On reading ‘I.O.U.’ by Noreen Hertz

David was on the phone to Noreena Hertz’s agent the other day, trying to get her to speak on debt at one of the G20 events at St Andrews later in the year. I think the conversation was going really well until they started talking about costs! Anyway, you have to aim high… Overhearing the chat inspired me to get I.O.U. off the shelf – a book which I should probably have read five years ago. Rightly or wrongly we tend to regard 2005 as a water-shed year, but much of this book still seemed extremely up to date. One of the sections that most intrigued me was the last chapter, where she looked at solutions to what she refers to as the ‘holocaust’ of  international debt poverty. Plenty here to disagree with and inspire debate (nobody still thinks the IMF should be arbiter of it’s own cases, do they?) but one of the sections that gave me the most optimism was when she described two of the main obstacles standing in the way of Fair and Transparent Arbitration:

‘First, commercial and investment banks don’t want to see it happen. If it did, not only would they see some of their existing debts written down, they would also see the value of any relevant bonds that they or their clients were holding slashed. Their opposition has been completely unambiguous. An alliance of banks including Citigroup, JP Morgan Chase, UBS and Deutschebank responded to the IMF’s SDRM proposal with a statement to the effect that the plan was unworkable in any form. ‘no changes in any specific aspect of the plan’ would alter their ’serious concern about the proposal,’ the banks said. And they wield immense political clout.

‘Second, despite Paul O’Neill’s support for a bankruptcy-type procedure while he was still in office, no one within the Bush Administration has got behind the idea since his abrupt resignation in December 2002. This is not surprising, given that all variants of this plan would entail the US handing over the de facto control it enjoys through the World Bank and the IMF  to a neutral authority. Multilateralism, as we all know, has not been high up the Bush Administration’s agenda.’ [Hertz, IOU, Harper Collins, 2004]

Reading this power analysis it occurred to me that both of these factors have changed – and changed in our favour. Clearly we have an administration in the US with a greater sympathy for multilateralism (as well as one which – thanks I’m sure to Jubilee USA – has already made a commitment to tackling the issue of odious debt). And as for the banks… well, they owe us one, don’t they? In fact, they owe us quite a few trillion…

Maybe one of the ways they could pay that back is by not interfering when we ask for an FTA?

James Picardo

North-South Illegitimate Debt Conference – 09/08 – Quito

Debt campaigners from over thrity countries in the rich and poor world met in Quito, Ecuador, over the last week to make plans for the international fight against illegitimate debt.

The location of Ecuador was not chosen at random, for while international delegates made plans the country´s officials and civil society members were finishing an audit of Ecuador´s illegitimate debt, the first time that any country has put together an official and properly-resourced exposé of unjust debt.

It was inspiring to participate, and see how Scottish  debt activism fits into a huge and highly diverse global movement. As the week wore on campaigners from Asia, Europe and the Amercias first got to understand each other´s perspectives and strategies, then to argue with each other, and in many cases to reach powerful agreements. And all this against the backdrop of a country which is beginning to assert itself strongly against the gross imposition of debt.

The two final resolutions that the conference passed were in support of the Haitian people – whose suffering is currently so exacerbated by unjust debt – and also in support of the Ecuadorean debt commission, with a particular hope that their findings would inspire policymakers to renounce and repudiate the country´s illegitimate debt.

As the conference breaks up, however, this final outcome hangs in the balance: the commission does not deliver its report until the 28th of September. And there is the small matter of a national constitution to steer through in the meantime. One thing is for certain – the debt campaigners of the world may be flying out of Ecuador, but they will be watching it extremely closely over the next few weeks. A small country, it could be about to throw a punch at international debt that is well above its weight.

Malawi’s debt relief enigma

What was the value of Malawi’s debt cancellation (received in September 2006)?

If Malawi had received its debt relief with no hidden reductions and cuts, it would have had $101 million extra per annum free in its budget (the UK, in comparison, gave $180 million in 2006: SID, table 16.2). What it has really had is less impressive even than this. At best Malawi’s debt relief amounts to nothing more than a marginal adjustment to its domestic debt interest bill; at worst it amounts to less than nothing.

In September 2006 Malawi completed the Heavily Indebted Poor Countries process. Goodall Gondwe set out his intention to use the money saved specifically for the benefit of the poor. “Mr Speaker, Sir, and Honourable Members”, he stated, “during the budget review in March, it was proposed to spend these debt relief resources on those social activities that would benefit the poorer segment of the population.” (2007/8 Budget Statement, para. 48 – link now broken.)

But this appears to be impossible, since the terms and conditions of the debt relief Malawi received actually reduce the amount of money available for “the poorer segment”.

