICEF had more experience with and was better suited for raising and implementing private donations. An internal survey conducted in UNESCO in 1995 found that private-sector funding had been given to 164 individual projects in different departments, but that this was based primarily on personal contacts rather than being an overall strategy.8 Responding to this, in 1997 the first guidelines for private-sector fund-raising activities were published (UNESCO 1997). UNESCO here tried to establish a more unified approach, and avoid the possible risks involved. However, the basic concern was still fundraising. At this point only one agreement of a more wide-ranging kind had been signed. This was the agreement with Rhône Poulenc that was signed in 1994 to support World Heritage sites, in which support was given not only in the form of cash donations, but also by the contribution of expertise.9 The second major partnership signed by UNESCO was with the cosmetics company L’Oréal. This started as a project by L’Oréal’s subsidiary Helena Rubinstein to give prizes to female scientists in order to promote the number of women in science. UNESCO lent its name and prestige. In 1999, the project was extended to include the whole of L’Oréal and it included also grants to female scientists, to all regions of the world. Then in 1999 came the speech by Kofi Annan in Davos that firmly put cooperation with the private sector on the agenda for the entire UN system. In spite of this being a personal initiative on the part of Annan, it was understood as a signal from UN headquarters to place more emphasis on partnerships with the private sector, and it had significant impact on UNESCO. In 2000, a new Partnership Section was created, within the Division of Relations with National Commissions and New Partnerships, and soon partnerships were on everybody’s lips.

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However, the drive towards partnerships was not uniform across the organization; for good reason, the main impetus came in the communication and information (CI) sector.

UNESCO and the ICT revolution The ICT revolution brought new challenges to UNESCO at the same time as it accentuated old fault-lines. The glaring inequality in access to computers and software across the world10 came to be seen not only as a problem in itself, but also as an impediment to reaching many of UNESCO’s other goals. One of those goals was Education for All, based on an initiative launched at the World Education Forum in Jomtien, Thailand, in 1990 as an international commitment to bring the ‘benefits of education to every citizen in every society’. It aimed to mobilize resources to improve access to education particularly for ‘hard-to-reach groups’. The commitment was reaffirmed in Dakar, Senegal, in April 2000, and then again in September 2000, when 189 countries and their partners adopted two of the EFA goals among the eight Millennium Development Goals (MDGs) (Sperling 2001). ICT was from an early stage identified as a key to providing quality education for all. Although early hopes – that the introduction of ICT into schools would yield major breakthroughs in learning skills – have been found hard to sustain empirically, there is general consensus that ICT used properly may serve several valuable functions in education. It may be (i) a pedagogic tool that will provide a new framework to foster an improvement in teaching and learning practices; (ii) a necessary instrument for preparing children to handle ICT systems in their future professional lives; (iii) a device to give access to sources of information and knowledge; and (iv) a management tool for teachers and school managers (Hepp et al. 2004). However, the use of ICT requires costly investment in equipment and proper training. According to the World Bank, the great challenges today are to achieve the appropriate integration of ICT into overall education systems and institutions, and to ensure that the new technologies become agents of expanded access and equity and increase educational opportunities for all, not just for the wealthy or the technologically privileged (World Bank 2002a). In response to the grim data that emerged concerning differences in access to communication technology, the UN Secretary-General’s office launched an ICT Task Force in 2001 to find solutions to the increasing discrepancies. It also took the initiative for the first World


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Summit on the Information Society, taking place under UN auspices, in Geneva 2003. From the start, the ICT task force focused on partnerships with the private sector as a means to bridge the digital divide. As argued by the Secretary-General, Kofi Annan, at its launch: Fortunately, the use of ICT for development is one of the areas where the long-term interests of the international community, governments and private business most obviously coincide. Empowering the poor and the marginalized can unleash vast creative energies. It can help level the playing field for entrepreneurs and for small- and medium-size businesses. And it can help expand and create new markets. Private companies can, in short, ‘do well by doing good’. (UN Secretary-General Kofi Annan: speech at the launching of the ICT Task Force, 20 November 2001) UNESCO increasingly adopted this view. The signals from the Secretary-General were frequently referred to when UNESCO started to debate the desirability of entering into partnerships with the private sector (Baker 2003). Director-General of UNESCO Koïchiro Matsuura also referred to UNESCO’s long experience with working with various different actors as an advantage when entering into partnerships: Let me now turn to another role that is proving important for redefining UNESCO’s profile and actions, namely, the role of the ‘honest broker’ within circuits of international cooperation and partnership. This role, which UNESCO is well equipped to perform by virtue of its neutrality, its commitment to universal values and its long experience as a catalyst of collaboration, looks set to grow in importance in the years ahead. (UNESCO 2003) However, in the ICT sector, partnerships with the private sector could mean a number of different things, and were not unproblematic. There were at least two critical issues involved, both familiar to UNESCO. First, UNESCO voiced concerns that the internet, which is predominantly in English, could threaten the diversity of cultures and languages that UNESCO was mandated to protect. Responding to this and other issues arising from the ICT revolution, UNESCO had focused on ‘info-ethics’ as early as 1997, with the principal objective

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‘to reaffirm the importance of universal access to information in the public domain and to define ways in which it may be achieved and maintained in the Global Information Infrastructure’.11 The second, related, and even more controversial issue was the conflict between patent-protected and Free and Open Source Software (FOSS). In order to understand the controversies around future partnerships, we now turn to this question. UNESCO and the Free Software Movement FOSS, the free software movement, denotes a loosely coupled network of groups and individuals attempting to challenge the nearmonopoly of Microsoft’s Windows operating system and its compatible software. The origin of the movement was a group of scientists led by Richard Stallman who, building on the spirit in the labs at MIT during the days of development of the first operating systems, launched the GNU (GNU’s Not Unix) project in 1984. The aim was to develop a Unix-compatible portable operating system with 100 per cent free software, so that its users would be free to redistribute the whole system, and free to change, and contribute to, any part of it. It took many years of work by hundreds of programmers to develop this operating system, some of them paid by the Free Software Foundation (FSF), but most of them volunteers. In 1991, the last major essential component of a Unix-like system was developed: Linux, the free kernel written by Linus Torvalds (Stallman 1999). Subsequently, many other programmers have joined, and various such open source programs have been developed. Although the fact that a program is based on FOSS does not always mean that it does not cost anything (it is often emphasized that ‘free’ in this case should be interpreted in the way it is used in ‘free speech’, not as in ‘free beer’),12 it comes with many benefits compared to licensed software for poor countries. First, if a FOSS program costs anything, it generally costs much less than a proprietary software program. Second, as soon as you have purchased the licence, you are free to distribute it to other people. And third, due to the open standards, you are free to adapt the program to suit your preferences. This then enables capacity building and ensures that technology users may have control also over the program that they use to store their data. In sum, the use of FOSS may, at least in theory, prevent dependency on proprietary software (in other words, on Microsoft), encourage the development of computer skills around the globe, and save users millions of dollars.


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At present, many FOSS products are gaining significant market share. A January 2005 survey found that 68.23 per cent of all websites were hosted on servers running the FOSS program Apache, whereas only 20.86 per cent were hosted on a Microsoft-equipped server. Moreover, use of Apache was increasing rapidly, whereas Microsoft was stagnating. A series of surveys also show that, although Microsoft’s operating systems, internet browser, etc., dominate the market, they are losing share to FOSS solutions.13 There have been several open controversies between FOSS users and Microsoft. The most famous is probably the one between Microsoft and the government of Luiz Inácio Lula da Silva in Brazil. When coming to power in 2003, Silva’s top technology officer Sergio Amadeu (author of the book Digital Exclusion: The Misery in the Information Era) was set the task to significantly increase the computer density of the country, and improve the technical skills of the Brazilians. The government first instructed all agencies of its federal bureaucracy to move to Linux and the free software programs that run on it. In the second phase, the government intended to encourage private citizens to make the switch, by providing a partial subsidy to lower-middle-class people for the purchase of 1 million computers running Linux and twenty-five other open source programs. Microsoft first responded by lobbying the government to deter them from signing governmental Linux use into law, and by donating software to NGOs and schools – a strategy it had already used in a series of other countries where it was facing challenges (Wired Magazine, 16 November 2003). This practice led Amadeu to charge that ‘Microsoft is like a drug pusher who gives free samples to get consumers hooked and then starts charging for the product’, an allegation that prompted Microsoft to sue him (CNN Money, 17 January 2005).14 However, although FOSS has gained more and more users, particularly among developing country governments, most multilateral institutions have failed to promote it. This includes the World Trade Organization (WTO) and the World Intellectual Property Rights Organization (WIPO) who, in the FOSS community, are viewed as defenders of proprietary software.15 The first World Summit on the Information Society (WSIS), in 2003, was therefore eagerly anticipated by the FOSS community as an opportunity to put the benefits of FOSS on the international agenda. Various groups promoting FOSS had registered as participants. However, the strong presence of the United States, and its defence of Microsoft and other holders of proprietary software technology, threatened to push FOSS off the

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agenda. This concerned, among others, the Linux Professional Institute (LIP). In a letter to the delegates they argued: Use of FOSS methodologies has proven to improve technology access in developing countries . . . Emphasizing private property in IT, without recognizing its detriments and without calling attention to collaborative approaches to IT ownership and innovation such as FOSS, is in our view, a regressive step that would in fact set the realization of the Information Society backwards rather than move it forward . . . To deemphasize FOSS while emphasizing proprietary ownership of IT resources is to increase concentration and dependence while denying freedom and selfsufficiency.16 However, in spite of the efforts by the FOSS community, FOSS was only indirectly referred to in a ‘watered-down’ statement in the final declaration: Access to information and knowledge can be promoted by increasing awareness among all stakeholders of the possibilities offered by different software models, including proprietary, open-source and free software, in order to increase competition, access by users, diversity of choice, and to enable all users to develop solutions which best meet their requirements. Affordable access to software should be considered as an important component of a truly inclusive Information Society. (World Summit on the Information Society, Declaration of Principles, B3 §27) As a result, the only multilateral organization that was viewed as a real friend of the FOSS movement was UNESCO. UNESCO had already started to lend its support to the Free Software Movement in 2001. This was a part of the ICT for Development agenda (ICT4D) and the efforts to promote ‘knowledge societies’. From 2001, UNESCO hosted a free software internet portal,17 facilitated the development of key software tools for processing information, and promoted their utilization.18 These software tools are distributed free of charge; the objective is to empower the users by giving them access to some key technology for development and knowledge sharing, access that most of them otherwise could not afford. UNESCO also hosted conferences and seminars in developing countries to spread information about the possibilities for utilizing free software, and the


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representatives of the Information and Communication Sector were popular speakers at the annual Free Software Meeting. UNESCO thus came to be viewed as a key partner in the Free Software Movement. It therefore came as a great shock when, in late 2004, the news came out that UNESCO had signed a partnership with Microsoft. It prompted leading members of the FOSS community to denounce it as neo-colonialism (Da Silveira, Sibaud and Couchet 2005). But was it? And what was the reason for the sudden change of strategy on the part of UNESCO? The next section will discuss this in the light of the general drive towards partnerships and the return of the United States to UNESCO.

UNESCO and partnerships with computer and software companies UNESCO’s first agreement with a computer company was signed in April 2003, an agreement with Hewlett Packard aiming to alleviate the brain drain from south-eastern Europe.19 Hewlett Packard was to donate equipment to universities in the region and facilitate contacts between them and international colleagues, often their own expatriates. As a result of the agreement, Hewlett Packard had by 2005 given approximately US$250,000 in cash and US$150,000 in equipment for the project that was administered by UNESCO’s Division of Higher Education and implemented by its regional office in Venice. By most parties, the Hewlett Packard agreement is viewed as a success, and this kind of project is also to be extended to countries in North Africa. However, according to the classification of privatesector agreements based on levels of commitment, developed by the Programme Specialist in the Private Sector Department (Letter of Intent; Memorandum of Understanding; Project Agreement; and Partnership Agreement involving the Director-General and the CEO of the company), the HP deal qualified only as a Project Agreement, not as a fully-fledged Partnership Agreement. It was specific, concrete and involved primarily the operating staff and field officers. In 2003, the United States rejoined UNESCO,20 and it made it clear from the start that it intended to strongly encourage partnerships with the private sector. The Director-General’s rhetoric about partnerships was viewed by many as serving to facilitate the smooth return of the United States, but it was also clear that the interests of

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the United States conflicted with the policies of the Information and Communication Sector. As early as 2001 the conservative US Heritage Foundation had complained about UNESCO’s approach to governing the internet and ensuring universal access: Matsuura has voiced concerns that the Internet, which is predominately in English, threatens the ‘diversity of cultures and languages’ to such an extent that government must intervene. These proposals are fundamentally at odds with U.S. free market policies, which seek to reduce government intervention in the market and regulation of electronic commerce except when it involves criminal activities. (Schafer 2001: 6) Moreover, the positive attitude to FOSS displayed by the leader of the Information and Communication sector, Philippe Quéau, was not welcomed by the United States. Quéau was a high-profile defender of knowledge and information literacy as a public good, and had on several occasions criticized the patent protection regime protecting software products. He argued on one occasion that ‘the concept of the “public domain” urgently needs to be revitalized, strengthened and protected against the voracity of private interests at a time when private operators are seeking to extend their control over information’ (Quéau 2000). In another article, he argued that, in the context of promoting information literacy, global information and software ‘commons’ (information in the ‘public domain’, open source software) allow for more universal access to information, which is a condition for better education (Quéau 2002). Although he was careful to point out that this was not a conflict between the United States and the rest of the world, but rather between the owners of knowledge and the excluded, his viewpoints were clearly not welcomed by the Americans. In mid-2003, Quéau was reassigned to Moscow as director of the UNESCO office there. Elizabeth Longworth, a New Zealand lawyer with experience of both the private and the public sector, took over as the head of the Information and Communication sector, and this opened the way for more wide-ranging agreements. One of her first actions was to call a meeting with a number of large ICT companies in order to explore the potential for partnerships, and to present the potential benefits of working with UNESCO. The justification was simple and obvious: that UNESCO had neither the financial clout nor the technical capacity to reduce the digital divide – either alone


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or in collaboration only with its traditional partners, the NGOs and academics. The first agreement that resulted from this contact was the Memorandum of Understanding signed with Intel on 9 November 2004. The background was UNESCO’s attempt to bring ICT into the classroom. One of the field officers of the Information and Communication sector had previous experience of working with Intel, and UNESCO presented its plans for teacher training to the company. Intel had by then already trained two million teachers in ICT through its Teach to the Future programme, and a deal was quickly reached concerning collaboration between UNESCO and Intel for the development of a syllabus for further teacher training. This agreement was fairly concrete and limited in scope, and caused little controversy. That was not the case with the partnership agreement signed with Microsoft a few days later (on 17 November 2004), which caused outrage in the FOSS community. As we have seen, in an article signed by a number of public-sector managers and representatives of free software organizations it was argued that the agreement was an example of ‘neo-colonialism’ in the computer age (Da Silveira, Sibaud and Couchet 2005). The critics charged that UNESCO had not only abandoned its former position of support to free software, but had put the development of countries and communities, cultural diversity and political independence in jeopardy: In the information society, only a country mastering its software tools may hope to control its own development. If it does not, it becomes a colonialized victim with regard first to economical and cultural issues, and then to political ones . . . We fear that through this partnership, with the involuntary assistance of UNESCO, Microsoft seeks to put developing countries not into a sustainable development scheme but into a durable subjection one. We fear that Microsoft’s ‘gift’ is actually the ‘kiss of death’ for developing nations’ research and software industries. Bill Gates’ offer to UNESCO is a money-making business opportunity for Microsoft, while free software is a real alternative offering cultural, scientific and technological advances for Southern countries. (Da Silveira, Sibaud and Couchet 2005: 3) In the next section, we will discuss the broader systemic implications of UNESCO’s agreement with Microsoft.

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The Microsoft agreement: leveraging UNESCO’s credibility, or giving in to Goliath? The public outrage regarding the Microsoft agreement led UNESCO to circulate a note to explain the situation (UNESCO 2005b). Here it was emphasized that the agreement was intended to maximize the impact of UNESCO and thus ‘provide our Member States with the best return for their contributions to UNESCO’ (UNESCO 2005b: 2). It was furthermore argued that the agreement was a means of ‘re-orienting private sector resources towards UNESCO priorities’ (UNESCO 2005b: 2). It was claimed in the note that the agreement would leverage UNESCO’s credibility: ‘It is our experience, from the field, that UNESCO’s greatest asset lies in its credibility as an honest broker in all our fields of competence. Leveraging this credibility towards gaining the most for our Member States is the fundamental philosophy underlying the various major partnerships we are seeking’ (UNESCO 2005b: 2). In order to assess whether this is the likely outcome, let us consider the process in which the partnership was conceived; the extent to which it primarily suits Microsoft’s interests (as argued by the opponents quoted above) or ‘re-orients’ private-sector resources towards UNESCO’s priorities; and whether it is likely to foster changes in the attitudes and practice of the two parties. The process leading to the signing of the Microsoft agreement differed significantly from that leading to other agreements. Whereas the starting point for other agreements was often a concrete project, in the case of the Microsoft agreement it was a high-level decision in principle to cooperate. It began with a contact between Microsoft and a field officer in Cairo. The process quickly reached the DirectorGeneral’s office, which contacted the IC department in order to give the agreement content. Only towards the end of this rapid process was the Private Sector Department involved. And in spite of the fact that the majority of the components of the agreement relate to education, the education sector was not consulted at all. The agreement that resulted had broad objectives that were generally in accordance with UNESCO’s 2002–7 Medium-Term Strategy (UNESCO 2002). This placed ICT high on the agenda – as a field of activity for UNESCO and as an element in various other fields. The agreement furthermore listed a series of ‘areas of collaboration’.21 However, the concrete activities mentioned were for the most part limited to already-existing projects, most of them initiated by Microsoft.


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There are three exceptions. The first is the project (to develop a syllabus for teacher training on integrating ICT into teaching) in which UNESCO is also collaborating with Intel. The aim of this project is to create a master curriculum targeting those offering certificated courses on teacher training and on the use of ICT. It will also develop guidelines for review of those courses. Microsoft was envisaged to contribute know-how on designing ICT products and services for educationalists, and UNESCO’s main contribution should be in bringing different groups together to jointly develop this syllabus. The second exception is a knowledge community project. The idea of this was to create ‘web based communities of practice’ that would share knowledge around three themes: Technology Solutions in Education, Multilingualism in Cyberspace, and ‘Information for All’. Microsoft would contribute the Solutions Sharing Network software (Open Application Sharing platform) and expertise on content. Finally, Microsoft was to contribute equipment and expertise to UNESCO’s Unlimited Potential programme which focuses on improving ICT skills among underserved communities through community centres or telecentres. Microsoft also made some financial contribution, but the sums were extremely modest. With regard to the knowledge community project, UNESCO is to contribute $30,000 and Microsoft $70,000. Regarding the community telecentre project it is only stated that Microsoft had contributed $75,000 and UNESCO $25,000 to a pilot project in Tunisia. With regard to the teacher training project, no sum is mentioned at all. The other projects were Microsoft’s own, and were mostly initiated in the context of Microsoft’s corporate social responsibility programme. In some of these projects the role of UNESCO was relatively unclear. First, there was an ‘innovative teachers’ network’, the goal of which was to allow teachers to participate in networks sharing the same concerns and interest. Microsoft was to contribute the structure and framework necessary, whereas ‘UNESCO will explore how to facilitate content development’ (Art. 4 (iii)). Second, it is stated that Microsoft ‘may invite UNESCO to participate on the board of its Partnerships for Learning program initiative’, which is one of the flagships of Microsoft’s corporate social responsibility programme for which the stated objective is ‘to enable holistic solutions to the problem of access to current software and the use of ICT to improve learning’. Third, according to the agreement, Microsoft and the International Development Research Center may invite UNESCO in driving the so-called Global Support Network’s five-year partnership and to attend consultation meetings (Art. 4 (vii)). The

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Global Support Network is an initiative of Microsoft and the International Development Research Center to develop telecentre support networks. Fourth, UNESCO will develop guidelines with ‘best practices’ for the Microsoft project ‘Digital Pipeline’, under its Computer Refurbishment and Vocational Skills programme. This is a project in which Microsoft helps orchestrate a PC pipeline from developed countries to developing countries. Finally, UNESCO was to assist Microsoft in its Local Language Program, in which Microsoft develops desktop software and tools in local languages. UNESCO’s role is envisaged as identifying which languages should be prioritized. Thus it may be argued that, in concrete terms, Microsoft’s contribution to reaching UNESCO’s goals is modest. In financial terms it is negligible. According to UNESCO, the lack of mention of money in the agreement was due to Microsoft’s preference to avoid expressions of collaboration in terms of funding levels in order to avoid common accusations that they buy their partners (UNESCO 2005b). In sum, the concrete impact of the projects seem modest; but how about the strategic impact? One of the effects of the agreement is that significantly more emphasis is put on ICT in education than is stipulated in UNESCO’s programme. Whereas ICT naturally occupies a significant portion of the strategy for the CI sector, only one of thirty-two sub-sections in the education strategy is devoted to the promotion of the use of ICT. Although the Microsoft agreement may indirectly affect other parts of the strategy for the education sector (for example, ‘Promoting experimentation, innovation and the diffusion and sharing of information and best practices as well as policy dialogue in education’ (§ 75)), the major focus on ICT and education resulting from the signing of the agreements may clearly signify a shift of focus. Furthermore, the agreement does signify a shift of strategy related to FOSS. The agreement does not exclude the use of FOSS in UNESCO projects or inhibit it from supporting a FOSS initiative; in a briefing note on UNESCO’s position vis-à-vis FOSS of April 2005, it is argued that, ‘[d]espite the agreement signed between UNESCO and Microsoft, UNESCO remains very interested in the free and open source development model, and will continue to support the ongoing and future activities in this field’ (UNESCO 2005a: 2). But, as the note goes on to say, ‘Microsoft has major market penetration in many of the countries where UNESCO is trying to build capacities. This is the reality we are duty-bound to recognize. The philanthropic programmes offered by Microsoft are a significant


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opportunity which UNESCO assesses it cannot afford to ignore’ (UNESCO 2005a: 12). Whereas it is clear that UNESCO does continue to work with the FOSS community, it is nevertheless clear that the latter feels that it has lost its main multilateral supporter. In order to draw some general conclusions about how UNESCO’s authority and legitimacy have evolved through the process of collaboration with the private sector, one has to take a broader look, and to include agreements other than that with Microsoft.

