Beyond Business Principles
NGO Seminar on Reform of Export Credits Guarantee Department - Seminar Report
by Sean Scannell, The Ilisu Dam Campaign
first published 23 May 2002
Summary
There is increasing concern about the impacts of projects funded through the UK Export Credits Guarantee Department (ECGD). On 23 May 2002, a group of NGOs spanning the fields of environment, human rights and development held a seminar with Members of the British Parliament to consider the effectiveness of reforms introduced by the ECGD. This paper summarises the proceedings of the seminar.
Contents
The last few years have seen increasing public concern over the environmental, human rights, development and debt impacts of projects funded through the UK Export Credits Guarantee Department (ECGD) - from dams to arms and fossil fuel plants.
Within parliament, the ECGD's activities and purpose have recently been subject to scrutiny by two Select Committees over a number of sessions. Outside of parliament, widespread opposition to the ECGD's potential involvement in the Ilisu and Yusufeli dams in Turkey has underlined the depth of public concern on the issue.
In response, the ECGD has now introduced a set of Business Principles intended to ensure that the ECGD's activities "take into account the Government's international policies, including those on sustainable development, environment, human rights, good governance and trade." The Department has also introduced an environmental screening process aimed at soliciting information about projects.
Earlier this year, the ECGD signalled that it would soon initiate a review of the screening process, now two years old. As a contribution to that review, a group of NGOs - spanning the fields of environment, human rights and development - held an expert seminar on May 23rd to consider the effectiveness of the reforms introduced to date and to propose changes necessary to ensure that the ECGD's practices and policies are compatible with UK law and the UK's obligations under international agreements.
The seminar focused on deficiencies in the current ECGD procedures for vetting projects with regard to arms sales, corruption, human rights, transparency, debt, labour standards and climate change impacts. Speakers also addressed the broader policy changes that the ECGD needs to embrace if it is to become a positive force for sustainable development.
Introduction by Tony Colman MP
The Seminar was chaired by Mr Tony Colman MP who, among other duties is Vice-Chair of GLOBE UK, the All-Party Sustainable Development Group.
Mr Colman opened the seminar with a short introduction detailing what he saw as "significant advances" by the Export Credits Guarantee Department (ECGD), notably the introduction of Impact Questionnaires, required completion of which accompanies all civil credit applications. He also referred to the upcoming Export Control Bill and its mention of sustainable development criteria.
Mr Colman went on to remark that the considerations surrounding the award of export credits needed to be more than just environmental. They should include human rights, labour standards and consider the ethical minutiae surrounding arms sales also. These remarks were timely as this was the main thrust of the day's proceedings. Mentioning that half of all HIPC (highly indebted poor countries) UK debt was owed to the ECGD, Mr. Colman then introduced the Minister responsible for the Export Credits Guarantee Department, International Trade Minister, Baroness Symons.
Baroness Symons, Minister for Trade
The Baroness began by welcoming the engagement between NGOs and the ECGD: the seminar represented a vital exchange and she commended it soundly. She also reiterated the Government's commitment to sustainable development and noted that Prime Minister Tony Blair would be attending the World Sustainable Development Conference in Johannesburg later this year. She went on to remark that the ECGD had come a long way in terms of considering corporate responsibility and sustainable development. The paper outlining the department's "Business Principles" was, she said, a fluid and living document. She further outlined the government's achievement at having "untied" trade from aid, and noted that the UK ECGD was one of only two export credit agencies (ECAs) to include a human rights component in its decision making process. In fact, she added, the UK hopes that its example will be followed by other ECAs. With this, she announced the start of the consultation process on "Case Impact Analysis" which the government had previously signalled was imminent. She then handed back to the Chair.
Mr Colman thanked Baroness Symons for her invaluable contribution and added that Japan had just passed the most stringent of environmental assessment regimes for its ECA into law.
Export Credits For What?
There then followed a number of presentations by representatives of concerned NGOs, each recommending steps that might be taken to bring ECGD practice into line with stated government policy or the UK's commitments under international law. At the conclusion of each paper, the audience was invited to offer questions to the speaker. In addition, the ECGD was formally invited to respond at the end of the day's proceedings.
First up was Daniela Reale from World Development Movement. She spoke to a paper that directly confronted the rationale for ECGD credits. She called into question the whole notion of guaranteeing private business with public money unless a public purpose could be demonstrated. She focussed on the guarantees habitually awarded to companies engaged in arms sales. She revealed that whereas arms trading accounted for only 3% of UK GNP, the industry was the recipient of 48% of all export credits.
In response to the widely held view that ECAs promoted development, Ms. Reale revealed that Saudi Arabia and the US are two of the four countries that receive most credits. She also outlined the resultant discrimination against domestic companies in the recipient Less Developed Countries (LDCs). In all, the outcome was that UK taxpayers' money was being risked in support of private corporate interest, resulting usually, in an increased debt burden upon the population of host countries. Ms. Reale believed: 1) export credits should be reserved for projects in the poorer developing countries that do not have access to private sector financing and have missed out on the massive rise in foreign investment through the 1990s; and 2) all export credits must first of all conform to the principles of an "ethical foreign policy".
