Development Today (Nordic publication): November 16,
1998
By Heffa Schücking
Turning up the Heat on
Export Credit Agencies
If you are an environmental activist and you are fighting
a project that will destroy a river, a forest or displace a community
in a developing country, chances are that the project you are up against
is being backed by an Export Credit Agency. Virtually all industrialized
countries have such government backed agencies that insure, finance or
guarantee private investments and exports to developing countries. Although
these agencies are backed by public money, most of them operate in total
secrecy and are involved in supporting environmentally and socially destructive
ventures.
A case in point is the "mother of all dams", the Three Gorges
project in China. In spite of the fact that this project will displace
1,8 million people and severely disrupt the ecology of the Yangtze River,
German, Swiss, French, Canadian, British, Norwegian and Swedish ECAs all
offered to back it through export credits or guarantees. The only country
that outright refused to provide export credit for Three Gorges was the
United States. Why so? Well, it seems that the US is the only country
that has clearcut environmental and social standards for its export credit
and investment insurance agencies. These standards gave environmental
and human-rights activists in the US the handle they needed to wage a
successful campaign against their country's involvement in this project.
German and Swiss NGOs, who waged similarly strong campaigns against Three
Gorges - but whose export credit agencies have no such standards - lost.
As long as there are no agreed international environmental and social
standards for ECAs, the deals are done with those agencies that have the
least scruples.
The Three Gorges experience made NGOs wake up and take notice of these
agencies and the profound impact they have on the environment and the
direction of development abroad. Annually, bilateral ECAs support some
432 billion in trade and investment, accounting for more than 10 % of
world exports. These agencies also hold about 20 % of developing country
long-term debt - more than is owed to the World Bank and the International
Monetary Fund combined. Often enough, the debt incurred through ECA schemes
are for exports that are contra human-rights and development. Take for
example the British Government's recent decision to guarantee the purchase
of 16 fighter planes by Indonesia in spite the fact that such planes were
used in the past to crush popular resistance in East Timor. Not counting
the new contract, Indonesia's total export debt guarantees according to
British sources amount to some 2.9 billion dollars, about half of it for
military purposes.
Over the last year NGOs have begun to turn up the heat on these agencies.
In Germany a coalition of 140 NGOs representing some 1 million German
citizens has been calling for a fundamental reform of "Hermes",
Germany's export insurance facility. The new German Government has taken
up this call by including the reform of Hermes in the coalition agreement
signed by the Social democrat and Green parties.
And in April of 1998, 160 NGOs from 46 countries issued a resolution
calling upon the G-7 and the OECD to establish strong common standards
to ensure that their ECAs back off from projects that harm the environment
and local communities. The US Overseas Private Investment Corporation
(OPIC) provided a good benchmark for such standards when it recently strengthened
its environmental policies. OPIC has now for example agreed to refrain
from insuring or financing infrastructure and extractive projects located
in primary tropical forests, projects involving the construction of large
dams that significantly and irreversibly disrupt natural ecosystems and
projects that require the resettlement of more than 5000 people.
Without international action however, the US-standards are in danger
of being revoked. During the last US-Congressional session, Senator Frank
Murkowski from Alaska tried to introduce an amendment that would have
prohibited the US Export-Import Bank from applying its environmental standards
to any foreign project being considered for backing by another G-7 country
export credit agency. Due to campaigning by US-NGOs the Murkowski amendment
failed, but one can expect that a similar proposal may come up again in
the next US- Congressional session.
One of the biggest challenges for NGOs is the upcoming merger of Japan's
Export-Import Bank (JEXIM) with the Overseas Economic Cooperation Fund
(OECF) which provides Japanese bilateral aid. The new agency is likely
to make loans in the order of US $ 21 billion, which roughly equals the
World Bank's annual lending. It is not clear yet what policies and standards
the new agency will apply.
Unfortunately, the Nordic countries, which are traditionally perceived
to be among the most progressive regarding development issues, do not
provide a shining light on the export credit front. None of the Nordic
Export Banks or Guarantee Agencies have defined standards regarding the
environment or stakeholder participation. A long overdue discussion of
these issues is just beginning. There are initiatives in the Swedish Parliament
to hold hearings on environmental policy improvements for its ECA. The
Norwegian ECA, GIEK, has been asked by the Government to draft an environmental
policy. And in Finland the Ministry for Foreign Affairs has just issued
a report on environmental assessment regarding its export promotion and
guarantee agencies. NGOs in these countries are asking their Governments
as a minimum to come up with standards that equal OPIC's new environmental
guidelines.
Export credit agencies have to change and they have to change fast in
order to discontinue the use of public money for projects that turn unique
biological sites into disaster areas, hurt human rights and disappropriate
poor communities. An international network of NGOs is emerging that will
take these agencies to task.
Heffa Schücking is a 1994 Recipient of the Goldman
Environmental Prize and Director of Urgewald,
one of Germany's leading environment and development NGOs
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