Examination of Witnesses (Questions 400
- 419)
TUESDAY 11 MAY 2004
FRIENDS OF
THE EARTH
Q400 Mr Hoyle: Which UK companies
and exporters have you been speaking to, so we get a feel for
who is backing it?
Ms Griffiths: I said I have not
had extensive dialogue with the companies.
Q401 Mr Hoyle: Would it be fair to
say none?
Ms Griffiths: We have obviously
approached companies in the past to release environmental impact
assessments.
Q402 Mr Hoyle: I meant about your
120-day period, because it is quite a long period?
Ms Griffiths: No, we have not
had discussions with companies on that.
Mr Hoyle: Okay; that is fine.
Q403 Chairman: Is there any reason
why you chose 120 days?
Ms Ellis: The World Bank standard,
I think, is that. If not that, it is 90 days, and the EBRD (the
European Bank for Reconstruction and Development) have a similar
disclosure period. One other point on that: the idea of the environmental
impact assessments being disclosed and them being created is to
ensure the long-term sustainability of that project, including
the business interest involved in that project. It is not meant
to hinder. It is not intended and it does not hinder the business.
Q404 Mr Hoyle: Would you agree, it
would not be good to go unilaterally because people who are next
to the market would still be doing their impact studies when everybody
else has delivered theirs and got the contract; so it would have
to be a multilateral approach and it would be one that maybe we
ought to—
Ms Ellis: That is the purpose
of strategic environmental impact assessment as opposed to environmental
impact assessment. I think there is a misunderstanding here. Strategic
environmental impact assessment would look, by definition, at
a whole area and the development opportunities and options of
a whole region or country, whereas an environmental impact assessment
tends to look at a specific project in an area. So it would require—
Q405 Mr Hoyle: So that is what you
have been pushing for; that is what you are suggesting?
Ms Ellis: Yes.
Q406 Chairman: I think the figure
the World Bank has is 90 days, but you are asking for another
30 days on top of that?
Ms Griffiths: I think that the
most—
Q407 Chairman: The thing is, if I
can just make the point, it could be perceived as being yet another
obstacle, an obstacle in preventing British business from being
able to get to the table to put in a bid if they are being saddled
with a timescale which is longer than the World Bank or other
international ECAs are requiring. If your organisation wishes
to frustrate major British projects abroad, then that is fine;
but if you do not say that, then surely it is better to get yourself
on all-fours with the other countries so that you are not disabling
British companies who might be prepared to go along with the objectives
you have. The idea that you can be longer than someone else because
it gives you something better: it may actually impede British
business from getting the work that would create jobs. That is
the point we are trying to get to here, the number of days, and
there is a point to how many there should be, and I think maybe
that point has to be made by us as well?
Ms Ellis: To go back to the 90-120-day
issue, that came from the European Bank for Reconstruction and
Development, who at the moment have a 90-day period of consultation,
but often it ends up 120 days due to a recent piece of US legislation,
which I cannot actually refer to at the moment but I can submit
that later.
Ms Griffiths: I think in some
ways—
Q408 Chairman: The chances are if
it is US legislation it will be to beat other countries, it will
be nothing to do with US companies.
Ms Griffiths: Our intent is certainly
not to impede the British companies but to make sure that we are
setting higher standards. We think that is our role on the global
scene. I think in some ways the discussion "90 days or 120
days" is perhaps a slight side-issue. If ECGD came out with
a statement tomorrow that it was going to require for all category
A and all category B projects a 90-day period of consultation,
we would be very supportive of that and we would not . . . I think
what I am saying is that the more fundamental question is, firstly,
that ECGD requires environmental impact assessments to be disclosed
and, secondly, that there is a consultation period. 120 days might
be best practice in the field, but 90 days would probably be adequate.
Q409 Chairman: Thank you. I am conscious
of the time. I wonder, Linda, if it might make more sense not
to start your two questions. There is going to be a vote and we
have to get across to the Chamber to vote and come back. Could
we suspend the proceedings now and come back immediately after
the vote?
Ms Griffiths: That would be fine.
The Committee suspended from 3.15 pm to
3.33 pm for a division in the House
Q410 Linda Perham: In paragraph 5.5
of your submission you are advocating the form of ECGD's investment
policy for extracting industries and you are recommending the
approach advocated by the World Bank in the Extractive Industries
Review. Do you know if there are other ECAs that are following
the World Bank's recommendations at the moment?