Partnerships, authority and legitimacy of UNESCO Partnerships with the private sector have clearly had an impact on UNESCO. However, the changes that may be observed are clearly also due to a related shift in the operating logic of the organization, which has been promoted by the member states, and particularly the United States. The Medium Term Strategy 31/C4 was based on results-based management and monitoring, a new feature for UNESCO (UNESCO 2002). Specific goals and targets were outlined and each department was to be evaluated according to those targets. According to interviewees, the introduction of resource-based management, and the conscious ‘mimicking’ of the private sector, had rendered the organizational culture of UNESCO more similar to that of UNESCO’s private partners. According to one UNESCO official: ‘People here have had to get rid of a lot of stereotyped conceptions. They have discovered that many of our partners are no better organized than us, but no worse either.’22 Thus, although some adjustments have had to be made when working with the private sector, these were not seen as much more significant than those that had to be made when working with academics and NGOs. From the management’s perspective, an important experience was that people found the differences between UNESCO and the private sector were not as great as earlier thought: One of the most important experiences we have had here in UNESCO from working with the private sector is that people have realized that they have a lot in common; the people in the private sector are not so different from themselves. There are some exceptions – sometimes you meet the classical industry types. But in general people discover that they speak the same language. That goes perhaps particularly for people from the large companies that have large CSR departments. These are the people that they normally send to work with us, and people

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Development Issues in Global Governance here discover that they are kindred spirits. They are committed to the same objectives.23

However, other people pointed out that this was true mainly with regard to the CSR departments of large multinational companies. This brings us to the question of whether these companies have changed as a result of interaction with UNESCO: to what extent do companies start to think in similar ways to UNESCO? Are there signs that working for jointly-established goals may override profit motives? One experienced UNESCO official made the following comment about the evolution in thinking among large transnational companies over the course of the interaction between UNESCO and the private sector: In the beginning the companies wanted to give money and get the logo. Now the good companies want staff involvement. They are ready to fund, but funding comes later. But there is a great imbalance between MNCs and SMEs. It is clear that the MNCs have come much further. And still probably the majority of MNCs have no idea about sustainable development or anything like that. There is another group that does the talk but not the walk. They may give some money, but nothing more. But a growing minority of pioneers have understood it. They understand the needs to connect with communities. This is one of our strongest assets: the connection with communities.24 Thus, while UNESCO ‘mimics’ the private sector, the large companies establish departments that ‘mimic’ those of multilateral organizations or bilateral aid organizations. Microsoft, for example, allows staff to devote a set proportion of their working day to philanthropic purposes, and it has allocated one official to work specifically with UNESCO. This does not mean that the logic of the company has changed; indeed, many of the initiatives may be interpreted as efforts to create new markets in regions where the demand is currently limited. However, it is the case that one part of the company is developing a culture which has more in common with the multilateral institutions, and perhaps large NGOs, than with the general international business culture. The implications for the authority and legitimacy of UNESCO are therefore mixed. Allying with big business has certainly resulted in the alienation of the FOSS community; but it is possible that channels for influence have been opened towards some of the world’s largest and most powerful companies.


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Conclusion UNESCO has from the start had one of the most unclear mandates of any UN organization; and many, partly contradictory, interests have affected its operation. Of particular importance has been the United States, which for much of the post-war period attempted to make UNESCO a part of its global anti-communist campaign. Its only partial success in this endeavour, coupled with impatience with UNESCO’s bureaucracy, led the US to withdraw during the Reagan administration. This greatly affected UNESCO, which, in the 1980s and 1990s, was one of the weakest UN organizations. Recent developments have brought new changes to UNESCO. It is evident that the United States intends to get ‘value for money’ after its return to UNESCO in 2003, and it exerts heavy political pressure on many fronts. The drive towards partnerships in UNESCO, as we have seen, started long before the US return; and, as this book shows, it is an ongoing process in all the UN organizations. However, pressure from the United States may certainly have added to this process. Does this imply that the US may come to dominate the organization through its partnerships with private companies? There is no basis for thinking of Bill Gates as a confidant of the US administration. On the other hand, it is clear that the sort of ideology favoured by the US has gained ground in UNESCO, and its days as an outpost of resistance to neo-liberal thinking in the multilateral system appear to be coming to an end. Two events in the autumn of 2005 are revealing in relation to this ongoing controversy. On 20 October the US experienced its first main defeat after returning to UNESCO, when 148 of the member countries voted to approve a new global convention for the protection of cultural diversity. Only Israel joined the US and voted against, and Australia, Honduras, Liberia and Nicaragua abstained. The treaty’s main sponsors, France and Canada, maintained that it would re-establish countries’ ‘sovereign right’ to promote diversity in ‘cultural expressions’ and give them ammunition to counter demands that they renounce the use of subsidies, quotas, and other measures to support domestic cultural products such as films, broadcasting, and publications. Washington argued that governments could use the new convention to place limits on imports such as Hollywood movies and US-produced music and television programming. It is unclear what effect the convention will have on trade issues (Bridges 2005). But, regardless of its effect, it was a clear reminder to the US that its power in the multilateral organization is not without limits.

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The second event was the Second World Summit on the Information Society (WSIS) that took place in Tunisia in November 2005 in the midst of heated debates about control of the internet, censorship and access to information. One of the most controversial issues was the right of the US-based NGO, the Internet Corporation for Assigned Names and Numbers (ICANN), to technically manage the internet. The suggestion to leave the management of the internet to a UN body was scrapped, but it was agreed that a new Internet Governance Forum (IGF) be formed to oversee the activities of ICANN. However, in this debate, the division between the US and the rest of the world was less clear than in the first case. Several actors from other parts of the world saw the benefit in leaving the task to a competent and experienced body, irrespective of its nationality. Thus, in this situation, although ICT companies (mostly US-based) are clearly exercising their market power, this may nevertheless be the most efficient way of securing a global public good. The case of UNESCO’s collaboration with Microsoft as opposed to FOSS offers a counter-example. Where does this leave UNESCO and its legitimacy as a multilateral organization? The WSIS and other large-scale events have not only brought new controversies into the public light; they have also drawn public attention to UNESCO. Although UNESCO has been criticized by activist groups for playing along with Microsoft and other large ICT companies, perhaps a worse fate would be oblivion. Taking on new issues and new battles of the kind described in this chapter is certainly risky for the organization; but this may provide UNESCO with new opportunities for proving its relevance, and hence establish legitimacy through its achievements.

7

Water For All The World Bank and private water companies1

Introduction In this chapter we examine the case of water supply provision and the World Bank. As in other chapters, we wish to examine the empirical experience of the interaction between the ‘norms’ of multilateralism and those of the market system. What are the terms of engagement of these two systems, and what is the outcome of this engagement in a particular setting? The experience analysed in this chapter is based primarily on Latin America in the last decade, for it is here that the World Bank has most actively promoted involvement of the private sector. But before examining this case, it is necessary to set the scene. What are the special characteristics of the water supply sector – in economic and political/normative terms – by comparison with other sectors? And what are the particular characteristics of the World Bank – in terms of its policies towards the private sector – by comparison with other multilateral organizations? Our concern is with the urban water supply sector.2 It is generally accepted that the provision of piped water to an urban centre constitutes a ‘natural monopoly’ in economic terms; that is, if it was left to the market, a single monopoly supplier would dominate in any particular city. In addition, water is widely recognized as a basic need. For both these reasons water supply has often been the responsibility of government, whether national or local. But even where government is the supplier, this is often in collaboration with the private sector. There are many different models of exactly how this works. In many countries, and especially the poorest, there are no local companies that are in a position to operate a major urban water supply system; their place has been taken by a foreign investor. A very few, very large companies from Western countries have expanded their market into other parts of the world.3

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Because drinking water is seen as a basic need, the political/ normative context of the water supply sector is rather different from that of other infrastructure services, such as electricity and telecommunications. Drinking water has long been a priority issue on the international development agenda: from the Water Supply and Sanitation Decade of the 1980s to the Millennium Development Goals (MDGs) of 2000, when ambitious targets were set for improved coverage. And it can be a high-priority and controversial national issue. ‘Water For All’ is a common slogan; but all have water (for without it, they die), so that the key questions in practice are: At what price is water available? How accessible and reliable is the supply? What is the quality? Simply providing more water in a particular city is by far from the whole story. There are many examples of public water supply systems where poor urban dwellers pay far more per cubic metre of water (purchased in small quantities from vendors) than do the rich; or have to wait long hours at a public tap. Thus ‘the devil is in the detail’, when it comes to water supply for the poor: which households are served, what tariff levels are applied, etc. The World Bank is only one of several multilateral organizations involved in the water supply sector. Other key UN agencies include UNICEF, WHO, and UNDP. But these have very limited funds for investment in major urban systems, so it is mainly the World Bank (and regional development banks) that are of relevance when it comes to involvement of the sector partnerships in urban water supply provision.4 The World Bank has generally been regarded as more positively inclined to the private sector than other agencies of the UN system. This was especially so in the structural adjustment era of the 1980s and early 1990s,5 although conditionality has been gradually replaced by a more indirect approach: to ‘create a favourable investment climate’, to encourage ‘policy dialogue’, to provide technical assistance etc., albeit often accompanied by loans.6 In this chapter we focus on the World Bank’s efforts to encourage private investment in infrastructure, and especially water supply. This is one of the more explicit, and controversial, manifestations of its private-sector-related activities. In brief, the following case study shows that the World Bank hoped, perhaps naively, that it could achieve a ‘win-win’ situation through Private Participation in Infrastructure schemes (PPIs), as they are called in the World Bank; that private sector investment would be increased, and that the poor would be better served. But this, in many cases, did not happen. The private sector – here represented by

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a very few large international companies – was indeed interested in expanding into new markets. For them, provision of water to the poor was not an important objective in itself, but they welcomed the involvement of the World Bank. For the World Bank, however, provision of water to the poor was only one of several important objectives. Another important objective was macro-economic: to reduce the drain on the governments’ budgets from the operation of public utilities. It was especially this that rendered the hoped-for ‘win-win’ situation difficult to achieve in practice. The situation was aggravated by the fact that several Latin American countries at this time suffered serious macro-economic crises (leading, in the case of Argentina, to a massive currency devaluation). The private companies were not prepared to reduce profit (or increase risk) for the benefit of the poor; and the Bank was unable, and perhaps hardly tried, to alter the companies’ behaviour. In effect, the Bank broadly accepted the rules of the market and the necessary consequences. One might claim that it had no choice – having no effective instrument by which to influence the firms concerned. One might also suggest, however, (i) that its concern with macro-economic issues (maximizing fiscal gain) was greater than its concern for the poor; and (ii) that having committed itself to targets and performance indicators, based on the extent of private involvement, it was reluctant to fail on this score.7

The World Bank and the private sector The International Bank for Reconstruction and Development (IBRD) includes not only the World Bank but also a private-sector arm, the International Finance Corporation (IFC).8 As Miller-Adams has pointed out, the Bank (as opposed to the IFC) is, paradoxically, illequipped to deal with the private sector: The World Bank’s relationship to the private sector is marked by a central contradiction. The Bank was designed from the beginning to promote a global capitalist economic order, but it can lend only to governments or with a government guarantee. (Miller-Adams 1999: 34) But the Bank has always, though to varying extents, tended to argue the merits of the private sector. This was especially the case in the 1980s. And in 1991 the World Development Report (WDR) promoted the view: ‘let markets work unless it is demonstrably better to step in’ (World Bank 1991: 5). More recently there is some

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evidence of a move towards the middle ground, and a more nuanced position concerning the appropriate roles of state and market, as summed up in ‘Private Sector Development Strategy – directions for the World Bank Group’, April 2002 (World Bank 2002b). Private initiative, unleashed in competitive markets, is key to promoting growth and poverty reduction, in parallel with public sector efforts . . . PSD is about a good balance between the complementary functions of the state and the private sector. It is about judicious refocusing of the role of the state, not about indiscriminate privatization. (World Bank 2002b: i) Notice the image of the private sector as a powerful force to be ‘unleashed’, but also the advocacy of a ‘balanced’ approach. The 2002 report argues for private-sector involvement both as ‘opportunity’ and as ‘empowerment’ – in line with the two ‘pillars’ of World Bank strategy as outlined in the WDRs. In non-competitive markets, case by case decisions are required to assess whether public or private provision may be preferable depending, in particular, on whether more risks for commercial performance can be shifted effectively to the private sector . . . (World Bank 2002b: iii (emphasis added)) One can note a continuity between this report and both earlier and subsequent WDRs.9 The categorization into ‘opportunity’ and ‘empowerment’ echoes the earlier and much contested WDR 2000/1 on poverty.10 The ‘empowerment’ argument, recommending a mixed state and private-sector approach, anticipates the WDR 2004 ‘Making Services Work for Poor People’, while the ‘opportunity’ argument anticipates WDR 2005 ‘A Better Investment Climate for Everyone’. The WDR 2005 is also fairly consistent with recent World Bank publications; not surprisingly, since some of the same people were involved in both. A detailed comparative analysis that was undertaken of WDRs from 1978 to 2001 concludes: Although they have always espoused a neoliberal vision, and it is apparent that the WDRs are strongly market-oriented in their assumptions and prescriptions, they are rarely dogmatic or crude in their discussions . . . As far back as 1983, we can find the

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statement that ‘the factor determining the efficiency of an enterprise is not whether it is publicly or privately owned but how it is managed . . . ’ They strive assiduously to present themselves as occupying the pragmatic middle ground. (Mawdsley and Rigg 2003: 278) This tendency, we suggest, is more marked in recent years, but as Mawdsley and Rigg interestingly note, in the new version of the state/market debate: ‘ . . . it is clear that the state is not only being relegitimized to support the market, but increasingly is being reinvented to operate itself on market mechanisms and assumptions’ (Mawdsley and Rigg 2003: 279). To what extent the case for the private sector is ideological is, of course, much disputed. It is often claimed that the Bank is under pressure from its major shareholder, the US, in favour of neoliberal economic views. In the 1980s, the era of Reagan and ‘the Washington consensus’, this certainly seemed to be the case (although the US was not alone in promoting such views). The debate over the Asian Miracle study can certainly be interpreted in this light (see Wade 1996). The question here, however, is rather more specific: to what extent did the US force the private-sector agenda on the World Bank? Here, informed opinions differ to some extent. According to Jonas Haralz, the Nordic Executive Director at the World Bank for several of the crucial years, and author of the chapter on the IFC in ‘The World Bank: its first half century’, the US very clearly exerted influence – notably in connection with the request for a capital increase to the IFC, intended to be concluded in 1990: The message was clear: if the World Bank wanted its affiliate to receive the resources necessary to grow, the Bank would have to accommodate US concerns over its private sector efforts . . . The US Treasury’s attitude and actions regarding this whole issue was rooted in politics and ideology. In the debate in the board, only Canada supported the US, with Japan neutral. (Haralz, quoted in Miller-Adams 1999: 44–5) But, according to Miller-Adams, the World Bank was already coming independently to the conclusion that it could do more to support the private sector, so that, although ‘a campaign to instil a private sector ethos at the Bank was led by the US Treasury Department’ (MillerAdams 1999: 43), ‘[c]ontrary to popular wisdom, the Bank’s private

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sector development agenda was not something imposed on the institution by its largest member’ (Miller-Adams 1999: 65). In 1992, a new Vice-Presidency for Finance and Private Sector Development was established as one of the three thematic VicePresidencies; by 1998 it had a staff of 700. In 1997 there was a reorganization into networks: FPSI (Finance, Private Sector and Infrastructure), PREM (Poverty Reduction and Economic Management) and ESSD (Environmentally and Socially Sustainable Development). ‘By the end of fiscal 1998, the FPSI network (which does not include IFC or MIGA staff) encompassed 1700 individuals. By comparison, the ESSD network had 300 members’ (Miller-Adams 1999: 53). This may be taken as an indicator of the Bank’s commitment to the private-sector approach. And of course the presence of such a large section within the Bank, with an interest and mandate to promote the private sector, was a source of continuing pressure. But the Bank’s activities are to some extent limited because they are in danger of encroaching on those of the IFC (and to a lesser extent the Multilateral Investment Guarantee Agency – MIGA). The World Bank is undoubtedly a key player on the global development field. It commonly asserts that it is the largest source of development finance and has the largest number of professionals in a range of different fields; and it has, in recent years, sought actively to assert its leadership with regard to ‘knowledge’; and has been rather successful in promoting ideas and views currently in favour, without necessarily initiating them (Bøås and McNeill 2004). Despite, or perhaps because of, the comments of its critics on both the left and the right, it has tended to avoid an extreme position in relation to the private sector. It is accustomed to sending slightly different messages, and presenting rather different faces, to different audiences. And in recent years, in response to the anti-globalization movement, the Bank has sometimes found it desirable to avoid being too closely associated with the private sector, and with what may be seen as neoliberal policies. The Bank’s commitment to privatization in the water supply sector can be explained in part by an ideological preference for the market; but a second, closely related, factor is the logic of structural adjustment, which attaches great importance to reduction of government deficits. Any measure that will yield a fiscal gain (such as selling off an existing water supply system, or the franchise for a new system) will tend to be favoured. A major motivation for encouraging private participation is to reduce the burden that unprofitable public utilities put on governments in many poor countries. Ideally, such a strategy

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will lead to greater efficiency in the operations of the utility. According to the stated expectations, this would be to the benefit of all, including the poor. Whether this is in fact the case depends, of course, on a number of factors – and especially two: whether the poor have piped water supplied; and what price they have to pay. As we shall see, there is in practice a trade-off between attracting private-sector investment and improving services for the poor. In order to make investment attractive it may be necessary to reduce the risk faced by potential investors, and/or enable them to increase profits by raising tariffs. Both of these run counter to the intention of the PPI approach.

