APPENDIX 16
Memorandum from Oxfam GB
INTRODUCTION
1.1 Oxfam welcomes the opportunity of making
a submission to the Review of ECGD's mission and status. As a
humanitarian and development NGO supporting programmes in over
70 countries, we are particularly interested in that aspect of
the Review which seeks to examine ECGD's role in helping the Government
to achieve its wider objectives, particularly those relating to
sustainable development. We note that the Secretary of State emphasised
the importance of this element of the Review in his own remarks,
and in this submission we will focus our comments and recommendations
on this area of policy.
1.2 At present, we believe that ECGD's Mission
Statement and its mode of operating leave it open to the charge
of undermining wider government objectives in a number of ways.
We will examine each of these in turn.
SOCIAL AND
ENVIRONMENTAL CONSIDERATIONS
2.1 ECGD's current Mission Statement simply
requires it to promote UK exports without any explicit requirement
to consider the potential social and environmental impact of those
exports on the importing country. While some exports may contribute
towards sustainable development, others, such as large-scale dam
projects which can cause massive displacement, may not. Detailed
examples of such projects being underwritten by ECGD are given
in a recent report on export credits by The Corner House[25].
We note that the G8 Cologne communique called for the development
of "common environmental guidelines for Export Credit Agencies
(ECAs)" and we are aware of multilateral initiatives within
the OECD to draw up common social and environmental guidelines
for ECAs. We are concerned, however, that progress is slow and
would like to see the British Government playing a much more proactive
role in seeking agreement in this area.
— We recommend that the British
Government should play a leading role in securing multilateral
agreement within the OECD on a set of clear and binding social
and environmental guidelines for ECAs.
2.2 Until there is such an agreement, the
British Government should seek to lead from the front by improving
its own record in this area unilaterally.
— Prior to securing a multilateral
agreement, we recommend that ECGD draws up its own set of binding
social and environmental guidelines in full consultation with
all interested parties, including civil society organisations
with expertise in these areas.
2.3 The general level of secrecy surrounding
ECGD's decision-making process has made it difficult for us to
understand the extent to which consultation within Whitehall already
takes place in relation to individual under-writing decisions.
Perhaps of even greater importance, it appears from the report
mentioned in 2.1 that there is no adequate mechanism to ensure
that development and environmental concerns are effectively considered
in ECGD decisions. We believe that this is vital if the ECGD can
serve any useful purpose in a government committed to these wider
objectives. This would require a new capacity in ECGD and/or in
DFID to advise on initial decisions and assess their follow-up
through the life of projects covered.
— We recommend that DFID are routinely
consulted on all ECGD decisions relating to developing countries
and countries in transition, that FCO are consulted in relation
to human rights records and that DETR are consulted on all decisions
which may have an impact on the attainment of sustainable development
objectives. Before such consultation can be effective, it will
require addidtional capacity in ECGD and/or DFID to provide adequate
advice and monitoring, and to commission social and environmental
impact assessments.
DEBT, PAST
AND FUTURE
3.1 In addition to having a direct negative
impact on sustainable development as outlined above, we believe
that in some cases, export credits have undermined development
indirectly by contributing to debt burdens. Over 90 per cent of
non-concessional debt owed to the UK is owed to the ECGD. The
list of debtors includes several HIPC countries such as Tanzania
and Zambia whose governments continue to spend more on servicing
their debts than they are able to invest in the provision of basic
social services such as health and education.
3.2 Oxfam warmly welcomes the leading role
which the British Government has played in international initiatives
to reduce debt and pays particular tribute to the work of the
Chancellor, Gordon Brown, and the Secretary of State for International
Development, Clare Short, in pressing the case for debt relief
to be clearly linked to poverty reduction strategies. Similarly,
we welcome remarks by the Secretary of State for Trade and Industry,
Stephen Byers, concerning ECGD's role in assisting countries emerging
from debt and we are pleased that in launching this Review, he
took the opportunity of announcing a further write-off of ECGD
debt owed to the UK by Mozambique.
3.3 While considerable progress has been
made in relieving the debt burdens of the poorest countries in
the past few months, we welcome the Chancellor's recognition that
more still needs to be done. President Clinton has made it clear
that he shares this view and indicated in a recent speech that
he would be prepared to move beyond the currently agreed Paris
Club threshold of 90 per cent to offer 100 per cent write-offs
in bilateral debt owed to the US. We understand that the Chancellor
has already suggested that the UK may be willing to follow suit
on a case-by-case basis.
— We recommend that the UK offers
100 per cent debt write-offs of all outstanding ECGD debt to those
HIPC countries who have adopted a clear poverty reduction strategy.
In line with the communique issued at the end of the Annual Meetings,
it is vital this initiative should be funded from new money and
not from funds diverted from the aid budget.
