APPENDIX 9
Memorandum by The Corner House
The Corner House is a not-for-profit research
and advocacy group, focusing on human rights, environment and
development. Over the past five years, it has closely monitored
the policies and operations of the UK Export Guarantees Department
(ECGD),[22]
submitting evidence to a number of parliamentary inquiries[23]
and UK Government departments.[24]
The Corner House welcomes the Trade and Industry
Committee's current inquiry in the ECGD and is grateful for the
opportunity to comment on the following issues:
— The ECGD's objectives and business
principles;
— The relationship between ECGD, its
customers and other Government organisations with responsibilities
for business development and trade promotions;
— The Department's role in the promotion
of sustainable development;
— The ECGD's relationship with the
commercial banking sector; and
— ECGD's corporate governance.
A. THE ECGD'S
OBJECTIVES AND
BUSINESS PRINCIPLES
Since the ECGD was established in 1919, its
main aim has always been the promotion of UK exports. The Mission
and Status Review of the ECGD in 2000, resulted in the Department
being broadly required to "take into account" the Government's
international policies on sustainable development, environment,
human rights, good governance and trade. This is to be welcomed.
However, three years on and despite some recent improvements,
there are clear indications that the ECGD's institutional culture,
its approach to underwriting and its interpretation of its founding
Act of Parliament, remain much more geared towards supporting
exports than to promoting the Government's international objectives
in the types of projects it continues to support. The Corner House
would argue that in order to meet its new Mission statement to
the full, the ECGD proactively seek business that accords with
the Government's international objectives rather than reactively
trying to make the business it supports fit, often rather uncomfortably,
with these objectives. The Corner House believes that if the ECGD
is to continue receiving taxpayer support, as it does, it must
demonstrate a clear public purpose, and that this purpose should
be the promotion of sustainable development.
The subsidy to the ECGD is now acknowledged
by both the Treasury and the ECGD itself. The extent and nature
of subsidy was documented in a January 2003 report, commissioned
by the ECGD, by NERA Economic Consulting. NERA noted: "ECGD
is currently not required to provide a return on the notional
capital required to run its business. This means that premiums
charged by ECGD do not reflect the cost of the notional capital
required to meet claims arising from ECGD's portfolio of exposures
and, thereby, comprise a subsidy element."[25]
NERA found the subsidy for EXIG (export insurance
and export credit guarantees), Overseas Investment Insurance and
FREF (Fixed Rate Export Finance) between 1992 and 2002 to be in
the region of £637-£718 million (although, since FREF
in particular has since been reformed, NERA emphasised that this
does not represent an accurate representation of the ongoing subsidy).[26]
This subsidy carries with it heavy potential liabilities for the
UK taxpayer.[27]
Indeed a KPMG report, also commissioned by ECGD, has described
the ECGD as "a non-profit organisation, without capital,
to provide long-term cover for UK exports to inherently risky
markets".[28]
Despite the fact that NERA concluded that "there is a strong
rationale for eliminating any subsidy in ECGD's current pricing
regime", and that removing the subsidy would have "a
negligible impact on UK capital goods exports and . . . on the
volume of business underwritten by ECGD", the government
has now committed itself not to raise premium rates for ECGD business,
or to phase out the subsidy. Indeed, the DTI is apparently considering
increasing the subsidy provided through the ECGD, by making a
contribution to the ECGD's premium rates in order to bring them
down.[29]
The Corner House believes that there is nothing
inherently wrong with the ECGD providing subsidies, but is of
the view that:
— The subsidies should be made explicit;
— They should have a clearly-defined
public purpose that reflects the common good; and
— There should be public debate and
agreement over what they are for and which industries they should
support.
In particular, The Corner House would question
whether subsidised support for projects abroad that do not contribute
to sustainable development, and which worsen human rights and
governance situations, are an appropriate or desirable use of
public money. We are also concerned that at a time when the ECGD
aspires to ensure that its operations mesh with the government's
international objectives, the ECGD is increasingly supporting
those very industries that are least compatible with those objectives.
