ECAWatch Newsletter 9

Flawed OECD reporting and analysis of HIPC transactions

(ECA Watch, Paris, 29 September 2006) The OECD’s Export Credit Group (ECG) agreed in July 2001 to a Statement of Principles designed to discourage the provision of officially supported export credits for “unproductive” expenditures in “Heavily Indebted Poor Countries” (HIPCs) and to report on and review these transactions. The release of flawed statistics raise questions about the commitment of the OECD to properly monitor these expenditures.

OECD Watch data on OECD Commitments to IDA countries 2002 – 2010.

(ECA Watch, Paris, 29 September 2006) In July 2001, the Export Credit Working Group of the OECD agreed to report transactions hosted in Heavily Indebted Poor Countries (HIPCs) with a view to bringing these countries’ debt burdens to sustainable levels, and to review them on an annual basis. Export credit debt made up a third of the external public debt of aid receiving countries in 2002 according to OECD External Debt Statistics for 1998-2002.

On June 19, 2006, the OECD’s ECG Secretariat released the 2001 – 2005 data on these HIPC committments showing that SDR 2.1 billion (US$3.1 billion) in credits with over 2 year repayment terms for 356 transactions in 38 countries over 42 sectors had been approved in this 5 year period.

However, the original posting of this data on the OECD web site provided geographic data for 68 countries and 589 transactions, and sectoral data for 38 countries and 356 transactions. A classical comparison of apples and bananas!

The World Bank HIPC initiative currently identifies 40 countries as potentially eligible to receive debt relief under the Debt Initiative for HIPCs mentioned in the OECD Statement of Principles for unproductive expenditure. The OECD lists 38 countries, two of which (Laos and Myanmar) are not on the World Bank list, leaving 4 HIPC countries missing from the OECD list (Eritrea, Haiti, Kyrgyzstan and Nepal). OECD statistics for 2004 however provide data for Haiti, Kyrgyzstan and Nepal, indicating that this information is available, even if not included in their HIPC specific reports.

Following ECA Watch queries about these discrepancies, the ECG revised the published data.

The OECD claims it is “best known for its publications and its statistics”, and that “Dialogue, consensus, peer review and pressure are at the very heart of OECD”. However, based on this very loose approach to the publication of data as demonstrated above, ECA Watch questions the seriousness of the OECD’s commitment to properly monitoring ECA lending to HIPCs and therefore of bringing their debt burdens to sustainable levels.

In this context, recent G7 warnings to China and India to not overload poor countries in Africa and elsewhere with high-interest loans would appear to be somewhat hypocritical unless they are prepared to seriously strengthen their own debt monitoring through their membership in the OECD’s Export Credit Working Group.

Armenians welcome US Senate move to block Ex-Im subsidy for railroad bypass

(Defacto, Yerevan, 22 September 2006) In a move that demonstrates the potential geopolitical impact of ECA financing, the US Senate Banking Committee has added an amendment to the Export-Import Bank Reauthorization Bill which would prohibit American involvement in a proposed Caucasus railroad deliberately excluding Armenia. In 2006, BP finished construction of the controversial BTC oil pipeline through Turkey, Azerbaijan and Georgia with ECA support, despite potential cost and distance advantages of an Armenian route.

EBRD urged by WWF to not fund controversial Sakhalin project

(EDIE, UK, 13 September 2006) The European Bank for Reconstruction and Development should not give the controversial Sakhalin oil and gas project its blessing – or its cash – according to the WWF. The Shell-led project has applied for a loan of around £500 million from the EBRD to help fund the project. WWF claims the controversial project has already breached a number of the bank’s policies and should therefore be refused the loan. Several ECAs are awaiting an EBRD decision on Sakhalin prior to making their own commitments, although Sakhalin’s lack of compliance with the OECD’s Common Approaches risks making the current review of these standards appear a rather hollow process.

G7 to discourage China from expensive export debt

(WSJ, Washington, 15 September 2006) – The Wall Street Journal reports that the G7 was to warn China at meetings in Singapore September 23-24 not to overload poor countries in Africa and elsewhere with high-interest trade finance loans. US Treasury Under-secretary for International Affairs Timothy Adams noted that “There are some aggressive countries out there that are ramping up their export-credit agencies and looking to take advantage of countries with lightened balance sheets.” The OECD’s Export Credit Group (ECG) agreed in July 2001 to a Statement of Principles designed to discourage the provision of officially supported export credits for “unproductive” expenditures in “Heavily Indebted Poor Countries” (HIPCs) and to report on and review these transactions.

Ex-Im increases subsidies for large aircraft

(PRNewswire, 7 Sep 2006, Washington) The Export-Import Bank of the United States (Ex-Im Bank) has extended its offer to reduce exposure fees by a third on asset-backed financings of new U.S.-manufactured large commercial aircraft for buyers in countries that ratify and implement the Cape Town Treaty. Ex-Im Bank’s board of directors applauded the progress that OECD export credit agencies (ECAs) have made to date in developing a common approach to offering improved financing terms to airlines based in countries that ratify and implement the Cape Town Treaty, which significantly reduces the legal risks associated with cross- border, asset backed aircraft financings and leases. Air transport represents 35% of OECD ECA long-term credits, with Boeing and AirBus being the greatest beneficiaries.

Armaris bids for four Bulgarian corvettes with Coface support

(Defense News, Paris, 12 September 2006) French company Armaris has tendered for four corvettes in Bulgaria, arranging for debt financing for the purchase with a pool of banks led by French bank Societé Générale, with repayment guaranteed by the Coface export credit agency.

ENCE announces withdrawal from ECA supported papermill investment in Uruguay

(MercoPress, Montevideo, 22 September 2006) Spain’s ENCE announced Thursday that Uruguay remains a “strategic” player for its pulp industry interests in spite of having cancelled the construction of a pulp mill until a new location is agreed with Uruguay. Ence was planning to build the mill with Spanish ECA CESCE support just across from neighbouring Argentina, next to another mill under construction belonging to Finland’s Botnia, in an area which was being challenged for environmental reasons.

Three European ECAs set to support Ilisu dam despite obvious failure to meet standards

(ECA Watch, Brussels, 27 September 2006) As OECD based ECAs debate revised environmental standards, 3 of them seem set to support one of the world’s most controversial dams in Turkey which will displace tens of thousands of people, destroy a significant cultural heritage site and increase the potential for conflict over water resources with neighbouring Iraq and Syria. ECAs are also looking at support for other controversial projects such as Sakhalin, Camisea II, Yusufeli, Yemen LNG, etc., projects whose approval would seriously undermine any remaining credibility of the OECD Common Approaches environmental and social standards.

OECD Watch report evaluates OECD MNC Guidelines 5 years after their revision [PDF]

  The OECD ‘Guidelines for Multinational Enterprises’ are not an adequate instrument for curbing corporate misconduct. This is the stark conclusion of OECD Watch in its report ‘Five Years On: A Review of the OECD Guidelines for Multinational Enterprises and National Contact Points,’ released on Oct.22 to coincide with the OECD’s Investment Committee’s meeting in Paris. The international NGO coalition calls for legally binding international social and environmental standards for corporations to help stop corporate abuses, particularly in developing countries.