June 2003

APPLYING LABOUR STANDARDS IN THE WORKPLACE Labour Standards in Development Finance Conference Washington DC, 18 April 2006

Content I. Labour practices versus DFI policies II. Client discomfort/ unease III. Private sector buy-in IV. DFI legal leverage over client

> Sector: e.g. plantation sector in Africa - historical background (bonded labour) - current working conditions (H&S, wages, migrant labour) - translation of int´l standards into local practice (labour contracts, PPE) > Country: e.g. China - legal limitations to freedom of association - legal limitations to migrant workers rights > Vulnerable Groups: - migrant workers, seasonal workers - workers in export processing zones I. Labour practices vs DFI policies

II. Client Discomfort/ Unease > International HR standards and the local context - translation of international standards into practice - cultural sensitivity/ respect for diversity versus this-is-our-culture excuse > Examples - women in garment sector in Bangladesh - Sikhs in the construction sector in Nigeria - private sector client in Afghanistan · culturally ingrained discrimination practices - Gender Apartheid · client to commit to proactive recruitment of women · client to commit to proactive local (out) sourcing of goods and services · focus on women led business

III. Private Sector Buy-In > Greenfield in backwaters of Nigeria - Category A including its Associated Facilities > Main risks - Impact on natural resource base (erosion, water sources) - Community relations (influx management, health impacts) - Labour conditions at Contractors (migratory labour from India) > Sponsor strengths & weaknesses - State-of-the-art industrial equipment - 100% Nigerian owned - No clue about impacts outside plant walls - No clue about contractor management

Private Sector Buy-In (cont´d) > Intensive E&S coaching trajectory by lead DFIs - CSR training of top management - Repeated visits before and after contracting/ disbursement - Upgrading EIA with adequate SIA - Creation of E&S unit - Development of ESMS > Local youth went for training visits in Niger Delta! > DFI focus on Social-License-to-Operate > Sponsor volunteers recognition and appreciation - buy-in to social management system, including management of labour risk

IV. DFI Legal Leverage over Client > FMO SLD Project - English Law/ New York Law - E&S building blocks > E&S Specialist´s Understanding of Legal Documentation - Default/ material adverse effect - Non-compliance on non-core elements - Conditions Precedent to Disbursement (CPs)

DFI Legal Leverage over Client (cont´d) > Nature of Financial Product - Loan, equity - Convertible loan (loan shareholders agreement) - Guarantee (recourse agreement) - Risk participation (willingness of lender) - Project finance (finance doc´s - CTA/ project doc´s - EPC) > Position of DFI in the Deal - % of total product - B-loan behind other DFI - Syndicate (voting mechanism on waiving CPs in Intercreditor Agt) - Lead in environmental and social due diligence

DFI Legal Leverage over Client (cont´d) > Legal Instruments critical, but not the end-all and be-all > Alignment of Sponsor vision with that of DFI > Green, yellow and red apples