Speaking from the floor, Tony Shepherd from the ECGD's Advisory Council said that ECGD's priority should be to support British industry: should this priority be abandoned in favour of promoting human rights and development?
Transparency
Phil Michaels, a solicitor for Friends of the Earth (FOE), gave the second address - on "Transparency and Release of Information". He highlighted the lack of transparency in the ECGD's current practices and illustrated his point by reference to the Yusufeli dam, in north-east Turkey, for which ECGD support had been requested by Amec, the UK construction company. (AMEC withdrew its application in March 2002.) Mr. Michaels recorded that FOE had written four letters to the ECGD requesting a copy of the environmental impact assessment (EIA) for the project under the Environmental Information Regulations 1992. The request had been refused, however, on the grounds that the EIA was commercially confidential and that it had been voluntarily supplied to the ECGD by AMEC. Mr Michaels revealed that ECGD had stated that it intended to return the EIA to Amec since the application for the project was no longer current, an action that Mr Michael's said would be the legal equivalent of "shredding", since the document would effectively be put beyond reach of the public.
Human Rights
Nick Hildyard from The Cornerhouse and Kerim Yildiz from Kurdish Human Rights Project (KHRP) were the third set of presenters. They welcomed the ECGD's adoption of its "Impact Questionnaires" but decried the fact that the new initiatives had no teeth. They drew attention to the ECGD's obligations under the European Convention on Human Rights (ECHR), which has now been incorporated into UK law through the Human Rights Act (HRA). They noted several areas where current ECGD practice was potentially in breach with the HRA. For example, the right of citizens to participate in the decisions which affect their lives and livelihoods is at the heart of the ECHR. For that right to be respected, it is critical that citizens are informed in advance of such decisions and have opportunities to challenge the decision if their rights are violated. A pre-requisite for compliance with this set of rights would appear to be the timely disclosure of applications received by the ECGD and their outcome. Under the present procedures, however, the ECGD does not require such disclosure. Hildyard and Yildiz also explored the possibility of legal challenges to ECGD support for project which violated the Human Rights Act. Finally, Mr. Yildiz highlighted the need to assess the general human rights record of those countries where projects were implemented: cover should not be given where human rights violations were routine. He highlighted the case of Turkey.
Corruption
Then Kirsty Drew from the Public Services International Research Unit spoke on the need for the ECGD to introduce measures to combat corruption. Ms. Drew gave a Powerpoint presentation that first outlined the requirements of the OECD Anti-bribery Convention, which makes it a criminal offence to bribe a foreign public official, before going on to illustrate what can be done by describing anti-corruption measures adopted by other ECAs and other international agencies in the areas of: transparency and disclosure; debarring companies; compliance with codes of conduct; support of internal and external whistle blowers. The presentation was supported by two papers: Still Underwriting Corruption? The ECGD's recent record by Dr Susan Hawley and Beyond Business Principles: The Case for Reform of the UK ECGD by Kirstine Drew, UNICORN, PSIRU.
Mr Colman interjected the idea that everyone present ought to write to the leader of the House of Commons to bring an anti-corruption bill forward to the next Queen's Speech.
Ms Drew's presentation was followed by a short summary by Margarida Trindade of Global Witness (GW) of the GW's campaign to require publicly-traded resource companies, such as mining and oil companies, to publish a breakdown of all royalties, fees and other payments which they make for the products of every country in which they operate. At present, such payments are undisclosed and the lack of transparency surrounding revenues is encouraging embezzlement, fraud and corruption. "Whilst companies are not responsible for how the royalties and fees they pay are spent," said Ms Trinade, "they have a clear responsibility to disclose what payments they are making so that the citizens of the countries concerned can hold their governments accountable."
Labour Rights
After a lunch break, the second session was begun by Rob Cartridge of War on Want. He spoke to a paper on the issue of core labour standards. He pointed to better practice by the Finns, the Dutch and the French in this sphere and also mentioned the Ethical Trading Intitiative (ETI) and FTSE4good as examples of best practice. At a minimum, he argued, the ECGD should require all applicants to have policy commitments to achieving core labour standards throughout their supply chains and in the specific projects being funded. Export credit support should also be tied to companies implementing the OECD Guidelines for Multinational Enterprises.
Mr Colman mentioned ex-UNIfI chief Rodney Bickerstaffe as leading a coherent campaign in respect of labour rights. He expressed concern that the ETI did not include any standards requiring free collective bargaining.