The ECGD's own External Environment Project's Varieties of Capitalism
analysis points to the fact that demand for ECGD business is "likely
to be stable in the defence and oil and gas sectors" with
a possible rise in demand from aerospace customers.[30]
We note that while announcing the forthcoming
DTI white paper on trade and investment, Patricia Hewitt stated
that: "We should also recognise that helping the developing
world to prosper is in our long-term interests, as well as a moral
imperative."[31]
We believe it is crucial that the DTI recognise this imperative
not just in its trade policy, but also in its export promotion
policies, particularly through the ECGD. Too often, export promotion
has focused narrowly on supporting UK business at any cost, and
at the expense of the real interests of the developing world.
We recommend that the DTI ensure that it examine more closely
how the ECGD can contribute to sustainable development.
The Corner House believes that if the ECGD is
to remain a public body and to enjoy a continued subsidy, it must
be subject to clear-cut, legally-binding sustainable development,
human rights and environmental policies. Although recent steps
made by the ECGD to embrace sustainable development objectives
are to be welcomed, they fall far short of a credible sustainable
development policy.
In particular:
— The ECGD's revised Mission Statement
fails to put sustainable development at the heart of the ECGD's
business. Moreover, the government's interpretation of the ECGD's
founding Act of Parliament limits the Department's ability to
take proactive steps to promote sustainable development and to
exclude companies whose activities are unsustainable.
— The legal status of the ECGD's new
Business Principles is unclear, their objectives largely aspirational
and their implementation discretionary. As such, they fail to
provide the incentives, penalties and binding rules that would
make them a suitable instrument for governing the ECGD's business
practice.
— The ECGD still views its prime objective
as supporting UK exporters. As a result it has consistently favoured
exporters interests over those of communities affected by the
projects it supports. A pertinent example is its refusal to make
disclosure of key project documents—including environmental
impact assessments—a condition of support, arguing that
to do so would be to jeopardise the exporters' interests.[32]
The Corner House believes that any element of
discretion should be removed from the ECGD's sustainable development
objectives. The Corner House therefore recommends that:
— Parliament consider amending the
Export and Investment Guarantees Act 1991 in order to require
the ECGD to promote sustainable development through its lending
practices and operations and to permit the ECGD to discriminate
in favour of environmentally sustainable sectors and exporters.
B. THE RELATIONSHIP
BETWEEN ECGD, ITS
CUSTOMERS AND
OTHER GOVERNMENT
ORGANISATIONS WITH
RESPONSIBILITY FOR
BUSINESS DEVELOPMENT
AND TRADE
PROMOTIONS
Non-governmental organisations and others have
consistently raised concerns over the ECGD's limited customer
base and the danger that because the ECGD is so demand-led, it
has effectively been captured by a handful of politically strategic
and powerful companies, mainly in sectors whose impacts are at
odds with the goals of sustainable development (arms, oil and
gas, nuclear).
Recent information provided to Parliament reveals
that BAE Systems and Airbus Industrie have consistently been the
ECGD's top two clients, by value, over the last five years.[33]
The ECGD's own "External Environment Project's Varieties
of Capitalism" analysis suggests that demand for the ECGD's
services in the future is likely to "come from a limited
number of successful exporters."[34]
The implication of this analysis was thought to be that the ECGD
should "develop new products to suit the small range of customers".
This is, however, likely to exacerbate the problem of the ECGD
being captured by a small handful of particular interests.
The danger of the ECGD being captured by a handful
of firms is that it creates a conflict of interest between providing
tailored customer-focused support to a few companies and ensuring
that these companies and the projects they put forward meet the
government's international objectives. The recent suggestion that
BAE Systems may have sought an exception for itself from the ECGD's
new anti-corruption procedures and particularly from the requirement
to provide full details of agent's commission during a political
risk insurance application for the sale of defence goods to Saudi
Arabia may reflect this problem.[35]
The result is that there is a persistent risk
that the ECGD's environmental and social standards will be diluted.
Exporters have consistently complained that changes introduced
by the ECGD in relation to environmental and social impacts and
even corruption, represent unwelcome "bureaucracy".
In relation to the Trading Fund consultation, one exporter stated
that "ECGD requires greater environmental and social impact
analysis than competitor ECAs. This creates the impression that
ECGD is an inhibitor rather than a facilitator of UK exporters".
The Corner House believes that the adoption
of clear-cut, legally binding sustainable development, human rights
and environmental policies is essential to ensure that there is
no dilution of the ECGD's business principles due to exporter
pressure, as is the danger with a discretionary case-by-case approach.