The evolution of PPI as a Bank development strategy Infrastructure has always been a central component of the Bank’s portfolio. Over the last two decades, this support has centred more and more on private-sector participation (Private Participation in Infrastructure: PPI). Changing attitudes in several industrial countries, and the debt crisis of the 1980s, combined to bring about a dramatic shift away from public ownership. In many developing countries, despite years of Bank support, most public water supplies had experienced no substantial improvements; the majority of the people were poorly served, and the utilities were a major drain on the government budget. This provided the impetus for the shift in Bank support. From 1988 to 1994, the Bank provided funds for 92 infrastructure projects which contained ‘significant PPI components’ (Karasapan 1995: 1). By the early 1990s, the Bank considered lending to public utilities as ‘untenable’ (Manibog, Dominguez and Wegner 2003: 2). In 1993 Bank policy papers regarding water11 and electricity12 and, in 1995, telecommunications13 formalized the Bank’s policy to promote private-sector development in these sectors. By the time the Bank’s 1994 World Development Report ‘Infrastructure for Development’ was released, the Bank’s policy of supporting PPI was already in full swing. Successes with PPI in Guinea and Argentina, combined with research, dissemination and technical assistance, led to the widely held view within the Bank that ‘Private Sector Participation (PSP) [was] a panacea to the perceived performance problems of the Bank’s water supply and sanitation portfolio’. The Bank itself labelled its strategy in the late 1990s as a ‘reliance on private sector’ (World Bank 2003: 3). It turned its focus to leveraging private flows, and its lending in these sectors declined significantly (World Bank 2003: 3). As we shall demonstrate, the

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strategy was not entirely successful, and came in for criticism not least from the Bank’s own Operation and Evaluation Department (OED).14 The Bank is still regarded as the primary and most influential proponent of PPI.15 In addition to dominating the literature, particularly in the area of private participation, the Bank is engaged in consulting, finance, risk guarantees, knowledge and information, dispute settlement and creating conditions for private participation.16 As we shall see, however, the experience in Latin America has demonstrated the difficulties in attracting private investment while at the same time pursuing improved services for the poor. During the 1990s, Latin America led the wave of PPI in developing countries, with 887 projects which involved the private sector (World Bank 2004a). Annual investment in infrastructure projects with PPI rose from US$14.6 billion in 1990 to a peak of US$75.6 billion in 1998. Many countries chose the approach of transferring state-owned assets to the private sector rather than complementing public-sector investments (World Bank 2004a). And the private sector initially jumped at the opportunity. As Guasch, Laffont and Straub (2002) point out: ‘[in the case of Latin America,] seldom a call to the private sector to take over and operate on an infrastructure service has had no takers’. However, since 1999, the situation has changed to pessimism, as is summed up by Harris (2003: 6): Annual investment flows to private infrastructure projects in developing countries are down. Projects have been renegotiated and some have been re-nationalized or cancelled. Investor interest in private infrastructure projects in developing countries is also subdued, while there are signs of popular discontent. Indeed, investment in private infrastructure dropped off dramatically from its peak in 1998, particularly in Latin America (see Figure 7.1). Leipziger (2004a: 5) reports that ‘the lack of investment in the Region [Latin America] has now reached the point that depreciation far exceeds investment and that as a result Latin America’s capital stock is declining.’ This ‘crisis in infrastructure financing’ can largely be explained by an increase in perceived risk by investors. Babbar (2003) points to increased risk aversion due to global economic crises and the worsening environment for infrastructure financing in emerging markets. In addition to global economic issues, she notes, citing data from Standard and Poor’s, that the number of project downgrades in Latin

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Figure 7.1 Annual investment in infrastructure projects in Latin America with PPI, 1990–2003, US$ billions Source: World Bank PPI Database.17

America has increased steadily since 2000. As a result, she points to the reduced number of strategic investors, eroded Bank capital, downgrading of key investors (for example, Enron) and the response of markets which have largely punished these investors with declining stock prices. In particular, she shows a dramatic decline in the stock prices of two of the largest water companies, Suez and Vivendi, between April 2002 and September 2002. Two major, and perhaps related, sources of increased risk in Latin America may be identified: global financial crises, and declining public support for reforms which introduce PPI. The 1990s were turbulent years for investors in developing countries, with the Argentinian crisis and the East Asian Crisis; Babbar (2003) notes that the average number of bidders for power projects decreased from four in 1998 to two in 2003. Suez, the largest global sponsor of water and sewerage projects with private participation, and third largest in electricity projects, states the following in its 2002 Annual Report: . . . Suez intends to reduce its capital employed in (emerging) countries by one-third by 2005 and will concentrate on healthier markets with more recurrent business opportunities, such as the European Union and North America. (Suez 2002: 25) In addition to global and regional crises, transnational companies perceive greater risks due to general public discontent with market reforms to introduce the private sector. According to surveys conducted

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by Latinobarómetro, the percentage of those who believe privatization has been beneficial has declined substantially over the last few years (Leipziger (2004a) and Latinobarómetro (2004)). In addition, public opposition to new privatization attempts has prevented PPI projects in Ecuador, Paraguay and Peru (Leipziger 2004a) and Costa Rica (Bull 2005). Nellis et al. (2001) cite the perception (real or not) of increased unemployment, price increases, potential collusion by bidders, corruption and fraud as sources of this discontent. Manifestations of this perception include riots in Arequipa, Peru, a ‘Water War’ in Cochabamba, Bolivia, anti-privatization protests in Ecuador and Paraguay, and cancellations of water privatizations in Lima and Rio de Janeiro (McKenzie and Mookherjee 2002). Researchers and policy-makers now face the reality that, in Latin America, ‘[t]he perception that privatization policies hurt the poor is widespread in the popular press and is an important factor determining the political sensitivity of the reform agenda’ (Estache, Gomez-Lobo and Leipziger 2001: 1180). In addition, the perception that PPI is imposed on governments from the outside is also widespread. Infrastructure services are highly politicized, and NGOs and other civil society groups have been quick to interpret the Bank’s actions as ‘forcing’ PPI on their governments. Loans which contain PPI conditions have been at the centre of this criticism. Bayliss (2004), for example, writes that ‘privatization of water and electricity has become a key element of aid conditionality’ and that qualification for debt relief under HIPC requires implementation of Poverty Reduction Strategy Papers which are ‘invariably pro-privatisation’. A recent study by the International Consortium of Investigative Journalists (ICIJ 2003) found that ‘over the last decade, privatization has been an increasingly important aspect of loan conditions’. The Consortium found that, by 1999, 70 per cent of the adjustment loans (classified as ‘water supply’) had a private-sector condition.18 They conclude that, ‘despite World Bank contentions that it does not force privatization on the poor . . . privatization is playing an ever-increasing role in bank lending policies’. The result is what Nellis et al. (2001) call a perceived loss of sovereignty due to infrastructure reform in Latin America.19 More detailed case studies show that this perception is somewhat misguided. Although privatization formally has played a large role in adjustment loans, in fact many reforms are never implemented. Moreover, particularly in Latin America, the local private sector has often been a stronger proponent of privatization than the World Bank. Although it is mostly foreign companies who have invested in

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infrastructure, they have often had local partners (Fernandez Jilberto 2004; Bull 2005). But the interaction between the World Bank and the local private sector has been of great influence on privatization processes (Teichman 1995; Bull 2005). In either case, Nellis et al. (2001) argue that, while privatization may be winning the economic battle, it is losing the political war, pointing to a politically challenging combination of medium-term benefits which are widely dispersed, and visible costs which are concentrated and immediate. Foster and Irusta (2003) sum up the arguments both for and against PPI. Proponents argue that reforms which introduce PPI will lead to an influx of private capital and sharpened commercial incentives which will expand the network into previously unserved areas. In addition, these reforms could enhance competition and incentives to keep costs – and thus prices – down, making services more affordable for the poor. Opponents of PPI argue that private operators driven by profit tend to concentrate efforts on the most lucrative segments of the market, largely by-passing the poor. Furthermore, many reform processes lack a poverty focus, which means that they were not designed in such a way as to overcome these adverse incentives to serve the poor. Their study of the reform processes in La Paz and El Alto, Bolivia, compared the experience within telephony, electricity and water. And they did in fact find that contractual obligations to serve the poor played an important role in ensuring that benefits accrued to them.20 There are, however, many examples where the PPI process has led to huge tariff increases. The most extreme case was Cochabamba, Bolivia, where prices more than tripled in a matter of weeks following privatization – leading to street riots.21 Other examples include Trinidad and Tobago22 and Tucuman, Argentina, where water tariffs doubled, and where in response to popular refusal to pay bills the private operator withdrew. One of the best-documented cases of PPI is the case of the water supply and sanitation concession in Buenos Aires. Here, both proponents and opponents make their case. The fact is that the results have been mixed. While connections have increased and costs have decreased due to the concession, prices have continuously risen,23 the contract has been renegotiated many times, and several investment projects have been cancelled. Estache, Foster and Wodon (2000) found that, so far, the poor have ‘enjoyed only mixed access gains’ from reforms which introduce PPI in Latin America. Regarding affordability, they argue that tariff increases do not automatically accompany such reforms. They point

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to experiences in Argentina and Chile as examples where tariffs actually decreased. McKenzie and Mookherjee (2002) attempt to reconcile the contrasting evaluations of privatizations by economists with the increasingly adverse perceptions in Latin America. In their evaluation of the reform process in Argentina, Bolivia, Mexico and Nicaragua, they found that privatization resulted in increases in access to infrastructure in all cases, and that the degree to which this has benefited the poor depended on the initial coverage. That is to say, in those sectors and countries where the middle and upper classes did not already enjoy a high coverage rate, expansion primarily benefited them. Regarding prices, they found that prices fell in half the cases while prices increased in the other half. They found that the impact on prices depended on: (i) the amount of competition and/or regulation faced by the private firm; and (2) the award criteria: awards based on highest bid will result in higher tariffs than will awards based on lowest tariffs. With regard to the latter condition, Estache, Gomez-Lobo and Leipziger (2001) argue that, when the aim of the reform is to reduce the fiscal deficit, governments may be tempted to set a high tariff level and award the service to the private investor who offers the highest up-front or annual transfer to the government. They point to evidence presented by Guasch (2000) which found that, in a survey of 600 concession contracts, most were tendered for the highest transfer or annual fee. This, they argue, suggests that ‘governments tend to use the auction to address more immediate fiscal concerns rather than to address efficiency concerns which would more directly meet the needs of the final users’ (Estache, Gomez-Lobo and Leipziger 2001: 1183). In summary, while the poor have benefited in many instances of PPI, such benefits have been far from automatic. To improve services for the poor through engaging a private provider generally requires that monopoly rents are kept low through regulation and/or competition. And in the cases examined here, there appears to be a trade-off between fiscal gains and improved services for the poor. The suggestion that the World Bank may, in practice, be unable or unwilling to integrate explicit targeting of the poor in its projects is supported by the OED: ‘[e]ven though the focus of a project may be stated as connecting poor households or improving their service quality, the objective is not often made explicit in terms of number of additional poor consumers served’ (OED 2003a: 6).

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We do not reject the claim that the Bank sought to benefit the poor through these private-sector initiatives; but we argue that in practice, as a result of varying incentives and objectives, the outcome has been largely unfavourable for the poor. To understand how and why this is, it is instructive to examine three specific cases of recent water supply projects, in Argentine, Brazil and Colombia.24

Case studies: Argentina, Brazil, Colombia It is notable that in each project the degree of PPI25 is used as a ‘Key Performance Indicator’ and in two (not Brazil), the percentage of loans committed is another, with this being largely dependent also on the degree of PPI.26 In the case of all three Project Appraisal Documents (PADs),27 a substantial loan was awarded to the national government to assist them in a reform process which would encourage greater PPI. Thus, one of the principal objectives of all three World Bank loans was to introduce PPI in a number of communities through franchise competition. Further, in all three cases, the Bank was involved in, and provided suggestions for, the creation of these bidding documents. The evidence from these three cases leads to the conclusion that the Bank, at least until very recently, has been narrowly focused on attracting PPI and fiscal gains in contrast to pursuing pro-poor use of funds. In Argentina, the PAD for a loan (World Bank 1999) was in support of a water sector reform project to ‘accelerate the transfer of a large number of utilities to private management’(World Bank 1999: 13). Despite the experience in Argentina of what the Bank identified as a ‘lack of clear strategy and feasible models to expand services to the urban poor in the context of PSP’, and that ‘private concessionaires tended to leave out the poor areas’ (World Bank 1999: 5), the ‘Key Performance Indicators’ depended primarily on the degree of PPI. Examining the indicators reveals that the Bank’s support did little to provide incentives to policymakers for increased pro-poor use of funds. Instead it heavily favoured the reinforcement of incentives to attract private investment. In Brazil, the PAD for a loan (World Bank 1998) was in support of a project which ‘encourages PSP’ rather than a ‘privatization-only’ strategy because, as the Bank puts it, ‘the Federal government [did] not agree with [such a strategy]’ (World Bank 1998: 6). Though the project was for Brazil’s poorer regions, the Bank’s project made no concerted effort to explicitly target the poor. But the project explicitly addressed

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policies needed to attract private investment, adhering to the Bank’s assumption that ‘once the private sector gets involved in managing the utilities . . . , [WSS] coverage will expand and the access of poor consumers to these services will increase’ (World Bank 1998: 7). Despite the absence of PPI in ‘The Government Strategy’ and a Bank perception of a ‘modest risk’ of ‘lack of wide social and political support to sector reform and PSP . . . ’, the first ‘Project Development Objective’ included ‘increasing private sector participation in investment and management’, with a corresponding ‘Key Performance Indicator’ of the number of people in the regions of the project receiving WSS services from private-sector operators. The other two Project Development Objectives dealt with the overall expansion and quality of the system. Beyond loans directed to the ‘poorer regions’, direct targeting of the poor households within the project’s objectives and indicators is lacking, again confirming OED findings. The PAD for a loan to Colombia (World Bank 2001) was in support of a water sector reform project, chosen due to the ‘requirement of incorporating the private sector in the management and operation of the water and sewerage utilities’. Once again, despite a ‘substantial risk’ for both ‘insufficient political support to PSP’ and ‘delays and corruption in the procurement of PSP’, one of the primary objectives of the project was ‘to support water sector reform by facilitating the incorporation of the private sector into the management and operation of water utilities participating in the project . . . ’ (World Bank 2001: 1). It is only here, in the most recent PAD, that explicit targeting of the poor appears as a development objective. Nevertheless, the Bank stresses that the ‘main indicator for measuring the success of the program is the progress made in attracting PSP’ (World Bank 2001: 1 (emphasis added)). In all three cases, the analysis confirms the findings of the OED that the Bank does little in the way of creating necessary incentives for policymakers to improve the pro-poor use of funds. This argument is further supported by the Bank’s views regarding the award criteria and tariffs. In 1993, the metropolitan water service of Buenos Aires was privatized. As the Bank notes, [the privatization] was done on the basis of greatest reduction being proposed to the government in average water tariffs, in lieu of any payment or cannon to the government for the concession rights. At the time, this was heralded as an extremely innovative and highly progressive way to award a concession,

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putting the interests of the consumer ahead of the fiscal goals of the government. (World Bank 1999: 5) Despite this apparently very relevant experience, the preferred method of award in all three cases analysed here was the highest annual fee.28 In Argentina’s PAD, the Bank characterized the award criteria of the Buenos Aires concession as a ‘poor choice’ (World Bank 1999: 5). The Bank explains that, ‘because the company’s cash generation capacity did not turn out to be as expected, the concessionaire was forced to seek tariff increases . . . ’ (World Bank 1999: 5 (emphasis added)).29 This example starkly exemplifies the limitations of this approach: when the (perhaps overoptimistic) projections of revenue are not realized, the private company concerned is ‘forced’ to raise the tariffs. The award criteria are at the centre of the debate regarding risk distribution, where most researchers agree that getting the private sector to take on risk is critical in order to capture the benefits of PPI. It would appear, however, that the Bank’s argument here supports doing the opposite: shifting risk back on the state.30 In Argentina, the Bank points out that ‘reform programs will not succeed, unless they are structured to attract potential investors and lenders’, and therefore ‘provinces and municipalities must allow sufficient rates of returns to potential investors’. To this end, the Bank got the local governments to agree to ‘more modest service expansion targets to make the concession less risky and more viable’ (World Bank 1999: 59). Regarding tariffs for the case of Argentina, the Bank maintained that the vast majority of water supply systems are plagued by a ‘lack of adequate tariffs based on metered consumption’. Accordingly, the Bank assigned ‘achievement of revenue adequacy’ as an eligibility criterion for sub-loans, in order to address the risk of ‘inadequate initial tariff level’ (World Bank 1999: 24). The Bank stressed the need to modify the pricing system in order to ‘get the signals right, especially to attract private risk capital’ (World Bank 1999: 7). In the case of Brazil, however, the Bank conceded that ‘further increase of tariff level is not possible’ (World Bank 1998: 55). In fact, they admitted that ‘most water companies analyzed have already raised the tariff levels to the limit’ (World Bank 1998: 55). In light of this, the Bank assumed that all utilities maintain their current tariff levels, and made no recommendations. In the case of Colombia, despite the acknowledgement of a need for tariffs which directly benefit the poor, the Bank made it clear that

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tariff increases would be required. The Bank pointed out that the first step for small- and medium-size municipalities involved in the project would be to reach an agreement with the authorities ‘in regard to the maximum acceptable tariffs increase’ (World Bank 2001: 43). As in the case of Argentina, this increase was intended to allow for sufficiently attractive rates of return to potential investors. To this end, one of the eligibility criteria is that the mayor and municipal council agree to new tariffs which would include a rate hike which was ‘as high as socially and politically possible’ (World Bank 2001: 12). A major, perhaps the dominant, motivation behind PPIs was to reduce the financial burden on government – even if at the expense of improving services to the poor. In the Argentina PAD, the Bank explicitly notes that ‘private concessionaires tended to leave out poor areas’ (World Bank 1999: 5) and that ‘the issue of poverty is frequently neglected in PSP arrangements’ (World Bank 1999: 6). But the Bank asserted that in the three cities analysed31 for the project, ‘the big winner is the government’. The three governments combined will ‘have a positive net fiscal impact equal to Peso 44 million’ and shareholder benefits were estimated at a combined Peso 19 million (World Bank 1999: 53–5). The Bank explicitly states that, while ‘[t]he risk for shareholders not to gain from the concession is small’, ‘[o]verall, customers are almost certain that they will not gain from sector reform’ (World Bank 1999: 58). In light of this, the adjustment made by the Bank to the government’s ‘overambitious expansion targets’ is particularly puzzling. Likewise, in the case of Brazil, it is emphasized that the ‘main objectives of the reform are expected to reduce the size of fiscal transfers and public sector employment’ (World Bank 2001: 4). The expected net fiscal impact of nine sub-projects equals R$12 million. Unlike the case of Argentina, the Bank here claims that the consumers are the ‘big winners’ of the project (World Bank 2001: 46). However, it should once again be noted that the Brazil reform lacks explicit targeting of the poor, so that the impact on the poor consumers rests on the assumption that they will be served by the private provider. Once again, it is only in the latest PAD of the sample, Colombia, that the Bank seems to make a more concerted effort towards addressing the interests of the poor. In this case, the Bank’s analysis of five medium-size cities demonstrates that not only will consumers in general benefit, but the lowest strata (the poor) will benefit the most. The fiscal impacts on the government are mixed for the five cities, but have an estimated combined improvement of US$3.5 million.

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In summary, the pro-poor policy is, in practice, at risk at all stages of the process. First, despite the rhetoric, the interests of the poor are not in fact highly prioritized at the first stage: performance indicators stress other issues – notably the extent of private-sector involvement. Second, awards of contracts are based on other criteria, such as the highest annual fee, rather than on pro-poor design. Third, contracts may be renegotiated, and tariffs may be raised, if it turns out that the investment is less attractive than expected.

Assessment On the basis of empirical observations regarding Latin America’s experience with utility reform, Chisari, Estache and Price (2001: 1) conclude that ‘the poor are often the last to benefit from increased access due to reform’. ‘What regulatory reform experience has demonstrated is that many operators perceive poor financial returns from supplying the poor and postpone such supply as long as possible, unless specific policy requirements force them to do otherwise.’ A recent report by the Water and Sanitation Program and the Public–Private Infrastructure Advisory Facility (2002: 2) confirms this conclusion: ‘reform measures may be skewed disproportionately for the well-off, rather than new services for the poor’. Further, Tynan (2000: 1) points out that ‘[traditional approaches to PPI] have had less success in extending service to the poorest households . . . ’. Finally, Estache, Foster and Wodon (2000: 9) argue that ‘[e]ffective regulation is needed to make sure the poor get their share of gains’. In other words, a profit-maximizing utility provider has little or no incentive to provide services to the poor when compared to the nonpoor segments of a population. In an IFC publication, Leipziger32 and Foster (2002) found the following: It appears that in many countries fiscal concerns, rather than poverty issues, have been uppermost in the design of privatization transactions. Worldwide, 42 percent of the private investment attracted to the infrastructure sectors during the 1990s was captured by the state in the form of asset sale revenues, rather than being reinvested in infrastructure networks to upgrade and expand services. In the Latin America region, the proportion captured by the state is even higher at 58 percent of total private investment. The Bank now appears to recognize the growing body of evidence ‘that making a private sector transaction actually “pro-poor”

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requires targeting elements of the transaction to serving their specific needs’.33 To attract private investment, while at the same time pursuing equitable service provision, has proved to be challenging. During its peak in 1998, Leipziger (2004a) estimates that private investment in infrastructure covered only about half of Latin America’s annual needs. Today, the prospects of relying on PPI to expand services for the poor are grim.34 During the ‘boom’ in the 1990s, it proved difficult to instil the incentives necessary to get private providers to improve services for the poor. The Bank’s own evaluations department (OED) evaluation of the Bank’s Water Resources Strategy concluded that ‘ . . . getting the private sector to focus on the alleviation of poverty and to design tariffs in a way that does not discriminate against the poor has proved hard to achieve in practice’ (Pitman 2002: 25). The fact that nearly 60 per cent of private investment has gone to the acquisition of government assets and concession rights in Latin America attests to the value placed on fiscal gains. Initially supported by the Bank, such large fiscal gains are now generally viewed as a redistribution of the benefits away from the poor. Estache, Gomez-Lobo and Leipziger (2001: 1183) present the argument as follows: When one of the main objectives of the reform is to reduce the fiscal deficit, governments may be tempted to set a high tariff level and award the service to the private investor who offers the highest up-front or annual transfer to the government. In some respects, high tariffs in this case can be viewed as a tax on consumers to fund the fiscal deficit through a high sale value of the company. If it hurts the poor disproportionately, it can be viewed as the result of regressive taxation . . . In summarizing its evaluation of the Bank’s Operational Policy 4.07,35 the OED identified three issues that illustrate the relative lack of attention given to the poor by the Bank (OED 2003a): • • •

The sector has not documented its effect on ensuring safe water and adequate sanitation for the poor. The pricing policies in the sector are ambivalent between satisfying efficiency and financial performance and facilitating the consumption of the poor. The long-term sustainability of private sector participation and its effect on meeting the needs of the poor are not documented.

