Export Credits and Sustainable Development :
How to minimize risks and save costs ?
Helene Ballande, Amis de la Terre France
to the OECD Forum 2003
28 April 2003
Special thanks for their contribution to this presentation are due to Emilie Thenard, (Fern, Belgium), Wiert Wiertsema (Both Ends, Netherlands), Jon Sohn (Friends of the Earth, USA), Antonio Tricarico (Eyes on Sace, Italy), Aaron Goldzimer (Environmental Defense, USA) and the members of ECA-Watch.
I thank the OECD for organizing a RT on ECAs and SD. This is welcomed acknowledgement by ECAs themselves and the OECD that this needs to be addressed as NGOs have been asking for many years: May this meeting today be the start of an open public debate on the role and impacts of ECAs not only on the environment but also on human rights, local communities and economic sustainability – and therefore the start of new negotiations amon governments for ECA policies.
Friends of the Earth is part of ECA-Watch, a large international network composed of 347 NGOs from 45 countries that signed on the Djakarta declarations. We want ECAs to reform to prvent harm on people, host county economies and the environment.
To give you an idea of the size of the problem, here are a few figures:
Official Export Credit and Investment Insurance Agencies have become the largest source of public international finance, supporting in 2000 over ten percent of world exports.
During that time, Berne Union members supported $504 billion in private sector business and investment, of which $71 billion was granted for middle- and long-term guarantees and loans, mainly supporting large-scale project finance in developing countries; you will note that this exceeds all bilateral and multilateral development assistance combined, which has averaged yearly at some $50 billion over the past decade.
Finally, ECAs account for 40 percent of the debt owed to official governmental agencies.
However, ECAs have no adequate policies and safeguards to prevent tax payer/public money backing for:
human rights violations and corruption in dams reservoir areas,
climate change fostered by fossil fuels projects,
increase of the debt burden for poor countries and
exarcerbation of violence through massive arms exports.
In the opening the Berne Union Yearbook, Mr. Vivian Brown stresses that after September 11, the world community emphasized that business must continue as usual and he says that ECAs have an important role to play.
In contrast Klaus Topfer the head of UNEP said : “We must … expose the forces that create poverty, intolerance, hatred and environmental degradation that can lead to an unstable world. …When people are denied access to clean water, soil and air to meet their basic human needs, we see the rise of poverty, ill-health and a sense of hopelessness. Desperate people can resort to desperate solutions.”
We have ssen through fact-finding missions and contacts with affected communities that business as usual called for by Mr. Brown hurts efforts to achieve sustainable development. If the OECD and the ECAs are serious about this issue, they must change perspective, open their eyes on the reality on the ground, engage in a dialogue with the affected communities about what their needs are and in their own countries facilitate new kinds of business. One priority could be in the renewable energy sector for small and medium enterprises for example. For instance, one priority concern could be placed on the renewable energy sector for small and medium enterprises.
My presentation will briefly address three aspects of the current reforms urgently needed for ECAs to address sustainable development.
The Trade agenda:
We find quite surreal that at a time when even the World Trade Organization defines its agenda for the new negotiating round as a development agenda, ECAs keep defining their business as trade for the benefit of exporting companies without linking trade to development..
There are encouraging signs from the European Commission: DG trade recognized as a priority for the Johannesburg summit that export credit guarantee schemes should reflect sustainability considerations. Yet European ECAs, like Coface in France and Hermes in Germany, are still opposed to one of the basic elements of EIA procedure, public ex-ante disclosure of project information.
In 1999, ECAs started to discuss environmental policies; they have gotten very far. But it's time to look at the whole picture of sustainable development. Since Rio, that means looking at cross-cutting issues including also economic development, labour and human rights. As we speak, there is another roundtable being held at this forum discussing the social dimension of trade and investment. Ten years after governments committed themselves to overcome this artificial division between environmental and social issues, civil society expects ECAs and finance ministries responsible to translate this commitment to their policies and operations.