Gondwe’s 2007/8 Budget Speech explains that the overall debt stock was reduced from $3.0 billion to $0.5 billion, leading to saving in interest and capital repayments of $101 million in 2007/8; however, Malawi had been receiving $36 million per annum since the year 2000 in interim debt relief; so extra value provided by debt relief in 2006 was around $65 million per annum

However, a large proportion of this new debt relief money was provided under the terms of the deal agreed at the G8 Summit in Scotland in 2005: and under these terms, countries receiving debt relief also get a cut-back in the amount of development loans they receive from the World Bank. One of the terms of the debt relief deal for Malawi was that its World Bank funding would be reduced by $27 million per annum (this is, apparently, because the US won out over the UK during the 2005 G8 Summit debt relief negotiations: download article here). Now, the World Bank provides money to Malawi, it says, specifically to help with reducing poverty; given this, it seems fair to say that this $27 million per annum reduction is money that would have been, and now is not, available to benefit the “poorer segment”.

Malawi has – or had, in 2006 – huge domestic debts; this is because the government under Muluzi shored up its budgets by borrowing large amounts from Malawian and Malawi-resident businesses. An agreement was made with the IMF that a large proportion of the money saved through getting debt relief in 2006 would be directed towards reducing domestic debt. This agreement, set out in the 2006 Article IV Consultation(para. 22) ringfences $26 million per annum for the Malawian budget, and directs the the remainder to reducing domestic debt.

This means that only $26 million per annum is available for spending specifically on projects that benefit “the poorer segment of the population”. But we have already seen that the World Bank is reducing the money available for reducing poverty by $27 million per annum So Malawi had less, not more, money available for spending against poverty as a result of getting debt relief.

Certainly, by reducing domestic debt, the Malawi government will have a lower domestic debt interest bill to pay, and this will improve its financial situation overall. The IMF Article IV consultation says it will reduce domestic debt by 1.4% GDP; I have not tried to calculate the significance of this for the annual domestic debt interest bill. However, the claim made by governments and NGOs alike, was that debt relief money would go directly to pro-poor spending. “The debt relief to be provided as a result of reaching completion point will provide a great push to Malawi’s poverty reduction efforts”, said Michael Baxter, World Bank country director for Malawi.

This is a tremendous overstatement. If Malawi had received debt relief without these underlying conditions, it would have made less difference than an ungenerous donor. As it is, the debt relief will result in less money available specifically for “pro-poor” spending, but with some circumstantial reduction in the pressure of the domestic debt interest bill.

Debt relief is a noble cause: but delivered in this form it is vitiated.

Jubilee Scotland

Witness to Injustice: Indonesian Speaker Tour

Kusfiardi –  Indonesian Anti-Debt Campaigner arrives in Scotland!

On Friday 23rd May the Jubilee Scotland team waited excitedly at Edinburgh airport for Kusfiardi the anti-debt campaigner from Indonesia to arrive. After introductions and a drive into Edinburgh the work immediately began with a initial briefing by Kusfiardi on Indonesia’s debt situation. It quickly became  clear that Kusfiardi was both an eloquent and passionate advocate for debt justice for Indonesia and we in the Jubilee Scotland team were immediately engrossed. We can’t wait to tour with him around Scotland!

Our discussions about Indonesia continued well into the evening with Kusfiardi remarkably showing no signs of jet lag (considering the flight from Jakarta had taken 15 hours to get to Scotland) and we looked forward to showing him a little of Edinburgh the next day as an introduction to Scotland.

 

 

 

 

 

The next morning our first visit was to show Kusfiardi the best view of Edinburgh, from Arthur’s Seat and the Crags, then we drove to East Lothian to North Berwick to walk on the beach and talk more about debt and the Jubilee Scotland campaign to cancel Indonesia’s arms debt owed to the UK.

Time and again Kusfiardi impressed upon us just how devastating the impact of debt was having in Indonesia not just by taking resources away from the government’s budget but also because of the lack of disbursement of loans in the first place. Not only is Indonesia having to repay the debts but it has never received the full amount that was owed to them in the first place!

It is Kusfiardi’s belief that is this that makes the issue of debt an issue of political control, with the creditors and multinational corporations having the power to control the destiny of Indonesia.

   

Kusfiardi also told us about the current political situation in Indonesia where the government that day were about to increase fuel prices, a development that was being driven by the oil multinational corporations based in Indonesia and the impact this would have on everyday life.

 

 

 

 

But he remains hopeful that by coming to Scotland and campaigning with Jubilee he can show the Indonesian government that there is concern for Indonesia’s debt issue in the international community and that the people of Scotland are determined not to continue to be party to the injustice of the arms debt owed to the UK government.

Tomorrow, the tour begins in Inverurie where Kusfiardi will be talking  with local campaigners and the public on Indonesia’s debt and encouraging them to take part in the Jubilee Scotland campaign. There will also be a screening of John Pilger’s ‘New Rulers of the World’ .

