Index for November 2013

Volume 12, Issue 11

  • Do Swedish ECAs support exports at the expense of human rights?

    Executive Summary

    Through its export credit agencies (ECAs) EKN and SEK, the Swedish state insures and finances Swedish companies' export. These operations are extensive. The Swedish ECAs have in their portfolios the responsibility for hundreds of billions of Swedish kronor, and in 2012 alone EKN guaranteed transactions of a value of 49 billion SEK in 123 countries.

    In two previous reports, Amnesty International and Diakonia examined and followed up the extent to which EKN and SEK take account of human rights in their credit assessments. Although the follow-up report from 2012 showed that steps had been taken in the right direction such as greater transparency, new procedures and new policy documents, we can note in our third report that large gaps still exist.

    In their policy instruments for the ECAs the government refers to the highest applicable international standards that exist when it comes to business and human rights: the UN Framework and Guiding Principles and the OECD Guidelines for Multinational Enterprises, but only in the ownership policyto SEK does the government require the UN Principles be observed. In its instruktions to EKN, the government only requires that EKN inform its customers of the UN Framework and Principles.

    In addition, our report shows that both EKN and SEK in practice apply the International Finance Corporation performance standards, which do not live up to the UN Framework and Guiding Principles. Sweden's Policy for Global Development (PGD), which entails that all policies should promote human rights and equitable and sustainable development, is not mentioned in the State's ownership policy for SEK, but only in the instruktion to EKN. The PGD is not mentioned in either the EKN and SEK's own policies.

    Examples: Eldorado and Suzanos mills

    To assess whether the new policy documents and procedures are sufficient to ensure that state supported export activitites do not affect human rights negatively, we examined two of the deals EKN and SEK prepared and approved in 2012. They are classified as potentially high risk (category A) and are exports for the two large pulp mills in Brazil: Eldorado in the central part of the country and Suzano in the northeast.

    Both mills are part of the massive expansion of the pulp and paper industry in Brazil. They employ more than 20,000 people for everything from the construction process to work on the hundreds of thousands of hectars of eucalyptus plantations that supply the mills with raw material. Previous experience with similar projects, both in Brazil and in other countries, show that there are serious risks with respect to the violations of human rights, specifically with respect to working conditions and poor people's access to land.

    The continued lack of transparency makes it impossible to conduct a full assessment, but on the basis of the information we received from EKN and SEK we have determined that the project management of both the working conditions and land issues has been inadequate. None of the projects meet the requirements of international standards set for companies to identify and take action to protect vulnerable groups. For example, no trade unions have been consulted during the impact assessment. EKN has imposed requirements in contracts with companies to try to overcome these shortcomings, the results of which are not accessible for review.

    Recommendations

    1. In line with its international obligations Sweden must through legislative and/or updated instructions and ownership directives ensure that the guarantees and loans given to business exports do not cause or contribute to human rights violations. Sweden must apply the United Nations Framework and Guiding Principles fully in their export promotion by clarifying what is required of the ECA's impact assessments, so that it meets the requirements of due diligence set in the Guiding Principles.

    2. Increased transparency and revised privacy directive
    Transparency and access to information is essential for people to be able to participate in decision-making processes that may affect their rights, and in order to hold companies and governments accountable. Therefore, transparency around state supported export activities must increase dramatically. SEK must immediately be made to comply with the OECD recommendations on publication of project information for high-risk transactions. The government must review the institutions' openness principles and if necessary amend the legislation.

    3. Ensure that PGD is fully applied to state supported export activity
    The state must update its governance policy and make clear that ECAs activities are covered by the PGD. The Ministry for Foreign Affairs and the Ministry of Finance must develop a guidance document that clarifies what implications the PGU goals and perspectives have for the ECAs. Furthermore, EKN and SEK must develop their own policies in relation to the PGD, thus enabling project specific evaluations. An independent mechanism should be set up to evaluate the implementation of PGD for consistency and efficiency.

    4. The regulations concerning arms exports must be improved.
    The export of miliatry equipment is by far the largest and most controversial business that has ever been funded and supported by the SEK and EKN. Such transactions must be subject to public scrutiny. Transparency is of utmost importance so that these exports can be assessed from a rights' perspective and in line with Sweden's PGD.