In addition, the Corner House believes that if the ECGD were to
be more pro-active in seeking business that meets the Government's
international objectives, it would automatically expand its customer
base.
C. THE DEPARTMENT'S
ROLE IN
THE PROMOTION
OF SUSTAINABLE
DEVELOPMENT
The UK Government has set out a number of policy
commitments with respect to sustainable development, notably:[36]
— Refocusing international development
efforts on the elimination of poverty and encouragement of economic
growth that benefits the poor.
— Giving particular attention to human
rights, transparent and accountable government and core labour
standards, building on the Government's ethical approach to international
relations.
— Using the Government's resources
proactively to promote political stability and social cohesion
and to respond to conflict.
— Encouraging financial stability and
the reduction of the external debt of developing countries to
sustainable levels.
— Promoting economic growth that is
equitable and environmentally sustainable.
— Working to reduce violent conflict,
including through tighter control of arms trade.
— Working to reduce corruption and
ensure respect for human rights and a greater voice for people.
— Encouraging corporate social responsibility
by national and transnational companies.
Whilst the ECGD has taken some welcome steps
at reform, its policies and practices still fall far short of
compliance with the Government's sustainable development commitments.
The Corner House's views on the ECGD's shortcomings in this regard
are set out in full in evidence submitted to the Environmental
Audit Committee's 2003 inquiry in the ECGD and Sustainable Development[37]
to which the Committee is respectfully referred. In summary:
— The ECGD's portfolio remains dominated
by unsustainable projects and sectors, as exemplified by its continuing
support for arms and fossil fuel projects.
— Of the four principle sectors supported,
three (airbuses, other aerospace and defence) are associated either
with high environmental impacts or with adverse developmental
impacts (defence). Of particular concern, given the UK's commitment
under the Kyoto protocol to reduce greenhouse gas emissions, is
the rise in support (as a percentage of overall business) for
power generation and energy projects—up from 42% in 1999-2000
to 47% in 2001-02.[38]
— The ECGD has failed to refocus
efforts on the elimination of poverty, a key UK Government sustainable
development commitment.
— Since September 1997, the UK has
refused to issue export credits for any expenditures that are
not defined as "productive".[39]
However, the "productive expenditure test" is only applied
to HPIC and IDA countries.[40]
As Romilly Greenhill of Jubilee Research points out, "This
means that ECGD is continuing to provide export credits for defence
expenditures in other developing countries, many of which are
also heavily indebted."[41]
In addition, the concentration of ECGD support in the oil and
gas sector is problematic given the clearly established linkages
between investment in extractive industries and the exacerbation
of poverty and corruption in countries where democracy is weak
and the economy overly dependent on mineral extraction.[42]
— The ECGD has adopted a limited
approach to the evaluation of Human Rights issues
— Since 2000, the ECGD has, to its
credit (and virtually alone among the ECA community), included
questions in its impact questionnaire on the human rights implications
of projects. Nonetheless, its approach to human rights is limited
and runs the risk of failing to ensure that the ECGD meets its
obligations under the Human Rights Act. For example, the ECGD's
assessment questionnaire also fails to elicit any information
about the human rights context in which the project will take
place. For example: are people free to express their views without
fear of retribution?
— The ECGD's procedures for assessing
Debt Sustainability are inadequate
— The ECGD has committed itself to
"ensuring that debt sustainability will be the prime determinant
of the provision of support for exports".[43]
Jubilee Research, which campaigns on debt issues, has expressed
concern that export credits are still being issued for countries
with significant debt burdens.[44]
They cite the example of South Africa where the ECGD recently
(2000-01) guaranteed an export credit of around £1.7 billion
for trainer/fighter aircraft being sold by BAE Systems.[45]
Jubilee notes that South Africa is heavily indebted, debt service
accounting for about one and half times the level of spending
on health.[46]
It is questionable whether increasing this debt through the sale
of fighter aircraft meets with the UK Government's stated sustainable
development goal of "reducing the external debt of developing
countries to sustainable levels".