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The report emphasizes that ‘substantial room remains for targeting the poor and vulnerable populations within water sector operations. Of most concern across the Bank is the scant attention given to the direct impact of these operations on the poor’ (Pitman 2002: 13). These findings by the OED support the findings from the analysis of the three PADs for water sector loans. It appears that the overriding goal has been that of attracting investment and/or improving the fiscal position of the government,36 and this often translates into perverse incentives for the government regarding services for the poor.37 There can be little doubt that the Bank’s reputation has been dented by its experience with privatization in the water sector. It has been widely criticized by NGOs and the media – as exemplified by several references included here, ranging from websites through to books such as The Water Business: Corporations versus People (Holland 2005). Some of these criticisms are exaggerated or ill-informed, and high-profile scandals have perhaps attracted disproportionate attention. But a balanced review of experience confirms some fundamental problems with the approach. Both the legitimacy and authority of the World Bank have suffered as a result.

The private-sector perspective Having dealt at some length with the World Bank’s motivation for, and experience with, private-sector partnerships in infrastructure, it is instructive also to consider also the other side of the coin. Why should the private sector be interested to work together with multilateral organizations, and with the Bank in particular? Why should the sector favour PPIs? And has the experience been fruitful for them? The World Bank can claim, with some justification, that it offers long-established and well-recognized experience and expertise in dealing with developing countries, and more specifically the governments of developing countries; and this is certainly of interest to private companies.38 The evidence suggests that they welcome cooperation with the Bank largely because this reduces commercial risk. The French (both private companies and the government) played an important role in promoting PPI in water. In France, there have for some time been mainly private sector providers in the water supply sector, and public providers in the other utilities. This is the opposite of the case in most other Western countries. In the era of Thatcher and Reagan, the option of private ownership became suddenly more attractive – including to the World Bank.39 Margaret Thatcher adopted a model of selling the assets, but the Bank took from the

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French the model of tendering concession contracts. There was a burst of interest in privatization, but this did not last very long. Companies discovered that such investments entailed a high degree of risk, especially as a result of currency devaluations; and the shares of Lyonnaise des Eaux, for example, fell by half. According to one informant: The Bank should contribute to reducing risk. The World Bank, regional Banks, the IMF and the G8 should contribute. This is what the system is for. Who else can do it? . . . In my opinion, though the Bank loans at a relatively low interest rate, they are no longer much lower than the interest rate on private loans. However, Bank loans gave assurance . . . The Bank’s involvement was a type of political insurance. It provided a kind of security. However, in practice it did not work out that way. It is generally assumed that profit maximization is the primary, or even the sole, objective for the private sector. A broad definition of profit maximization would of course also encompass risk minimization, and we suggest that this is the major motivation for the private sector in collaborating with the World Bank.40 It may be useful, however, to distinguish between risk mitigation and risk redistribution. The danger, for the Bank, is that in their cooperation with the private sector they will simply be assisting the private sector to redistribute risk – onto themselves or, more likely, onto the government of the country concerned, to the cost of the organization itself, to the multilateral system, and to the public good generally. Have there, perhaps, been other motivations for the private-sector water companies in their involvement in Latin America? Are they interested in serving the poor? In recent years, multinational companies have seen merit in improving their image, by, inter alia, cooperating with development agencies (whether one attributes this to the powerful forces of the anti-globalization movement, or to an increased social responsibility originating from the companies themselves). If the dominant motivation of the private sector in cooperating with the World Bank is altruistic, then such initiatives are to be welcomed. If, however, the dominant motivation is transfer of risk, then there are good grounds for scepticism. Unlike the World Bank, private companies are not subject to independent evaluations (although they are answerable to their shareholders and, increasingly, to others, through initiatives such as Corporate Social Responsibility). It is therefore not easy to find

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answers to the question posed above. In the water supply sector there are few major players on the international scene that are relevant to our assessment. The most important are Suez41 and Vivendi (both based in France), and Thames Water (in the UK);42 companies from the USA have not played a significant role. Suez was involved in Buenos Aires in Argentina – which is an extreme, but important, case. The losses here were due mainly to massive devaluation (in a short period, the peso fell to 25 per cent of its former value against the dollar). Here, it is estimated, Suez lost US$700 million, and the shareholders were not pleased. The role of the World Bank was important, as one of our interviewees explained: Suez would not have been involved in Buenos Aires without Bank involvement. First, I don’t know if Argentina would have issued a tender and, second, Suez would not have answered it anyway (without a Bank loan). Now, globally, water companies are very cautious. And as a result, Suez at least is not bidding on tenders [in developing countries]. In the early optimistic days the involvement of the private sector was perceived as a ‘win-win’ situation. It was not difficult to demonstrate the potential for huge reductions in water losses, from leakages, illegal tapping, etc. A well-run company, it seemed to those concerned, could increase revenues enormously, and generate a healthy profit. Estimates were made of consumption (often based on crude and optimistic assumptions about what percentage of income consumers would be willing to pay), yielding apparently very good revenue projections. But, as one interviewee put it, ‘all the big risks are those beyond your control’. And the biggest risk was devaluation. But although private companies did suffer some losses, the major cost fell on the government and the users. As noted above, companies were able, in some cases, to renegotiate their contracts.43 Companies are withdrawing from such risky enterprises. International Water, driven away from Cochabamba, is set to end its water activities; and the management of Thames Water has clearly stated that World Bank plans for private water activity up to 2007 are unrealistic (Holland 2005: 170). Its plans are to expand in the USA, Britain and Germany (Holland 2005: 201). John Talbot, Chief Executive of Saur, states that it is ‘simply unrealistic’ to believe that ‘any business must be good business . . . the scale of the need far outreaches the financial and risk taking capacities of the private sector . . . If [subsidization] does not happen, the international water

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companies will end up being forced to stay at home’ (quoted in Goldman 2005: 258). In brief, there was what in retrospect may be seen as an unfortunate interplay between the Bank and some few major water companies. The latter sought, successfully, to push this sector higher up on the agenda; and the World Bank helped to create opportunities for them. The motive of at least some of the senior management in the private companies was to help the poor; they genuinely believed in a ‘win-win’ situation. There was enthusiasm and good faith among many of those involved; but in retrospect these beliefs and expectations were unrealistic. As one of our informants said: ‘I feel a bit naïve and guilt . . . I cannot believe we were part of it . . . Were we in bad faith?’ he asked rhetorically, concluding: ‘perhaps “implicit bad faith”’. His summary assessment is negative: ‘Moving forward will be difficult. The ideological fight surrounding water distribution has destroyed the system . . . it has severely diminished the investment available in the water sector. In this fight, the poor have lost.’ The Bank now appears also to take a much more cautious view, based on its largely unsatisfactory experience. It has recently announced a revitalized drive on infrastructure, which lays out plans to significantly increase its lending activities in this sector; and, shortly following the release of this statement, the WDR 2004 ‘Making Services Work for Poor People’ (World Bank 2004a) was also published. The strategy set out by these two documents, combined with a series of operational guides on the respective roles of the public and private sectors,44 are evidence of important shifts in Bank policy focus. One Bank critic has described this as ‘reactionary’, and, indeed, the strategy appears to respond to some of the issues addressed in this chapter. The Bank now recognizes that reforms to put the sector on a sound financial footing will not alone guarantee that the poor are reached (World Bank 2004c). It notes the importance of measurement and analysis of the challenges facing the poor, and that ‘[s]taff should work with government counterparts to ensure that the content and sequencing of reforms and investments take into account the needs of the urban poor. Deferring implementation of pro-poor reforms in order to focus on improving services for existing consumers may worsen conditions for the poor’ (World Bank 2004c: 11).

Conclusion What lessons can be drawn from the cases analysed in this chapter? In terms of improving services to the poor, the result is extremely

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unsatisfactory. This is not to say that public provision would necessarily have been better; as we have seen, public water utilities in poor countries often mainly serve the rich. Our interest, however, is primarily in the broader, systemic lessons to be learned: what is the empirical experience of the interaction between the ‘norms’ of multilateralism and those of the market system? Ideally, the former are concerned with serving the needs of the poor; and the role of the World Bank is to represent these. In practice, in these cases, the World Bank (and national governments) gave higher priority to the macroeconomic objective of reducing government debt, and did little or nothing to pressure the private sector into serving the poor. And the private sector, interested in generating a profit and minimizing risk, made little attempt to do so. The World Bank, in fact, possesses rather limited power to induce a multinational company to alter its behaviour – by contrast with, say, a national government in the North. And in Latin America in this period the situation was greatly exacerbated by the serious economic crisis that engulfed much of South America. But the story is still not an encouraging one for those who believe that public–private partnerships can yield a ‘win-win’ situation. What are the broader, systemic lessons to be learned from this experience? The failure of the PPIs to deliver, in the cases evaluated in this chapter, has surely weakened the World Bank’s position. On the one side, the criticism that the World Bank supports the interests of the private sector (and in this case of multinational companies) against those of the poor has been given more credibility. On the other side, the private sector has been to a large extent scared away from what appears to be a high-risk investment area. It might be claimed that the Bank, through its private-sector infrastructure initiatives, sought to become a ‘nodal point of governance’ – at least at the country level – as mediators between the national government and (in many cases international) private companies. But they certainly do not seem to have succeeded in the case of the water supply sector in Latin America. Can this be explained by the nature of the sector concerned? Or of the multilateral organization concerned? The political/normative context varies – certainly between, and even within, different sectors. In those we have chosen to study in this book, private-sector involvement is particularly controversial; but by comparison with the others – medicinal drugs, child labour, education – water supply is no more so. And the multilateral agencies concerned vary from powerful investment organizations (the World Bank) to professional but

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economically weak organizations such as WHO, ILO and UNESCO. One might suppose that the World Bank could expect to arouse more scepticism than other organizations among potential critics; but also that its prospects for successfully influencing the private sector might be greater. In the water supply sector in Latin America, however, the World Bank was generally unsuccessful. In retrospect one can make two claims. First, quite confidently, that the Bank was naïve in its expectation that a ‘win-win’ situation was possible. Second, a credible but-less-well grounded claim: that the Bank made little or no attempt to use its power and influence to change the behaviour of the private sector. This raises again the broader question which is of great relevance for this book: from where do the norms of ‘the market’ draw their strength? These norms are ideas, values – but they are interpreted and put into practice by powerful institutions, such as the World Bank. A common view is that the Bank promotes the norms of the market – and that the push for privatization is simply one manifestation of this. The examples from this chapter to some extent support this claim. But the situation is rather more complex. In explaining what occurred in the water supply sector in Latin America, the belief in the macro-economic logic of structural adjustment – that the overriding imperative is to reduce government debt – played a crucial role. The World Bank was thus not so much following the ‘laws’ of the market – of profit maximization (and the alleged efficiency gains that go with it); rather it was following the ‘laws’ of economics – as interpreted and practised by its macroeconomists.

8

Market Multilateralism Towards a new institutional form?

Introduction Multilateralism, according to Ruggie’s classic definition, is ‘an institutional form that coordinates relations among three or more states on the basis of generalized principles of conduct’ (Ruggie 1993: 11). In Chapter 1, we put forward the claim that there is emerging a new form of multilateralism which deserves to be recognized and studied, which we called ‘market multilateralism’. While multilateralism coordinates relations between states, this new multilateral system is composed not only of states, but also of multilateral organizations and private actors – predominantly large transnational corporations. In order to learn more about the nature of this new phenomenon, we have, in this book, examined several different examples of public– private partnership. In this final chapter we will summarize our conclusions, and address the question of to what extent there are common features between these very diverse cases which may indicate the existence or emergence of ‘general principles of conduct’ of this new market multilateralism. If indeed such ‘generalized principles of conduct’ are emerging, then these are the outcome of interaction between two sets of norms: the classic norms of multilateralism (Ruggie) and the norms of the market. It is debatable, however, what one should take to be the ‘norms of the market’. It is widely recognized that a ‘free’ market, or a ‘perfect’ market, does not exist in reality; there is widespread market failure, due, for example, to lack of information, or to asymmetric information, or to high transaction costs. This is why there is a need for the provision of ‘public goods’, both global and national (and a need for redistributive policies). Hence we may slightly modify our hypothesis and say that ‘market multilateralism’ is the result of the interaction between the classic

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norms of multilateralism and the interests of market actors – primarily transnational corporations. In some cases, these interact in a positive way, in the sense that they contribute to the provision of global public goods, or improve the condition of the poor in poor countries. In other cases this is not so. In all cases, however, our data suggest that the interests of the private actors tend to be determinant – whether this is the direct maximization of profit, the reduction of risk, or the expansion or securing of markets. In all the cases we have selected in this book the starting point has been a pressing issue in development. Improved access to drugs and vaccines, a decent childhood free from hazardous work, bridging the digital divide and access to drinking water are all crucial elements in an agenda for improving the living conditions of the poor majority of the global population. Although it is of interest to assess to what extent the partnerships have contributed to these goals, this is not our main concern in this book. However, as argued in Chapter 2, the continued legitimacy of the multilateral organizations will partly be based on their record in this respect. Therefore at the end of this chapter, where we return to the issue of legitimacy, we will also discuss the extent to which the partnerships have fulfilled their stated goals.

The different practices of market multilateralism The cases we have explored differ across many dimensions: they relate to different issue areas, they involve the private sector in different ways, and they include different multilateral organizations. The nature of the collaboration between the multilateral organizations and the private sector also varies. The most advanced form of collaboration is arguably found in the health sector. Here there are signs that collaboration between private foundations, companies and multilateral organizations has in some cases led the pharmaceutical companies to act according to new norms and principles of conduct in specific issue areas. This is true in the fields of both vaccination and antiretroviral drugs (ARVs) for HIV/AIDS patients in which companies collaborate with the multilateral system on a regular basis, and where there seem to be signs that this collaboration has contributed to a change in behaviour on the part of the companies. This does not mean that the pharmaceutical companies have become ‘philanthropists’; for they have at the same time fought hard to ensure a multilateral agreement on intellectual property rights in

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spite of its possible hazardous effect on developing countries’ production of life-saving drugs (Sell 1999). Moreover, as shown in Chapter 4, the pharmaceutical companies are not willing to enter into agreements which have any significant negative consequences on their profitability. For example, vaccine prices still reflect demand and the degree of competition (which is significantly affected by the intellectual property rights regime) rather than any conscious effort to keep down prices on vital vaccines. Nevertheless, the achievements made in multilateral cooperation with pharmaceutical companies are significant. Although it may be difficult to distinguish between what is a motive for the pharmaceutical companies’ collaboration with multilateral organizations and what is an outcome of their interaction, it is evident that pharmaceutical companies have become more concerned to operate according to ethical norms.1 The multilateral organizations have not achieved these changes on their own. Pressure from NGOs, and global media campaigns, have been crucial as well. Nevertheless, the multilateral organizations have, at least in some instances, been able to capitalize on the companies’ desire to make changes, and have provided guidance as to how to do so. This is also true for the second case discussed, child labour. This is an issue that easily captures media attention, and its abolition has been high on the agenda for politicians and NGOs. Without this attention, and the concern of large transnational chocolate and tobacco companies of its possible impact on consumer demand, it would most likely not have been a topic for global partnership. The nature of the involvement of the ILO in these partnerships is less formal and less profiled than the involvement of the WHO, UNICEF and UNDP in the health partnerships. Nevertheless, the ILO has played an important role, and the companies may now to some extent be said to follow a set of norms regarding child labour. However, there is a significant difference between this case and that of the health sector. Here, there is a lengthy production chain, from the farmer in, say, Côte d’Ivoire or Malawi, to the consumer. The major TNCs are directly involved in only the final stage; yet they may be held morally responsible also for what happens at earlier stages. In order to have an impact here they need good knowledge about all the various stages in the production chains. This has put the ILO, with its expertise generated from many decades of work with child labour issues, in a unique position. Expertise is also a major asset of UNESCO, the organization in focus in Chapter 6. The interest of the information and technology

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companies in forming partnerships with UNESCO is said to be partly due to its wide web of contacts in developing countries. The UNESCO case, as with the health case, involves a clash between owners of technology and actors who have the potential and the will to make it beneficial for broader groups. However, the producers of free and open source software (FOSS) differ from the producers of generic medicines, since they indeed are also producers of technology rather than just re-producers. The UNESCO case shows clearly that the extent to which companies have evolved as followers of norms developed through collaboration with the multilateral system depends on the management of the company. Quite opposed to the neo-classical view of firms as essentially similar, companies here emerge as quite different with regard to their commitment to multilateral norms. Some have developed significant strategies and set aside resources to collaborate with the multilateral organizations, whereas others seem to be trying to exploit the image of UNESCO. Whereas in the health sector there was a notable difference between ‘big pharma’ and ‘small pharma’ (in other words, that big pharma tended to be able to make more commitments thanks to superior resources and scope for strategic planning), in the ICT sectors it was more a matter of leadership and company culture. But it is true here, as in the health sector, that willingness to collaborate does not involve willingness to challenge the main principles of the market, or, perhaps more precisely, the institutions designed to support the production of knowledge in a market-based economy. More specifically, no partnership challenged the right that producers of proprietary software have to protect their intellectual property, under national legislation encouraged and enforced by the TRIPs agreement. At present, the most high-profiled partnerships between information and communication companies also fail to facilitate the extension of FOSS to new groups. The last case examined, in Chapter 7, is very different from the ones discussed in the previous three. This relates to cases of privatization in a traditional sense: the encouragement by the World Bank of private-sector involvement in water supplies in Latin America leading to the divestiture of public-sector utility companies. These initiatives were presented by the World Bank as promising a ‘win-win’ situation, in which the involvement of the profit-seeking but efficient water companies would result in improved water services to the poor. The results are discouraging. There are few signs that the water companies have come to abide by norms other than profit maximization or risk minimization; and the World Bank has given priority to


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macro-economic issues (maximizing fiscal gain to the government concerned) rather than services to the poor. Thus, we cannot claim that all companies change as a result of their interaction with the multilateral system. The outcome varies both with the company, the multilateral organization and the issue area involved. Nevertheless, we do see evidence of companies that come to assume roles previously not associated with profit-seeking entities. The reasons relate partly to the size of the company and partly to changes in their environment.