Ms Ellis: I can answer that. Not
at the moment, as far as I know, because the World Bank themselves
have not responded to the Extractive Industries Review. I know
at the moment the UK Government is still coordinating their response
to the review in terms of what it will mean for the World Bank.
After that we will expect a response from other international
financial institutions, like the European Bank for Reconstruction
and Development and the European Investment Bank, as to what they
think it means to them and what impact it will have on their project
portfolio and all the ECAs will definitely be questioned by a
range of groups as to how many, if any, of the Extractive Industries
Review recommendations they will be taking on.
Q411 Linda Perham: The review, as
you listed out in that paragraph, it is a phase-out of funding
for all oil and coal projects. Quite drastic proposals, would
you not say, or would you say they are ones that you fully agree
with?
Ms Ellis: First of all, Friends
of the Earth, yes, definitely fully agree with them. With regard
to the Extractive Industries Review, this has been endorsed by
the European Parliament, by Desmond Tutu, hundreds of NGOs have
supported this review. It is important to consider that these
recommendations of the review were considered against the World
Bank's mission and mandate of poverty alleviation, and it came
to these conclusions based on that. In fact, the review concluded
that in the majority of cases extractive industry projects were
not alleviating poverty and promoting sustainable development
and therefore were not suitable use of World Bank funds; but in
terms of the Export Credit Agency, it does not have that mission
of poverty alleviation. Friends of the Earth believe that the
ECGD needs to radically reposition its mission in terms of sustainable
development, and if its mission was to be—even if it was
not a primary mission, sustainable development, but a precursor
to its investment, it could not fund oil projects because of international
commitments on climate change. It is not a suitable use of funding.
It should be financing and helping support renewable energies,
and that is an area of business which is crying out for support
and international subsidy. Just on that note, I think that the
ECGD has a great opportunity coming up, because in June there
is an international renewables conference in Bonn, which is a
follow-up conference from the UN sustainable conference in Johannesburg
on sustainable development, and at that conference there will
be a strong push by international governments for greater investments
by international financial institutions, including ECAs, to be
financing renewables and not oil and mining projects; and support
of the renewables industry is one of the big things that ECAs
and other international finance institutions can do. It is not
just a question of increasing lending from renewables projects,
it is a shift in the project portfolio away from extractive industries
projects for renewable energy projects which promote sustainable
development.
Q412 Linda Perham: Going back to
something you were talking about before the break about the strategic
impact assessments, I do not know if you know whether any other
ECAs have mechanisms in place for monitoring compliance inspection.
They have got sanctions against companies for non-compliance?
Ms Kanzaki: Yes, there are a few
ECAs who have compliance mechanisms. Also Japanese ECA, Japan
Bank for International Cooperation have their own compliance mechanism
since October last year under its new guidelines, and with this
mechanism, which this is, affected people can directly claim to
the bank about their violation of its guidelines. It is very new,
so they have not used yet, but I think it is necessary to have
this kind of same kind of compliance mechanism in each ECAs?
Q413 Linda Perham: Is it just Japan,
or are there other countries?
Ms Kanzaki: They have it in Canada,
Canadian ECAs, and I think OPIC and several others, but not many.
Ms Griffiths: I wanted to add
to that that monitoring and compliance is incredibly linked to
ECGD's own due diligence procedures. Friends of the Earth's view
is that ECGD is not carrying out proper due diligence in the after
financing stage perhaps as well as in the consideration for support
stage. Again, to take two examples from the Baku-Tblisi-Ceyhan
pipeline, a Turkish man called Ferhat Kaya has recently been arrested,
detained and allegedly tortured in Turkey because of his activities
of monitoring the Baku pipeline and documenting effective communities
on the ground. I would like to know what due diligence procedures
ECGD is invoking in investigating that case and investigating
the risk to ECGD's own reputation in having supported a pipeline
which has directly contributed to a campaigner being arrested
in the host country, especially when one of ECGD's business principles
is to ensure that ECGD does not contribute to human rights abuses
or violations in providing cover for any project or investment.
My second example is again this example of the paint used on the
joints in the Azerbaijan and Georgia sections of the pipeline.
I think it is imperative that ECGD looks at its due diligence
policy and looks at how it is picking up problems such as these
in the first place and how it is responding to them once they
have been picked up. It seems to us that ECGD is overly reliant
on NGOs and the press in documenting and finding these instances
in these cases and then responding to them but not responding
to them properly. I think that is one big area of concern.