The dates and venues of the tour are:

Monday 26th May  – Inverurie
Tuesday 27th May – Kilmarnock
Wednesday 28th May – Edinburgh
Thursday 29th May – Dumbarton
Friday 30th May – Kirkcaldy 

 For more information about these events click here

 

Here’s an update on our speaker tour with Kusfiardi:

Inverurie 26th May – The Acorn Centre, West Church

Our first stop on the speaker tour was Inverurie and what an opener! A packed hall gave their full attention to Ardi’s presentation and there followed a good discussion afterwards on the issue of Indonesia’s huge odious debt. The audience were also keen to take action and find out what they could do to support justice for Indonesia so the Jubilee Scotland campaign received lots of petition signatures as well as support for lobbying the local MP Malcolm Bruce.

For Ardi, the evening was a sign that Scotland was prepared to do what it could to support his movement in Indonesia and a real encouragement for the rest of the speaker tour.

A thousand thanks go to the organisers at the Acorn Centre who fed, hosted and gave us a bed for the night. Special thanks goes to Ian Groves and good luck to all at West Church!

Kilmarnock 27th May – St. Kentigerns Church
After travelling down from Inverurie and stopping off for a couple of hours in Edinburgh the speaker tour was on the road again, this time to the western town of Kilmarnock. It is amazing to see how people engage with both Kusfiardi and the John Pilger documentary film we show, this combination really translates well the injustice that Indonesia continues to face under the mountain of debt. The discussion continued after the event on a whole range of issues to do with food security, sovereignty and positive conditionality. Thanks to Grant Barclay for all his help on the evening.

Edinburgh 28th May – Scottish Parliament
Kusfiardi had the opportunity to address the International Development Group (IDG) at the Scottish Parliament with Patricia Ferguson MSP and impress upon them the issue of Indonesia’s debt. A small meeting, but helpfully arranged by Patricia at short notice to give Ardi the chance to speak to the IDG. There was a good discussion, displaying the depth of knowledge that many of the Group members bring, and Patricia called for the group to review the situation with Indonesia’s debt and to return to it later in the year. This Parliamentary group is one of the most important forums for development and politics in Scotland, and it was great to be invited to it (the photo shows Ardi with Patricia Ferguson MSP, convener of the Group, and former Minister with responsibility for international development in Scotland – plus Adriana Sri Adhiati of Down to Earth, and other members of the Group).

 

 Edinburgh

Wednesday evening, 28th May. Ardi spoke at Augustine United Church, along with Adriana Sri Adhiati, and David Lunan, the Moderator of the Church of Scotland. “Evil debts” – so David Lunan called the vast sums which function to enslave the developing world.

We were there to discuss the effects of debt on Indonesia. A vast country, tremendously rich in natural resources: “The greatest prize in Asia”, Richard Nixon called it, quoted in John Pilger’s film “The New Rulers of the World.” Adriana showed us a map of “Indonesia Incorporated”, compiled by Friends of the Earth Indonesia. Vast swathes of the country were blocked out in red for mining, brown for logging, and the like — vast swathes: and this in a country longer by far than the breath of the USA (Indonesia is the fourth most populated country, after China, India and the US.

Ardi, James and Adriana at the Edinburgh Witness to Injustice event.

In theory, foreign loans are a good way for a country to develop. If a neighbour has a surplus, why not invest that surplus and take a return from the proceeds of their augmented labours? But Ardi underlined, through multiple examples, the difference between the theory and the reality. The reality is that loans come under certain economic conditions, that they entrench the power of certain elites, and that the financial mechanisms that underpin them serve to pipe wealth out of the country. A comfortable recitation of the theory, it seems, will never give us the whole story of the political economy of debt.

Ardi speaks with David Lunan, Moderator of the Church of Scotland 2008.

 

A few pictures from the event in Dumbarton, at the wonderful St Augustines Church.

 

The last day of Ardi’s tour of Scotland: Friday 30th May. A day of political meetings. In the afternoon Ardi met with Mark Lazarowicz, MP for Edinburgh North and Leith, and a long time supporter of Jubilee Scotland. Mark asked Ardi about the Indonesian government’s views on debt cancellation, and whether that government would be able to use the money wisely. Ardi pointed out that there is a public budget process in Indonesia, and that the use of funds is open to public scrutiny.

In the evening James, Westaly and Ardi went to Kirkcaldy, seat of the current UK Prime Minister Gordon Brown, for a meeting in the city council chambers. The audience was small, but comprised Kirkcaldy’s most committed and influential campaigners, as well as Marilyn Livingstone MSP, a member of Fife Council, and a researcher from the Prime Minister’s own constituency office.

This event closed the speaker tour in Scotland. Ardi had spoken at evening events in Inverurie, Kilmarnock, Edinburgh, Dumbarton and Kirkcaldy, at the Scottish Parliament and at a campaign planning meeting with other NGOs; VIPs he met included the Moderator of the Church of Scotland, Patricia Ferguson MSP, Mark Lazarowicz MP, Marilyn Livingstone MSP, Fife councillors and a researcher for Gordon Brown: and many of the most heartfelt, wise and committed campaigners in Scotland (one hundred and sixty or so people came to an event during the week).