The changing role of transnational companies The textbook view of transnational companies has developed significantly over time. Firms used to be viewed as profit-seeking entities whose actions could be best understood as the outcome of rational behaviour in the face of external uncertainties and constraints. More recently, an influential view has been that firms are created in response to transaction costs; issues of power have played a very minor role in such theories. With the works of Stephen Hymer (1976) and Raymond Vernon (1979), the issue of why some companies are transnational became a legitimate focus of research. More recently, also the understanding of companies as atomistic actors seeking maximum profit in a competitive market has been challenged. TNCs are shown to operate in complex webs of competition and collaboration; they are themselves networks between companies with various forms of linkages, and they are embedded in horizontal and vertical networks with other firms (Dicken 2003). These networks all involve social relations, some of which depend on geographically situated cultures (Yeung 1998). Only a few years back the dominating view of transnational companies among economists was that they were not qualitatively different from any firm. But the thesis that economic actors are socially embedded (Granovetter 1985) has been confirmed also at the global level; and at the same time, a significant literature has focused on the TNCs’ political strategies. The fact that TNCs behave as individual political actors challenges the traditional corporatist structures of participation with employers’ organizations, labour organizations and states. The tendency for large TNCs to maintain close direct relationships with policymakers has been studied in many contexts, but mostly at the national level. In terms of relationships with international organizations, it has been most closely examined in the context of the European Union where David Coen has used the term ‘elite

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pluralism’ (Coen 1997) to describe the tendency for large companies to shift between acting alone and acting through business associations. Moreover, students of trade policy have noted the degree to which individual companies and business associations increasingly have evolved from being lobby groups seeking to uphold protection of their own businesses or securing market access of their own products, towards being partners in debating the architecture of the global market economy (Woll and Artigas 2005). However, it is a big step from arguing that TNCs are socially embedded political actors at the global level to arguing that they have become governed by norms developed in the multilateral system. The literature on TNC networks focuses mostly on relations between different companies, not between companies and other institutions. Moreover, these networks are aimed to increase profit and/or decrease uncertainty, not to reach any broader social goals. As clearly stated by Dicken (2003): TNCs are essentially capitalist enterprises. As such they must behave according to the basic ‘rules’ of capitalism, the most fundamental of which is the drive for profit. Of course, business firms may well have a variety of motives other than profit, such as increasing their share of a market, becoming the industry leader, or simply making the firm bigger. But in the long run, none of these is more important than the pursuit of profit itself. (Dicken 2003: 199) We do not contest this view. However, due both to their size and their geographical reach, two features may induce TNCs to engage in norm-governed behaviour. The first is the fact that, due to their sheer size and visibility, they become dependent on their image for sustaining markets. Even though the threat of consumer boycott may be relevant for only a few global companies, most companies are concerned with their own image – both internally (towards their own employees) and externally (towards the market). The second fact is that the size of TNCs allows them to a greater extent than smaller companies to think long-term, and sometimes it may pay to sacrifice short-term profit in order to secure new markets and long-term market share. Seen from the point of view of the multilateral organizations, TNCs may improve access to a large number of actors. Although in many cases the problems to be resolved are not directly caused by TNCs, and may not even be directly affected by a change in TNCs’ behaviour, TNCs are embedded in large networks of


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organizations, ranging from small sub-contractors and suppliers to other TNCs. They are therefore tangible actors through which it may be possible to reach other, more remote and numerous actors, such as cocoa farmers in Ghana or tobacco farmers in Malawi. The evidence we have examined brings us into accord with the view of Stopford and Strange (1991) that TNCs are evolving into statesmanlike actors. Their main goal is profit seeking, but reaching that goal may involve that they enter into partnerships which have non-profit, short-term goals, and these may come to have a significant impact on their practices. As early as 1991 John Stopford and Susan Strange wrote: [Furthermore] multinational firms themselves are increasingly having to become more statesmanlike as they seek corporate alliances, permanent, partial or temporary, to enhance their combined capacities to compete with others for world market shares. (Stopford and Strange 1991: 2) Related to this, Stopford and Strange further made the point that, in a world in which surviving in competitive struggles depends on developing such relationships, new qualities about firms are emphasized: with regard to ability to master change, differences between firms may become more important than differences between industries. We would argue that this holds true also with regards to firms’ involvement in norm-governed activities related to development issues. Most large TNCs have now established separate departments that deal with issues of corporate philanthropy or corporate social responsibility. However, the quality of these departments, and their ability to influence the company, differ greatly across companies. Some are evolving into serious and professional units with expertise on social issues that are in great demand in other departments of the company, while others remain marginal and understaffed. Experienced officials of multilateral organizations are, one may hope, able to differentiate between companies that are serious partners in development and those that are mainly seeking partnerships in order to give increased legitimacy to their own activities. In the process of dialogue, some commonalities evolve between large TNCs and the multilateral organizations. Multilateral organizations have come to operate increasingly on the model of corporations, as shown particularly in Chapter 6. Furthermore, there is some evidence that they are increasingly interested in recruiting

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people with a business education or experience from the private sector. This may in turn facilitate understanding and cooperation between the two different types of organization. At the same time, as noted by several informants to this study, employees of the CSR departments of large companies often have the same sort of background as their counterparts in multilateral organizations. There is thus also a certain ‘adjustment’ on the part of some TNCs. Our case studies also involve private foundations, more specifically the Rockefeller Foundation that played a key role in the early days of the vaccine partnership, and the Bill & Melinda Gates Foundation that was instrumental in setting up GAVI and in securing its long-term funding. As partners of multilateral organizations, foundations are of a different nature than companies, not only because they operate non-profit, but also because they often focus on sectors in which the company from which the money comes does not operate. This is the case with the Bill and Melinda Gates Foundation which, in its international giving, has a main focus on the health sector.2 In the case studies involved in this book we have met Bill Gates in two different roles: as the founder of the Bill & Melinda Gates Foundation in Chapter 4 and as the Chairman and Chief Software Architect of Microsoft Corporation in Chapter 6. These are quite different roles, and, as discussed in the respective chapters, the partnership between Microsoft and UNESCO is clearly more controversial than the donations of the Bill & Melinda Gates Foundation to GAVI. However, to argue that companies are becoming more statesmanlike does not mean that the role of states in the multilateral system is diminished. Rather, the role of states is changing, as they operate in an increasingly complex environment populated not only by other states but also by NGOs, companies and foundations.

The role of states Throughout the history of the multilateral system, states have been the most important actors. Collaboration between states has been the foundation of multilateralism, and conflicts between states have been the most important impediment to multilateralism’s efficient operation. In this book, the role of states and inter-state conflict has been discussed most explicitly in the cases concerning UNESCO and the ILO, in which superpower tensions overshadowed many debates during the Cold War. In both cases, the US attempted to use the organization to further its own interests, and in both cases it withdrew


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for a period due to ideological differences and its perceived failure to get ‘value for money’. The increasing involvement of private actors does not weaken the importance of states; it is still only states that have voting power in the relevant governing bodies and arenas such as executive boards and annual meetings, and states still provide the bulk of funding for the multilateral organizations. The more appropriate question is, therefore, not whether private actors will replace states, but whether the increasing involvement of the private sector may change the dynamic between states. The evidence from Chapters 4 and 5 is of relevance here. In the health case, most of our informants were of the view that divisions between the European governments and the US government – whether in their opinions about best practice, or differences in style and preferences – were more important than any division between public and private actors. However, it was also clear that, although there is no link between the Bill & Melinda Gates Foundation and the US government, the former was viewed as representing the ‘American view’; when the Bill & Melinda Gates Foundation made its first donation, experienced officials felt that it was crucial to get some European governments on board so that ‘it would not look like an American thing’.3 Similarly, UNESCO’s sudden interest in collaborating with Microsoft was connected by many observers with the return of the US to UNESCO. Although it may be difficult to establish any exact link between the two events, it is nevertheless interesting for our purposes to note the extent to which Microsoft and the United States are viewed as expressions of the same power. One could propose various hypotheses about how private companies might affect the power of their home countries in the multilateral system. Stopford and Strange suggest that there is emerging a new form of diplomacy in which states are increasingly door-openers for companies. Based on this logic, one could hypothesize that companies may benefit from their home countries occupying a strong position in the multilateral system. The reverse may also be the case: that the participation of companies strengthens the position of their home countries in the multilateral system. If this should be so, it would clearly further skew the balance of power between the North and the South. The companies discussed in this book are primarily based in the United States or Europe. This reflects the general pattern in the world: of the 100 largest companies, 53 are of US origin, 35 are European, 7 Asian, 2 Middle East (Saudi-Arabia) and 3

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Australian (Financial Times 2005). One could therefore hypothesize that the increased involvement of companies reinforces the dominance of the rich countries in the multilateral organizations. Does the evidence in this book support this suggestion? There are some cases where this may be true, perhaps particularly with regard to the issues of patented versus free and open source software (FOSS), and patented versus generic drugs, discussed in Chapters 6 and 4 respectively. But the line between rich and poor countries is difficult to draw; large, middle-income countries play a significant role here. The World Bank represents a special case in terms of the relationship between states and companies. It has long been accused of contributing to weakening the role of states through structural adjustment programmes, and other measures to resist the ‘crowding out’ of the private sector by the state. However, ironically, while it is often conceived of as the multilateral organization which has most persistently advanced the interests of private companies, it is also the organization which has the most severe constitutional constraints against working directly with private companies. As discussed in Chapter 1, the World Bank subsidiaries – the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA) – may work directly with the private sector, but they account for a very modest share of total World Bank lending. The overwhelming proportion of lending from the World Bank group goes to states, and states are without doubt the most important partner for the World Bank. This has put the Bank in a peculiar position as an agent of the ‘roll back the state’ agenda of the 1980s and 1990s, and a clear supporter of private-sector development. While it has been promoting privatization and an increased role for the private sector in development, its raison d’être has been to lend to states. The evidence from Chapter 7 is that increased participation by the private sector does not reduce the need for states. The private sector cannot be relied upon to put the poor first, and there is rarely a winwin relationship between the private companies’ goals and the interests of the poor. Indeed, of the cases examined in this book, this is perhaps one where the pursuit of private profit may be most directly incompatible with the goal of bringing benefits to all. The epilogue to the story told in Chapter 7 demonstrates this clearly. After the 2001 economic crisis, the Argentine government froze utility tariffs and converted them from US dollars into pesos in order, among other things, to protect the poor that were hard hit by the


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crisis. This rendered the contracts held by companies such as Suez unprofitable overnight, and brought the Argentine government and the Suez-controlled Aguas Argentinas into a lengthy dispute. In 2003, Suez and the other partners in Aguas Argentinas (Sociedad General de Aguas de Barcelona, S.A. and Vivendi Universal, S.A.) brought the case to the International Center for Settlement of Investment Disputes (ICSID) – an organization affiliated to the World Bank. However, in September 2005, before the case was resolved, Suez announced that it would withdraw from the contract. Interestingly, the World Bank was not an active participant in the controversy.

The gradual change in multilateral organizations The main concern of this book has been with the multilateral organizations. Are these changing as a result of PPPs? What is the role of the officials of the multilateral organizations in shaping the partnerships? In the literature, international bureaucracies have generally not been well treated; with few exceptions, they have been either ignored or regarded in negative terms – as a drain on time and resources. The picture of them as the ‘twining plants’ of international cooperation, as mentioned in Chapter 2, has been prevalent among politicians as well as academics. Among the organizations discussed here, this image is perhaps most strongly associated with UNESCO and the ILO. But how well does this picture fit with the evidence presented in this book? First, it is important to note that many of the partnerships discussed here are – formally – established outside of the multilateral organizations. GAVI and the Global Fund have board representatives from several multilateral organizations, but they are both independent. The two partnerships we discussed related to the ILO are a foundation and a non-governmental organization respectively. Indeed, the only example of a partnership between a multilateral organization and a company, in the strict sense of the term, is that between Microsoft and UNESCO (and several of the smaller health partnerships discussed). The organizational creativity thus displayed, in terms of establishing new and non-traditional forms, is partly a result of actual or perceived bureaucratic inefficiencies; as noted particularly in the health case, creating independent organizations was originally viewed as a way of overcoming the bureaucratic processes involved in being engaged directly with the WHO. However, creating partnerships is not only a result of the bureaucratic limitations of the multilateral organizations. It is also a result

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of organizational creativity. Whether this is allowed and encouraged depends much on the leadership of the multilateral organizations. Robert Cox argued in 1969 that the quality of the leadership exercised by the executive head is a crucial factor for enhancing the growth and scope of authority of an organization (Cox 1969). The importance of the role played by the executive head has been shown in several of the chapters. However, as noted particularly in the case of the WHO, what is understood as a good leader differs significantly across different parts of the constituency of the multilateral organizations. For example, a person regarded by the medical community as a highly qualified and efficient leader was not the kind of leader favoured by the private sector or the NGOs However, equally as important as the actions of the executive head are initiatives taken by officials in intermediate positions in the organizational hierarchy. Although they must always respond to signals coming from higher levels, many have sufficient room for manoeuvre to significantly affect the fate of the partnership initiatives. Such people have in several cases acted as ‘boundary role occupants’: activist brokers between their own organization and its environment. The energy and effort of these boundary role occupants have been crucial in shaping the partnerships, and they bear witness to the potential for agency also in multilateral organizations, stereotypically envisaged as rigid and bureaucratic structures. Thus, to the second question asked above, whether the officials of the multilateral bureaucracy shape the partnerships, our answer is clearly in the affirmative. The first question, whether the partnerships in turn change the organization, is more difficult to answer. Indeed, the question is probably not well formulated. What has happened is that the multilateral organizations have been put under increasing pressure from member states to mimic private organizations, through the introduction of results-based management and other initiatives associated with ‘new public management’. This has, in turn, also made them more able and inclined to work with private companies. Therefore, in general, one may say that changes in the organizations have facilitated partnerships; they are not caused by them. It should also be noted that the multilateral organizations have attempted to mimic not only private organizations, but also other multilateral organizations which have been viewed as successful. More specifically, many have sought to emulate UNICEF. The success of UNICEF in attracting private funds has been a source of inspiration for many officials of multilateral organizations. However, they have usually discovered that few issue areas are as easy to ‘sell’ as


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children; and the fact that UNICEF is a fund, and therefore a different organizational form, does indeed matter. Furthermore, as the idea of partnerships has evolved, it is no longer associated only with fundraising, but also with close collaboration and exchange of expertise. The expertise of the multilateral organizations is what has enabled them to be ‘linking-pin organizations’ in policy-oriented partnerships. The clearest examples in this book are the International Cocoa Initiative (ICI) and the Eliminating Child Labor in Tobacco (ECLT) initiative. In these partnerships, the multilateral organization, that is the ILO, formally plays a rather limited role. However, the International Program on the Elimination of Child Labor (IPEC) of the ILO has been a crucial linking-pin organization, bringing together other partners and giving the initiative a direction. The limitation of linking-pin organizations and boundary role occupants is that they may never become more than that. They may evolve into isolated, outward-oriented and change-oriented units within a much larger structure, while this structure remains the same. It is, for example, relevant to note that it was IPEC, and not the ILO as a whole, that served as a linking-pin organization in the case of child labour partnerships. Although some specific partnerships have had rather limited significance for multilateral organizations, we nevertheless claim that market multilateralism is an important phenomenon. Multilateral organizations are changing due to several factors in combination: states pushing them to be more like private organizations, NGOs demanding participation and transparency, the private sector demanding their services in order to better fulfil their new role in a global economy – as well as the increased availability of private funding in some issue areas. Public–private partnership may thus be seen as one of a number of indications of the gradual transformation of multilateral organizations from being parts of the compromise of embedded liberalism towards being parts of a system of market multilateralism.

Goal achievement of the partnerships These changes in the multilateral system are of interest for many reasons. Although our main concern in this book has not been the extent to which the partnerships contribute to the achievement of development goals, we will briefly comment on this here; not least because we have argued that such goal achievement is of importance for the continued legitimacy of the organizations.

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In this book we have discussed cases which involve the private sector in attempting to alleviate structurally very different problems. Three of the chapters – on health, information and communication technology, and water – involve the population in Third World countries as consumers of goods produced by transnational companies; a fourth chapter involves them as producers and workers. To generalize, and express the matter simply, the dilemma is either that there is a great need for the goods produced by the TNCs, but there is little demand; or that there is a demand, but for various reasons there is little effort to meet it by those who have the technical and financial possibility to do so. In both cases there is incompatibility between the interests of the TNCs and the fulfilment of the basic needs of the poor. There are several reasons why these are incompatible. In some cases it is simply that goods and services cost more than the poor can pay, and there is therefore a need for the public sector – whether the state or a multilateral organization – to contribute funding. In other cases, the problem is the existence of a monopoly situation, which can be altered only by public regulation. In yet other cases, it is public intervention, for example to protect intellectual property rights, that has created a monopoly for certain goods. This was the case both of the pharmaceutical sector in Chapter 4 and the ICT sector in Chapter 6. The question is therefore not only the extent to which the partnerships have contributed to achieving their stated goals, but also the extent to which they have been able to alter the structural causes of the problems. With regard to the health sector, the achievements of the partnerships are impressive. In particular the Global Alliance for Vaccines and Immunization (GAVI) has made a significant contribution to protecting children from preventable diseases. This could not have been done without the initial willingness of the Bill & Melinda Gates Foundation to contribute long-term funding, which later also triggered very significant funding from traditional donors. It could also not have been achieved without collaboration with the pharmaceutical companies. However, this collaboration has so far not been able to address the underlying structural problems in the pharmaceutical industry, that make the goal of vaccines and drugs for all difficult to achieve in the first place. It has given the pharmaceutical industry the incentive to produce vaccines for the poor through ensuring a stable demand with funding from the PPPs. However, although new producers are entering the market, this has so far not contributed to reduced vaccine prices. It is too early to evaluate the achievements of partnerships in the ICT sector. However, it is not likely that these will be as impressive as


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in the health sector, primarily because there is nothing like the same amount of money involved; in this case Bill Gates plans to contribute expertise and some products, but not large amounts of money as in the health sector. Although, among the industries discussed here, the ICT industry and the pharmaceutical industry are the most similar (they are both high-tech, and the global industries are characterized by few players with many linkages between them), they also differ significantly. One important difference is that the generic producers of medicines live by copying patented ones, whereas the producers of Free and Open Source Software (FOSS) develop their own products in competition with patented products. Therefore, trade-offs that have to be made in the health sector – between attempting to hold prices for drugs and vaccines down while at the same time encouraging research and development – should not be as difficult in the ICT sector. However, although the partnership discussed here between UNESCO and Microsoft is of quite limited scope, it may contribute to reinforce rather than to alleviate the structural problems in the ICT sector. The water sector is of a quite different nature. Here, the tendency towards monopoly provision is not related to technological developments or the rules created to protect these. Rather, water may be characterized as a natural monopoly, and if private actors are to provide water services at reasonable prices, regulation is needed. The World Bank has attempted to act as a broker between the different goals sought by the private providers and the needs of the poor. However, as concluded in Chapter 7, the results are discouraging. When a trade-off has to be made between the different goals, serving the poor has not been the priority. The case involving child labour in cocoa and tobacco is quite different again. Here we meet the population of Third World countries not as consumers but as employees. The underlying structural cause is not market failure, but almost the reverse; it is competition rather than monopoly – competition between the hundreds of thousands of small farms producing cocoa, and estates producing tobacco leaves, and the millions of working children in dire need of education, but even more of securing their own livelihood. Their opportunity to think long-term is non-existent. These differences between the cases exemplify a major contradiction in the global economy following the abandonment of embedded liberalism: that the current system of governance of the global economy produces fierce competition at some levels and monopoly at others. The market does not provide a ‘level playing field’, and the

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rules of the game are complex, varied, and controlled mainly by rich countries. Apparently there is justification for artificially producing monopoly situations in order to protect intellectual property rights, so as to encourage technological progress; but those that have few skills and little expertise are unprotected, and must engage in fierce competition. Compared with these fundamental systemic biases, the impact of partnerships discussed in this book appears small and partial. The ICI and ECLT may help a significant number of poor children working on cocoa and tobacco farms to gain some education and perhaps a better life, but they will do little to help reduce the extent of the phenomenon of low wages. In order to really make a difference, such partnerships would have to be far broader and more encompassing, aiming at the long-term development of communities and countries. This is, however, not to diminish the importance of many of the existing partnerships. We believe that many may contribute greatly to achieve important goals, as well as raising awareness among business leaders, governments and other involved parties, about the important issues involved. They are not enough; structural factors in the multilateral system must also be addressed. However, they may still be of significance for the continued legitimacy of the multilateral system, an issue to which we turn in the following section.

The legitimacy and authority of the multilateral organizations In Chapter 2 we outlined different sources of the legitimacy and authority of the multilateral system. In addition to the traditional sources of legitimacy deriving from the system’s basis in legitimate, sovereign states and its (at least partial) democratic structure, we emphasized that multilateral organizations may gain legitimacy through, first, their acknowledged expertise in specific issue areas, second, their moral standing as non-political and non-partial players, and third, their demonstrated ability to achieve commonly acknowledged goals. Before evaluating the impact of PPPs on the legitimacy of the multilateral organizations, some words of caution are required. First, it is likely that the multilateral organizations discussed here will be judged not only on their own performance but also on the performance of the multilateral system as such. And the legitimacy of the system as a whole will probably depend more on its performance in solving urgent security crises – such as the war in Iraq – or its


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handling of critical humanitarian disasters, than the PPPs. Although the issues discussed in this book are vital to human lives, they do not all capture headlines or influence the general public’s view of the multilateral organizations. In addition, recent research shows that people’s opinion of the multilateral organizations differs greatly between countries.4 The actual performance of organizations does not have an unmediated impact on public opinion: their impression of the multilateral organizations is influenced by historical experiences, political leanings, and the press. PPPs may nevertheless have consequences for the legitimacy and authority of the multilateral organizations. Concerns about the negative consequences of partnerships for the multilateral system’s legitimacy have been many. As one critic has argued: If the ‘partnerships’ approach to interacting with the for-profit sector is not abandoned soon, the end of the 20th century and beginning of the 21st could well go down in history as the era in which UN agencies sold off the interests of those they are meant to stand up for. Indeed, some fear it will be known as the period in which the UN sold itself off. (Richter 2003: 16) This book does not take such an extreme view. The main conclusion that emerges from these case studies is that the influence that the private sector gains in the multilateral organizations through PPPs varies greatly, and so does the degree to which the PPPs affect the multilateral system’s legitimacy, in its different forms. The issues of formal-legal and democratic legitimacy were discussed in Chapter 2. These refer to the formal legitimacy that the organizations have because they are made up of legitimate states, and the legitimacy they have as democratically structured organizations, respectively. Here, we will focus on the three less traditional forms of legitimacy: expertise, moral standing and goal achievement. One lesson to be drawn from our case studies is that the multilateral system may, through PPPs, be able to extend its expertise to new groups. The businesses studied here have been unanimous in their appreciation of the expertise of multilateral organizations, within the issue areas covered by the partnerships. This has not changed their opinion of the multilateral organizations as essentially slow-moving and inefficient organizations; but it has given the multilateral organizations a certain authority, in specific fields, among groups that formerly had little to do with them.