— Defence and aerospace contracts—a
major segment of the ECGD's portfolio—are excluded from
the environmental screening process
— The failure to screen defence and
civil aerospace contracts has been criticized by a previous report
by the Trade and Industry Committee.[47]
The Corner House also notes that the practice is at odds with
UK government commitments under the OECD's Recommendation on
Common Approaches on Environment and Officially Supported Export
Credits, which clearly states that "Members should screen
all applications for officially supported export credits covered
by this Recommendation."[48]
— The ECGD's procedures for vetting
projects for corruption have been flawed
— Corruption has major impacts on both
the quality and effectiveness of development. Research undertaken
by The Corner House revealed that the ECGD has consistently underestimated
corruption as a serious risk factor that could undermine the viability
of projects, and as a reputational risk both for the companies
concerned and the ECGD itself. The ECGD is set to announce new
anti-corruption measures imminently, which will herald a more
pro-active approach to corruption. There has however been no public
consultation and little transparency on what these measures are
likely to be. They are also likely to stop short of imposing the
ultimate sanction of debarring companies convicted of corruption—a
step strongly recommended by the OECD's 1997 Revised Recommendations
on Combating Bribery, and widely recognised as a very powerful
and important deterrent against bribery (see below under "Governance").[49]
— The ECGD's disclosure policy remains
secretive.
— Public access to environmental information
and participatory consultation with stakeholders prior to decisions
on financial support is a sine qua non of best international development
practice. Yet, despite recent reforms, the ECGD still does release
information on the vast majority projects it is considering backing
prior to a decision being taken on their support. Details of projects
are only released if the project is categorised as High Potential
Impact—and then only with the applicants' permission.
The Corner House believes that the ECGD's operations
will continue to remain at odds with the government's sustainable
development commitments unless the Department is permitted to
take proactive measures to seek out business that promotes such
development. At present, however, the ECGD is entirely passive
in its approach to the sectors its supports, arguing that it is
required under its founding Act of Parliament to consider all
applications and that it "can consider supporting only that
business which comes to us".[50]
To address such policy failures, and to bring
the ECGD in line with the Government's sustainable development
policies and objectives, the Corner House would encourage the
Select Committee to recommend that ECGD:
— Revisit it's legal advice in relation
to the Export and Investment Guarantee Act 2001;
— Adopt clear, ex-ante human rights,
development and environmental standards that apply to all its
projects on a non-discretionary basis;
— Develop a timetable for phasing out
support for fossil fuels;
— institute exclusion criteria against
which projects are screened prior to their consideration for support.
Categorical exclusions should include: arms; nuclear projects;
new fossil fuel power stations and oil exploration projects; and
projects in countries with poor human rights records;
— Expand its productive expenditure
criteria to all low- and middle- income countries, as classified
by the World Bank;
— revise its definition of productive
expenditure to: "whether projects contribute to social and
economic development, poverty reduction, and debt sustainability"[51];
— review whether it is encouraging
pro-poor investment;
— Make the publication of basic project
information—name, a short description of the project, its
potential environmental, social and human rights impacts and its
impact category—a precondition of appraisal for all projects,
including cases involving insurance only;
— Require all contracts to include
a clause binding contractors and sub-contractors to abide by the
OECD Guidelines for Multinational Enterprises, in addition to
the ILO Tripartite Declaration on Multilateral Enterprises and
Social Policy, and refuse support for companies that have been
found to be in breach of the OECD Guidelines for Multinational
Enterprises;
— Adopt tighter anti-corruption due
diligence procedures, including suspending cover while companies
are being investigated for corruption allegations and debarring
companies found guilty of corruption;
— Adopt legally-binding administrative
procedures for assessing project impacts, including appeals and
redress mechanisms.
D. ECGD'S RELATIONSHIP
WITH COMMERCIAL
BANKING AND
INSURANCE COMPANIES,
AND THE
DEVELOPMENT OF
THE PRIVATE
EXPORT CREDIT
AND REINSURANCE
SECTOR
It is clear that commercial banks are the major
if hidden beneficiaries of ECGD support. Certainly ECGD support
enables banks to invest in and provide finance for projects in
risky markets while passing off all risk to the ECGD, and hence
to the UK taxpayer. The recent case of claims made by three banks
under Overseas Investment Insurance to the ECGD for their investment
in Enron's Dabhol project in India highlights the worrying lack
of clarity over who is ultimately responsible for poor due diligence
on such investments (see Annex I).