The next job for Jubilee Scotland is to organise lobbies of the most relevant Scottish ministers to press home the points from the “Witness to Injustice” tour. We still have live hopes of cancelling Indonesia’s arms debts, and setting new rules for international finance.

Ardi, in the meantime, has gone to London for a few days, prior to returning home.

 

On 3rd June I accompanied Kusfiardi to a meeting of the All-party Parliamentary Human Rights Group in Portcullis House, Westminster. 

Jubilee Scotland’s main reason for wanting to attend this meeting was to keep our campaign engaged with civil society perspectives on the human rights situation in Indonesia. Earlier in the year Ben and I had met with Richard and Benny from the Free West Papua campaign, and had been horrified to learn of the extent of continuing human rights violations in West Papua. What would be the consequences of cancellation in this context?

Meeting Ardi made a huge difference to my understanding of the links between debt and human rights. The point that he made, strongly and repeatedly, was that it was at the point of bad loans being issued that they shored up the impunity of odious regimes, as the projects to which they were attached presented ample opportunities for corrupt elites to skim off money. Debt cancellation, by making more money available to the scrutiny of civil society and parliament, serves instead to increase the sovereignty of the people. 

After the meeting – which was attended by several MPs and one Lord – Ardi confessed to me that at points he had felt uncomfortable about some of the language in which the discussion was couched, particularly the way in which the UK government was asked to ’save’ people from the villainies of the Indonesian government. In his contribution to the discussion he preferred to look at the role of the Western backers of the ‘comprador’ Indonesian regime, at the activities of multinationals like Rio Tinto and BP, to whom Suharto was bribed to open Indonesia and its economy, and who now preside over the environmental and human despoliation we see in West Papua. By extension, he also perhaps led us to look at the possibility of using leverage on Western economic institutions – corporations, IFIs and Export Credit Agencies – to bring about positive change in the field of human rights.

It was a real privilege to meet the Indonesian and UK campaigners who battle – often at great personal risk – for the human rights of people in Indonesia. It was also exciting to see how much Ardi brought to the table. When global justice campaigners look at individual national cases many difficult questions are thrown up, which can be side-stepped when one talks in general terms about ‘the world’s poor’. But this meeting showed that by engaging with these issues head on campaigners who traditionally ply different paths can enrich and strengthen each others work. I hope that the alliances forged at this meeting play a strong role in the future of Jubilee Scotland.

Kusfiardi’s last engagement was on Thursday the 5th of June, when we went with our colleague Sarah Williams from Jubilee Debt Campaign to meet officials from the Export Credit Guarantee Department, the UK government department who ensured – and are currently collecting repayments for – the bad loans that are the focus of our campaign.  

I had noticed throughout the speaker tour that the more confrontational and technical his interlocutors, the more Ardi rose to the challenge, and this meeting was no exception. He refused to be intimidated by the plutocratic architecture of Canary Wharf – ‘the elevator is speaking to us’ he remarked with a smile as we disembarked on the 13th floor of Exchange Tower – and repeatedly brought the discussion back to the core concerns of our campaign.

Ardi stressed the difficulty the people of Indonesia had in finding their feet when around 60% of their taxes went to debt repayments. He did not beg, but stressed the growth of a strong grass-roots movement in his country that was increasingly pushing the Indonesian government to de-recognise it’s illegitimate debts. Within this context I suggested that the Jubilee ‘Lift the Lid’ campaign, with its emphasis on an international and multilateral consensus on odious debts, was worthy of their serious attention.

It’s difficult to gauge how much of this serious attention we got. Certainly the meeting room was stuffed with officials of some seniority, including the CEO – Patrick Crawford. We encountered some of the usual red herrings – including the obligatory statement that it is pointless for the UK to clean up its own act when China behaves in the way it does. We were also told that standards had improved in the last few years, and that no new deals are being made to Indonesia. 

While these last statements are possibly true, they are impossible to verify as long as so many ECGD-backed deals remain shrouded in commercial confidentiality. And while it felt exciting to expose this most business-minded of departments to the views of a campaigner from the Global South, it will clearly to be difficult for our campaign to make headway while the accounts of this secretive organisation remain closed to the public. To lift the lid, in other words, it may first be necessary to open the books.

Jubilee Scotland and Jubilee Debt Campaign meet the ECGD

Kusfiardi’s last engagement was on Thursday the 5th of June, when we went with our colleague Sarah Williams from Jubilee Debt Campaign to meet officials from the Export Credit Guarantee Department, the UK government department who ensured – and are currently collecting repayments for – the bad loans that are the focus of our campaign. 

I had noticed throughout the speaker tour that the more confrontational and technical his interlocutors, the more Ardi rose to the challenge, and this meeting was no exception. He refused to be intimidated by the plutocratic architecture of Canary Wharf – ‘the elevator is speaking to us’ he remarked with a smile as we disembarked on the 13th floor of Exchange Tower – and repeatedly brought the discussion back to the core concerns of our campaign.