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It is difficult to judge how the PPPs affect the moral standing of the multilateral institutions. Opinions regarding the ‘morality’ of these institutions vary considerably according to a person’s view – both of the market and of global ethics. Concerning the market, they range from those who see it as the ultimate expression of individual freedom and responsibility, to those who castigate it as at best amoral (McNeill 1999). And perspectives on multilateral institutions parallel these views. When it comes to specific multilateral institutions and issue areas, the situation is more complex, and some partnerships entail more challenging moral dilemmas. We have chosen, in this book, to focus on some relatively high-profile and controversial issues. Multilateral organizations gain moral standing by seeking to confront these – such as providing vaccines for the poor or opposing child labour. But by entering into partnerships with the private sector they risk compromising their position. We will argue, however, that legitimacy in terms of goal achievement is going to be more rather than less important in the years to come. Organizations that do not demonstrate an ability to provide solutions to concrete and urgent problems will be viewed as less legitimate; and questions about moral standing may become more muted in relation to those organizations that are able to achieve results. There are dangers inherent in this tendency. It may lead to an excessive concern with easily measurable goals to the exclusion of more important but less tangible ones. It may also lead to an exaggerated emphasis on publicity. Despite this, the new global political situation does now offer multilateral organizations an opportunity to carve out a substantial role for themselves.

Conclusion: the strengths and limitation of market multilateralism In this book we have discussed theoretically, and investigated empirically, the emergence of what we call market multilateralism – an institutional form that involves collaboration not only between states, but also between private actors and multilateral organizations. The primary role of multilateral development organizations, such as those examined in this book, is to improve the lot of the world’s poor: to facilitate the provision of water, education, and health for all, or to bridge the digital divide. The role of private corporations is very different. To assess the merits of public–private partnerships, one should distinguish between the immediate practical outcome of particular initiatives and the longer- term, systemic effect of a plurality of


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such partnerships. With regard to the former we have found that the picture is very mixed: some initiatives have made a significant contribution, others little or none. More important for us, however, are the systemic effects. Here, we conclude that market multilateralism does not challenge the principles of the market and the interests of TNCs, but it does engage private actors in norm-governed behaviour. We have argued that the TNCs are emerging as political actors that may in some cases act according to norms emerging in the multilateral system. In our view, the multilateral system should always provide an arena for what Cox called ‘political multilateralism’; it should always be a forum for debating possible structural changes. That private actors are now a part of this system is, on balance, positive. Although achievements to date are modest, including the private sector in the multilateral system has the potential to add to, rather than detract from, the long-term goal of creating multilateral institutions that are better at solving the pressing development problems of today.

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Notes

1 The Rise of Public–Private Partnerships in the Multilateral System 1 Guardian Weekly, 27 August–2 September 2004. 2 This is roughly the same as the definition James Caporaso (1992: 602) uses for multilateral institutions. 3 Most debates about multilateralism have focused on issues that clearly affect national interests, and the explanation for choosing a multilateral approach has been based on weighing possible short-term costs against long-term rewards. Today, the most hotly debated topic is the implications of the increasing unilateralism of the USA, and its unwillingness to take the multilateral route where this might involve a change of behaviour, e.g. in security issues (Foot et al. 2003; Ikenberry 2003; Brooks and Wohlforth 2005). 4 Although not specified by Ollila, risk is often connected to debates over ‘conflicts of interest’ in the multilateral organizations, i.e. that such a relationship may be viewed as serving the interests of private actors rather than fulfilling the mandate of the multilateral organization. 5 It was not officially closed down, but transferred to UNCTAD. 6 UNFIP funds partnerships and projects implemented by UN organizations. By 2005, it had supported 324 projects in four priority areas: women and population; environment; children’s health; and peace, security and human rights. It has also funded several partnerships, among them the Global Reporting Initiative which is a tool for encouraging businesses to publish reports on their environmental and social impact. 7 Later, a tenth principle on corruption was added. 8 The Global Compact was initially run by a small secretariat depending for its existence on support from governments and non-profit organizations. The loose governance structure was intended to maintain its flexibility and independence from the UN system and businesses. In September 2005, a new governance structure was adopted which added a triannual Leaders’ Summit, a Board, Local Networks, and annual Local Networks Forum, but the emphasis is still on a non-bureaucratic and network-based organizational structure. 9 http://www.un.org/partners/business/otherpages/guide.htm 10 An example of this is the World Bank’s involvement in infrastructure reform. See Chapter 7.

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11 To our knowledge there do not exist any global figures for private-sectorfunded activities in the UN system. However, some estimates point to 2– 3 percent of the budget of some specialized agencies (e.g. WHO). 12 UNICEF annual report, 2003. 13 For example, see British Airways’ programme: http://www.britishairways.com/travel/crcfgood/public/en_gb 14 See: http://www.unicef.org.uk/corporatepartnerships/partner_detail. asp? partner = 5&nodeid = partner5§ion = 4 15 For more information, see: http://www.unicefusa.org/faf/home/default. asp?ievent=59730 16 This includes all donations larger than US$100,000. 17 See: http://www.unhcr.ch/cgi-bin/texis/vtx/home/opendoc.htm?tbl = PARTNERS&id = 3e5dd4974&page = partners 18 See: http://www.unep.ch/natcom/assets/about_natcom/changing.doc 19 See: http://www.unido.org/doc/4364 20 See: http://www.cib.db.com/community/htm/db_microcredit_dev_fund. html 21 See: http://www.uncdf.org/english/ 22 See: http://www.netaid.org/ or http://www.cisco.com/netaid/ 23 See: http://www.yearofmicrocredit.org/ 24 See: http://www.wdwmagic.com/millennium_dreamers.htm 25 http://www.loreal.com/_en/_ww/loreal-women-in-science/focus-womenin-science.aspx 26 See: http://www.mondialogo.org 27 See: http://www.alcanprizeforsustainability.com/ 28 See: http://www.seedawards.org/ 29 See: http://www.iccwbo.org/awards/ 30 See: http://www.iccwbo.org/awards/ 31 See:http://whc.unesco.org/venice2002/edito.htm 32 See: http://www.walden.com/teach/movies/david_unhcr.jsp _ 33 See:http://www.johannesburgsummit.org/html/sustainable_dev/p2_means_ implement/2008_engaging_ad_industry.pdf and http://www.uneptie.org/ outreach/vi/initiatives.htm#advertising respectively. 2 Multilateralism and Globalization 1 The term ‘indivisibility’ derives from the theorizing of security communities and refers to the understanding that an action against one partner is an action against everybody. The term ‘diffuse reciprocity’ is based on Keohane (1989: ch. 6) and refers to the giving of something without a specific expectation of what is to be returned. 2 See Katzenstein, Keohane and Krasner (1998) for a review of different approaches to international institutionalization. 3 For some important contributions to this debate, see Strange (1996), Mann (1997), Weiss (1998, 2005). 4 In the case of Norway, for example, the integration into a global economy has been associated with an extension of social protection and welfare (Mjøset 2004). 5 Also here there is significant national variation and many ‘hybrid forms’ of neo-liberal states (Christensen and Lægreid 2001).

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6 One example is the convention concerning labour rights issued by the governing body of the ILO, the International Labor Conference (ILC), that have been adopted by most countries of the world. 7 One example was the, admittedly unsuccessful, attempt to introduce Codes of Conduct for Transnational Enterprise under the framework of UNCTAD in order to make the activity of transnational companies compatible with development goals. 3 Partnerships in Context 1 This point has been made not only by academics such as Ruggie, but also, for example, by the financier George Soros: ‘The globalization of financial markets has rendered the welfare state that came into existence after World War II obsolete because the people who require a social safety net cannot leave the country, but the capital the welfare state used to tax can’ (Soros 2002: 3). ‘There is an urgent need for the provision of global public goods, and the rich countries ought to pay for them’ (2002: 106). 2 Founding president of New Ventures, and Executive Director of the New York-based Surdna Foundation. 3 For more information about NetAid, see: http://www.netaid.org/ or http://www.cisco.com/netaid/ 4 These websites can be found at: http://www.un.org/partners/business/ index.asp http://www.unglobalcompact.org and http://www.un.org/unfip/ respectively. 5 Some would say misleading, since the corporations’ figures refer to sales, while GDP figures refer to value added. 6 The difference between the three may be summarized as follows. A patent is essentially an institutionalized bargain between the state and the inventor, where the state agrees to ensure the inventor is paid for his/her idea when others use it (for the term of the patent) while the inventor allows the state to lodge the idea in its public records, to ensure public dissemination of innovation. Copyright is concerned with the form of knowledge and information that would normally be termed ‘literary and artistic works’, and needs no formal registration. Trademarks distinguish the products of one company from another (May 2005: 166). 7 Two cases in particular brought global attention to the problems with TRIPs. The first was the adoption of legislation in South Africa that in effect gave the Ministry of Health the right to abrogate patent rights to pharmaceuticals. This led an alliance of thirty-nine companies to sue the government, but they withdrew the case in the end due to fears that unfavourable information would leak out. The second case was the Brazilian usage of Article 8 on compulsory licensing. 8 The dispute was between the United States and Malaysia, Pakistan and Thailand over the legality of the US ban on imports of shrimp caught without the use of turtle-exclusion devices on shrimp fishing nets. 9 As noted by Chan and Ross (2003), the social clause issue has forged strange alliances as Western bankers, multinationals and employers align with southern governments in favour of unrestricted trade without labour conditionality, whereas Western NGOs, human rights groups and

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trade unions that usually stand on the opposite side from their governments have often been on the same side over this issue. 10 See: http://www.globalpolicy.org/ngos/ngo-un/infoindex.htm/ 11 See: http://www.csrforum.com/ 4 Global Partnerships for Health: health for all, or more ‘big pharma’? 1 http://www.ippph.org 2 This includes diseases such as malaria, tuberculosis, African trypanosomiasis (sleeping sickness), Chagas’ disease, dengue, leishmaniasis, schistosomiasis, onchocerciasis and lymphatic filariasis. 3 The European Generic Medicines Association applies the following definition of generic medicines: ‘A generic medicine is the therapeutic equivalent of an originator pharmaceutical product whose patent has expired. It contains the same active substance as, is essentially similar to, and is therefore interchangeable with the originator product.’ 4 It should be noted, however, that production of generic medicines does not only occur in developing countries; there are several generic companies with an increasingly global reach, many of which are based in Europe or the United States. 5 The most severe supply slump was for the DTP vaccine, dropping from 550 million in 1994 to 100 million in 2003 (UNICEF 2004b). Although the supply has risen slightly since then, the demand still outpaces supply of many vaccines, a situation which makes it more difficult to drive prices down. 6 In 1999, 95 per cent of the new cases were found in the Third World, and in 2000, two-thirds of all cases were found in Africa. 7 These suppress the load of the HIV virus in infected persons, thus reducing the susceptibility to opportunistic infections, or prevent and/or treat opportunistic infections that eventually kill persons with full-blown AIDS. 8 Interview, Dr Kate Taylor, Director, the Global Health Initiative, World Economic Forum. 9 The WHO constitution mandates it: ‘To stimulate and advance work to eradicate epidemic, endemic and other diseases’ (Article 2, g). 10 Interview, senior WHO official, 8 April 2003. 11 Interview, Gro Harlem Brundtland, 9 April 2003. 12 Interview, Gro Harlem Brundtland, 9 April 2003. 13 As a result, although Pfizer was ranked 127th largest company in the world in terms of total revenue in 2001, it ranked seventh in terms of profit (Henry and Lexchin 2002: 1591). However, between then and 2005 profits dropped for many big pharmaceutical companies including Pfizer. This was due to a combination of problems getting new drugs out of their pipelines and into the markets, the withdrawal of several highprofile medicines because of safety concerns, and the emergence of generic competition to ‘blockbuster’ drugs (those with more than $1 billion in global annual sales (The Economist, 16 June 2005)). 14 By comparison, the Rockefeller Foundation was about one-tenth the size, with total assets of US$2,679 million and donations in 2002 worth US$149 million (Renz and Lawrence 2004).

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15 The Norwegian government, in June 2000, pledged a provision of approximately US$25 million per year (1 billion Norwegian Kroner) over five years. 16 DTP3 is the diphtheria–tetanus–pertussis vaccine. Countries will receive funds based on demonstrating an increase in the reported number of children who receive DTP3 before one year of age, compared to baseline DTP3 coverage, and verified by an external audit. However, due to various criticisms, the performance criterion has now been ‘softened’: countries can apply also for ‘up-front’ funding, and, in 2003, 40 per cent of the funds were channelled towards support for vaccination systems. 17 Three disease organisms: pneumococcus; rotavirus; and menigococcus. Three technologies: vaccines stabilization; non-invasive test for tetanus to measure overall effectiveness of immunization programmes; and devices to ‘defang’ used needles. 18 Defined as countries with less than $1,000 per capita annual Gross National Income. 19 Interview, Global Fund official, 8 April 2003. 20 Other private sources amount to only US$2.8 million or 0.09 per cent of the fund’s resources. 21 By the end of 2004 the fund had achieved the following results: 130,000 had received anti–retroviral treatment for HIV/AIDS; 385,000 TB cases were treated; more than 1.35 million families had received insecticidetreated bed-nets to prevent malaria; and more than 300,000 people had received Artemisin combination therapy for malaria (Global Fund 2004). 22 Its role in accelerating ACT treatment is highly debated. It has been accused of holding back the take-up of ACT treatment due to funding for ineffective anti-malarials such as chloroquine and Sulfadoxinepyrimethamine (Attaran et al. 2004). A report commissioned as a result of the controversy concluded that the evidence was mixed. The Global Fund had indeed contributed to acceleration of ACT take-up, but a reprogramming was proposed that would encourage ACT treatment in more countries where the old treatments had been shown ineffective (Vestergaard 2004). 23 These may be defined as teams of experts employed by different organizations and companies that meet regularly to discuss strategic issues, submit themselves to common management and commit to delivering specific pieces of work within given timelines (Nwaka and Ridley 2003). 24 See, for example, Brugha et al. (2004). 25 That we choose here not to study firms in developing countries does not mean that we assume that they are more inclined to cooperate than ‘Big Pharma’, and therefore constitute a less ‘hard case’ for the testing of our hypothesis. Our interviews actually indicate the opposite; that they have been more inclined to act opportunistically on the boards and less willing to enter into unprofitable deals. 26 The monovalent Hepatitis B is a mature product, and the prices have decreased significantly over the last years and are expected to continue to fall. However, the prices of Hib vaccines have remained high and the price of Yellow Fever vaccine doses has increased (from $0.34 in 2002 to $0.80 in 2004, and a forecast of $0.97 in 2006 (Fife 2003; UNICEF 2004b, 2005a)). Some of the price increase was due to a change in vial size.

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27 Two new vaccines – DTP+HepB and DTP-HepB+Hib – were made available especially to GAVI. These are significantly more expensive than the monovalent vaccines and prices are increasing: DTP+HepB was available at $1.10 in 2001, and was forecast to increase to $1.25 in 2005. The comparable prices for DTP-HepB+Hib were $3.50, $3.65 and $3.60 (Fife 2003; UNICEF 2004b, 2005a). 28 Listed in the MSH International Price Indicator Guide. 29 Discovery is generally more risky than product development. But even here, levels of risk vary. A low-risk discovery project is to adopt a ‘metoo’ approach; in other words an attempt to produce an improved drug from an existing class. A medium-risk project might be to ‘piggy-back’ on existing chemistry designed against a target of relevance for human disease that also has a tropical diseases indication. The highest-risk projects are those that try to derive a new class of inhibitor against a new molecular target (Nwaka and Ridley 2003). 30 Meningitis was left out because the Gates Foundation supported other efforts to find a meningitis vaccine. 31 In the case of pneumoccocal vaccines there already exists one for use in the US; but to suit developing countries, there was a need for a rather different cocktail. (A 7-valent vaccine is used in the US, whereas a 9valent vaccine is required in developing countries.) In the case of rotavirus there was a vaccine, but it was withdrawn because of sideeffects. Now there is a new one that has been licensed in Mexico, and approval is awaited in other countries as well. 32 There was an international tender, and the health foundation PATH won the contract for the rotavirus vaccine, while Johns Hopkins University won the contract for the pneumoccocal vaccine. The board decided not to fund the research on improvement of technology. 33 One example is the sudden reneging on a 100 million euro ($133 million) pledge to the Global Fund by Italy in December 2004. 34 For example, it takes between nine and twenty-four months to produce a dose of vaccine, and two to three years to increase capacity for vaccine production. 5 Tripartism meets CSR: the ILO’s partnership experiments to combat child labour 1 Elisabeth Olson, ‘ILO, long in eclipse, regains some prominence’, New York Times, 23 March 2000. 2 The first such social reforms in Great Britain were introduced by the textile manufacturer Robert Owen in the early nineteenth century. His mill and manufacturing community at New Lanark in Scotland became famous throughout Europe for its social reforms. He was the architect of the Owen Bill, carried through the British Parliament by Robert Peel in 1819. Peel rejected any linkages of reform with cost disadvantages to manufacturers, either domestically or in foreign trade. This issue was first raised by the Swiss banker Necker. The first to introduce the possibility of international industrial treaties on social reforms was Charles Hindley, a British MP from 1835 to 1857 (Stokke 1997).

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3 In particular: that labour is not a commodity; freedom of expression and of association are essential to sustained progress; poverty anywhere constitutes a danger to prosperity everywhere; and that the war against want requires to be carried on with unrelenting vigour within each nation, and by continuous and concerted international effort in which the representatives of workers and employers enjoy equal status with those of governments. 4 The Conference recognized the obligation of the International Labor Organization to promote among the nations of the world programmes to achieve: (i) full employment and the raising of standards of living; (ii) the employment of workers in occupations in which they can have the satisfaction of giving the fullest measure of their skill and attainments and make their greatest contribution to the common well-being; (iii) the provision, as a means to the attainment of this end and under adequate guarantees for all concerned, of facilities for training and the transfer of labour, including migration for employment and settlement; (iv) policies in regard to wages and earnings, hours and other conditions of work calculated to ensure a just share of the fruits of progress to all, and a minimum living wage to all employed and in need of such protection; (v) the effective recognition of the right of collective bargaining, the cooperation of management and labour in the continuous improvement of productive efficiency, and the collaboration of workers and employers in the preparation and application of social and economic measures; (vi) the extension of social security measures to provide a basic income to all in need of such protection and comprehensive medical care; (vii) adequate protection for the life and health of workers in all occupations; (viii) provision for child welfare and maternity protection; (ix) the provision of adequate nutrition, housing and facilities for recreation and culture; (x) the assurance of equality of educational and vocational opportunity. 5 http://www.ioe-emp.org/ioe_emp/About the IOE/about_the_ioe.htm 6 The wording of the Singapore Declaration is: ‘We renew our commitment to the observance of internationally recognized core labor standards. The International Labor Organization (ILO) is the competent body to set and deal with these standards, and we affirm our support for its work in promoting them. We believe that economic growth and development fostered by increased trade and further trade liberalization contribute to the promotion of these standards. We reject the use of labor standards for protectionist purposes, and agree that the comparative advantage of countries, particularly low-wage developing countries, must in no way be put into question. In this regard, we note that the WTO and ILO Secretariats will continue their existing collaboration.’ 7 The principles were: (i) that labour should not be regarded merely as a commodity or article of commerce; (ii) the right of association; (iii) the payment of an adequate wage to maintain a reasonable standard of living; (iv) an eight-hour working day or forty-eight-hour week; (v) a weekly rest of at least twenty-four hours; (vi) abolition of child labour; (vii) equal pay for equal work; (viii) equitable economic treatment of all workers of a country; and (ix) an inspection system to ensure the enforcement of the laws for worker protection.