On 28 February 2003, the Financial Times revealed
that three banks, ANZ, ABN Amro and Standard Chartered, were considering
legal action against the ECGD because it was failing to accept
their claims, for around $60 million. It appears that the ECGD
gave backing to the three banks during 1999 for their involvement
in Dabhol, despite the fact that:
— in January 1999, Human Rights Watch
had published a report detailing serious human rights abuses associated
with the project;
— there had long been strong and persistent
rumours of corruption;
— the Project had been subject to numerous
litigations concerning whether the main contract violated India's
Electricity Supply Act (1948); and
— the Project had been described as
"commercially unviable" by the World Bank who refused
to finance it.
The claims by the three banks are in many senses
a test case of ECGD's Overseas Investment Insurance. The case
raises questions about what levels of due diligence banks are
required to undertake before investment insurance is offered.
The Corner House believes that the ECGD should ensure that banks
are required to undertake careful due diligence with regard to
risks posed to a project by human rights, environmental and social
concerns and by corruption allegations.
E. ECGD'S CORPORATE
GOVERNANCE
The Corner House has closely monitored a number
of infrastructure projects for which ECGD support has been requested,
from their inception to the point of decision and beyond. These
include the Ilisu Dam in south-east Turkey, the Yusufeli Dam in
north-east Turkey, and the Baku-Tbilisi-Ceyhan oil pipeline. It
has also conducted in-depth research into the decision-making
that accompanied a number of ECGD-backed projects where corruption
has been alleged.
Based on this experience, the Corner House has
identified a range of governance failures with respect to the
ECGD's due diligence and risk management procedures: the Export
Guarantees Advisory Council; public oversight of the ECGD; and
the lack of accountability mechanisms.
1. DUE DILIGENCE
AND RISK
MANAGEMENT PROCEDURES
The Business Principles Unit is subordinate to
the Underwriting Authority
The Business Principles Unit (BPU) is responsible
for assessing the environmental and social risks of the projects
for which ECGD support is sought. However the advice provided
by the unit is not binding on the underwriting authority to which
the BPU reports. The Corner House views this as indicative of
the place accorded to sustainable development objectives within
the ECGD's institutional culture. It recommends that where the
BPU advises that a project should not be supported for environmental
or social reasons, this advice should be binding.
The ECGD's Case Impact Assessment Procedures are
weak, untransparent and open to abuse
The ECGD relies on a questionnaire in order
to make its initial assessment of the environmental and social
impacts of a project and assign an "impact category".
Projects deemed to have low or medium impacts are not required
to provide an environmental impact assessment (EIA). However,
the "tick-the-box" format of the questionnaire is open
to abuse. For example, applicants are asked whether the proposed
project/business has been designed to meet specified environmental,
health and safety, and social standards and gives a series of
boxes to tick as a response. No evidence is required to demonstrate
compliance with the standards that are ticked.
The ECGD does not disclose the basis on which
specific projects are assigned an impact category nor does it
require that information on category B and C projects to be made
public
This lack of transparency makes it impossible
for affected communities to challenge the ECGD's categorisation
of specific project (particularly Category B cases which should
arguably be Category A). In addition, such lack of transparency
cuts the ECGD off from a potential source of information—the
public—on projects risks that may not have been revealed
through the questionnaire. The Corner House believes that the
ECGD's risk assessment would be significantly improved if information
were disclosed on all projects being considered by the ECGD.
The ECGD's anti-corruption policies lack credible
enforcement procedures
As mentioned before, the ECGD is due to introduce
further improvements to its anti-corruption procedures from April
2004. However good these procedures will look on paper, they will
be inadequate unless the ECGD has a proper enforcement policy
regarding corruption. In particular, it is vital that underwriters
are proactive in reporting evidence or suspicions of corruption
picked up while undertaking due diligence procedures or during
post-issue monitoring. Most of the six allegations of corruption
forwarded by the ECGD to law enforcement agencies since February
2002, appear to have been as a result of newspaper articles. This
suggests a reactive rather than proactive response to such allegations.
The ECGD meanwhile told the ECGD Advisory Council in September
2003 that "there were no cases that were signed after the
warranties had been introduced that were any concern", despite
the fact that two other government departments had independently
forwarded allegations to UK law enforcement agencies regarding
a project in Papua New Guinea backed by the ECGD since the warranties
started (see Annex II). The Corner House believes that the ECGD
must show that it is willing to police its no-bribery warranty,
both by more pro-active reporting of suspicions and by using its
own audit powers to request information and documentation from
companies where suspicion arises. Given that taxpayers' money
may otherwise be underwriting bribes since the ECGD includes agent's
commission in the amount to be underwritten, a proper enforcement
policy is essential.
