Jubilee Scotland and Jubilee Debt Campaign meet the ECGD

12 June 2008

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.

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ECGD – The UK government’s debt generator

21 February 2008

 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

4 February 2008

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:

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

Read the rest of this entry »


January Campaign Update on Indonesia

1 February 2008

Jubilee Scotland is currently trying to convince the UK government to cancel the >£500 million it’s owed by Indonesia. This is a small goal within a much broader international objective, which is to promote the doctrine of ‘odious debt’.

‘Odious debt’ is a concept which enjoys some international credibility, but not nearly enough! Put simply, it is based on the idea that, if a dictator takes out loans for violent, abusive or simply frivolous purposes, his people should not be required to pay back the debt after he has gone. Every victory of debt-cancellation on this basis – and there are many such campaigns all over the world – strengthens this important doctrine.

Why is there any need for this? What was wrong with campaigning for debt cancellation solely on the basis of a country’s poverty? Here are a couple of reasons to be going along with, although there are plenty more.

Firstly, the existing debt-cancellation mechanisms demand that a country be branded as a ‘Heavily Indebted Poor Country’ before it qualifies for debt relief. It is obvious why this is demeaning.

Secondly, if debt cancellation is enacted on the basis of bad lending, it turns the spotlight back on the lender, and perhaps makes them think twice about dealing with dictators in the future.

This is a global movement within which Jubilee Scotland plays a small part. Jubilee USA are campaigning, for example, on cancelling the debts extended to Haiti’s infamous Duvalier regime, the European anti-debt coalition EURODAD is working to get government’s to sign a declaration of responsible lending, while the Norwegian government has already cancelled its debts to Ecuador and other countries on the grounds of illegitimacy.

More to follow…


Nigerian Debt Scam: UK not implicated

1 February 2008

It’s general knowledge that the UK’s vast increase in development aid (ODA) from 05-07 consists largely of Nigeria’s debt buy-back. Net UK ODA increased by £2.5 billion 04-06, of which Nigeria’s debt cancellation counted for £1.7 billion. (Net ODA in 04 was £4.3 billion, in 06 it was £6.8 billion, as set out in DFID’s Statistics on International Development.)

We’ve long complained that debt relief should not be counted as aid, on the grounds that debt cancellation is not new money going into a country, but old money not leaving the country. It’s a difference that can’t be captured just by looking at the accounting, though: one has to think about the history and ethics of the money. This makes the argument slightly shakey.

But recently we’ve been concerned about it for another reason. According to the international accounting rules for debt cancellation (set by the OECD), cancellation of military debts cannot be counted towards overseas aid targets. The UK has made some fairly significant steps towards reaching the 0.7% GNI target, going from about 0.36% GNI in 2003-04, to 0.51% in 2006-07. We been wondering, though, whether this level has been reached by counting the write-off of military debts towards the 0.7% target – that is, by breaking the OECD rules.

All of the debt cancelled for (or rather: bought back from) Nigeria was export credit debt, that is, old commercial debts that had been guaranteed by the UK and Nigerian governments. On average, around 40% of export credits are for arms. If this percentage held for Nigeria’s debts, then around 40% of Nigeria’s debts should not be counted towards the UK’s 0.7% aid target. This would mean that, potentially, the UK would have to reduce its ODA by £700 million (about 40% of £1.7 billion).

Given Nigeria’s history of military dictatorships, and the vast amounts of money that elites in that country have had for prestige projects, it surely would not be surprising if Nigeria had military debts to the UK.

We asked DFID whether they had gone through Nigeria’s debts before cancellation, and excluded the military debts, but they didn’t have the information. So Gavin Strang MP asked a Parliamentary Question on our behalf, which was answered very promptly, which was great, and the answer came back:

Arms Trade: Nigeria

Dr. Strang: To ask the Secretary of State for Business, Enterprise and Regulatory Reform what proportion of export credit outstanding at the end of financial year 2004-05 for Nigeria was for military goods. [180895]

Malcolm Wicks [holding answer 28 January 2008]: Information on ECGD business supported prior to 1991 is not held on a basis which enables defence to be identified separately from other sectors. ECGD has however supported no defence business on Nigeria since that date. (29 Jan 2008 : Column 202W)

The first part of the answer means that military debts cancellation may have been counted towards the 0.7% target, but that there is no record of what this is. The second part of the question, though, would be great news if true, since it would mean that the Abacha regime received no official military support from the UK. UK arms sales to Africa, however, according to the Observer:

UK arms sales to Nigeria [are] up tenfold since 2000 to £53m, including armoured vehicles and large calibre artillery. (June 12, 2005)

Now, Nigeria is surely a risky market (though markets warmed to it immediately after the debt cancellation); and the Export Credit Guarantee Department exists to support UK exports into risky markets. Furthermore, export credits were being provided well into the 90s for exports to Indonesia, so why baulk at Nigeria?

It therefore seems absolutely incredible that the Export Credit Guarantee Department has guaranteed no loans to Nigeria since 1991. Absolutely, mind-stunningly, incredible. Totally, discombobulatingly, extra-terrestrially incredible. However, there can be no doubt that the answer to the Parliamentary Question is entirely accurate.