The problem of illegitimate debt is one of definition. Clearly we know that many – most even – of the debts owed by the poor countries of the world are bad, that they violate jus cogens, human rights, the peremptory norms of international law. Clearly we know that  by any reasonable moral standard, the loans extended to leaders like Mobutu and Marcos – with full knowledge of their misdeeds – should be cancelled without question, alongside those which were for projects that could never have been built, or loans which could never realistically have been repaid, or loans which simply disappeared into Swisss accounts. But nobody could argue that all debts were bad.

The problem is not therefore one of morality – the moral argument is black and white – but one of definition. Creditors have complex systems for defining and measuring concepts such as sustainability or payability, but how can we approach them asking for cancellation on the basis of legitimacy when there is no collectively agreed definition for that term? In this context the power to define becomes highly political. As one famous radical said: ‘Power is the ability to define things and have them react accordingly.’

The World Bank does an awful lot of defining. EUROAD, the European Network for Debt and Development, recently circulated a World Bank formula for establishing whether or not a debt was odious (a narrow subset of illegitimacy).

This excerpt shows – rather like Swift’s Laputa – how defining things bureaucratically tends to lead us quite quickly into the absurd. A juridical method for defining legitimacy – while producing an outcome that would probably satisfy nobody wholly – would at least create a definition that was meaningful enough to ground a productive debate. And with the bad debts still being collected, it’s vital that that debate happens soon.

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

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.

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.

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.

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).

The previous post looked at debt owed to the UK government via DFID and CDC. Below is the result of a Freedom of Information request on debt owed to the UK export credit department run by the DTI. Most signifiantly is the percentage of Indonesian debt owed for arms related trade. While no breakdowns are given for specific debts the fact that roughly 75% of Indonesian debt owed to the UK is arms related is utterly shocking. As before any comments…

LESOTHO, INDONESIA, KENYA AND TANZANIA

UK ECGD DEBT

a) Lesotho

1. How much outstanding debt is owed to ECGD?
The Government of Lesotho does not owe any debt to ECGD.

2. Is the ECGD currently owed debt by the Lesotho government regarding the Lesotho Highlands Water project?
No.

b) Indonesia

1. How much debt does Indonesia currently owe ECGD?

The Government of Indonesia owes £507,353,037.91 and US$399,251,3113,93 [sic. We assume this should read $399,251,313.93 which is broadly consistent with other sources: see Jeremy Corbyn PQ] of debt to ECGD under the current UK/Indonesia Debt Agreement.

2. How much of this is for arms related equipment?

ECGD is not able to provide a precise answer to this question. Please see the answer to Question 3 for further details. ECGD’s best estimate, based on researching a 150-page report produced by a former IT system and making intuitive estimates of which original debts were a rms-related, is approximately 75 percent.

3. How much is currently owed concerning the sale of

- 16 Hawk-209 aircraft in November 1996

- 50 Alvis Scorpion and Stormer vehicles in 1996

ECGD is not able to answer Question 3 and the last two points in Question 4. Sums recovered from Indonesia under Paris Club debt agreements are not recovered against specific contracts, but against tranches of debt consolidated in rescheduling agreements. Each such rescheduling agreement takes the form of a Bilateral Debt Agreement between the Governments of the United Kingdom and Indonesia; a number of such agreements have been entered into over the past forty years to give effect to Paris Club debt arrangements involving Indonesia. ECGD’s IT systems do not keep track of details of specific debts falling within each Paris Club rescheduling. Accordingly, it is not possible to obtain the information you request in Question 3.

4. For these debts please detail the following information:

Date of contract
Hawks: 6 February 1996
Alvis vehicles: 19 August 1996

Name of exporter/company
Hawks: BAE Systems Defence Ltd
Alvis vehicles: Alvis Vehicles Ltd

Exported goods or services
Hawks: Hawk aircraft
Alvis vehicles: Scorpion family vehicles and associated support

Name of importer
Hawks: The Republic of Indonesia through the Ministry of Defence and Security
Alvis vehicles: The Republic of Indonesia through the Ministry of Defence and Security

What type of backing was provided by ECGD (Insurance, guarantee or loan) Hawks: Buyer Credit
Alvis vehicles: Buyer Credit

Amount recovered on contract
Amount outstanding owed to ECGD
See answer to Question 3.

c) Kenya
1. How much debt does Kenya currently owe ECGD?
The Government of Kenya currently owes ECGD approximately £19.5m under the UK/Kenya Bilateral Debt Agreement.