Q414 Linda Perham: So you think they
should not be responding to you and other organisations in the
press, that they should be proactively investigating themselves?
Ms Griffiths: I think they should
have a policy in place that enables them to proactively investigate,
and, secondly, to respond in a much more comprehensive manner
when NGOs and the press do raise things. We will continue to raise
things, but we cannot monitor all of ECGD's projects.
Q415 Chairman: Before we leave this
question of international comparison, our understanding of the
ECGD's international comparable role, as it were, is that it tends
to be largely focused on the OECD and the range of assistance
that can be given, the parameters of aid, and people usually complain
that the ECGD is too niggardly by comparison with some of the
other OECD members. I believe there are certain development criteria
within the OECD criteria, and I think the ECGD played some part
in getting this established. Do you pay any credence to what the
OECD has set down, or is that not part of the—
Ms Griffiths: I think the OECD's
guidelines on multinational enterprises provide a good starting
point of looking at what are the appropriate standards for projects.
The OECD's common approach on export credit, I think ECGD has
played a role in developing those and they again provide a good
starting point, but they are not the be-all and end-all and ECGD
within that should be working to constantly and incrementally
improve those.
Q416 Chairman: So that I can get
it clear in my mind, at the present moment the World Bank has
put out for consultation, is that correct, a set of criteria which,
if adopted, would be the yardstick for sustainability? I am using
shorthand here, but the World Bank in its Extractive Industry
Review and in other areas is trying to lay down ground rules for
ECAs, but at the moment the membership of the World Bank has yet
to underwrite it. Is that correct?
Ms Ellis: Not exactly. In terms
of the Extractive Industries Review, that was an independent review
commissioned by the World Bank in 2000. The World Bank themselves
are yet to respond to the EIR as to how those recommendations
are going to be put in place. The World Bank regularly review
many of their policies and at the moment are also reviewing their
indigenous people's policy, their safeguard policies and then
what used to be called their structural adjustment lending; but
I think also what is important is to draw a distinction between
international financial institutions' policies and the practice
of what is happening on the ground. It is one thing to compare
the ECGD's policy to other ECAs or other financial institutions;
it is another thing to compare what is happening on the ground.
Also, if you look at World Bank funded projects, projects which
the ECGD has additionally been involved in, again, like Baku-Ceyhan,
according to our research these projects have contravened a lot
of World Bank policies and guidelines, I believe something like
192 in the Turkish section alone, of the Baku-Ceyhan project.
Chairman: Thank you very much. I wanted
to get that clear on the record, because I think that when it
is a wee bit woolly it needs to be sorted out.
Q417 Judy Mallaber: Can I return
to the question of renewables.
Ms Griffiths: Yes.
Q418 Judy Mallaber: In section 6
of your memorandum you recognise the ECGD's efforts to promote
the exports of nuclear energy technology—this £50 million
worth of exports that they are talking about making cover available
for, particularly for renewable exports—but you are asking
for a more proactive approach from the Department to encourage
applications. What would such an approach involve? What exactly
are you asking ECGD to do?
Ms Griffiths: The renewables industry
is a new stakeholder for ECGD, or would become one once they started
applying for export credit, and I think it is incumbent upon ECGD
to understand that community better than it does at the moment.
I would suggest perhaps having a consultation with that industry
and other stakeholders in terms of looking towards understanding
what is preventing them at the moment from applying for export
credit in order to adjust their policy or their procedures to
make it easier for that industry to engage with ECGD and get some
money from that fund. Again, returning to this issue, I would
say that ECGD needs to think about screening out fossil fuels,
because they are the main competitor for the renewables industry.
If it truly wants to support the renewables industry, it has to
do that in an incredibly proactive way.
Q419 Judy Mallaber: Is it not ECGD's
job to stimulate particular industrial sectors, as opposed to
just supporting those that are seeking help?
Ms Griffiths: We believe it should
be ECGD's job to stimulate sustainable development and the export
of sustainable development. Admittedly that requires a big shift
in ECGD's role and its portfolio, but we think that the time has
come for ECGD to stop supporting destructive industries; it is
not an appropriate role for a developed country in the 21st century.
ECGD recognises it has some commitments to sustainable development,
but it is not at the moment translating those paper-based commitments
into reality, and the transition to sustainability takes more
than just words on paper; it means a definite change in direction
in what the British Government, and ECGD in particular in this
case, are actually doing to promote that and to support it when
it is in its infant stage.
| 