2. EXPORT GUARANTEES
ADVISORY COUNCIL
The Corner House welcomes the changes that have
been made to the Export Guarantees Advisory Council and the publication
of its minutes. However, it is concerned by the governance implications
of a number of proposals that have been discussed in the Council.
For example:
The minutes from the EGAC meeting of March 2003
make clear that EGAC considers that NGOs are not significant enough
ECGD stakeholders to warrant the Council's engagement with them.
Given the important role that NGOs have played in bringing adverse
environmental and social impacts of projects to the ECGD's attention,
we believe that the Council's decision is misplaced. We would
encourage the Committee to recommend to EGAC that it engage more
constructively with NGOs and indeed with affected local communities
on high profile and controversial projects.
We are also concerned that in its latest annual
report 2002-03, the EGAC suggested that "with all the systems
now in place" in relation to the Business Principles, it
hoped that the Council "may spend less time looking at these
issues and concentrate on other areas". We believe that business
principles will need constant monitoring, and it is in part the
Council's job to provide this function.
In order to improve the transparency of EGAC,
we also recommend that its minutes be published shortly after
its meetings, rather than waiting for two months before its next
meeting in order to approve minutes.
3. PUBLIC OVERSIGHT
OF THE
ECGD
We believe that there needs to be greater public
oversight in relation to the ECGD. We would encourage the Trade
and Industry Select Committee to consider the case for Parliament
establishing a sub-committee with the specific remit to examine
the ECGD's annual accounts. We also recommend that high-profile
Category A projects should be required to go through a process
of parliamentary approval, as happens in the US (where projects
over $100 million must get Congressional approval).
ESTABLISHING
ACCOUNTABILITY MECHANISMS
The UK Government lays great stress on the links
between sustainable development and good governance. It is therefore
of regret that the ECGD lacks an easily accessible appeals mechanism[52]
through which members of the public—and particularly project
affected peoples—may challenge its decisions. The Corner
House notes that both Canada's EDC and Japan's JEBIC have both
established ombudsmen department, and that the US' OPIC is considering
a similar complaints mechanism to ensure greater accountability.
22 Since 1999, The Corner House has participated in
eight field missions to assess the social and environmental impacts
of a number of projects for which ECGD support was or is being
sought, notably the Ilisu and Yusufeli dams and the Baku-Tiblisi-Ceyhan
pipeline. It has also undertaken in-depth research into a number
of ECGD-backed projects which have been tainted by allegation
of bribery. Back
23
See, for example, submissions to inquiries into the Ilisu Dam
by the Select Committee on Trade and Industry and by the International
Development Committee; and the submission to the Environmental
Audit Committee's 2003 inquiry into Export Credits Guarantee Department
and Sustainable Development. Back
24
For example: "UK Export Credits Guarantee Department (ECGD)
minimum conditions for reform : A memorandum from concerned non-governmental
organisations and parliamentarians", July 2000; "Lessons
of the Ilisu Dam UK Export Credit Policy, Corporate Governance
and Future Investment in Turkey: Lessons from the Ilisu Hydroelectric
Project. A Memorandum from Concerned Non-Governmental Organisations",
January 2002; Hawley, S, Turning a Blind Eye: Corruption and
the UK's Export Credit Guarantee Department, The Corner House,
July 2003. Back
25
NERA, Estimating the Economic Costs and Benefits of ECGD: A Report
for the Export Credits Guarantee Department", January 2003,
pii. Back
26
NERA, Estimating the Economic Costs and Benefits of ECGD: A Report
for the Export Credits Guarantee Department", January 2003 Back
27
Recent reports have revealed that huge losses have amassed from
ECGD business prior to 1991, when a break-even objective was initiated.
The debts from this business are in the region of £9.5 billion.