Ardi stressed the difficulty the people of Indonesia had in finding their feet when around 60% of their taxes went to debt repayments. He did not beg, but stressed the growth of a strong grass-roots movement in his country that was increasingly pushing the Indonesian government to de-recognise it’s illegitimate debts. Within this context I suggested that the Jubilee ‘Lift the Lid’ campaign, with its emphasis on an international and multilateral consensus on odious debts, was worthy of their serious attention.

It’s difficult to gauge how much of this serious attention we got. Certainly the meeting room was stuffed with officials of some seniority, including the CEO – Patrick Crawford. We encountered some of the usual red herrings – including the obligatory statement that it is pointless for the UK to clean up its own act when China behaves in the way it does. We were also told that standards had improved in the last few years, and that no new deals are being made to Indonesia.

While these last statements are possibly true, they are impossible to verify as long as so many ECGD-backed deals remain shrouded in commercial confidentiality. And while it felt exciting to expose this most business-minded of departments to the views of a campaigner from the Global South, it will clearly to be difficult for our campaign to make headway while the accounts of this secretive organisation remain closed to the public. To lift the lid, in other words, it may first be necessary to open the books.

Ardi enters the human rights debate

On 3rd June I accompanied Kusfiardi to a meeting of the All-party Parliamentary Human Rights Group in Portcullis House, Westminster. 

Jubilee Scotland’s main reason for wanting to attend this meeting was to keep our campaign engaged with civil society perspectives on the human rights situation in Indonesia. Earlier in the year Ben and I had met with Richard and Benny from the Free West Papua campaign, and had been horrified to learn of the extent of continuing human rights violations in West Papua. What would be the consequences of cancellation in this context?

Meeting Ardi made a huge difference to my understanding of the links between debt and human rights. The point that he made, strongly and repeatedly, was that it was at the point of bad loans being issued that they shored up the impunity of odious regimes, as the projects to which they were attached presented ample opportunities for corrupt elites to skim off money. Debt cancellation, by making more money available to the scrutiny of civil society and parliament, serves instead to increase the sovereignty of the people. 

After the meeting – which was attended by several MPs and one Lord – Ardi confessed to me that at points he had felt uncomfortable about some of the language in which the discussion was couched, particularly the way in which the UK government was asked to ’save’ people from the villainies of the Indonesian government. In his contribution to the discussion he preferred to look at the role of the Western backers of the ‘comprador’ Indonesian regime, at the activities of multinationals like Rio Tinto and BP, to whom Suharto was bribed to open Indonesia and its economy, and who now preside over the environmental and human despoliation we see in West Papua. By extension, he also perhaps led us to look at the possibility of using leverage on Western economic institutions – corporations, IFIs and Export Credit Agencies – to bring about positive change in the field of human rights.

It was a real privilege to meet the Indonesian and UK campaigners who battle – often at great personal risk – for the human rights of people in Indonesia. It was also exciting to see how much Ardi brought to the table. When global justice campaigners look at individual national cases many difficult questions are thrown up, which can be side-stepped when one talks in general terms about ‘the world’s poor’. But this meeting showed that by engaging with these issues head on campaigners who traditionally ply different paths can enrich and strengthen each others work. I hope that the alliances forged at this meeting play a strong role in the future of Jubilee Scotland.

 

 

 

THE EUROPEAN INVESTMENT BANK by Cornelia Trogmann

Previously we examined the role of the Export Credit Guarantee Department (ECGD) and its role as the major UK government debt generator. Cornelia Trogmann here turns the spotlight on another lender funded by the UK government. The European Investment Bank (EIB)

The European Investment Bank was established in 1958 as the long-term lending institution of the European Union. It is mandated to provide financing in support of all policy objectives of the EU (CEE Bankwatch Network: The European Investment Bank. Promoting Sustainable Development “Where Appropriate”. November 2007). With an annual lending portfolio of more than €45 billion, the EIB is probably the largest public international financial institution. But it also is the least transparent European institution. It operates worldwide in a wide range of projects – in 2006 alone, the EIB distributed €5.9 billion to projects outside the EU – yet it does so without clear environmental, social or development policies in place. (Bank Watch 2008)  

 

But while the World Bank and the IFC operate with a single overarching mission in all their countries of operation, the EIB operates with distinct regional mandates outside the EU, as defined by the European Council. Acting outside of the EU, the bank is charged with implementing European Commission policy in the sphere of development cooperation. As a European Institution it has the duty to promote human rights and social principles outside the EU. But it still lacks specific operational policies on key social development and safeguard issues such as potential risks and impacts, public participation and information, health and safety, independent experts, meaningful prior consultation with affected communities, core labour standards, gender equality, and resettlement  (Tom Griffiths 2006) Instead, the main focus seems to lie on the European companies’ profit. Certainly, their controversial projects display a strong lack of expertise and an even stronger interest in lucrative investments. (The Guardian 2008)

The EIB is rather secretive about its projects. Minutes of its meetings are never published, so it is widely suspected that there is a culture of swapping favours between the countries. The EIB doesn’t even publish staff contact information and the evaluation of individual projects is considered as internal information and is not made public in principle. (Bank Watch 2007).

