WB’s Landmark Step: New Guidelines for Social Development in Procurement Policy

Creating employment and enhancing skills in developing countries is currently one of the World Bank Group’s key priorities. Keeping this priority in mind, the World Bank is adding necessary guidelines to its procurement policy to help address employment challenges.

Approximately 1.2 billion young people will enter the workforce in developing countries in the next decade, but only 0.42 billion jobs are projected to be created in these countries. If this huge employment gap is not addressed, it could lead to social instability, hinder economic growth, encourage illegal migration, and ultimately impede the poverty reduction process. To address this urgent crisis, the World Bank is emphasizing working in new ways, outside of its traditional methods.

How will the World Bank address this challenge?

The World Bank has announced an important policies to support job creation and skill development using its ‘Procurement Framework’. Investment Project Financing is a key mechanism through which the World Bank assists the public sector development of a country, especially in sectors such as infrastructure, human development, agriculture, public administration, and others. Under these projects, goods, works (Civil Works) and services are procured, which are essential for achieving desired development and progress outcomes – such as road construction, equipping schools, or modernizing a country’s judicial system.

This update to the World Bank’s procurement framework is based on measures introduced in March 2025. These measures were designed to attract highly qualified bidders and provide better results in the procurement process through innovative solutions in bank-financed investment projects. This includes placing greater emphasis on quality in bid evaluations, ensuring adequate importance is given to other qualitative features in the evaluation of high-value contracts, including life-cycle costs, innovation, sustainability, and local job creation.

Key aspects of the new policy:

• 30% local labor cost obligation: In international Civil Works procurement contracts (e.g., construction and maintenance of transport and energy infrastructure), contracting firms must ensure at least 30 percent of the total labor cost comes from local labor. This new rule will be effective from September 1, 2025.
• Encouragement for skill development: The World Bank is encouraging its client countries to develop the skills of their local workforce. It has taken a policy decision that those who show plans for local skill development can be rewarded by including non-price criteria in bidding documents.

This new initiative reflects the evolution of the World Bank’s Procurement Framework, which maintains core principles such as value for money, economy, efficiency, integrity, transparency, fairness, and fit-for-purpose.

Why is this policy important?

• Income growth and skill development: Utilizing local labor contributes to income growth among the local population, enabling families to improve their living standards, build knowledge and skills, and reinvest in the local economy.
• Community strengthening: By prioritizing local talent, the World Bank is strengthening communities worldwide and building economic resilience.
• Long-term investment: World Bank Vice President Gallina A. Vincelette stated, “By prioritizing the use of local labor in World Bank-financed projects, we are not only creating immediate jobs for people in our client countries, but also investing in the long-term potential of local communities. This approach helps create a skilled and better-equipped workforce and strengthens local economies”.

Conclusion

Many are welcoming this initiative. It is seen as an important initiative by the World Bank to increase social sustainability. The implementation of these new guidelines for social development in procurement policy will make the procurement process a powerful driver of development. It will remove barriers for development partners while ensuring local ownership of projects. Some have expressed hope that this rule will particularly emphasize the skill development of women, as women in developing countries face greater discrimination due to a lack of employment and quality skill development programs.

However, many have already commented that this initiative is “long overdue” and have noted that many countries, including India, have already incorporated similar social improvement policies through small (SME), micro, small, and medium enterprises (MSME) into their national procurement policies. Additionally, some challenges may arise in the field:

• Contractors bypassing local labor: Contractors often bring in cheaper migrant workers to reduce costs, which deprives local workers. Will this fear increase?
• Unemployment of skilled local youth: Even when major infrastructure projects (Mega Construction Projects) are ongoing in their own districts, skilled local youth often remain unemployed. How will this concern be addressed?

To address these challenges, emphasis should be placed on transparent labor recruitments, strict enforcement of mandatory local hiring rules, and ensuring proper skill development programs related to land use changes and construction activities.

Overall, this new step by the World Bank can bring about a major change in job creation and skill development, but strictness and transparency in its implementation and monitoring are extremely important.

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