ECAs & debt
The heavy debt burden owed to ECAs by many developing countries precludes real sustainable development and puts the achievement of the Millennium Development Goals (MDGs) beyond reach.
Finally, my third point: increasing good governance in international investment by improving transparency and accountability.
Transparency is in our view the first step to minimize the risks of investment. By transparency we mean:
“disclosure of all social, environmental and human rights impact assessments, debt impact analyses, construction and off-take agreements;
all project related information that is relevant to informing people as to the project risks
and of course the name and description of the project and financial transactions
all of which should be disclosed at least 120 days prior to decision-making by the board of the ECA.”
If needed ECAs should request a modification of confidentiality laws so as to provide transparency of their project portfolio.
You know better than we do what the risks of investment are, however here are a few examples that I would like to comment on:
As Transparency International describes “Corruption acts like a tax to the foreign investing companies.” In addition, with corruption, the price of contracts increases and thus creates a higher risk for the ECAs and their home governments.
Yet ECAs are involved in backing companies that abet corruption. In Lesotho, ECA client companies are being charged with corrupting a local official (2 million $ bribes). Every player in this game claims that he wants good governance. The Lesotho case shows the problem has a boomerang effect, and rightly so, on the bribe givers. In this case ECA client companies may have to pay fines.
In the case of the Bujagali Dam (Uganda), corruption jeopardized their own investments – the project is now stalled, no-one wants to get involved.
Corruption needs to be addressed from the bribe taker as well as from the bribe giver and ECAs have an active role to play. As you heard last week, the action statement is insufficient, active cooperation with justice and transparency at all stages of the project will help avoid corruption cases and will minimize risks and create healthier environment for sustainable development.
Responding to a parliamentary question, the German Trade Minister said that 62% of exporters refused the publication of the deals that got Hermes Guarantee. This shows clearly that transparency on a voluntary basis, as defined in the Hermes guiding principles, does not work and that mandatory transparency is needed for all OECD ECAs.
Of course transparency is not a guarantee per se against reputational risk. Transparency is a tool to open up dialogue and discussion with other stakeholders than just the exporters, on the projects' contribution to sustainable development.
The Japanese ECAs recognize this by saying: “we welcome information provided by concerned organizations and stakeholders, so that it may consider a diverse range of opinions and information in its environmental reviews and supervision of projects. This is the way to avoid the social and environmental risk as earliest stage possible.”
ECAs that are lagging behind the most in terms of transparency are from countries that have ratified the Aarhus Convention on access to information, right to participate in decision making and access to justice, including for people outside of the Parties' jurisdiction.
If ECAs are, as the BP chairman Lord Brown puts it, about giving out “Free public money”, at least it should be done in the public interest, and that is Sustainable development around the world.
We have high expectations from OECD and the biggest ECAs, like Hermès (15-16 billion euros total guarantee) that have been lagging behind to change their attitude towards SD.
We thank you for this opportunity to present at the Forum and we reiterate the demands that we hope that you will forward to the Ministers' Council, while reporting on the Forum. In fact NGOs have been barred from meeting the Ministers at the Ministerial Council, while other parts of civil society like business and unions, get the opportunity to raise concerns directly to them.
We think it very important, that in their communiqué, the ministers call on the OECD to:
As a last word, all the sponsors of the OECD Forum, AREVA, EDF, TotalFinaElf, Société générale and Suez are involved in destructive projects supported by ECAs. AREVA in K2R4 in Ukraine, EDF in NT2 in Laos, TFE in the BTC pipeline, Suez in water privatization in Argentina and SG in most of those. This makes us uncomfortable still we came here in good faith and we hope that you will take more seriously the sustainable development mandate and follow our recommendations.
We thank you for your attention.
Home | What
are ECAs? | The Problems | Goals
| Take Action! | Press
Room | About Us
For Questions or Comments, email info_at_eca-watch.org
To report broken links and/or technical difficulties, email webmaster_at_eca-watch.org
View our Privacy Statement