Counter Balance and Bankwatch have recently had a closer look at some of the projects the EIB has helped to fund, and the findings are worrying. One the EIBs more controversial recent involvements has been with the Gilgel Gibe hydro power project in Ethiopia, to which it contributed millions of euros (the remainder of the project was financed by the World Bank, the Austrian Development Cooperation and the Ethiopian Government). This project dates all the way back to 1985, but is still being implemented in 2008. The EIB has so far leant €41m for the construction of Gilgel Gibe I and €50m for Gilgel Gibe II. The bank has been formally approached by EEPCo for a new loan for Gilgel Gibe III, an offer that the World Bank has flatly refused to accept because of criminal proceedings that are hanging over the head of Salini Costruttori, the Italian construction company responsible for the building of the Gilgel Gibe II dam. Nevertheless, the EIB is still considering a multi-million euro loan for the construction of this third dam.

The EIB’s participation in the operations raises various concerns about the coherence and the compliance with international standards and best practices (the Gilgel Gibe III Dam does not comply with any of the seven strategic priorities of the World Commission on Dams), as well as with EU policies and with the bank’s own operational policies. For example, the EIB has apparently failed to consider that the energy generated by Gilgel Gibe III is fully export oriented. This will certainly not help the cause of Ethiopia, which already has one of the world’s lowest levels of access to modern energy services, and relies primarily on traditional biomass, which is responsible for massive deforestation that in turn causes severe erosion and loss of topsoil in many of Ethiopia’s river basins. While EEPCo (fully state-owned and currently the sole electric utility in the country) claims to have increased energy access from 17 percent to 22 percent between 2005 and 2007, figures reflecting direct access to electricity remain at only 12 percent of the population, and there is a great disparity between the access rates of urban and rural residents (Counter Balance 2008)

Also, the project cannot be considered as one of poverty reduction. Rather than bringing social development and an alleviation of poverty, the creation of the reservoir has resulted in the displacement of an estimated 10000 civilians. Of these, many were resettled on swampland, which was of poor agricultural quality and which had no electricity supply, despite being crossed by the high voltage transmission line. (CEE Bankwatch Network and International Rivers 2007).

 Neither did the EIB consider Ethiopia’s hydrological vulnerability to drought or climate change. The dam’s impact on animal disease, child and health nutrition, environmental health and ecology, epidemiology and infectious disease and soil fertility is still being analysed. (Counter Balance 2008)

The European Investment Bank, as well as the other main donors supporting the Ethiopian energy sector, justifies its investments by the projects’ potential for exporting to neighbouring countries. But from the evidence given above, the difficulties that this particular project has brought to the Ethiopian population are very clear to see. And this example is far from unique, in fact, a recent report of Counter Balance, which focussed specifically upon the Gilgel Gibe I, II and III large hydro projects, showed how goals to eradicate poverty and support local communities are most often compromised when major corporations and political elites are intent on maximising profits ( Counter Balance 2008)

Other examples of the EIB’s involvement in controversial projects include:

 Water privatisation in Indonesia. Since 1993, the EIB has granted almost €300 million in loans to projects in Indonesia, mainly in the gas and water sector. But rather than helping the poor to safe or more accessible water, these investments helped the private sector companies to increase profits at the expense of millions of consumers. (CEE Bankwatch Network 2006)

Bolivia-Brazil gas pipeline. Constructed in the late 1990s, this pipeline crosses several important ecosystems. The EIB granted a €55m loan for this project to a consortium including Enron and Shell. The EIB ignored the fact that gas is not a renewable energy, proof to many of the lack of respect the EIB shows towards EU environmental law in its projects. (CEE Bankwatch 2006)

Chad-Cameroon oil and pipeline project. In 2001, the EIB granted loans to the Chadian and Cameroonian governments and to Chevron and Exxon. Amnesty International found that the Chadian security forces carried out large-scale massacres of unarmed civilians in the oil-producing region in the late 1990s at the time of intense project preparations. The scandal was deepened further by the fact that Chad used part of the loan to purchase weapons. Nevertheless, the bank ignored the severe human rights abuse and corruption in these two countries. Negative effects include the loss of biodiversity along the pipeline route, and the poor waste management of the oil and drilling fluids threaten groundwater supplies. (CEE Bankwatch 2006)  

Mining in Zambia. The following year, the EIB granted a loan of €14m for the construction of a large mine without asking for an Environmental Impact Assessment prior to its approval of the project. This mine is a major source of air and water pollution in the local area. (CEE Bankwatch 2006).

