Index for June 2015

Volume , Issue

  • Dutch state violates own CSR procedures in Egypt's Suez Canal Expansion

    Eva Schram (1988) is research editor at OneWorld
    The original Dutch article can be read here
    4 June 2015

    When Muhamed Mohamed al-Mahdy was stationed in 1973 during the Yom Kippur War in the Sinai Peninsula in Egypt, he fell in love with the region. He sold his land near Cairo and moved into the Sinai. He started an orchard and a family. He built houses for his sons and thought he would never have to leave.

    Until last year soldiers entered his village Abtal and ordered Mahdy (65) and his family to leave their homes within a week. Abtal lies on the track for the expansion of the Suez Canal, in which the Dutch dredging companies Van Oord and Boskalis participate. Mahdy now lives in a hut of bamboo and sells candy bars and drinks along the edge of the road. "Life has become a humiliation," he said to John Beck, reporter and photographer of VICE.

    Mahdy (65) was evicted from his home in Abtal, a village in the Sinai, in order to make room for the new Suez Canal. As compensation he was given a small piece of waste land.

    Evicting people from their homes is a major human rights violation, according to the UN Commission on Human Rights. Therefore, it is disturbing that two Dutch companies are involved in the project that according to several reports in international media already led to 2,000 evictions. Even more disturbing: the Netherlands guarantees the payment risks that Van Oord and Boskalis incur for this project.

    The Dutch state helps

    Van Oord and Boskalis applied for a so-called export credit insurance for the project from the Dutch state. This is a financial product to promote the export of Dutch companies (see box).

    What is an export credit insurance?
    In capital-intensive projects or for exports with a very long maturity Dutch exporters run the risk that they are only partially or not getting paid at all by their foreign customer, as they often incur costs during the project. If that risk is too high to insure in the commercial market, as is often the case in emerging economies, the Dutch state jumps in: it then offers an insurance to cover the risks.

    Export credit insurances are assessed and issued by Atradius Dutch State Business, an implementing agency of the Ministry of Finance and a subsidiary of the commercial insurer Atradius. The budget from which any compensation should be financed, and where the proceeds of the issued insurance policies (the exporter pays premiums) go, is on the budget sheet of that ministry.

    Before Atradius DSB issues an insurance, the organization looks at the financial risks of the transaction as well as the environmental and social risks. The Corporate Social Responsibility (CSR) policy, prepared by the State and implemented by Atradius DSB, is based on guidelines drawn up in the OECD, the so-called Common Approaches (see box). The Dutch CSR policy goes beyond the OECD Guidelines: also projects that last less than two years or for which no financing is required (sometimes banks or exporters advance expenses for the project before they get paid themselves) are subject to a CSR screening.

    According to the guidelines?

    The Suez Project in which Van Oord and Boskalis participate is a Category A project. Almost all dredging projects fall into that category. The OECD prescribes special rules for such projects in case is medium or long-term financed projects. An Environmental and Social Impact Assessment (ESIA) is mandatory to assess what impacts the project will have on the environment and human rights, and how the companies plan to mitigate such effects. The standards for such an ESIA are extensively described in the Common Approaches.

    The OECD also stipulates that a credit insurer needs to provide thirty days advance notice in case it plans to insure a Category A project. That allows those involved the time to ask the ESIA and any other documentation and to submit an opinion on the project.

    OECD Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence

    The Common Approaches of the OECD (Organisation for Economic Co-operation and Development, an association of the 34 most prosperous countries) prescribe a categorization of projects.

        A: there is great potential of irreversible negative environmental and / or social impacts, possibly beyond the location of the project
        
    B: there are significant potentially negative environmental and / or social impact, but these are limited to the boundaries of the project
        
    C: there are few or no negative environmental and / or social impacts

        
    According to the Common Approaches, applicants for a Category A project, almost always applicable for dredging projects, have to submit an environmental impact assessment (EIA, in English ESIA).


    Atradius DSB has never announced in advance that it planned to issue an insurance to Van Oord and Boskalis for the Suez Project. This can be concluded from an e-mail of Atradius DSB to Both ENDS sent in the beginning of March 2015, a copy of which is in the hands of OneWorld. It reads: "In recent months we have been making serious efforts to obtain information in connection with the environmental and social assessment. These efforts included a visit to Egypt, as well as information from the Dutch Embassy in Egypt, the public domain and the Dutch exporters. These efforts have not led to an ESIA, or sufficiently similar information for ex ante publication of the project. "

    Thus no ESIA has been done. There was not even sufficient information to announce that Atradius DSB would issue this insurance on behalf of the State. Was there then enough information to assess which potential harm to the environment or social harm might be brought about?

