Amnesty International UK
Campaign Against the Arms Trade
The Corner House
Jubilee Debt Campaign
Jubilee Scotland
WWF-UK

Rt Hon Alistair Darling MP
Chancellor of the Exchequer
HM Treasury
1 Horse Guards Road
London SW1A 2HQ

1 April 2009

Dear Chancellor,

We are a group of organisations that share a range of concerns relating to the social and environmental impacts of Export Credit Agencies (ECAs). We are writing to you with regard to the proposals being discussed this week by the Group of Twenty (G20) countries to expand the financial capacity of Export Credit Agencies (ECAs) to respond to the global financial crisis.

As government ministers have repeatedly said, business cannot be allowed to continue as usual. It is time to recognise that ECAs support high-risk investments in many poor countries that have been linked to human rights violations, corruption and environmental damage. We now have an opportunity to rethink how export finance might better serve the poor and the environment.

There is at present an enormous accountability gap in so far as the activities of ECAs are inadequately monitored for their social and environmental impacts, and are often incompatible with the international human rights obligations that their home states have entered into.

We would like to raise the following areas of concern that need to be addressed if ECAs are to play a positive role:

Curbing Fossil Fuels
The draft G20 statement gives a clear commitment to the stimulus being used to boost green investment for the post-carbon, post-depression future. However, the ECGD has shown itself to be unable to support green technologies, and more broadly, ECAs are responsible for an increase in greenhouse gases through their financing of fossil fuel projects. ECGD has committed to reporting on the carbon emissions of high and medium impact projects, and this move is welcomed by civil society. However, ECGD-supported aerospace projects, which accounted for 29% of ECGD business in 2007-8, are not subject to such carbon reporting. In line with the Environmental Audit Committee report, we support the recommendation that “the ECGD should bring all aerospace-related applications within the Case Impact Assessment Process, in addition to ICAO assessment.”

Promoting Renewable Energy
The UK’s domestic economic stimulus package includes increased support for renewable energy and energy efficiency, and so should any international stimulus plan. However, most export credit agencies provide little support for renewable energy. In 2003 ECGD announced that it would ring-fence >50 million to support the export of renewable energy technology. Since this initiative was established, there has not been a single application to access this credit. The UK Government announced its response to the Environmental Audit Committee report of 2008 that in 2009 it would “consider, in collaboration with other Government Departments, how its ‘Renewables Initiative’...might be incorporated into a new Government initiative to coincide with the UNFCCC COP 15 and Kyoto Protocol COP/MOP 5 meeting in December 2009 in Copenhagen.”

A dramatic expansion in financing for renewable energy is needed to stimulate economic growth and generate jobs. Meanwhile, export credit agencies should support the growth of the renewable energy and energy efficiency sectors in less wealthy countries through financing terms that provide advantages over fossil fuel-associated transactions; these terms should be more economically sustainable for developing countries than previous ECA schemes.

Debt and Development
It is well-recognised that ECA financing is responsible for generating a significant portion of the public international debt of poor countries. In recent years, export credit agency debt has been approximately 30-40% of total official public sector debt. In the absence of debt reforms for export credit agencies, these transactions will undermine the goal of the G20 economic stimulus proposal and send a message that developed countries seek an economic recovery at the expense of developing countries. This is particularly worrying at a time when countries face the threat of tipping into a renewed debt crisis. Out of 43 countries the World Bank assesses as most vulnerable to the economic downturn, Jubilee Debt Campaign estimates that 38 had unpayable debts before the crisis.

Human rights and responsibilities
The UN Special Representative on the issue of Human Rights and Transnational Corporations, John Ruggie, has highlighted the need for ECAs to explicitly consider human rights concerns. ECAs must adopt robust policies to ensure that they do not undermine member states responsibilities under international and national law to respect, protect and fulfil human rights obligations. This requires clear human rights standards and due diligence mechanisms for the operations of ECAs, adequate reporting and monitoring of both ECA activities and the companies supported by them, as well as the imposition of sanctions on companies that transgress these standards. Underpinning such standards should be much higher levels of transparency and disclosure, without which it will be difficult to hold ECAs to account for their impacts.

Excessive support for military goods
In some countries, disproportionate export credit support is given for military projects. In the UK, for example, in 2007-8 57% of ECGD cover was for such projects even though military goods account for less than 2% of all UK exports. Government Minister Quentin Davies MP admitted that military production does little to stimulate the economy (Commons' Defence Committee, 16.12.08). The military industry is also amongst the most corruption prone, whilst sales to countries with a poor human rights record risk fuelling violations.

Combating Corruption
The Government should be wary of economic stimuli that rely on institutions that are often associated with corruption. Bribing foreign officials in order to secure overseas contracts for their exports has become a practice for some global corporations seeking business in industrializing countries – and has been associated in a number of cases with transactions supported by export credit agencies. Despite measures to combat corruption taken by the export credit group of the OECD, this corruption persists. In the UK, the Government should consider the following measures:

• De-bar companies that are found guilty of corruption for up to 5 years;
• Ensure that the review of ECGD’s anti-bribery provisions, due this year, commits the ECGD to operating to the highest standards
• Commission an independent review of anti-bribery best practice by ECAs and other financial organizations, and benchmark the ECGD against this.

Conclusion
We believe that international economic stimulus plans need to be designed with regard to their impacts on human rights, development and the environment. We question whether export credit agencies can have positive impacts on society, without being subject to proper regulation and accountability mechanisms. At the very least, this means that all projects supported by ECAs should be screened and monitored for their social and environmental impacts.

We urge that you condition any economic stimulus role for export credit agencies on reforms that promote substantial reductions in greenhouse gas emissions, increased investments in renewable energy, decreased debt for poor countries, and that prevent the human rights abuses and corruption associated with some of the projects supported by these public finance institutions.

We look forward to your response and would be happy to discuss these concerns in more detail.

Yours sincerely,

Tim Hancock, Campaigns Director, Amnesty International UK
Ann Feltham, Campaign Against the Arms Trade
Nick Hildyard, The Corner House
Nick Dearden, Director, Jubilee Debt Campaign
David Milway, Jubilee Scotland
David Norman, Director of Campaigns, WWF-UK

Cc: Rt. Hon Lord Mandelson, Secretary of State for Business, Enterprise & Regulatory Reform
Rt. Hon Douglas Alexander, Secretary of State for International Development

 

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