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YORK - March 25 - An international coalition of environment and development organizations today
launched a campaign to reform export finance agencies that support private
sector projects in developing countries. The group's report, A Race To the
Bottom: Creating Risk, Generating Debt and Guaranteeing Environmental
Destruction, profiles a sample of the environmental and social negligence of
these export finance agencies.
Export credit agencies (ECAs) and investment insurance organizations are
together the world's largest public international finance institutions,
subsidizing more than 10 percent of world trade. In 1997 they approved more than
$105 billion in new loans, guarantees and insurance, more than half of which
went for large infrastructure projects in developing countries. Their mandate is
to subsidize private sector exports and investment abroad. While bilateral aid
agencies and multilateral development institutions, such as the World Bank, have
adopted detailed social and environmental procedures, the more obscure ECAs have
few, and often times no environmental or social standards.
Among all international financial agencies, ECAs are the least transparent,
not even sharing key information on their operations with other ECAs and
international institutions such as the World Bank. "Export credit agencies
finance projects—many riddled with corruption--that other taxpayer-supported
agencies reject as environmentally and economically unsustainable," said
Bruce Rich, Senior Attorney with the Environmental Defense Fund (EDF).
"These agencies are providing corporate welfare and financing
environmental destruction worldwide with public money," said Jon Sohn,
Policy Analyst with Friends of the Earth, U.S.
The impact of ECA-funded projects on local communities, human rights and the
environment in many countries is devastating. "We in Indonesia want the
taxpayers of the industrialized world to stop subsidizing the expropriation of
our land, the destruction of our environment, and the ruination of public health
through ECA projects that their country's own aid agencies and the World Bank
would reject," said Titi Soentoro, of Bioforum, Indonesia, representing a
coalition of some 70 Indonesian non-governmental groups.
"We await long overdue reforms in Germany that the new government
promised in its coalition agreement," said Heffa Schuecking, who represents
a coalition of over 100 church, development and environmental groups that are
calling for environmental and social accountability in the German export credit
agency Hermes. "We call upon the German government to become a leader in
international efforts to set standards to halt the taxpayer-subsidized havoc
caused by these agencies."
Race to The Bottom provides a series of fifteen country and project case
studies exploring the gross environmental and social negligence of these
publicly-owned institutions. Among them:
Ilisu Hydroelectric Dam, Turkey: Several ECAs are considering
extending about $850 million in export credits and guarantees for this project.
Damming the Tigris near the Iraqi and Syrian borders, the project in the heart
of a militarily occupied Kurdish area will enable Turkey to block flows of the
Tigris to Iraq for several months, further exacerbating the current turmoil
characterizing the region. Ilisu will flood 52 villages, 15 small towns, and
evict the 5,500 inhabitants of Hasankeyf, drowning the best preserved medieval
town in Anatolia, a legally protected archaeological and cultural site. It will
forcibly displace an estimated 15,000 mainly Kurdish refugees. It violates five
policy guidelines of the World Bank on 18 accounts, and core provisions of the
UN Convention on the Non-Navigational Uses of Transboundary Watercourses, which
Turkey has opposed.
Indonesia Country Survey: Between 1992 and 1996, ECA exposure in
Indonesia grew by 25 percent. By 1996, 24 percent of Indonesia's total external
debt -- approximately $28 billion -- was held by export credit agencies (ECAs)
supporting foreign investment in corruption plagued mega-projects linked closely
to the Suharto family. Of the 33 projects surveyed, the most significant amount
of ECA-leveraged finance was concentrated in four sectors, the largest being the
power and paper/pulp sectors, including support for a number of controversial
mega-projects such as forest-depleting giant paper and pulp mills in Sumatra
valued at a total of $4 billion -- Tanjung Enim Lestari (PT.TEL), Indah Kiat,
and Riau Andalan Kertas – and the $4 billion corruption-plagued Paiton coal
plants in Java.
Three Gorges Dam, China: The Three Gorges Dam, which will cost at
least $43 billion (unofficial estimates cite figures upwards of $72 billion),
will be 600 feet high, more than a mile wide and create a reservoir 400 miles
long. The project will forcibly displace some 2 million people, and flood one of
the world's richest archeological areas. The World Bank advised China not to
seek support from it for the project, and the U.S. Export-Import Bank refused in
May 1996 to support the project on environmental grounds. The Chinese Finance
Ministry was opposed to the project on economic grounds, but political pressure
from then premier Li Peng pushed it ahead. Massive support from the German
Hermes Guarantee and Swiss, Canadian and Japanese ECAs led a "race to the
bottom" and catalyzed funding for the project to proceed, but a March 18
front-page New York Times story reports growing internal opposition calling for
a halt to the project because of multi-billion dollar funding shortfalls, shoddy
construction, and massive corruption in resettlement efforts.
In 1997, the G-8 Summit final Communiqué included a section on
"Environmental Standards for Export Credit Agencies" encouraging ECAs
to adopt "sustainable practices by taking environmental factors into
account when providing financing support for investment in infrastructure and
equipment." The 1998 Communiqué of the G-8 Finance Ministers also contained
language supporting this goal. But these secretive institutions have made very
little progress in changing their approach. Accordingly, non-governmental groups
from around the world have launched an international grassroots campaign to
research and expose environmentally and socially harmful ECA-backed projects and
promote the adoption of international common environmental and social standards
for all bilateral ECAs.
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