    To the question "Did you add an Environmental Impact Assessment (acronym in English: ESIA) to the application for an export credit insurance?" Boskalis responds, also speaking on behalf of Van Oord: "YES (sic), there is a comprehensive "Environmental and Social Assessment" conducted by Witteveen and Bos. This assessment was part of the application.".

    Atradius DSB confirms the existence of the report of Witteveen and Bos, but the insurance company would not comment on the contents of the report. Also Boskalis declines to respond to that question.

    The above quoted email indicates that the investigation of Witteveen and Bos in any case did not meet the standards that the OECD, and thus Atradius DSB, require for an ESIA. If we again explicitly ask Atradius DSB, they answer: "As stated earlier, we could not publish because there is no ESIA available."

    The reason to insure the transaction anyway, was according to Atradius DSB: "In accordance with our national policies and taking into account the different aspects of this case, including the environmental and social information that was available and the fact that the Dutch exporters work in a consortium with a foreign party that already obtained an ECA coverage (export credit insurance, ed.). "

    Prestigious cash cow

    The current Suez Canal is a cash cow for the Egyptian government. In 2014 over 17,000 ships passed through the channel, yielding the Egyptian treasury $ 5.5 billion. But the channel, connecting the Mediterranean and the Red Sea, is too narrow to allow two ships sail alongside each other, so skippers usually have to wait in one of the six so-called bypasses. Ships are there often waiting for hours and on average take 16 hours to travel the 136 kilometers of the channel.

    Therefore, one is currently working hard to expand the Suez Canal. Over a length of 35 kilometers, a new channel is dug, so that ships can sail in both directions. Moreover, parts of the existing channel are deepened. The estimated revenue for the Egyptian treasury is $ 12.5 billion annually.

    The Suez Project is "one of the largest dredging jobs this decade," said Peter Berdowski, CEO of Boskalis last year in an interview with a Dutch business newspaper (Het Financieele Dagblad). It is also a showcase of President el-Sisi of Egypt: expanding the channel should stimulate the ailing Egyptian economy. Therefore the works are speeded up: el-Sisi wants the channel to be ready by August 5 of this year.

    The dredging works are done by Van Oord and Boskalis in a consortium with the Belgian company Jan de Nul and NMDC from Abu Dhabi. The turn-over of $ 1.5 billion is divided by four. The consortium for the project had to compete with Chinese companies.

    Google Earth

    That the Suez Project, which is compared in scale with the construction of the Second Maasvlakte (Rotterdam Harbor), creates environmental damage is beyond dispute. Dredging projects always cause environmental damage. But that does not mean to be a ground for refusing an insurance. Dutch dredgers are supposed to be the best at limiting environmental damage.

    But what about the social risks? Wiert Wiertsema, co-founder and policy advisor at Both ENDS, says: "Human rights in Egypt are violated on a large scale. People who have problems with the authorities are locked up and given draconian sentences. "

    Moreover, the news about the thousands of evictions already emerged last year, shortly after the start of the operations. Atradius DSB only issued an insurance to Van Oord and Boskalis on February 12 this year. So they have had time to incorporate the reports of evictions in their assessment.

    OneWorld asked Boskalis to comment on the reports of the evictions, and got a quote from the research of Witteveen and Bos: "The Dutch embassy in Egypt told us that all the land in the project is owned by the Suez Canal Authority (entirely owned by the Egyptian government, ed.) and that various persons are unofficially living in the area. A number of plots has been evacuated and people involved are compensated with land where they can build houses. A search on Google Earth shows that since 2004 there have been no large scale settlements within the limits of the project area. "

    Complicity not ruled out

    John Beck, the freelance journalist who has been in the village Abtal to make the VICE-report, was shocked by what he found there. "I saw the houses that stood there before the project began only in pictures, but the extremely meager ‘compensation’- a small piece of waste land - did not come close to the replacement of lost homes, cultivated land and possessions. A lawyer who works for the displaced villagers told me that according to Egyptian law, evictions can only take place if 'fair' compensation has been paid beforehand. That was absolutely not the case here."

