More questions re OECD export credit monitoring statistics

(ECA Watch, Paris, 30 October 2006) The OECD prides itself in providing members with accurate and comprehensive publications and statistics. In it’s own words, “It helps governments to ensure the responsiveness of key economic areas with sectoral monitoring.”

But a review of published statistics covering the expenditure of member countries of over US$104 Billion a year on official, taxpayer funded export credits, raises serious issues of major discrepancies, sloppy presentation and a general reluctance to fully account for the use of large sums of money, sums which greatly exceed official development assistance and the budgets of all the multilateral development banks.

Last month we raised the question of errors in the posting of OECD ECA data which monitors commitments to HIPC countries in an effort to prevent accumulation of unproductive and unsustainable debt. Export credit debt made up a third of the external public debt of aid receiving countries in 2002.

This month we look at statistics prepared for the OECD Arrangement, a gentlemen’s agreement amongst its Participants, who represent most OECD Member Governments. The Arrangement sets forth the most generous export credit terms and conditions that may be supported by its Participants. The World Trade Organization's Agreement on Subsidies and Countervailing Measures (ASCM) recognizes that export credit terms under the Arrangement are not considered subsidies under WTO rules, which prohibit export credit agencies (ECAs) from charging “premium rates that are inadequate to cover the long-term operating costs and losses of the programmes.”

The OECD is charged with monitoring this break-even requirement both for itself and on behalf of the WTO, and publishes annual cash flow data for ECAs as part of an ECA peer review process, which is intended to ensure adherence to non-subsidized premiums and interest rates and thus to demonstrate "break-even". (1)

It is an open secret that many of the credit facilities on offer from OECD ECAs breach the Arrangement. For example, the UK Government has admitted that the annual subsidy to ECGD is estimated to be £150 million.

In reviewing these OECD reports on net operating costs, ECA Watch has noted that the 2004 OECD report shows a restated increase of almost One Billion SDRs or US$1.44 Billion in income from the Japanese ECA JIBC for the period 1999 to 2003, as compared to the 2003 OECD Report.

It is not clear how US$1.44 Billion in extra revenue could appear in the JIBC statistics and there is no explanation in the OECD reports for this discrepancy. Enquiries of the OECD ECG Secretariat indicate that: (1) there is no uniform accounting standard by which ECAs report their cash flow results and (2) the ECG Secretariat is not aware of which ECAs use full cost accounting (i.e. operating and capital costs), and which do not. Secretariat staff were not aware of this discrepancy, indicating that there is apparently no serious peer review process taking place to monitor ECA expenditures to subsidize export sales.

An internal OECD “review a couple of years ago of practices across the Organisation showed that the [Export Credit] Working Party classified more documents as ‘Confidential’ than the institutional average.” While they claim to now limit the number of “confidential” documents to the strict minimum and to systematically post summaries of outcomes of each meeting of the Working Group on the OECD Web site and all correspondence with CSOs, the experience of CSOs is that the Export Credit Group (ECG) of the OECD Secretariat is anything but transparent.

ECA Watch calls on OECD ECAs to explain these discrepancies and to undertake to meet their commitments under their own Arrangement and the WTO ASCM. This will require a much higher degree of transparency in ECA reporting and the implementation of more detailed reports by the ECG Secretariat, which now issues public reports using grossly aggregated data which are completely inadequate to ensure accountability for the use of public funds.

Note 1: Interestingly, the OECD only makes public the operating cash flow data for ECAs and not the entire internationally accepted asset and liability statements which cover financial as well as operational accounts. This means that national ECA profits or losses on capital allocated from tax revenues are not published and not presumably counted as part of the net costs and losses mentioned in the WTO Subsidies Agreement. The UK Treasury has admitted that the annual subsidy to ECGD is estimated to be £150 million, a substantial sum which makes a significant difference to its profitability and therefore to the premiums to be charged to break even. The Dutch Ministry of Finance has committed to implementing a full and proper accounting system for Atradius DSB by early 2007 which will adequately present their situation with respect to the 'break-even' requirements of the OECD Arrangement and the WTO's ASCM.