These debts represent a cost to the UK taxpayer in terms of revenue
forgone. There is still some lack of clarity over whether all
of these debts are being actively recovered. Although these losses
are historical, ECGD is still a risk to the taxpayer. KPMG report
found that ECGD's portfolio "represents a contingent risk
to the Exchequer." The recent revelation that the ECGD was
providing political risk insurance for a new defence contract
with Saudi Arabia, at a time when some analysts consider Saudi
Arabia to be very unstable raises the question of whether ECGD
is still placing politically favourable projects above appropriate
risk assessment. The decision also to provide backing to UK companies
in Iraq despite the fact that serious concerns were raised within
government, particularly by the Treasury, as to whether such contracts
would be deemed legally binding by any future incoming administration,
raises a similar question. Back
28
KPMG: Risk management Review for HM Treasury and ECGD, para 3.2.1. Back
29
Export Guarantees Advisory Council (EGAC), Minutes of Meeting
held 17 September 2003, para 3.2.2. Back
30
Export Guarantees Advisory Council, Minutes of Meeting held 19
November 2003. Back
31
Quoted in The Guardian, 23/1/04, "Hewitt plans white paper
on prosperity in the developing world". Back
32
The ECGD states that for High Impact Projects, disclosure of
EIAs is now required. However, this "requirement" is
subject to the consent of the exporter. Back
33
Hansard, 12/2/04, Columns 1615-1616W, Response from Mr
Mike O'Brien to Matthew Taylor. Other businesses that appeared
regularly in the top five clients by value were: RWE Thames Water
plc, Mabey and Johnson, and ABN Amro Bank NV. Back
34
Export Guarantees Advisory Council (EGAC) minutes, 19/11/03,
para 3.2.5. Back
35
The Guardian, 27/11/03, "Millions Risked on BAE Contract". Back
36
See: Eliminating World Poverty: A Challenge for the
21st Century (1997) and Eliminating World Poverty: Making
Globalisation Work for the Poor (2000). Back
37
House of Commons Environmental Audit Committee, "Export
Credits and Sustainable Development", Seventh Report of Session
2002-03, HC 689, 2003, pp Ev 6-Ev 48. Back
38
ECGD support for fossil fuel plant illustrates the point. Recent
research has shown that ECGD supported power plants contribute
an annual 13.3 million tonnes of carbon emissions, despite Government
commitments to reduce the UK's emissions by 26.5 million tonnes
and to assist developing countries to curb their emissions. Although
the ECGD has now made available some £50 million of cover
for the UK renewable energy sector, the support it offers is a
fraction of that offered to projects relying on fossil fuels. Back
39
Dfid, White Paper, "Eliminating World Poverty: Making Globalisation
Work for the Poor", December 2000. Back
40
Greenhill, R, "Recommendations for the Export Credit Guarantee
Department on Debt and Export Credits", Jubillee Research,
in Corner House et al, op cit 8. Back
41
Ibid. Back
42
Striking a Better Balance: The Final Report of the Extractive
Industries Review, December 2003, available at http://www.eireview.org/eir/eirhome.nsf/be65a087e9e6b48085256acd005508f7/75971F6A8E5A111385256DE80028BEE2?Opendocument Back
43
ECGD Business Principles, December 2000. Back
44
Greenhill, R., "Recommendations for the ECGD on Debt and
Export Credits", Paper presented to "Beyond Business
Principles Seminar", in Corner House et al, op cit 8. Back
45
ECGD Annual Report and Resource Accounts 2000-01. Back
46
Greenhill, R., "Recommendations for the ECGD on Debt and
Export Credits", Paper presented to "Beyond Business
Principles Seminar", in Corner House et al, op cit 8. Back
47
Trade and Industry Committee, Third Report, Session 1999-2000,
The Future of the Export Credits Guarantee Department, para 56,
pxxvi: "We can see no reason for defence equipment and aerospace
to be exempted from the screening process and request and explanation
for the exemption." Back
48
OECD, Common Approaches, Paris, 2004, para 4. Back
49
Hawley, S, Turning a Blind Eye: Corruption and the UK's Export
Credit Guarantee Department, The Corner House, July 2003. Back
50
ECGD Annual Review and Resource Accounts, 2002-03, p 18. Back
51
Currently, the departments definition is: "whether the projects:
assist social and economic development; or are of maximum benefit
to areas most affected by poverty; or tackle problem areas where
private investment is not available; or, wherever possible, earn
foreign exchange; or encourage viable self-financing projects."
Back
52
Currently, the ECGD can only be challenged through judicial review
or the parliamentary ombudsman. Back
| 