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8 The most well-known case is probably the experiences from the Bangladeshi garment industry in the early 1990s. As a result of consumer and trade union pressure, in 1992 a bill was presented in the US Senate to ban imports of products made with child labour. Although the bill was never passed, it caused panic among owners of Bangladeshi garment factories, for whom 50 per cent of the market was in the US, and who had been in focus for alleged use of child labour. As a result, abrupt dismissals of child factory workers started in 1993, and as many as 40,000–50,000 children lost their jobs. After reports emerged about the destiny of these children – most of them were suffering increased poverty or had found more hazardous jobs – UNICEF, the ILO and the Bangladesh Garment Exporters and Manufacturers Association (BGMEA) started a programme to get children into schools and to find alternative income sources for the families. Although this programme helped some children, it was concluded that such measures should be in place before, rather than after, children were dismissed from their factory jobs (ILO and UNICEF 2004). 9 For example Tørres and Tsoka (2000) show how the tobacco estates in Malawi are organized in such a way that a tenant farmer has no choice but to involve his/her entire family in the production of tobacco. When a tenant is employed on the estate he or she is employed as the head of the household and is responsible for fulfilling the quota required by the estate owner. This quota cannot be grown unless the entire family of the tenant is involved in the growing of tobacco. 10 This is especially true for those who apply the technique of ‘negative filtering’, in other words filtering out companies that fail to adhere to established standards. Many apply the UN conventions in the formulation of standards, and exclude from their portfolio companies that break any of these (including ILO conventions and the convention of the rights of the child). 11 The two major cocoa-producing countries in West Africa are Côte d’Ivoire and Ghana. Côte d’Ivoire is the world’s largest producer of cocoa beans. Its average share of world production in the period between 1994 and 2003 was 38 per cent, while Ghana’s production was 12 per cent. (Data compiled from FAOStat 2004.) Both countries are therefore very dependent upon cocoa production and the world market price. The climatic conditions in Côte d’Ivoire and Ghana are almost perfect for cocoa production. 12 These articles were written by Sudarsan Raghavan and Sumana Chatterjee, and published in the Miami Herald and the New York Times in 2001. Similar stories about child slaves and child slave markets were also published in the popular backpacker West Africa travel guide produced by Lonely Planet. 13 External founders of the foundation include the United States Agency for International Development (USAID) and the United States Department of Agriculture. According to the WCF, it spends about $400,000 a year on programmes to support West African cocoa farmers. 14 The cocoa tree is fragile, and it depends upon a tropical climate where the soil is rich in organic material, an average temperature between 24 and 28 degrees Centigrade, and an annual rainfall of no less than 1,600

Notes

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16

17 18

19 20 21 22 23 24 25 26 27 28 29

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millimetres. The tree also needs to find shelter from the wind, and it grows best if shade can be provided. These are precisely the kinds of conditions found in the tropical forest belt along the coast in southern Côte d’Ivoire and southern Ghana. A huge majority of the farmers are small farmers, and cocoa production is labour intensive during the harvesting, but less so in the rest of the year; there are also significant variations between small farms and large, and between relatively new and older farms. The work to create a certification programme was done by the industry itself without the involvement of the ILO. Therefore, it will not be treated in further detail here. Our interviews revealed that, whereas there was great optimism regarding the feasibility of such a system on the part of the industry, the ILO had little faith in it. The 1 July 2005 deadline was not met. For further information, see http://www.worldcocoafoundation.org or http://www.laborrights.org/projects/childlab/cocoa_obligations.htm Considering the strong role that trade unions have had in other work on child labour, it is surprising that in the ICI, they are referred to as NGOs; two trade union representatives – of the International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers’ Associations (IUF) and the IFFTU – are among the six ‘NGO representatives’ on the board. The hazards in the tobacco industry are related to the use of pesticides, machinery, repetitive and physically hard work and so-called ‘green tobacco sickness’ (ILO, undated). Alliance One, Altadis, British American Tobacco, Gallaher Group PLC, Imperial Tobacco Group PLC, Japan Tobacco Inc., Philip Morris International, Philip Morris USA, Scandinavian Tobacco Company, Tribac Leaf Limited, and Universal Leaf Tobacco Co., Inc. Interview, Marc Hofstetter, Director ECLT, 29 September 2005. Interview, ILO official, 28 September 2005. Interview, ILO official, Multinational Enterprise Programme, 1 December 2004. Interview, ILO official, 28 September 2005. Interview, ILO official, 27 September 2005. Interview, ILO official, 26 September 2005. Interview, partnership representative, 27 September 2005. Interview, industry representative on ECLT board, 29 September 2005. Interview, ILO official, 1 December 2004. Interview, representative of the tobacco industry, 12 October 2005. Interview, representative of the tobacco industry, 12 October 2005.

6 UNESCO and the Software Companies: bridging the digital divide, or transforming US dominance? 1 For an elaboration of the role of science in French foreign policy after World War One, see Gilpin, France in the Age of the Scientific State (Princeton: Princeton University Press, 1968). 2 The NWICO proposal asserted, among other issues, the ‘right to inform’ (i.e. the right of self-interpretation to other) and the right to be heard, as well as the right of every developing country to exercise full sovereignty

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4 5 6 7 8 9 10

11 12 13 14

15 16 17

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over information, both that concerning its day-to day realities and that diffused to its people. It also enunciated the right to preservation of a way of life (cultural integrity). The first controversy concerned a proposal to make the Allied ‘re-education’ of the German people into a global exercise that should include UNESCO supervision of revision of textbooks, particularly history textbooks to make them instruments for peace. The second concerned a decision by the Executive Board of UNESCO in 1967–8 to submit to inter-governmentally sponsored screening of the Arab State textbooks used in United Nations Relief and Works Agency (UNRWA)/UNESCO schools for Palestinian refugees, after Israel complained that they were spreading hatred against Israelis, and attempted to replace them. French intellectual Alain Finkielkraut argued in 1987 that it had ‘degenerated into a tool for parochialism and relativism’ (quoted in Hylland Eriksen 2001). Assistant Secretary of State for International Organizations, Gregory Newell, ‘The United States and the Withdrawal from UNESCO’, Time, 9 January 1984, p. 17. Its total budget has been between US$550 and 600 million biannually, of which the US now is set to contribute approximately one tenth. About 10 per cent of the first budget approved by UNESCO was devoted to cooperation with NGOs for the implementation of its tasks (Ascher 1950). ‘UNESCO’s experience with fund-raising in the Private Sector’, Executive Board Document (1995–146EX/INF.4). Specifically this was done through involving the corporate designers of Rhône Poulenc in designing teachers’ educational kits concerned with World Heritage sites. A 2003 report measured Info-density and Info-use according to a series of indicators (including internet hosts per thousand population, teledensity – fixed and mobile, literacy rates, school enrolment ratios, TVs, PCs, internet use and residential phone lines per hundred households or inhabitants, and internet/telephone traffic). It found that index values ranged from 230 in the best-served countries to as low as 5 at the other extreme (Sciada 2003). UNESCO, ‘Info-ethics’, at http://www.unesco.org/webworld/public_ domain/legal.html See the home page of the Free Software Foundation (http://www.fsf.org) for a more thorough explanation. See Wheeler (2005) for a thorough and updated survey of surveys. Over the course of the next two years, Microsoft changed strategy towards Brazil. After dropping the lawsuit, in 2005 Bill Gates adopted a more conciliatory line, attempting to arrange for a meeting between himself and Lula during the World Economic Forum in Davos in January 2005. Interview, Frederique Couchet, President, Free Software Foundation (FSF), France, and Benôit Sibaud, President, L’Association pour la Promotion et la Recherche en Informatique Libre (APRIL), 7 June 2005. Document WSIS/PC-3/172-E, 25 September 2003. http://portal.unesco.org/ci/en/ev.php-URL_ID=12034&URL_DO = DO_ TOPIC&URL_SECTION=201.html

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18 The most popular UNESCO software tools are CDS/ISIS, Greenstone and IDAMS. For example, during 2004, UNESCO distributed upon request more than 5,600 copies of its information storage and retrieval software CDS/ISIS, a program much used for managing databases in libraries and information centres. 19 Albania, Bosnia and Herzegovina, Croatia, FYR of Macedonia and Serbia and Montenegro. 20 The official US justification for rejoining was that: (i) UNESCO’s mission and programming reflect and advance a wide range of US interests (for example, UNESCO manages the ‘Education for All’ programme, which promotes universal basic education and literacy. This initiative advances US educational goals worldwide and closely parallels the US ‘No Child Left Behind’ programme); (ii) UNESCO advocates education that promotes tolerance and civic responsibility. This is a key to building democracy and combating terrorism; (iii) UNESCO helps countries protect their natural and cultural heritage. It promotes adoption of sound scientific standards. These efforts are important in maintaining a healthy balance between continuity and imperatives for change; (iv) UNESCO promotes press freedom and independent media, essential foundations of democracy; (v) UNESCO brings countries together to address issues that have significant implications for the future, such as bioethics and cultural diversity (Fact Sheet, U.S. Department of State, 22 September 2003, http://www.state.gov/p/io/fs/2003/24189.htm). 21Education and learning, community access and development, cultural and linguistic diversity and preservation, digital inclusion and capacity building, exchange and promotion of best practices on the use of ICT for socio-economic development programmes (known as ICT4D, or ICT for Development), facilitating exchange of information and of software applications, and sharing expertise and strategies, such as on ICT4D efforts. 22 Interview, high-level CI-sector official, 3 June 2005. 23 Interview, high-level UNESCO official, 3 June 2005. 24 Interview, mid-level official, UNESCO, 3 June 2005. 7 Water For All: the World Bank and private water companies 1 This chapter draws very heavily on the work of Ryan Glenn Anderson, in his ‘Pro-poor Concession Contracts and the Role of the World Bank’, MSc in Environmental and Development Economics, University of Oslo (2005). 2 The majority of the population in Latin America are urban dwellers, and the situation regarding rural water supply is very different. 3 Suez is the largest in the world, followed by Vivendi (now Veolia Water). In 2001, the two had a combined turnover nearly four times that of the five other major international water companies combined: Thames Water (now RWE of Germany), Saur, Cascal/Biwater, Anglian Water and IWL (Holland 2005: 17). But these companies sometimes collaborate; for example, in Buenos Aires the consortium is owned by Suez, Veolia, Anglian Water and a few others (Holland 2005: 18). 4 There are some public–private initiatives in the water sector involving other UN agencies, but these are relatively minor.

204

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5 According to the World Bank Vice-President and Legal Counsel, ‘[p]lacing greater emphasis on private sector development and reliance on market forces have probably been the most noticeable development in the Bank’s operations since the initiation of adjustment lending in 1980’ (Shihata 1995: 6). 6 Through this dialogue, the Bank tries to influence countries to shift to a greater reliance on market forces, ‘often using the volume of lending as an incentive’ (Shihata 1995: 6). 7 An important aim of the Bank, to maximize its investment lending, seems not to be a driving force in this case, since the Bank cannot lend to the private sector. 8 And the Multilateral Investment Guarantee Agency (MIGA). 9 WDRs, though formally enjoying some independence, are usually taken to reflect World Bank thinking. 10 ‘Opportunity’, ‘Empowerment’ and ‘Security’ were the titles of the three central sections of the report. The first was seen as reflecting the promarket view, and the second the pro-state view. Even the order in which the sections were presented became an issue of contention. 11 ‘Water Resources Management Policy Paper’. For reference, see World Bank (1993a). 12 ‘The World Bank’s Role in the Electric Power Sector’. For reference, see World Bank (1993b). 13 World Bank’s OP 4.50 (Telecommunications Sector). 14 The Operations Evaluation Department (OED) is an independent unit within the World Bank; it reports directly to the Bank’s Board of Executive Directors. The OED claims that the Bank has now acquired a more ‘nuanced’ view of PPI which has corrected for this ‘excessive faith in the private sector as operator’ (OED 2003a: 21). 15 See The Center for Public Integrity’s ‘Water Barons’ website: http://www.icij.org/water/default.aspx 16 See the Bank’s Private Sector Development home page: http://www. worldbank.org/privatesector/ppi/index.htm 17 See http://ppi.worldbank.org/ (1 November 2004). 18 According to the same source, of the 276 loans that the World Bank granted for water projects between 1990 and 2002, 84 called directly for privatization (quoted in Goldman 2005: 252). 19 A recent study of privatization in Central America (Bull 2005) indicates that the influence of the World Bank may in fact be much exaggerated. But the perception is nevertheless powerful. 20 In particular, they find that while the electricity and telephone companies were required to meet a generic Universal Service Obligation, the water utility was placed under much more stringent obligations to meet specific connection targets in low-income neighbourhoods. As a result, new water connections increased substantially, while new telephone and electricity connections realized no sustainable increase. 21 OED (2002: 2) labelled this project an ‘Unsuccessful Privatization’. 22 OED (2003b: 1) noted that ‘[t]he operation failed to achieve most of its objectives . . . ’. 23 The Buenos Aires water and sewerage concession contract allowed the private operator to charge connection fees of between US$1,100 and

Notes

24 25 26 27 28 29

30

31 32 33 34 35 36

37 38

39

205

US$1,500 in areas where the average monthly income was US$245 (Nellis, Menezes and Luca 2004: 4). The following analysis is based only on the three Project Appraisal Documents (PADs), but it confirms much of the Bank’s own independent evaluation department’s findings. ‘Degree of PPI’ here encompasses (i) the number of utilities with PPI, (ii) the number of people served by private sector operators, (iii) revenues generated, and (iv) investment level. This is because all three cases projects propose a ‘demand-driven’ reform where sub-loans are given to those communities demonstrating willingness to reform or to utilities with PPI. Water Sector Reform Project in Argentina (World Bank 1999), a Second Water Sector Modernization Project in Brazil (World Bank 1998), and a Water Sector Reform Assistance Project in Colombia (World Bank 2001). In the case of Colombia, the award criterion is the lowest annual subsidy required to meet the stipulations of the contract. Concerning the renegotiation of the contract for Buenos Aires, the Managing Director of Suez, Jean Bernard Lemire, says that Aquas Argentinas (the consortium) was not informed of the poor state of the water company: ‘A certain flexibility must exist in a contract’ (quoted in Holland 2005: 55). This would be the argument in Argentina, at least. Here, the probability that cash generation would not be as expected would have been a calculated risk at the time of the award. The argument presented here argues that the government should bear this risk instead. Parana, Posadas and Villa Mercedes. At the time of writing, Danny Leipziger was the Bank’s Director for Finance, Private Sector and Infrastructure for the Latin America and Caribbean Region. See http://rru.worldbank.org/PapersLinks/Results.aspx?topicids = 3 (8 September 2004). There are indications that the financial situation in some countries has improved since this analysis was undertaken, but the major water companies are extremely wary. Pitman (2002). Those who emphasize the importance of fiscal considerations should not thereby be automatically classified as ‘anti-poor’. And economists who promote the merits of structural adjustment policies may well believe that these are in the best interests of the poor; but the empirical evidence is against them. In his thesis (2005) on which this chapter draws, Anderson shows that this is what would be predicted by a fairly standard model. As Miller-Adams (1999) notes, World Bank staff are not specially qualified as private-sector experts, but as national and sectoral policy specialists. But they are perceived by private companies as much better qualified than the UN. This is confirmed in our interviews: ‘The UN thinks differently than the Bank. Who works with water in the UN? They could not help with money. They could not help practically’ (interview). It is not possible to assess whether this was due to the general ‘zeitgeist’ or because of the special influence of Anglo-Saxon thinking in the Bank.

206

40

41 42 43 44

Notes

It does, however, appear to be the case that the French felt they were speaking to deaf ears in the Bank until Mrs Thatcher came to power. Suez Annual report, 2003, states that it can only maintain its place in developing countries if it can be assured that public authorities are able to honour their contractual obligations, and risks are avoided. The company has appointed a chief risk operator (Holland 2005: 131). In 2002, Suez signed a cooperation agreement with UNESCO, in four areas: water and health, water and education, water social management, and sustainable development. Now taken over by RWE, Germany. There are rumours of dishonesty with regard to tariff negotiations: that in some cases the company would think ‘let’s get in and renegotiate later’. But genuine (ill-informed) over-optimism is an adequate explanation. See World Bank (2004b) and World Bank (2004c).

8 Market Multilateralism: towards a new institutional form? 1 The attempt by the International Federation of Pharmaceutical Manufacturers’ Associations (IFPMA) to challenge in court South Africa’s Medicines and Related Substances Control Amendment Act (90 of 1997) due to its alleged incompatibility with TRIPs rules is less likely to occur today. After serious criticism from shareholders, politicians and prominent authors such as John Le Carré, the pharmaceutical companies withdrew their case against the South African government on 18 April 2001 (Heywood 2002). 2 It also supports libraries globally, an activity which could be more closely related to the activity of Microsoft (http://www.gatesfoundation.org). 3 Interview, senior officer, GAVI, 7 April 2003. 4 According to a survey made about trust in the UN among European countries, 78.8 per cent of Norwegians say they trust the UN, whereas only 26.4 per cent of Greeks say the same. The average percentage of the population that trusts the UN in Europe is 44.4 per cent (European Social Survey, 2005, reported in Aftenposten (2005, 14 November).

Index

Accelerated Access to HIV/AIDS Care and Treatment in Developing Countries Initiative (AAI) 80, 83 Accelerated Development and Introduction Plan (ADIP) 84 Africa 48, 70, 104, 107, 195n6; North 124; Sub-Sahara 46, 56; West 103–6, 199n11 Aguas Argentinas 168 AIDS see HIV/AIDS Alliance One 200n18 Al-Qaeda 35 Altadis 200n18 Amadeu, S. 122 American Federation of LaborCongress of Industrial Organizations (AFL-CIO) 94, 96 Anglian Water 202–3n3 Annan, K. 1, 3, 7–8, 62, 78, 97, 118, 120 Anti-Corruption Network for Transition Economies 18 antiretroviral (ARV) treatment 79– 80, 83, 159, AOL-Time Warner 18 Apache 122 Argentina 136, 140, 144–46, 148– 49, 154, 168, 204n27, n29, n30 Artecef 66 artemisin combination therapy (ACT) 69, 79–80, 196n22, Asian financial crisis 48, 142 Association of Chocolate Biscuit and Confectionery Industry 104

Australia 132, 167 Avantis 68 Bangladesh 199n8 Bangladesh Garment Exporters and Manufacturers Association (BGMEA) 199n8 Bayer 66 Bellamy, C. 76 Biersteker, T. 35 Bill and Melinda Gates Foundation 13, 18, 21, 51, 75, 77, 79, 87–90, 165–66, 197, 205. biotechnology 45, 55, 68, 75 Bolivia 144 boundary-role occupants 40 Brazil 69, 82, 122, 146, 148–49, 194n7, 201n14, 204n27, Bretton Woods Committee 10 Bretton Woods: Conference 31; system 26 British Airways 193n13 British American Tobacco (BAT) 106, 200n18 Brundtland, G.H. 73, 76, 106 Buenos Aires 144, 147–48, 154, 204n23, n29 Bulgaria 17 business associations 1, 6–7, 17, 32, 40, 61–53, 98, 163 Cairo 127 Canada 70, 132, 138 capital flows 2, 46; official 45–47, 54; private 46–47, 54, 141

208

Index

Casal/Biwater 202n3 child labour 21, 61, 91–93, 98–112, 156, 160, 170, 172, 175, 198n7, 199n8, 200n16 Children’s Vaccine Initiative (CVI) 75–76 China 19 Cisco Systems 16 civil society 7, 18, 30, 38, 41–43, 54, 98, 117 Citigroup 16 club model 30 Coartem® 69 Cochabamba 143–44, 154 Coen, D. 162 Coinstar 13 Cold War 7, 92, 94–95, 116, 165 Colombia 146–49, 204n27, n28 conditionality 11, 135, 143, Consultative Group on International Agricultural Research 18 Convention of the Rights of the Child (CRC) 100 Corporate Social Responsibility (CSR) 33, 40, 62, 75, 91–92, 97– 98, 102, 108, 113, 130–31, 153, 165 Costa Rica 143 Côte d’Ivoire 104–5, 160, 199n11, 200n14 Country Coordinating Mechanism (CCM) 78–79 Cox, R. 3, 27–28, 30, 41–42, 44, 96, 169, 176 CNBC 16 Culture Link Network 18 da Silva, L. I. L. 122 DaimlerChrysler 14, 16 Dakar 119 Davos 8, 42, 62, 75–77, 118, 201n14 De Beers 16 Declaration of Fundamental Principles and Rights at Work and its Follow-up 97 Declaration of Philadelphia 93 deregulation 11 Deutsche Bank 15

development; and multilateral institutions/organizations 5, 6, 21, 33–34, 45–46, 97, 175–76; and multilateralism 5, 23; sustainable 8–9, 16, 58, 126; finance 9, 46– 54; role of the private sector 10, 12, 15, 33, 41, 61, 73, 139–40, 164, 167, 170; and knowledge/ expertise 35; and trade rules 57– 60; and child labour 99–100, 102, 111, and information technology see information and communication technology (ICT); and water 135 development aid 5, 23, 46–47, 52– 53; official development aid (ODA) 46–47, 52, 54 digital divide 21, 54, 114, 120, 125, 159, 175 Dominican Republic 107 Ecuador 143 Education for All 119, 202n20 East Asia 48 Eastern Europe 18, 48 Eliminating Child Labor in Tobacco (ECLT) 92, 106–10, 112, 170, 173 embedded liberalism 24–25, 27, 29– 30, 170, 172 Engel, E. 103 see also Harkin-Engel Protocol Ethical Trade Initiative 102 European Generic Medicines Association 195n3 Expanded Program on Immunization (EPI) 72, 74, 76 FAFO 106 Fidelity 18 Financing for Development Initiative (FfDI) 9 Foucault, M. 29 foundations: private 1–2, 6–7, 13– 14, 17, 21, 32, 40, 48–52, 64, 67, 74–75, 78, 81, 87–90, 92, 117, 113, 159, 165 Ford Foundation 15, 18, 49, 51 foreign direct investment (FDI) 13, 15, 47, 49,