    "The media reports about evictions, I have not been able to verify," says Wiertsema, "but that also applies to the claims of the dredging companies and Atradius that enough research has been done. After all, they do not disclose anything.” According to Wiertsema that is particularly unwise. "I'm not saying that the dredging companies, which operate with state support, are complicit in human rights abuses in Egypt. But it can not be excluded, and that's worrisome. "

    ‘Very exceptional cases'

    Wiertsema follows the export credit insurer Atradius DSB for years. He questions the way the investigation into the environmental and social risks is conducted. "That is precisely why it is so important that the information is made public. Then outsiders can assess whether the risks are properly reviewed. In the end of 2014 Atradius DSB has also promised to share the requested social and environmental information with Both ENDS, but it decided this spring otherwise."

    Atradius DSB said in a comment: "Annunciation was in this case not required in accordance with the Common Approaches, as the maturity is less than two years." But according to the CSR policy of the State that Atradius DSB implements and applies to all transactions, ex ante announcement and disclosure should have taken place.

    Regardless of the OECD Guidelines and its own CSR policy, the Netherlands has signed the Aarhus Convention. That means that the Dutch government (and Atradius DSB, as an implementing agency) should provide access to environmental information. Egypt has not signed the treaty. But the question is whether the Netherlands in this case on the basis of the treaty does not have the legal duty to share environmental information about Egypt with Egyptian stakeholders. There is certainly a moral obligation to do so.

    In the meantime, OneWorld has appealed under the freedom of information act, which includes specific provisions for the retrieval of environmental information, to disclose the investigation reports that have been done in preparation for the issuing the insurances.

  • First ECA-OECD Guidelines complaint submitted on Suape, Pernambuco, Brazil

    At the beginning of June an OECD Guidelines complaint was filed with the NCPs of Brazil and the Netherlands against the Dutch dredging company Van Oord and the Dutch ECA Atradius Dutch State Business on the adverse social and environmental impacts caused by ECA supported dredging projects in Suape, Pernambuco, Brazil. This first ever OECD Guidelines complaint against an ECA has been filed by the Associação Fórum Suape Espaço Socioambiental, Conectas Direitos Humanos, Colônia de Pescadores do Município do Cabo de Santo Agostinho (Z08) from Brasil and Both ENDS from the Netherlands.

    Communities of fishermen and shellfish collectors in the Brazilian state of Pernambuco, along with Brazilian and Dutch NGOs, allege that the Dutch dredging company Van Oord and the Dutch export credit agency Atradius DSB have failed to comply with the OECD Guidelines related to a dredging project in north-eastern Brazil. Van Oord has been active in the Port of Suape since 1995. Its most recent projects include dredging for the Promar Shipyard and the dredging of an ocean access channel to the Port of Suape. In November, 2011, the official export credit agency of the Dutch government, Atradius DSB, provided Van Oord with an export credit insurance for its operations in Suape. The complaint is the first under the revised OECD Guidelines to be directed against an export credit agency. 

    According to the complainants, Van Oord’s dredging operations have caused numerous adverse human rights and environmental impacts. Extended sections of rocky ocean bottom have been blown up with explosives as part of the dredging process. Coral reefs, and mangrove forests have been destroyed seriously affecting local fish populations. Local water management systems are affected in such a way that people living in the port area increasingly suffer from floods. Traditional fishermen and small-scale farmers lost their homes and livelihoods, for which they have received insufficient compensation. The complaint further alleges that Van Oord and Atradius DSB, in collusion with the Suape port authority,  failed to conduct appropriate human rights due diligence in order to prevent and mitigate human rights impacts, failed to provide local stakeholders with timely information about the projects’ adverse impacts, and failed to meaningfully engage stakeholders on business decisions that directly impacted them.

    The complainants request that the Brazilian and Dutch NCPs jointly handle the case and that they facilitate a dialogue with Van Oord and Atradius aimed at bringing the activities of both companies into line with the OECD Guidelines. Specifically, the complainants request that Van Oord remediate the damage it has caused by rehabilitating damaged areas and ensure protection for other areas endangered by the dredging operations. The complainants also request that the loss of local livelihoods be remediated by establishing protected fish reserves. Finally, the complainants demand that both Van Oord and Atradius DSB undertake and communicate publicly about a process of due diligence to identify, prevent, mitigate and remedy impacts that they cause, or to which they contribute or are linked.

Volume 14, Issue 6

  • (USA Today, Washington, 30 June 2015 14:03 EDT) The charter for the Export-Import Bank of the United States expires at midnight Tuesday, delivering at least a short-term victory for fiscal conservatives and activists who targeted the 81-year-old institution as a free market distortion.