2. What proportion of this debt is owed concerning

1. 1. - Turkwell Gorge Dam

   2. - Ewaso Ngiro project

ECGD’s records contain details of an unidentified hydro-electric dam project in Kenya. This project may be the Turkwell Gorge Dam, although it is not specifically so identified. For the purposes of this response we have assumed that this is indeed the case, and the related details are accordingly provided here.

While case support was given in respect of a contract awarded to Knight Piesold on the Ewaso Ngiro project, it is not possible to trace an amount of Paris Club debt back to individual contracts. Please see the response to b) 3 above for the reason for this.

3. For debts concerning these two projects please detail the following information:

Date of contract
Ewaso Ngiro: 20 July 1990
‘Hydro-electric dam’: 14 August 1986

Name of exporter/company
Ewaso Ngiro: Knight Pieshold & Partners
‘Hydro-electric dam’: Scott Wilson Pieshold Ltd

Exported goods or services
Ewaso Ngiro: A consultancy contract.
‘Hydro-electric dam’: Design and construction of a hydro-electric dam

Name of importer
Ewaso Ngiro: The Kenya Power Company Ltd
‘Hydro-electric dam’: Kerio Valley Development Authority

What type of backing was provided by ECGD (Insurance, guarantee or loan)
Ewaso Ngiro: Buyer Credit
‘Hydro-electric dam’: Unknown

Amount recovered on contract
Amount outstanding owed to ECGD
Please see answer to b)3 and c)2 above in respect of the assumed Turkwell Gorge Dam project and to b)3 above in respect of the Ewaso Ngiro project.

d) Tanzania

1. 1. How much debt does Tanzania owe ECGD?
   The Government of Tanzania does not owe any debt to ECGD.

1. 2. Did ECGD insure or guarantee BAE systems concerning the sale of an Air traffic control system in 2002 that is currently under investigation by the Serious Fraud Office?

No.

Lift the Lid on Bad Loans

Research on UK debts April 2007

The debt campaign is entering new terrain. Coupled with the HIPC initiative, the Gleneagles debt deal in 2005 has provided debt relief for 22 countries so far with another 9 in the pipeline. Some countries like Malawi will have 90% of their debts cancelled and this has to be recognised as a success for the Jubilee debt campaign worldwide.

But the campaign has to also recognise that there are issues of debt justice that have less to do with the headline grabbing billion dollar debt relief packages and more to do with uncovering the whys and whats of the loans in the first place. Debt cancellation in many ways covers over some uncomfortable truths about the origin of the debts and their legitimacy. For example Rwanda has had a large proportion of its debts cancelled – and quite rightly so, but how much has this distracted attention from rumours that UK companies were supplying arms that fuelled the Rwandan Genocide in the early 1990s? How much of Uganda’s debt (cancelled in 1998) was due to lending made to Idi Amin and should be investigated? It are these uncomfortable details that the G8 and international institutions are keen to avoid as this would highlight their own co-responisibility in the horrors that debt has caused. It is time to lift the lid on bad loans and begin uncovering the truth about debt.

It is in this vein that Jubilee Scotland are researching into outstanding debts owed to the UK. Despite the UK government taking the international lead on debt relief they have so far been reluctant to recognise theirbad lending in the past. The research began with a series of Freedom of Information requests to UK government departments that are or have been creditors to developing countries. We narrowed our requests down to a selection of relevant countries where there was suspicion of bad lending. These countries were Indonesia, Kenya, Lesotho and Tanzania.