3.4 As well as helping to tackle the burden
of outstanding debt, we believe that ECGD has a vital role to
play in helping to prevent future indebtedness. As countries emerge
from debt and their economies strengthen, many will once again
become eligible for ECGD cover. At this point, it is imperative
that exports and investments support, rather than undermine, national
poverty reduction strategies and that all possible steps are taken
to prevent export credit deals contributing to future debt.
3.5 The Chancellor's Mauritius Mandate initiative
to limit ECGD cover for HIPCs to supporting productive expenditure
(discussed below in more detail) is a useful starting point but
could be expanded upon.
— We recommend that for all HIPC
countries coming back on to ECGD cover, export credits should
only be used to support productive expenditure aimed at contributing
to an agreed national poverty reduction strategy, and that cover
should only be extended to governments who can demonstrate that
they have a clear debt management strategy.
ARMS EXPORT
POLICY
4.1 In launching the Foreign Office Mission
Statement in May 1997, the Foreign Secretary introduced a new
"ethical dimension" to foreign policy which put human
rights at its centre. Tighter regulation of arms exports has been
central to this objective, and the Government has introduced new
guidelines in the UK and played a pivotal role in securing an
EU Code of Conduct on arms sales. In view of this, Oxfam is disturbed
to note that defence-related exports accounted for a large share,
24 per cent (£763 million), of ECGD's business in 1997-98.
This is approximately double the £374 million (14 per cent
of business) in 1996-97. We accept that the figures fluctuate
from year to year, and that the proportion of arms business has
been broadly level during the 1990s (with a substantial increase
around 1993). It would nevertheless be reassuring to hear that
ECGD plans to prevent this figure of 24 per cent increasing still
further, and indeed plans to reduce it to a far lower level which
might be merited by the size of arms exports as a proportion of
total UK exports.
4.2 Overseas Trade Statistics for 1997-98
show that the UK's trade with the rest of the world for that year
was worth around £168,289 million while data produced by
the Stockholm Institute of Peace Research (SIPRI)[26]
estimates that UK earnings from arms exports averaged around only
£1,190 million per year. In other words, arms exports accounted
for only around 0.7 per cent of the UK's trade with the rest of
the world. The fact that they secured 24 per cent of ECGD cover
suggests that the defence industry is currently enjoying a disproportionately
large slice of ECGD's cake. This was even the case in the 1980s
when arms accounted for around 10 per cent of ECGD cover. The
fact that such a large proportion of ECGD debt (around 40 per
cent based on figures given in Hansard) relates to defence deals
also suggests that defence-related contracts yield a higher than
average default rate. In this way, ECGD can effectively subsidise,
and not just facilitate, arms exports.
— We recommend that ECGD draws up
a proactive strategy for diversifying its client base and reducing
the proportion of its business which is connected with defence
exports.
4.3 The use of export credits to underwrite
arms deals to poor countries who can ill afford them is an issue
which concerns us greatly, especially as many of these countries
are either prone to, or emerging from, violent conflict. While
we welcome the Chancellor's Mauritius Mandate initiative to ensure
that ECGD cover to HIPC countries would only be given in support
of "productive expenditure", we note that the majority
of HIPC countries are off cover for ECGD anyway as their high
levels of indebtedness make them a poor risk. To be truly meaningful,
we believe that this clause would need to apply to a wider group
of poor countries.
— We recommend that the Mauritius
Mandate stipulation that ECGD cover should only be given in support
of "productive expenditure" should be extended from
HIPCs to cover all low income countries.
4.4 Overall responsibility for arms exports
obviously lies with those government Departments charged with
scrutinising export licences rather than with ECGD who can only
provide cover once a licence has been granted. Nevertheless, ECGD
cover for arms to Indonesia has, rightly, raised widespread concerns
of how ECGD has compounded failures in the arms licensing system.
British tax payers money was used to underwrite the supply of
Hawks (as well as Alvis light tanks and other armoured vehicles)
to Indonesia which were at the very least used to intimidate civilians
in East Timor. We understand that £760 million is currently
owed on this deal while the state of the Indonesian economy means
that its Government may not be able to repay this debt which has
already been rescheduled.
4.5 While it may be unrealistic to cease
using UK export credits to underwrite arms deals while all major
competitors continue to do so, there is a clear case for seeking
a multilateral agreement in this area. The Managing Director of
the IMF, Michel Camdessus, referred to this in his speech to the
recent IMF/World Bank Annual Meetings[27],
repeating the suggestion that the sales of military equipment
to sensitive regions should be restrained and the provision of
export credit for military purposes should be abolished.
— We recommend that the British
Government plays a leading role in negotiations to secure a multilateral
agreement to abolish the provision of export credit for military
purposes.
4.6 The rapidly increasing globalisation
of the arms industry raises a further challenge for ECGD. Joint
ventures, licensed production and mergers will increasingly mark
the European and global arms industry. There is therefore the
real possibility that ECGD will in future be asked to provide
cover for a UK company involved in the export of arms manufactured
in a second country and destined for a third. In fact, ECGD gives
the example of the Grippen aircraft joint venture between British
Aerospace and Saab.