  • Hold The Applause on UK Coal Financing Announcement

    (ECA Watch, 30 November 2013, Ottawa) Export Credit Agency Watch (ECA-Watch) members say “hold the applause,” on today’s UK announcement that the government will limit financing for foreign coal fired power plants.  Although restrictions on some sources of public financing for coal are something to shout about, the U.K. plan has loopholes big enough to drive a coal train through.

    For example, the U.K. plan exempts financing through the government’s export credit agency, UK Export Finance, which is an important source of corporate welfare for U.K. companies involved in the coal sector  The U.K. government announcement implies that this exemption is nothing to be concerned about because that the government has not financed a coal power plant since 2002.  However, since 2007 U.K. Export Finance has supported at least $100 million in financing for the coal mining sector, according to a forthcoming report of the Natural Resources Defense Council.    

    The U.K. announcement on increasing coal financing restrictions should not cloud the fact that the government will likely continue to finance climate and environment-damaging fossil fuel projects despite pledges in recent years to ban this practice.

    “This ’pledge‘ is not worth the pledge it is written on.  It excludes U.K. Export Finance, the main part of the U.K. government which funds dirty fossil fuels overseas,” said Tim Jones, ECA-Watch member and Jubilee Debt Campaigner in the U.K.  “In the last year, U.K. Export Finance has guaranteed loans to Siberian coal mines and Brazilian offshore drilling.  All this is set to carry on, continuing to break a previous government commitment in 2010 to end U.K. Export Finance support for “dirty fossil fuels,” said Jones.

    ECA Watch recently asked OECD export credit agencies to discontinue financing of coal projects.

     

  • November 14, 2013

    ECA Watch has prepared this ‘shadow report’ — with the support of other civil society groups — in order to assess current ECA practice in relation to issues such as transparency, public accountability and more generally, their compliance with the EU’s objectives on external action. It is based on ECAs’ own annual public reports, questionnaires sent to Export Credit Agencies (ECA), and freedom of information requests. The report starts by giving some background information regarding ECAs and how they are regulated. It analyses ECAs’ answers to ECA Watch’s questionnaires, and highlights a couple of case studies to illustrate our concerns. It analyses the annualreports that Member States sent to the EC and highlights points that should be investigated further by the EC. It concludes by indicating options for the European Commission, Council and Parliament to improve the regulatory framework for EU ECAs.

  • (Guardian, 20 November 2013, Warsaw) British taxpayers' money will no longer be used to build coal-fired power stations in developing countries, the energy secretary Ed Davey pledged November 20th, as the fortnight-long United Nations climate talks in Poland entered their final phase. The UK has provided about $500m (£300m) for such projects in the past seven years, mostly through its funding for development banks, according to research by the US Natural Resources Defence Council. Ending that is meant to encourage countries to move to low-carbon energy. However critics have said 'hold the applause", noting that, contrary to Ed Davey's announcement, British taxpayer's money can still be used to fund coal power stations because the new policy explicitly excludes UK Export Finance, the main part of the UK government which backs loans to other countries. It is like pledging not to eat sugary food, but exempting chocolate.

  • Through its export credit agencies (ECAs) EKN and SEK, the Swedish state insures and finances Swedish companies' export. These operations are extensive. The Swedish ECAs have in their portfolios the responsibility for hundreds of billions of Swedish kronor, and in 2012 alone EKN guaranteed transactions of a value of 49 billion SEK in 123 countries. In two previous reports, Amnesty International and Diakonia examined and followed up the extent to which EKN and SEK take account of human rights in their credit assessments. Although the follow-up report from 2012 showed that steps had been taken in the right direction such as greater transparency, new procedures and new policy documents, we can note in our third report that large gaps still exist.

    Read the report here.