Indonesia, Kenya and Lesotho have not received debt relief because they are deemed not to be ‘poor’ or heavily indebted enough. The Jubilee movement calls for debts to be cancelled not just if a country cannot afford to pay them but also if these debts are deemed to be illegitimate in the first place. By looking at countries that are not due debt relief we aim to highlight how the unethical nature of their debts should warrant cancellation.

We are using Tanzania because of a bribery and corruption case that is being investigated between the Government of Tanzania and the UK arms company BAE systems.

The Freedom of Information request was sent to two UK government departments. One to the Department for International Development (DFID) and the other to the Export Credit Guarantee Department (ECGD) which is part of the Department for Trade and Industry (DFI). UK bilateral debt is split between these two institutions and require separate analyses.

Each request asked for a breakdown of outstanding debt owed by the four countries. The following information is required to begin the research.

FOI request to DFID

Indonesia
Kenya
Tanzania
Lesotho

For each country please provide details of

1. Outstanding UK bilateral debt

2. How much of this is ECGD Debt

3. How much is CDC debt

4. How much is other bilateral debt

For each CDC debt please detail:

Date of contract

Name of borrower

Purpose of loan

Original amount of debt

Outstanding debt owed

Of this what is made up of interest and what of penalties

UK bilateral DFID debt

Dfid Response:

Outstanding Bilateral Debt (excluding any ECGD Debt) owed to the UK is as follows:

DFID Aid Loans

There is no debt currently owned in the form of DFID aid loans by Indonesia, Kenya, Tanzania and Lesotho.

World Bank Loans with DFID as a Creditor

These World Bank loans, the bulk of which were to Low Income Countries, were originally funded by the UK and other then EEC creditors in the 1970s. Although they are administered by the World Bank, these loans were classified as bilateral loans in 2005.

The UK would wish to grant relief on these loans. However, it is only possible to give such debt relief if all eight creditors agree to do so. Debts held by Heavily Indebted Poor Countries (HIPCs) are cancelled in full when they reach HIPC Completion Point, with any payments made to the UK since 2000 returned to them. We are in the process of negotiating debt relief on loans to Decision Point HIPCs (again, any payment to the UK since 2000 will be returned to the country). The UK is not currently able to provide debt relief on our share of the loans to non-HIPC Low Income Countries because we have not been able to secure the agreement of the other creditors. We are continuing discussions and hope to be able to offer debt relief on these loans soon.

CDC Loans

No debt is owed directly by any government to CDC Group plc, which only lends to commercial organisations. However, some loans by CDC to parastatal and quasi-governmental organisations were guaranteed by their governments, and details of these loans are recorded in the attached table (below).

 ANALYSIS:

Indonesia: CDC’s investments

 We began to look at the four loans made to Indonesia by CDC. Without the specific details of each loan we looked for the projects that CDC have been part of in Indonesia

CDC has invested in a wide range of businesses though its main investment sector is agribusiness. They have made multiple major investments in Indonesia, hence it is hard to determaine which of these investments account for the £16.6m, recorded in DFID’s account of Bilateral Debt still owed to the U.K.
Projects that CDC have invested in that may still exist as debt include, PT Agro Indomas (AI) in Central Kalimantan and PT Harapan Sawit Lestari (HSL) in West Kalimantan. Both investments were agreed with the government without the local people’s prior knowledge. As a result, some local people have found their lives in upheaval, their customary land rights denied and their livelihoods destroyed. These reports have called into questioned CDC’s decision to invest in these conflict-ridden projects given the agency’s close ties to the British government’s overseas aid agency, DFID. DFID, which promotes environmentally and socially responsible development and stakeholder involvement in decision-making in its own forestry sector projects, is currently CDC’s sole shareholder.
There are many question marks over where the outstanding debt to the U.K came from and until DIFD publish a complete breakdown of the figures, stating specifically what the loan spent on, judgements on how ethical the loans were is purely conjecture. Hence we must look to those who have been involved in the projects at some level to shed light on their content and state.

END

if you have any information that would help with our research then please get in touch by either emialing me at david@jubileescotland.org.uk or posting a comment. As the research comes in i’ll try and get it posted. more soon…