Archived press release

Export credit agency: least green of the lot!

2 August 1999

The Export Credits Guarantee Department is the least green branch of Government,according to a new analysis from Friends of the Earth. The news comes on the day that Trade Secretary Stephen Byers is expected to launch a review of the purpose and“mission” of the ECGD.

The ECGD provides insurance guarantees for British firms trading abroad. But its environmental and social record is “abysmal”, according to FOE. The record of the ECGD “utterly undermines Labour's claims to have brought ethical standards to British foreign policy”.

Examples of environmentally unfriendly projects backed by the ECGD include:

. massive coal-fired power stations, including the Liaocheng, Heze II, Shiheng II and Liaocheng stations in China, and the Visakhapatnam plant in India
. huge dam projects such as the Three Gorges Dam in China, the Maheshwar Dam in India and the proposed Ilisu dam in the Kurdish region of Turkey
. nuclear power plants such as the Daya Bay and Quishan plants in China. China plans to build more than 50 nuclear reactors by the year 2020, mostly constructed by Western companies
. environmentally damaging mining projects, such as the Alumbrera copper and gold mine in Argentina
. arms deals such as the sale of Hawk jets to the Indonesian Government

In the most outrageous recent example of ECGD indifference to the human effects of their decisions, a £200 million credit is being sought by UK construction giant Balfour Beatty to build the Ilisu dam. The dam will flood 52 villages and 15 towns, including the internationally important archeological site at Hasankeyf. It will require the relocation of up to 20,000 people, many without compensation. The dam will control the waters of the Tigris river, and threaten water supplies to neighbouring Iraq and Syria. Former Trade Minister Brian Wilson refused to publish a Swiss environmental impact assessment into the dam,described by senior Government officials who have read it as “utterly inadequate”, but has offered £5,000 for a further review of the assessment by an international environmental consultancy, believed to be ERM.

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In the mid 1990s the private sector financed up to 15% of all infrastructure investments in the Third World, and the World Bank has predicted that this proportion could rise to as much as 70% in future. Where importers default and ECGD insurance policies are taken up by the UK companies covered, the UK government seeks to recover them from the developing country government concerned. An estimated 95% of debt owed by Southern countries to the UK is in the form of export credit debt. Major debtors include Iraq, which owes more than £652 million, including debt incurred in developing its arms industry before the Gulf War.

The ECGD is heavily influenced by businessmen connected with companies which benefit from its guarantees. The Advisory Council, which meets to help Trade ministers make export credit decisions, includes as members the Finance Director of GEC, the Chair of the BICC Group and the Managing Director of Rolls-Royce Industrial Power Group. In 1997/98,top UK firms benefiting from ECGD guarantees included British Aerospace, Taylor Woodrow, Marconi Avionics, AMEC International, Balfour Beatty and Rolls Royce.

The ECGD is required under the Export and Investment Guarantee Act 1991 to take into account economic and political factors when considering a loan, but has no legal obligation to consider environmental, social or human rights issues. This is despite the Final Communique of the 1997 Denver G7 summit, attended by Prime Minister Tony Blair which committed the UK to “help promote sustainable practices by taking environmental factors into account when providing financing support for investment in infrastructure and equipment”. In May 1997, Foreign Secretary Robin Cook promised a foreign policy with “an ethical dimension”. In November 1997, the Department for International Development announced that the UK's aid programme would “avoid large capital projects”. In March 1999, G8 Environment Ministers called for reform of export credit agencies to be speeded up. But progress has been extremely slow, with the UK Government failing to apply any real pressure for change.

Friends of the Earth is demanding urgent action by the UK Government to ensure that the ECGD operated to mandatory environmental, developmental and human rights standards. An ECGD Ethical Guarantees Policy is needed, which should be at least equivalent to those operated by the World Bank, and should also meet the UK's obligations under a series of international conventions and treaties, including the UN Climate Convention, the Kyoto Protocol, the Rio Declaration on sustainable development, and the UN Convention on Biodiversity. Environmental and social impact assessments should be required by the ECGD before considering any major projects and these should be made publicly available.

Commenting, FOE Executive Director Charles Secrett said:

“A review of the Export Credits Guarantee Department is long overdue. It has a rotten record as the least green branch of the whole of British Government. It has crashed around the planet funding schemes which line the pockets of British business, at the expense of human rights, the economies of developing countries and the world environment. Its record utterly undermines Mr Cook's claim to have brought an ethical dimension to foreign policy. No wonder its work is carried out in conditions of grubby secrecy. If Mr Byers is serious about reforming the ECGD he should start by calling a halt to the scandal of the Ilisu dam”.

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Published by Friends of the Earth Trust