African Forum and Network on Debt and Development
Afrodad is a civil society organisation born of a desire to secure lasting solutions to Africa's mounting debt problem
which has impacted negatively on the continent's development process.

The Concept Paper: The Impact of Export Credits on Africa's indebtedness and Environmental Degradation

Introduction

The traditional role of an ECA is to support and encourage exports and outward investment by insuring international trade and investment transactions. While no two ECAs are identical, they do share some common characteristics and mandates. At the very basic level, the common function of an ECA is to take or provide cover to exporters, banks, or investors for political and commercial risks causing loss over a short, medium, or long term.

For export credit transactions, political risks are the risk of non-payment on an export contract or project due to action or failure by an importer's host government. Such action may include intervention to prevent the transfer of payments, cancellation of a license or acts of war or civil war. Commercial risks arise primarily as a result of nonpayment by a private buyer, commercial bank or a public buyer, due to default, insolvency or bankruptcy, or failure or willingness to take delivery of the goods (i.e. repudiation).

For foreign direct investments, ECAs (through investment insurance or PRI) can also cover political risks associated with expropriation, confiscation and nationalization without compensation, inability to convert and transfer profits and dividends, and the effects of war and civil war. Most ECA export credit support is provided via insurance or guarantees, and there is little practical difference between these instruments. ECA guarantees are more similar to insurance than typical financial guarantees. Typically, an insurance or guarantee policy embraces commercial and political causes of loss against specified risks or classes of risk and is therefore conditional. While insurance usually covers less than 100% of the risk, guarantees are usually for 100% of the risk.

Contextual Framework

The use of export credits has recently become an important source of support from industrialised countries for exports and investments of private corporations in developing countries. Internationally, lending by export credits increased over the eight years from 1988 to 1996 by 400%, from US$26 billion to US$105 billion. They facilitated US$412 billion or 10% of exports from their home countries in 1999 and US$14 billion in foreign investment - mostly based on loans. According to the OECD all aid recipients had a joint official debt of US$ 1,064,718 million owed to public creditors by the end of 2002. Of this huge amount, US$ 368,503 million (nearly 35%) was owed to ECAs, underscoring the fact that export credits are a significant public contributor to the debt crisis of the South.

Export credits are supposed to help bear responsibility for promoting sustainable and equitable development in developing countries but too often their promotion conflicts with domestic priorities. Export guarantees and investment insurance turn out to be primarily trade-promoting instruments for companies in the North rather than development-oriented instruments for the Third World. The economic, social and environmental consequences of the projects supported are dubious, and the 'ambiguous' character of export credits and guarantees only further aggravate the problem.

Studies by ECA-Watch have noted that ECAs do not have convincing policies, procedures, safeguards, or standards to protect local communities, the environment, and human rights, or to prevent corruption, manage debt impacts, or to consult with citizens in affected communities. Nor do they have effective policies to disclose information regarding their activities. It is against this background that ECAs have been regarded as globalisation's dirtiest secret mechanisms - with massive "dirty" projects in many countries across Africa, Asia and Latin America. The Common Approaches on Environment and Officially Supported Export Credits as agreed in December 2003 by the OECD do not provide sufficient improvements in this field.

To-date, little or no information is available on the role of export credits in Africa's mounting external debt. It is against this background that AFRODAD in collaboration with EURODAD and Bothends in April 2006 commissioned studies in three countries-Nigeria, Cameroon and Zambia. The studies sought to assess the operation and impact of export credits in relation to Africa's indebtedness and economic development. The research findings together with other pertinent issues related to this subject matter will be discussed during an international conference scheduled for mid-October 2006 in Cameroon. The research outcomes and the conference deliberations are intended to influence policy at the national, sub-regional and regional levels in Africa, as well as at the global level. The regional comparatives will help shape regional harmonisation as part of the consolidation of the African Union policy framework. Civil society organisations engaged in issues of globalisation are expected to benefit from these studies as they develop their lobby and advocacy work on issues of corporate globalisation.

Tentative Programme

Dates : October 17th -18th 2006

Venue: Djeuga Palace Hotel, Yaounde, Cameroon

Day 1

0900-0920 Welcome Remarks by Opa Kapijimpanga, AFRODAD board chairperson

0920-0930 Official Opening by the Inspector General of Cameroonian Ministry of Finance

Tea Break

The concept and philosophy of ECAs

Chair:

1030-1100 The history, legal frame and role of ECAs in the development of poor countries- Bruce Rich, Director, International Program, Environmental Defence, Washington

1100-1120hrs Export Credits within the OECD and non-OECD countries- Wiert Wiertsema, Both Ends, Amsterdam

1120-1150 Plenary Discussion

ECAs and the African continent

Chair:

11.50- 1230 AFRODAD key findings on Export Credits in Africa-The Case of Nigeria & Cameroon by Mr. Chikwuma (Researcher)

1230- 1330hrs plenary discussions

1330- 1430hrs Lunch Break

Debt and ECAs

Chair:

14:30 - 14:50 The global Campaign against ECAs and the Environment - Bob Thomson, ECA-Watch, Paris

14:50 - 15:10 Africa's Environmental degradation and ECAs - Samual Nnah Ndobe, CED Cameroon.

1520-1620hrs Plenary Session

Tea Break

16:35 - 17:45 Panel debate: Sharing persepectives on ECA

Moderator:

Panelists:

David Barnden, CEDHA, Cordoba Argentina

Serge ??, World Bank

Ifrahima Diouck, Deputy-Minister of NEPAD, African Economic Integration and Good Governance Policies, Sengal

Representative of the IMF in Cameroon

Chinedu Brown, Abia State, Nigeria

Representative of the Cameroon Sinking Fund

Day 2

Chair:

09.30-10.00 ECAs and the private sector - Kwasi Abeasi, African Business Roundtable

10:00 - 10:20 Oumar Makalou, Mali, retired IMF

Charles Mutasa, Executive Director, AFRODAD

1020-1030hrs Tea Break

Chair:

1030- 1200hrs Group Work and Discussions

1200hrs- 1300hrs Lunch

Chair:

1300- 1400 Group Report Backs and Discussions

1400- 1415 Way Forward and key Statement Messages

1415- 1445 Closing Remarks and Close down