 So what can be done to prevent the EIBs continued involvement in such controversial projects in future? Opposition parties have provided many answers, though all effectively seem to come to the same conclusion. Counter Balance, for example, has suggested that the EIB has to adopt clear and binding standards that are coherent with EU policies, and must also become more accountable for the catastrophes that are brought by their actions. (Counter Balance: European Civil Society Concerns About Inadequate Policies and Practices of the European Investment Bank. Memo for European Parliamentarians. February 2008). As Tom Griffiths has suggested, the EIB as a European Institution has a duty to promote human rights and social principles outside the EU as enshrined in European external policies and in European development co-operation treaties.  (Griffiths, Tom: 2006) Similarly, Bankwatch has suggested that the European Commission and Parliament have to exercise more control over EIB operations in poorer countries and ensure compliance with long-term sustainable development objectives. (CEE Bankwatch 2006).

Economical with food for thought

This week’s Economist says something puzzling:

The middling poor, those on $2 a day, are pulling children from school and cutting back on vegetables so they can still afford rice. Those on $1 a day are cutting back on meat, vegetables and one or two meals, so they can afford one bowl. The desperate—those on 50 cents a day—face disaster.

Puzzling because it neglects that the poverty metrics cited are “purchasing power parity” figures, pegged to 1993 US prices. That means the “middling poor” are living on the equivalent of that could have been purchased in the US, in 1993, for $2 (Pogge and Reddy set this out [PDF]). People on $2 PPP US 1993/day are not sending their children to school and buying vegetables (at least in any reasonable quantity). So to describe them as “middling poor” is tendentious in the extreme. “Tendentious in the extreme” means: “wrong”. The description of the eating habits of “the middling poor” and their less fortunate cousins in the lower categories is also “tendentious in the extreme.” Those on $1 PPP US 1993/day are not cutting out meat, ‘cos they’re not eating it.

The Economist reserves the adjective “desperate” for those on 50c (presumably 50c PPP US 1993/day). Such verbal economy leaves a vague but reassuring impression that things are not after all really all that bad. But I doubt any letters will be published next week insisting that the description “middling poor” should be reserved to those in industrial countries living on less than 60% of the national median household income (ref here).

After all, comes the standard riposte, we’re talking “absolute” rather than “relative” poverty. I think this is a bogus distinction: it lets the complexity of defining “poverty” act as a convenient buffer against the truth. New economics foundation takes life expectancy as the key determining factor in defining poverty, and defines an “ethical poverty line” of $3 PPP/day. At $3 PPP/day people in general live for their whole genetic lifespan; where poverty cuts life short, it certainly breaks human rights.

Let’s at least not describe as “middling poor” people who fall below this line. And let’s at least not restrict the epithet “desperate” to only those who live (on average) on for a couple of dozen years. Brief existences, true; but perhaps still not unworthy of fair treatment by the self-described “authoritative weekly newspaper.”

But perhaps there is a little more to say on this matter. The Economist’s enlightening account of “The food crisis and how to solve it” seems to have been occasioned by a quotation from Josette Sheeran, Executive Director of the World Food Programme. Sheeran was chosen for the job after consultation with UN Secretary General then-elect Ban Ki Moon. Apparently, there was some concern regarding her previous association with another moon, viz: Rev. Sun Myung and his Unification Church. Some unkind people have called “Moonies.”

The Washington Post writes:

Sheeran said of her candidacy, “I don’t know why personal faith has any relation or bearing,” adding: “It is a matter of record that I have no association with the Unification Church.”

This doesn’t appear to the the Post’s view, which writes (same link):

The Bush administration [which nominated her - ed] was sensitive to the possibility that Sheeran’s former membership in the Rev. Sun Myung Moon’s Unification Church would emerge as an issue in the race. A U.S. official pressed The Washington Post not to mention Sheeran’s past links to the church, saying it was inappropriate to describe her religious affiliation.

But enough of Ms Sheeran’s quasi-religious interests. They are personal matters, and irrelevant. Suffice to say that someone who thinks living on $2 PPP US 1993/day counts as being “middling poor”, is in charge of the “world’s safety net”, the World Food Programme.

Max Hiatus at DebtTribunal

ECGD – The UK government’s debt generator

 The UK government’s bilateral debt relief policy is largely made up of cancelling debt owed to the ECGD. In fact about 95% of bilateral debt owed to the UK is through the ECGD.

Most of the ECGD debt cancellation that occurs is through the HIPC initiative.  HIPC only includes countries that qualify as having ‘unsustainable debt’ as calculated by the World Bank & IMF. So far only 23 countries qualify as having had unsustainable debt. This process is part of the big debt relief deal agreed in 1999 in the wake of the Jubilee2000 campaign.

The forum for ECGD debt cancellation is the Paris Club  an informal creditors club that meets to decide the fate of country’s debt problems. This forum includes all the export credit agencies owed debt by the country under consideration as well as other governmental representative. For the UK this includes someone from Dfid, FCO and the Treasury.