  • (Herald Review, 15 November 2013, Decatur) After a year as gloomy as the bottom of a mineshaft, Caterpillar Inc. woke up to a bright ray of sunshine Thursday. The U.S. Export-Import Bank wants to say “yes” to making a $694 million loan that will help support more than 3,000 jobs, including hundreds in Decatur. The Washington, D.C.-based bank is the official export credit agency of the nation and steps in to aid American businesses hunting big overseas orders. The $694 million in financing will enable the controversial Roy Hill iron ore mine in Australia to buy boatloads of Caterpillar mining equipment, especially the giant off-road trucks, the world’s biggest, built at its Decatur factory.

  • (Wall Street Journal, 19 November 2013, Dubai) The $200 billion aircraft order bonanza at the Dubai Airshow has focused attention on the little-known system of government export credit agencies, which are used to help fund planes and other big-ticket equipment such as power generators. Proponents such as Boeing - a big winner at the show - maintain that ECAs are a crucial part of doing business, and competing with overseas rivals such as Airbus. Critics insist they distort industries, since not all airlines can access the support, while proponents of small government in the U.S. reckon they should be closed down.

  • (Sydney Morning Herald, 25 November 2013, Sydney) Australia's export credit agency wrote more loans in the 2013 financial year than the year before, despite almost halving the total amount of taxpayers' funds it provided. The mining sector comprised almost half of its financial assistance, with EFIC's single biggest commitment being a $US150 million loan for the Ichthys LNG project in Darwin. EFIC was among eight export credit agencies and 24 commercial banks to participate in the $US20 billion financing of the project, the world's biggest. EFIC has been criticised in recent times for loaning to large corporations such as Exxon Mobil and Leighton Holdings, and it was urged by a Productivity Commission report in 2012 to ''substantially reorientate'' its focus towards small exporters, rather than big companies that can easily source money elsewhere at low interest rates.

  • In their submission to the OECD ECWG consultation with CSOs on 19 November 2013, the Danish, French and German national human rights Institutes identified the following main issues of concern regarding the consistency of actions of the OECD Working Party and national export credit agencies with the requirements of the UN Guiding Principles on Business and Human Rights3:

    • Integration of human rights: How is respect for human rights being effectively integrated as an evaluative criterion for ECA-sponsored activities at national level, in line with the state duty to protect human rights, as set out in Pillar I of the UN Guiding Principles on Business and Human Rights, and the corporate responsibility to respect, under Pillar II?
    • Improving transparency: Transparency is prerequisite to accountability of state and private sector duty bearers to human rights standards, but is currently lacking in relation to export-credit supported activities. What role will the Common Approaches, and the Working Party, play in resolving this?
    • Grievance mechanisms: What steps are the Working Party and national authorities taking to meet the requirement for effective mechanisms to provide a remedy for any complaints relating to ECA-sponsored activities, in line with the requirements of Pillar III of the UN Guiding Principles on Business and Human Rights?
  • (Lanka Business Online, 28 November 2013, Colombo) Sri Lanka has US$1.9 billion of new bilateral and multilateral commitments up to September 2013 led by China with export credit from other countries also showing increases, a finance ministry report showed. China has committed US$517.9 million up to September, Japan US$421.5 million, Asian Development Bank US$371.2 million, the World Bank US$196.4 million, the United Kingdom US$103.7 millionand USA US$64.9 million. While Japan, the ADB and World Bank give long term loans at low interest China gives export credits at semi-commercial terms. Sri Lanka has been using large volumes of export credits and supplier finance for infrastructure from the Exim Bank of China, but other countries are now also giving larger volumes of export credits.

  • UK Export Finance and Korea

    UK Export Finance has signed Memoranda of Understanding (MOU) on reinsurance with the Korean export credit agency, Korea Trade Insurance Corporation and with Korea Eximbank on mutual support.
    The agreement sets out how UK Export Finance (UKEF) and the Korea Trade Insurance Corporation (K-Sure) will cooperate in the field of export credits, facilitate collaboration, and better co-ordinate efforts on projects in other markets where there are export opportunities for both the UK and Korea. The signing was witnessed by Business Secretary, Vince Cable, and the Korean Minister of Trade, Industry and Energy, Yoon Sang-jick.

    This MOU follows the signing yesterday of a separate MOU on Mutual Support between UK Export Finance and Korea Eximbank, the Export-Import Bank of Korea.