  • (St. Louis Post-Dispatch, Brussels, 12 June 2015) Talks on phasing out a form of coal subsidies ended in stalemate as Japan, the biggest user of the aid, led calls for more time in defiance of this week's G7 pledge on fossil fuel subsidies, sources said. The Paris-based Organization for Economic Cooperation and Development has been trying for a year to get an agreement from its 34 member nations on phasing out export credits for coal, the most polluting of the fossil fuels. Sources close to talks in Paris on Wednesday and Thursday, speaking on condition of anonymity, said nations would review the situation over the summer ahead of further talks in September. An OECD spokesman, who asked not to be identified, confirmed the OECD's export credit committee planned to meet in September to debate further how "export credits can contribute to our common goal to address climate change." The pressure for a deal is strong, but so is opposition, especially from Japan, the biggest user of the credits that help companies such as Toshiba Corp to sell coal plant and mining technology abroad.

  • More than $73bn of international public finance was given to coal between 2007 and 2014 via credit export agencies

  • Germany's KfW IPEX Bank finances non-polluting shipping AND fossil fuel carriers!

    In two separate news items this month, KfW IPEX-Bank of Germany brags about financing the world's largest, non-polluting clipper ship along with Croatian ECA HBOR, while also arranging and closing a $186.3 million financing package to cover four new LNG carriers for the international liquefied petroleum gas trading and transport company Petredec along with Euler Hermes.

  • (Global Trade Review, Rome, 5 June 2015) Italian export credit agency Sace has guaranteed a line of credit worth US$200mn for Angolan national oil company Sonangol, GTR is able to confirm.The goal is to increase the export of goods and services between Italian companies active in oil and gas in emerging markets, and sub-Saharan Africa in particular.

  • (Newsweek, Washington, 8 June 2015) The nearly 80-year-old federally run Ex-Im bank claims to cover its own costs—even generating a surplus—thanks to the interest it collects on loans. It claimed to support $27.4 billion in U.S. exports last year, less than 2 percent of all American exports. And its highly technical line of work offering export-related loan guarantees and export credit insurance to exporters and banks is hardly the sort of subject that’s going to galvanize the American public... And yet, thanks to the growing clout of a group of Tea Party–inspired members of Congress and their allies around the country, Ex-Im has become the latest litmus test of fiscal conservatism. Those trying to kill the bank, whose charter expires at the end of June 2015, believe its demise can be a springboard in their bigger fight to remake Washington.

  • (Bloomberg, Washington, 17 June 2015) General Electric Co. Chief Executive Officer Jeffrey Immelt threatened to move U.S. jobs overseas if Congress doesn’t reauthorize the Export-Import Bank’s charter, which expires at the end of June. “We’re not going to lose this business,” Immelt said Wednesday to the Economic Club of Washington. “We’ll build these products in places where export credit financing is available.” GE’s product lineup includes diesel locomotives, medical-imaging equipment and gas turbines. It’s also the biggest maker of jet engines, a business that risks being crimped without the Ex-Im financing for Boeing Co. jets. GE, one of the top three public company exporters in the U.S., has much to lose if the Ex-Im bank disappears: its overseas customers received more than $973 million in credit assistance from the bank last year, according to an Ex-Im annual report.

  • (Al-Monitor, Washington, 11 June 2015) Companies from Saudi Arabia and the United Arab Emirates together pulled in about $12 billion in trade financing over the past five years — 8.5% of the $141 billion global total — to help pay for nuclear reactors, industrial power generators and new fleets of Boeing jets. That includes a record-setting $5 billion loan to help Saudi Arabia build one of the world's largest petrochemical complexes... Turkey rounded out the top three Export-Import Bank financing recipients in the Middle East, with $4.5 billion for aircraft and power plant equipment, according to a review of five years’ worth of Ex-Im bank financial reports. Overall, companies in the Near East and North Africa accounted for 13% of Ex-Im trade financing from fiscal year 2010 through fiscal 2014, including a high of 27% in fiscal 2012.

  • (One World, Amsterdam, 4 June 2015) Evicting people from their homes is a major human rights violation according to the UN Commission on Human Rights. Therefore, it is disturbing that two Dutch companies are involved in the project that according to several reports in international media has already led to 2,000 evictions. Even more disturbing: the Netherlands guarantees the payment risks that Van Oord and Boskalis incur for this project. Van Oord and Boskalis applied for a so-called export credit insurance from Atradius Dutch State Business for the project from the Dutch state. The Corporate Social Responsibility (CSR) policy, prepared by the State and implemented by Atradius DSB, is based on guidelines drawn up in the OECD, the so-called Common Approaches,  which require an Environmental and Social Impact Assessment (ESIA). Atradius in an early March 2015 email to Dutch NGO Both ENDS noted that its efforts "to obtain information in connection with the environmental and social assessment... have not led to an ESIA, or sufficiently similar information for ex ante publication of the project." It thus appears that Atradius DSB issued an export credit insurance without an ESIA being available for this Cat A project. Political and economic considerations thus seem to have overruled the CSR policies of this ECA. 