The debt cancelled at the Paris Club under HIPC owed to the ECGD is then counted as ODA by the UK government. This goes towards the government’s target of aid spending as a proportion of Gross National Income. By including debt relief as ODA the UK government (as well as many other EU governments) inflate the amount they spend on aid and by a huge amount. click here to see the UK aid chart and the proportion of this as debt relief

ECGD debt cancellation should not come from the aid budget! Not only is this a massaging of the aid figures and denying poor countries more aid but at the same time it subsidises UK exporters for their operations in the developing world- not for reducing poverty. Why should this come out of the aid budget? The biggest industry that the ECGD subsidises is the arms industry. For example the ECGD is owed over US$1billion by the Indonesian government for tanks and jets sold to Suharto in the 1990s.
Military debt cancellation is also not supposed to be counted as ODA even though about 45% of ECGD’s business concerns the arms industry. For more information on this see the Blog entry on Nigeria
Therefore the UK government is moving towards its aid target at the expense of those that its aid is supposed to benefit. This is all despite constant calls from campaigns such as Jubilee Scotland but the OECD whose Development Assistance Committee (DAC) analyses ODA levels actually allows this practice to continue.

In 2005 there was international recognition that global aid spending needed to be increased by at least US$50 billion a year to meet anti-poverty targets(the Millennium Development Goals). THIS FIGURE DID NOT INCLUDE DEBT RELIEF.

However in the same year,the UK as well as other creditors implemented two of the biggest debt relief deals outside of HIPC. Debt cancellation for Iraq and Nigeria. Iraq’s situation was spurred by reconstruction efforts after the war and calls by the US administration for debt relief. In Nigeria the government threatened to default on their debt payments resulting in partial cancellation in return for a one-off payment. Most of the debt owed to the UK by both countries was through the ECGD.

This has meant that the UK and global aid figures are even more inflated than usual:

“ODA was exceptionally high in 2005 due to large Paris Club debt relief operations (notably for Iraq and Nigeria) which boosted ODA to its highest level ever at USD 107.1 billion. In 2006, net debt relief grants still represented a substantial share of net ODA, as members implemented further phases of the Paris Club agreements, providing USD 3.3 billion for Iraq and USD 9.4 billion for Nigeria. Excluding debt relief, ODA fell by 0.8%.”

http://www.oecd.org/dataoecd/7/20/39768315.pdf

|In the UK 24% of ODA was spent on Iraq and Nigerian debt cancellation in 2006 http://www.concordeurope.org/Files/media/internetdocumentsENG/Aid%20watch/1-Hold_the_Applause.FINAL.pdf

For more information here is a few links to reports on Export Credit Agencies and debt.

http://www.whiteband.org/resources/issues/debt/debt-cancellation/Export%20Credit%20DEBT(final).doc <http://www.whiteband.org/resources/issues/debt/debt-cancellation/Export%20Credit%20DEBT%28final%29.doc>

http://www.eurodad.org/aid/?id=122

Other organisations that scrutinize Export Credit Agencies

ECA Watch www.eca-watch.org <http://www.eca-watch.org/>

EURODAD www.eurodad.org <http://www.eurodad.org/>

The cornerhouse www.thecornerhouse.org.uk <http://www.thecornerhouse.org.uk/>

Time to drop Suharto’s arms debt

Former Indonesian President’s death must trigger cancellation of illegitimate debts

Jubilee Debt Campaign, Jubilee Scotland and the Anti-Debt Coalition Indonesia are calling on the UK government to cancel £525 million of illegitimate debt owed by Indonesia from loans made to former President Suharto, who died on Sunday 27th January

Much of Indonesia’s debt to the UK was contracted in the 1980s and 1990s to buy British arms, including tanks, water cannon and aircraft. At least 75% of the £705 million Indonesia owes the UK – which is still being repaid – is known to relate to arms sales [1]. Suharto’s use of arms to suppress his own people, such as in East Timor, is notorious.

Ben Young, of Jubilee Scotland, said:

“Indonesia is still paying the UK millions in debt every year from arms loans made to Suharto. Rich countries including the UK knowingly lent this dictator billions of dollars, to fund arms sales including Hawk jets and Scorpion tanks. It’s time the Indonesian people stopped paying for their own oppression.”

Yuyun Harmono, of Koalisi Anti Utang (Anti Debt Coalition Indonesia), said:

“The Indonesian media are maintaining that Suharto had no faults; they need reminding that he was a dictator and has committed many crimes. Suharto took out many loans from the multilateral institutions, and from the UK, the US, Australia and Germany. These loans were not taken out by Indonesia, but by a dictator. We’re saying that the Indonesian people will not now pay the loans back.”

Sarah Williams, of Jubilee Debt Campaign, said:

“After the fall of Saddam Hussein there was clear international agreement that whatever the reasons for the original loans, the Iraqi people should not have to repay their dictator’s debts. Yet ten years after the fall of Suharto, the Indonesian people are doing exactly that, while more than half the population live below the poverty line.

“Suharto’s death is a chance for the UK and other rich countries to take the lead in cleaning up international lending – by cancelling Indonesia’s illegitimate debts.”

1. Obtained following a Freedom of Information request by Jubilee Scotland, see:

http://debttribunal.wordpress.com/2007/04/12/export-credit-debt-owed-to-the-uk/.