4.7 Though Sweden has a strict export licensing
system, this is not true of all countries whose companies are
or may become involved with UK counterparts in joint arms ventures.
Therefore there is the potential loophole that ECGD may be asked,
through a UK company involved in such a venture, to cover arms
manufactured in a country without an effective arms licensing
system. For this reason, ECGD can not simply depend on the UK
licensing system to prevent it subsidising arms which abuse human
rights, fuel aggression or divert resources from development.
— ECGD should develop and publish
binding guidelines, based upon the EU Code of Conduct on Arms
Transfers, to determine how to decide on cover for arms exports.
Where applications for cover are made which involve exports which
have not received a UK export licence, ECGD should require the
agreement of the FCO, MOD and—for developing countries and
countries in transition—DFID before granting cover.
LACK OF
TRANSPARENCY
5.1 The Manifesto on which the Government
was elected committed it to "the elimination of excessive
government secrecy"[28]
and Oxfam welcomes progress towards more open government in a
number of areas. For example, we welcome the fact that DFID now
consults on and publishes its Country Strategy Papers. The Government's
new Annual Report on Strategic Exports gives some (not all) of
the information which Parliament and the public require to make
an informed judgement on the UK arms licensing system.
5.2 The main problem we have faced in engaging
with this Review, however, is the marked lack of publicly available
information concerning ECGD's role and operations. We have found
this to be particularly true in relation to the defence element
of ECGD's business. Given that defence contracts accounted for
roughly one quarter of ECGD's business last year, we find it extraordinary
that they merit a mention of a mere one and a half paragraphs
in ECGD's 60 page Annual Report—roughly the same amount
of space devoted to a single civil project aimed at easing traffic
congestion in Panama. Giving a geographical breakdown of the defence
portfolio by region, rather than by country, strikes us as a way
to obscure potentially sensitive destinations of ECGD-covered
exports.
5.3 We note that parliamentarians have fared
little better in their attempts to ascertain information from
ECGD on its defence-related business and that parliamentary questions
are routinely met with blocking answers citing disproportionate
cost, lack of information available or commercial confidentiality.
ECGD's excessive secrecy appears to be out of step with the drive
for transparency in other parts of government.
— Overall, we recommend a much greater
presumption in favour of disclosure, with ECGD providing detailed
information on all aspects of its business, including arms sales.
5.4 At the very least, we believe that the
information provided by ECGD should be consistent with the information
provided by other government departments in relation to arms sales.
— ECGD should publish a more detailed
breakdown of cover for arms exports—at least to be consistent
with the level of information on arms exports provided by other
government departments. The detail should include, by country
of destination, the type of equipment, numbers exported and value
of ECGD cover.
— We recommend that details on ECGD
cover for arms sales should also be included in the next Annual
Report on Strategic Exports in the interests of making the Government's
reporting more accessible to Parliament and the public.
THE ADVISORY
COUNCIL
6.1 We are also concerned at the selection
and role of the Advisory Council. We understand that the primary
role of the Advisory Council is to advise on levels of risk and
on which countries should be on or off cover, rather than to become
involved in individual under-writing decisions. Nevertheless,
if the Advisory Council is to fulfil this role in a way which
is consistent with the delivery of wider government objectives
such as those on sustainable development, it is not unreasonable
to expect that at least some members of the Advisory Council should
offer expertise in these areas. We are therefore concerned that
at present, all members of the Advisory Council are appointed
by the Secretary of State and "generally drawn from senior
levels of the banking, commerecial and industrial sectors".[29]
— We recommend that in future, membership
of ECGD's Advisory Council should include independent experts
who can advise on development, human rights and environmental
issues.
CONCLUSION AND
RECOMMENDATIONS FOR
ECGD'S MISSION
STATEMENT
7.1 In this submission, we have made a number
of specific recommendations about the ways in which we believe
ECGD could make a greater contribution to the realisation of wider
governmental objectives, particularly those relating to sustainable
development. For ECGD to fulfil this role, we believe that the
Department's Mission Statement must be amended to take account
of these wider considerations. Rather than simply promoting exports
as an end in themselves, we believe the Mission Statement should
be amended in order to commit the Department to promoting exports
in line with wider government objectives, including those on sustainable
development.
— We recommend a new Mission Statement
for ECGD which makes it clear that the Department will only promote
exports which are consistent with the attainment of wider government
objectives including those on poverty reduction, sustainable development
and the promotion of human rights.
Oxfam GB
October 1999
25 Export Credit Agencies and Corporate Welfare,
The Corner House, June 1999. Back
26
Though SIPRI is one of several reputable sources of data on arms
transfers, the data provided by SIPRI covers the trade in major
weapons systems that is most closely aligned with the types of
equipment given ECGD cover. Back
27
Address by Michel Camdessus to the Board of Governors of the Fund,
Washington DC, 28 September 1999. Back
28
New Labour because Britain deserves better May 1997. Back
29
ECGD Annual Report, 1997-98. Back
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