  • (Both Ends, Amsterdam, 5 June 2015) At the beginning of June an OECD Guidelines complaint was filed with the NCPs of Brazil and the Netherlands against the Dutch dredging company Van Oord and the Dutch ECA Atradius Dutch State Business on the adverse social and environmental impacts caused by ECA supported dredging projects in Suape, Pernambuco, Brazil. This first ever OECD Guidelines complaint against an ECA has been filed by the Associação Fórum Suape Espaço Socioambiental, Conectas Direitos Humanos, Colônia de Pescadores do Município do Cabo de Santo Agostinho (Z08) from Brasil and Both ENDS from the Netherlands.

  • (The Economic Voice, London, 18 June 2015) UK Export Finance, the UK’s export credit agency and a government department has laid its 2014-2015 annual report before Parliament. It reported clear progress throughout 2014-2015, both on the support it provided exporters and on the development of capabilities in line with its three-year business plan published at the start of the year.

  • (Military Technologies, Singapore, 1 June 2015) Satellite operators on June 1 expressed concern that the U.S. Export-Import Bank and France’s Coface, the world’s two most-active export agencies (ECAs) in funding satellite projects, might reduce their support for the industry in light of the failure of start-up satellite operator NewSat of Australia. But these operators were far from unanimous about whether the failure, in which the Ex-Im Bank has definitively lost well over $100 million, would have a long-term chilling effect on ECA financing for satellite projects. Coface’s loss, as a backer of NewSat’s launch contract with Arianespace of Europe, is uncertain and is much less than the Ex-Im Bank’s as backer of the satellite construction contract.

  • (The Independent, London, 18 June 2015) Britain has guaranteed more than £130m in loans for repressive governments to spend on arms in the last year, new figures show. Indonesia already owes Britain £246m from historic loans, however this year the UK government has guaranteed a further £132m of loan for the country to purchase arms. The loan guarantee has been used by the Indonesian military to purchase the British-built Starstreak anti-aircraft missile, to the dismay of anti-arms trade campaigners. New figures for 2014 also show that UK Export Finance, Britain’s official export credit agency, backed a bond of £190,000 to allow Saudi Arabia to purchase “unspecified” arms. The figures come as a Jubilee Debt Campaign report claims that 75 per cent of the export owed to debt is “illegitimate” and much of it comes from past loans for arms sales to repressive regimes.The figures come as a Jubilee Debt Campaign report claims that 75 per cent of the export owed to debt is “illegitimate” and much of it comes from past loans for arms sales to repressive regimes.

  • (Global Trade Review, St. Petersburg, 15 June 2015) Sberbank of Russia and Italia export credit agency Sace signed a memorandum of understanding (MoU) during the St. Petersburg International Economic Forum... Despite the sanctions, Russia remains an important partner for Italy. Alessandro Castellano, Sace’s CEO remarks: “With over €4.4bn of exposure in our portfolio, Russia remains the top foreign market for Sace.

  • (TFX, London, 12 June 2015) Despite the current sanctions environment, an anonymous industry poll at the recent TXF ECA Finance conference in Paris, suggested 25% of the audience had completed an ECA-backed transaction into Russia in 2015. The poll, which had close to three hundred respondents including banks, ECAs, exporters and borrowers, asked not only when was participants last ECA-backed deal into Russia, but also when would be their next such transaction. 26% said their next deal into Russia would be in the second half of 2015, and 12% said their next would come within quarter two. In particular, 55% of export credit agencies (ECAs) polled said their next deal into Russia would come this year, with 65% of European ECAs. The results seem to demonstrate that despite the current situation, some deals are getting done, and that it is possible to complete transactions that do not violate international sanctions law.

  • (Times of India, New Delhi, 7 June 2015) What is good for Bangladesh is good for India. The government is extending a $2 billion line of credit to its neighbour which is expected to create 50,000 jobs in India and provide a big boost to the government's Make in India drive. A line of credit is a promise to provide loans at subsidized rates from agencies such as Exim Bank. These are normally conditional on the recipient using the loan amount to buy equipment and services from Indian entities such as BHEL, RITES, small and medium enterprises.