Debt
The next speaker was Ann Pettifor, once head of Jubilee 2000, now with Jubilee Research at the New Economics Foundation. Her topic was the ECGD and debt. Ms Pettifor began by acknowledging the sterling work done in the past by the late Joan Lester MP with her work in the area of development, and the comedian Mark Thomas. Mr Thomas had, some years previously, made public that a member of the advisory council of the ECGD was also on the board of a number of companies which had received export credits. Following the revelation, the council member had felt compelled to resign from the council.
Ms Pettifor reiterated, in detail, how private corporate debts are nationalised, and paid for ultimately by the poorest of the poor. Although the UK government has played a leading role in writing off the bilateral debts, including ECGD debts, owed to it by the 42 countries included within the World Bank and IMF's Heavily Indebted Poor Countries (HIPC) initiative, and other IDA only countries, Jubilee Research and other NGOs remain concerned about several aspects of ECGD processes relating to debt. Such concerns include: the ECGD's definition of 'productive expenditure'; the number of countries for which the 'productive expenditure' criteria apply; and the lack of analysis of the potential impacts of increased ECGD debt on overall debt sustainability.
Arms
Ann Feltham of Campaign Against the Arms Trade (CAAT) then spoke on the ECGD and the Arms Trade. She explained how arms sales were on average 2% of UK exports, but represented around 30% of ECGD guarantees. In 2000, 49% of all export credits went on one single arms deal with South Africa. The subject was broached: "were there not Productive Expenditure Requirements?" Also speaking to the issue of the arms trade was Michael Bartlet of the Religious Society of Friends. He could find no moral case for the arms trade and its support by the ECGD. Drawing attention to answers received in response to parliamentary questions, he drew attention to the consistent failure of premiums paid on arms credits to cover losses. In effect, he argued, the ECGD's support for arms sales was being cross-subsidised by its other business.
At this point, Mr. Jim Cousins MP, a member of the Treasury Select Committee, asked a question: was there a "national content" requirement for ECGD support? Did a minimum percentage of an export have to have been manufactured in the UK? What percentage of foreign input of any particular weapon system, sold from here, might render it beyond UK export credit guarantee? Although a number of staff were present from the ECGD, they were unable to answer the question
Renewable Energy
The final speaker from the assembled NGOs was Tony Juniper of Friends of the Earth. His subject was the ECGD, Sustainable Development and Climate Change. Mr Juniper talked of the agreements made so far in response to climate change, but regretted that they had resulted in no effective change in behaviour patterns - even though there is now a generally accepted consensus of the scientific as well as a legal case for change. Included in this presentation was a reiteration of a FOE International position paper of January 2002 that "if export credit agencies do not begin a meaningful transformation towards binding environmental and social standards and significant portfolio shifts away from fossil fuels towards renewable energy within two years, they should be abolished" (FOEI position paper, January 2002).
A member of the ECGD's Advisory Council, Mr Elkington asked a question on the environmental feasibility of cleaner natural gas. Mr Juniper responded by allowing that co-generation strategies could utilise natural gas as an interim measure in a strategy to move away from fossil fuels. Mr Tony Shepherd, also of the ECGD Advisory Council, interjected that the ECGD could not afford to fund such a changeover. Mr Juniper retorted that this was not what had been suggested. But the fact remained the ECGD massively supports fossil fuels, dams etc. It was time the department began heavily favouring renewables. In fact he suggested that if the ECGD did not show a marked propensity to fund renewable strategies within two years, Friends of the Earth would begin campaigning to have the Department abolished.
Ms. Sue Doughty MP, a member of the Environmental Audit Select Committee, pointed out that Germany was "not out of the woods yet" with respect to transition to renewables but was already exporting energy from renewable sources.
ECGD Response
With the completion of the contributions from the assembled NGOs, it was the turn of David Allwood, the ECGD's Business Principles Adviser, to respond on the ECGD's behalf. Mr Allwood argued that "unilateral change by individual export credit agencies rarely have a significant impact in the buyer country - the suppliers simply source the goods from another country." Multilateral change was therefore the way forward. He said that the ECGD "fully recognised the scale of the challenge" that it and other agencies faced, and that the government was seeking to address the "varied and sometimes conflicting demands" of NGOs. Mr Allwood then responded to criticisms raised by NGOs on transparency, human rights, corruption, labour standards and other issues. He said that the ECGD could not introduce exclusion lists that would place some projects and forms of business off credit: the law obliged the department to consider all applications.
Mr Allwood was challenged from the floor on this latter claim. It was pointed out that the law allowed the Secretary of State for Trade and Industry considerable discretion - and that Section 3 of the Act permitted the Department to "make any arrangements considered to be in the interests of the proper management of the ECGD portfolio." Mr Allwood's claim that the Department followed World Bank procedures was also challenged. The Bank's safeguard policies require the disclosure of Environmental Impact Assessments and Resettlement Action Plans prior to assessment of the project. The ECGD had no such requirement.