Index Fortune Global 500 48 France 60, 77, 132, 152, 154 Free and Open Source Software (FOSS) 59, 121–26, 129–31, 133, 161, 167, 172 Gallaher Group PLC 200n18 Gates, B. 1, 88, 126, 132, 165, 172, 179, 201; family 88; foundation:see Bill and Melinda Gates Foundation General Agreement on Tariffs and Trade (GATT) 30, 57, 59, 95 Geneva 70, 72, 104, 108, 120, Germany 154 Ghana 105, 164, 199n11, 200n14 GlaxoSmithKline 66, 68, 82 Global Alliance for Tuberculosis Drug Development (TB Alliance) 75, 80–91, 84–85 Global Alliance for Vaccines and Immunization (GAVI) 21, 75–78, 81–84, 88, 90, 165, 168, 171, 197n27, 205n3 Global Compact 8, 17, 18, 33, 55, 60, 62, 92, 97–98, 102, 113, 192n8, Global Fund for Children’s Vaccines 77 see also Vaccine Fund Global Fund to Fight Aids, Malaria and Tuberculosis (the Global Fund) 21, 78–80, 168, 196n22, 197n33. Global Development Network 18 Global Public Goods Network 18 Global Public Policy Project18 Global Reporting Initiative 18, 33 Global Support Network 128–29 globalization 3, 29, 32, 35, 43–46, 54, 60, 63, 91, 93, 95, 97 GNU (GNU’s Not Unix) 121–22 governance: of multilateral organizations 1, 6, 31, 43, 67, 77, 88, 92, 156; global 2, 10, 20, 32, 32, 38, 46, 56, 60, 62, 172; world 2; networks of see networks; transnational 37, private 41, of the Global Compact see Global Compact Gramsci, A. 27; gramscian hegemony 28, 37; neo-Gramscians 94

209

Great Britain 26, 93, 154, 197n2 Guinea 140 haemophilus influenzae type B (Hib) 68, 76, 78, 197n27 Hall, B. 35 Hansenne, M. 97 Haralz, J. 138 Harkin, T. 103 see also HarkinEngel Protocol 104 Harkin-Engel Protocol 104 Hasbro, M.B. 14 Health for All 21, 65, 70, 89, 175 Health in your Hands Partnership 16 hegemony 26–28, 37; hegemonic stability 26, 28 hepatitis 68, 78, 196n28 Helena Rubinstein 118 Hershey Foods 104 Hewlett Packard 124 Hilton Foundation 11 Hindley, C. 197–98n2 History Channel 16 HIV/AIDS 19, 58, 69–70, 78–80, 82, 101, 159, 195n7, 196n21 Hoffman-La Roche 73 Hollywood 132 Honduras 132 House of Representatives 104 Hymer, S. 162 ICT for Development (ICT4D) 123, 202n21 ICT industry/companies 114, 125, 133, 172 IKEA 13 Ikenberry, J. 23 Imperial Tobacco Group PLC 200n18 India 69, 82 Indonesia 107 information and communication (CI) sector 119, 125, 129 information and communication technology (ICT) 45, 54–55, 114–15, 119–20, 123, 125–29, 133, 161, 171–72, 202n21 Information for All 128 influence see power

210

Index

Initiative for Public Private Partnerships for Health (IPPPH) 64–65 Intel 114–15, 126, 128 intellectual property rights (IPR) 17, 45, 58–59, 159, 160, 171, 173 International Aids Vaccine Initiative 79 International Bank for Reconstruction and Development (IBRD) 11, 52, 136 International Center for the Settlement of Investment Disputes (ICSID) 11, 19, 168 International Chamber of Commerce (ICC) 7, 15, 62 International Cocoa Initiative (ICI) 92, 103, 105, 107–8, 170–73, 200n16 International Confederation of Free Trade Unions (ICFTU) 94, 96, 98 International Conference of Financing for Development 9 International Development Association (IDA) 11, 52 International Development Research Center 128–29 International Federation of Pharmaceutical Manufacturers Associations (IFMPA) 20, 205n1 International Finance Facility for Immunization (IFFIm) 77 International Finance Corporation 11–12, 15, 19, 136, 138–39, 150, 167 International Institute for Intellectual Cooperation (IIIC) 115 International Labor Conference (ILC) 94, 95, 98, 194n6 International Labor Organization (ILO) 10, 19, 21, 33, 60, 91–113, 157, 160, 165, 168, 170, 194n6, 198n6, 199n8, 200n15. International Monetary Fund (IMF) 10, 30, 36–37, 42, 153 International Organization of Employers (IOE) 94 International Partnership for Microbicides (IPM) 75

International Program on the Elimination of Child Labor (IPEC) 99–101, 107, 109, 170, International Tobacco Growers Association (ITGA) 106 International Water 154 International Workers’ Congress 98 Internet Corporation for Assigned Names and Numbers (ICANN) 133 Investment Advisory Council 18 Iraq 173 Japan Tobacco Inc. 200n18 Johannesburg 9 Johns Hopkins University 85 Jomtien 119 Kell, G. 6–7, 60 Kenya 82 Kraft Foods 104 Kyrgyzstan 107 Lao PDR 82 Latin America 22, 47, 134, 136, 141–45, 150–51, 153, 156–57, 161 Latour, B. 38–39 League of Nations 93, 115 legitimacy 2, 12, 30–31, 40–44; democratic 31–33; formal-legal 31–33; of companies 12, 33; of civil society 38; based on expertise 33–34; based on moral standing 34; based on goalachievement 34; see also multilateral organizations: legitimacy and authority Leipziger, D. 204n32 liberalization 11, 24, 59, 198n6 Liberia 132 Lima 143 linking-pin: actors 40; organizations 40, 52, 170 Linux 121–22 Linux Professional Institute 123 Longworth, E. 125 L’Oreal 118 Lyonnaise des Eaux 153

Index MacArthur Foundation 48 MacLeish, A. 116 Mahler, H. 72 market authority 35 market multilateralism 3–4, 20, 42– 43, 93, 158–59, 170, 175–76 Malawi 106–7, 160, 164, 199n6 Mali 82 Mars 104 Match 106 Matsuura, K. 120, 124 McDonald 16 Médecins Sans Frontières 70 Medicines for Malaria Venture (MMV) 80, 84–85 Merck 66, 68 Merill Dow 66 Mexico 145, 197n31 Miami Herald 103, 199n12 Microsoft 59, 114–15, 121–22, 124, 126–31, 133, 165–66, 168, 172, 201n14, 205n3 Middle East 48, 166 Millennium Development Goals 8, 13, 16, 21, 119, 125 Minimum Age Convention (ILO Convention 138) 98 Monterey, Mexico 9 Munck, R. 94 multilateral institutions 4, 12, 27, 30–31, 34, 36–37, 39, 45, 69, 78, 84, 86, 89, 93, 112, 131, 175–76, 192n2. Multilateral Investment Guarantee Agency (MIGA) 11, 15, 19, 139, 167, 203n8 multilateral organizations 3–7, 10, 24, 28, 30, 42–44, 63, 158, 170; and the private sector 1, 3–4, 7– 12, 14–17, 20–21, 131, 151, 159–63, 165–68, 169, 171, 192n4; legitimacy and authority of 31–35, 44, 133, 173–76; influence and power of 35–37, 44–46, 170; and networks 37–40, financing 52, and NGOs 60–61; in health 64, 66, 74–78, 81–82, 89, leadership of 169. multilateral system 3–4, 7, 12, 24, 28–33, 36, 42–43, 50, 63, 67, 70,

211

81, 85, 89–90, 132, 153, 158–59, 161–63, 165–66, 170, 173–74, 176. multilateralism 2–5, 20, 23–31, 36, 41–43, 63, 70, 73–74, 111, 113, 134, 156, 158–59, 165, 170, 175–76: economic 27, 41, 43: political 27, 40, 43: executive 31, public-private 64, 81; cosmopolitan 43; complex 43 Nairobi 106 Nakajima, H. 72–73 Nicaragua 132, 145 neo-liberalism 11, 29, 42, 132; neoliberal order 29, 43; neo-liberal states 194n5 Nestlé 104 NetAid 16, 55 networks 11, 14, 16–17, 37–40, 61, 121, 128, 139, 192n8; governance 2; policy 11, 17, 18, 20, 37–38; knowledge 20; governmental 34, 38, global public policy (GPP) 38; radio 116; infrastructure 144, 150, of transnational companies 162–63 New International Economic Order 27 new public management 29, 169 new world information and communication order (NWICO) 116, 201n2 New York Times 16, 104, 199n12 NeXstar 66 Niebuhr, R. 116 Non-Aligned Movement 116 non-governmental organizations (NGOs) 2, 6, 10, 21, 32–34, 38, 40–41, 45, 50, 54, 60–61, 64, 78, 88, 92, 96, 98, 100, 104–5, 107, 111, 117, 112, 126, 130–31, 133, 143, 152, 160, 165, 169–70, 200n16, 201n7, Nordic countries 71, 138 North American Free Trade Area (NAFTA) 60, 96 Norway 73, 77, 193n4 Nossal, G. 71 Novartis 69, 82, 85

212

Index

Operation and Evaluation Department (OED) 141, 145, 147, 151–52, 203n14 Oswald, R. 107 Owen, R. 197n2 Pan-American Health Organization (PAHO) 71 Paraguay 143 Pediatric Dengue Initiative 75 Peel, R. 197n2 Peru 143 Pfizer 74, 195n13 pharmaceutical industry/companies 20–21, 58, 64–70, 73–74, 77, 79–83, 85, 89, 95, 159–60, 171– 72, 194n7, 195n3, n13, 205n1 Philip Morris: international 200n18; USA 200n18 Philippines 107 philanthropy/philanthropists: corporate 48, 50–51, 83, 164; venture 6, 51 pneumococcus 84, 196n17, 197n31, n32 Polio Eradication Initiative 70 Polanyi, K. 25 power 9, 31–32, 162: structural 20, 28, 37, 39; Weberian (relational) 36; institutional 36; of knowledge 36, 111; relations 10, 29; of the United States 25–26, 37, 166; hegemonic 25; in networks 37– 39; productive power 39; of TNCs 45, 54, 62–63, 96–97, 131, 137, 162, 166 private actors 3–7, 11, 13, 16, 33– 34, 41–43, 64, 74, 78, 158–59, 166, 172, 175–76, 192n4. private authority: in international relations 2, 32–34 private sector 1–4, 6–20, 22, 24, 33, 38, 42, 55, 61–67, 70, 73, 75–76, 80, 84–86, 88–90, 92, 108, 110– 11, 115, 117–18, 120, 124, 127, 130–31, 134–61, 165–67, 169– 71, 174–76, 203n5, n7, n14, n16, 204n25, n28, n32. Private Sector Department (World Bank) 11, 124, 127

Private Sector Participation (PSP) 140, 146–47, 149 privatization 11–12, 22, 137, 139, 143–47, 150, 152–53, 157, 161, 167, 203n8 public goods 158; global 2, 45, 159, 194n1 public-private partnerships (PPP) 1, 5–20, 41–43, 45–46, 59, 63, 75, 92, 114,168, 171, 173–75; for health (PPPH) 64–70, 83–89; research and development 65; technical assitance/service support 65; advocacy 65; financing 65 Public-Private Partnership for Urban Development 18 Prince of Wales International Business Leaders Forum (PWIBLF) 62 private participation in infrastructure (PPI) 135, 140–52, 56, 203n14, 204n25, n26 Procter and Gamble 13 Program for Vaccine Development (PVD) 72, 76 Project Appraisal Document (PAD) 146–49, 152, 204n24 Quéau, P. 125 Ranbaxy 85 Reagan, R. 132, 138, 152; Reaganomics 12 regulation 19, 27, 29–30, 41, 97, 100, 109–10, 117, 125, 145, 150, 171–72 Renault 106 Rhône Poulenc 118 Rio de Janeiro 9, 143 Rio Summit see United Nations Conference on Environment and Development Rockefeller Foundation 14, 49, 74– 75, 165, 196n14 Roselaers, F. 109 Rotary International 13 rotavirus 84, 196n17, 197n31, n32 Ruggie, J. 2, 4, 20, 24–30, 41, 158, 194n1

Index Safe Injection Global Network 18 Saur 154, 202n3 Save the Children 100 Scandinavian Tobacco Company 200n13 Security Council 5 Singapore 60, 95 Shell 19 Slaughter, A-M. 34 small and medium size enterprise (SME) 15, 19, 131 Smallpox Eradication Program 70 Social Accountability International (SAI) 33 social clause 49, 95, 97, 195n9 social movements 4, 42, 96, Sociedad General de Aguas de Barcelona 168 Soros, G. 194n1 Soros Foundation 18 South Africa 69, 82, 194n7, 205n1 Soviet Union 116 Special Program for Research and Training in Tropical Diseases (TDR) 66, 84 Stallman, R. 121 Starbucks Coffee Company 104 Stopford, J. 164, 166 Strange, S. 164, 166 structural adjustment 12, 36, 135, 139, 157, 167, 204n36 Støre, J.G. 76 Sudwesttrundfunk 16 Suez 16, 142, 154, 168, 202n3, 203n3, 204n29, 205n41 Sun Microsystems 18 Switzerland 79 Talbot, J. 154 Tanzania 70, 107 TB Global Drug Facility (GDF) 83 Tesner, S. 6–7, 60 Thatcher, M. 152, 205n39; Thatcherism 12 Thames Water 154, 202n3 Thorvalds, L. 121 Time Warner 8 Tobacco Free Initiative 106 Tobacco Tenants and Allied Workers Union 106

213

Trade Related Aspects of Intellectual Property Righs (TRIPs) 22, 57– 59, 69–70, 82–83, 161, 194n7, 205n1 transnational corporations (TNCs) 3–4, 15, 17, 41, 43, 45, 55–57, 62–63, 96–98, 102, 106, 113, 158–60, 162–64, 171, 176. Tribac Leaf Limited 200n18 Trinidad and Tobago 144 tripartism 94, 108 tripartite: structure of the ILO 60, 92–94, 97–98, 108 tuberculosis (TB) 69, 78, 80, 85, 195n2 Turner, T. 1, 8 Uganda 107 United Kingdom (UK) 77 see also Great Britain United Nations 1, 3; collaboration with business 4–10, 13–18, 33, 55, 61–62, 118, 174, 193n11; authority and legitimacy of 31– 34; and labour issues 93; Secretary-General 3, 7–9, 17, 33, 97, 120; General Assembly 7–10, 27; funding 52–53, 74; and the WTO 60; and NGOs 60, trust in 205n4. United Nations Capital Development Fund 15 United Nations Centre for Transnational Corporations (UNCTC) 7, 9 United Nations Children’s Fund (UNICEF) 10, 13–14, 16, 64, 66, 68–69, 73–76, 80, 83, 100–101, 105, 108, 118, 135, 160, 169–70, 199n8 United Nations Conference on Environment and Development (UNCED, the Rio Summit) 9–10, 61, 97 United Nations Conference on Trade and Development (UNCTAD) 7, 15, 17, 19, 192n5, 194n7 United Nations Economic and Social Council (ECOSOC) 9, 61–62

214

Index

United Nations Educational Scientific and Cultural Organization (UNESCO) 10, 14, 16–17, 22, 61, 92, 114–21, 123–33, 157, 160– 61, 165–66, 168, 172, 193n31, 201n3,5,7,8, 202n18,20 United Nations Environmental Program (UNEP) 14–17, 33 United Nations Development Program (UNDP) 15–17, 19, 55, 66, 75, 135, 160 United Nations Foundation (UNF) 8 United Nations Fund for International Partnerships (UNFIP) 8, 35, 192n6, 194n4. United Nations Fund for Population Activities (UNFPA) 14, 64, 80 United Nations High Commissioner for Refugees (UNHCR) 14, 16 United Nations ICT task force 54, 119–20 United Nations Industrial Development Organization (UNIDO) 15, 17, 19 United Nations Joint Programme on HIV/AIDS (UNAIDS) 14, 64, 80, 82–83. United States (USA/US) 10, 22–23, 25–26, 36–36, 46, 50, 56, 59–60, 70, 80, 110, 114–17, 124–25, 130–32, 154, 166, 192n3, 195n4, 199n13 United States Agency for International Development (USAID) 199n13 United States Department of Agriculture 199n13 United States Department of Labor 105 United States Department of Treasury 10, 138 United States Food and Drug Administration 104 United States National Confectioners Association 104 Universal Leaf Tobacco Co. 200n18 Vaccine Fund 77–78, 84, 88, 90 vaccines 14, 55, 61, 64–79, 81–82, 84, 86, 88, 90, 159–60, 165, 171,

172, 175, 195n5, 196n16, 17, 197 n27, 30–32; impeded 67; developing market 67; candidate 67; proto 67 Veolia 202 Vernon, R. 162 Versailles Treaty 93–94 Visa 16 Vivendi 142, 154, 169, 202n3 Walden Media 16 Walt Disney Water for All 21, 135, West Africa Cocoa and Commercial Agriculture Project to Combat Hazardous and Exlpoitative Child Labor (WACAP) 105 Wolfensohn, J. 76 World Bank 5, 7, 10–12, 14–16, 19– 20, 22, 30, 34, 36, 42, 52–53, 61, 64, 66, 75–76, 80, 119, 134–39, 143–46, 152–57, 161, 167–68, 178, 192n10, 202n1, 203n9, n19, 204n38 World Bank Group (WBG) 19, 52, 167 World Bank Institute 14 World Business Council for Sustainable Development (WBCSD) 9, 61 World Cocoa Foundation (WCF) 104, 199n13 World Commission on Environment and Development 73 World Development Report (WDR) 136–37, 140, 155, 203n9 World Economic Forum 8–9, 42, 62–63, 75–76, 195n8, 201n14 World Federation of Trade Unions (WFTU) 94 World Health Assembly (WHA) 65, 90 World Health Organization (WHO) 14, 17, 52, 61, 64–66, 68–89, 106, 135, 157, 160, 168–69, 195n9 World Heritage 16, 118, 201 n9 World Intellectal Property Rights Organization (WIPO) 122

Index World Summit on Sustainable Development 9 World Summit on the Information Society (WSIS) 119–20, 122–23, 133 World Trade Organization (WTO) 30, 42, 45, 56–60, 69, 82, 92, 95, 97, 113, 122, 198n6 World Water Council 18

Worst Forms of Child Labor Convention (ILO Convention 182) 99, 104, 105 Wyeth Vaccines 68 Yellow Fever 68, 78, 197n26 Zambia 107 Zentaris 66

215

Development Issues in Global Governance: Public-Private Partnerships and Market Multilateralism (Warwick Studies in Globalisation)

Development Issues in Global Governance: Public-Private Partnerships and Market Multilateralism (Warwick Studies in Globalisation)

Regionalisation and Global Governance: The Taming of Globalisation? (Routledge Warwick Studies in Globalisation)

Civil Society and Global Finance (Routledge Warwick Studies in Globalisation)

Regulating the Global Information Society (Warwick Studies in Globalisation)

Global Knowledge Networks and International Development (Routledge Warwick Studies in Globalisation)

Microregionalism and Governance in East Asia (Routledge Warwick Studies in Globalisation)

Development and Global Governance

Banking on Knowledge: The Genesis of the Global Development Network (Warwick Studies in Globalisation)

The Evolution of Regionalism in Asia: Economic and Security Issues (Routledge Warwick Studies in Globalisation)

New Regionalism in the Global Political Economy: Theories and Cases (Routledge Warwick Studies in Globalisation)

The World Bank and Governance: A Decade of Reform and Reaction (Routledge Warwick Studies in Globalisation)

Partnerships in Property Development

Non-State Actors and Authority in the Global System (Routledge Warwick Studies in Globalisation, 1)

Globalisation and the Asia Pacific: Contested Territories (Warwick Studies in Globalisation)

Globalisation and governance in the Pacific Islands

The Group of Seven: Finance Ministries, Central Banks and Global Financial Governance (Routledge Warwick Studies in Globalisation)

Democracy in an Age of Globalisation (Studies in Global Justice)

Democratisation, Governance and Regionalism in East and Southeast Asia: A Comparative Study (Routledge Warwick Studies in Globalisation)

Regional Integration in Europe and East Asia: Convergence and Divergence? (Routledge Warwick Studies in Globalisation)

Key Issues in Development

Power in Global Governance (Cambridge Studies in International Relations)

Privatisation And Market Development: Global Movements in Public Policy Ideas

Power in Global Governance (Cambridge Studies in International Relations)

Palgrave Advances in Global Governance

Globalization and Political Violence: Globalization's Shadow (Routledge Warwick Studies in Globalisation)

Rethinking Popular Representation (Palgrave Studies in Governance, Security and Development)

Multiregionalism and multilateralism: Asian-European relations in a global context

Development Issues in Global Governance: Public-Private Partnerships and Market Multilateralism (Warwick Studies in Globalisation)