Export credit agencies (ECAs) are public-backed financial institutions that provide guarantees, loans and insurance to companies. Many have so far gotten away with financing disastrous projects, some of which are being investigated for corruption.

Unlike the international financial institutions (IFIs) such as the World Bank and International Monetary Fund (IMF), currently besieged by public criticism, ECAs have remained largely unnoticed. However, their funding far outstrips that of the IFIs

NGOs hope to push ECAs to become more accountable, to be bound by laws that compel them to probe contracts for corruption and to suspend agreements if bribes were involved.

ECAs in industrial countries provide about 100 billion dollars in project financing each year and NGOs charge that many of them do so with little consideration for environmental or human rights concerns.

These agencies assist manufacturers and investors in their countries to do business overseas by providing them with insurance on risky undertakings or financial backing to protect against non-payment.

Large parts of ECA operations involve underwriting financial packages to support the sale of capital goods, such as aircraft, machinery and services.

NGOs note that many of these deals require ‘sweeteners’ for contracts to be sealed.

Corruption and bribery continues to oil global economic transactions and the World Bank estimates that payoffs and bribes amount to 80 billion dollars a year.

Among the demands expected to be presented by NGOs at the OECD Export Credit Group meeting next month are that exporters applying for official export credit declare in writing that no illegal payments will be related to the contract.

These demands are part of the June 2000 Jakarta Declaration for Reform of Official Export Credit and Investment Insurance Agencies. The declaration was endorsed by more than 350 NGOs from 45 countries.

The declaration calls on the relevant governments to compel their ECAs to make projects easily accessible to enable parliaments and civil society groups to raise concerns about corruption and monitor the use of public credits and guarantees.

Three international consortia, nine companies and three officials of dam building firms are currently on trial in Lesotho, southern Africa, charged with bribing the former head of the Lesotho Highlands Water Project with amounts alleged to be as high as 2 million dollars.

While the World Bank, which funded part of the project, has begun an internal investigation, up to the end of last month ECAs from both OECD and non-OECD nations that financed the project had not.

”By and large they are lawless institutions that often shield themselves from public scrutiny and it’s not an easy task to try and get them regulated,” notes John Sohn of the non-governmental Friends of the Earth USA. ”Often the Export Credit Group of the OECD does not recognise NGOs as formal participants in decision-making.”

In February last year, the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions came into force. It makes bribing foreign government officials a criminal offence.

Civil society groups, however, say it lacks clear and binding consequences for ECAs that stray. For instance, under the convention, it does not necessarily follow that credits or guarantees that ECAs extend for corrupt projects will become invalid.

In a working paper on corruption in ECAs written by Dieter Frisch, Transparency International (TI) notes that bribing foreign officials to secure overseas contracts has become a widespread practice in industrial countries – particularly in certain sectors such as exports of military equipment and public works.

Usually the value of bribes are presented as ‘commissions’, and would normally be treated as part of the costs of supply. They are therefore included in the total contract value covered by the guarantee and would also be tax-deductible.

Frisch notes that in the case of insurance, the indemnification of the exporter would include the amount of the bribe – which may represent 10 to 20 percent, sometimes even more, of the contract value – a practice that is an indirect encouragement to bribery.

However, TI, an international NGO that monitors global corruption, concedes that it is often complicated for an ECA to enquire closely and systematically into the make-up of contract prices and draw the line between a genuine commission and an excessive one, which presumably contains a bribe.

”We cannot speak on behalf of other agencies but we always strive to maintain transparency and accountability and have abundant information publicly available on our websites,” says Timothy Harwood of the US-based Overseas Private Investment Corporation.

Enquiries to a number of other agencies were unanswered, or responsible officials were not present to respond to media queries.

During the first half of this year, Canada’s Export Development Corporation (EDC) was accused of financing disasters and being an accessory in harmful projects.

EDC financed the Marcopper mine in the Philippines where a massive mine-waste spill in 1996, dubbed the country’s biggest industrial disaster, forced the evacuation of five villages and affected 20,000 residents. A UN investigation says the accident caused a total loss of aquatic life and biological productivity in the affected area.

EDC’s hand in damaging projects is contained in an NGO study ‘Reckless Lending: How Canada’s EDC puts people and the environment at risk’.

The report cites nuclear reactors in several countries that have experienced problems such as safety mishaps and the Urra Hydroelectric Project in Colombia, which destroyed the traditional food supply of the indigenous Embera Katio people.

According to Pamela Foster of the NGO Working Group on the EDC which produced it, the report, ”highlights the need to ensure that EDC be required by law to uphold public policies and international standards protecting human rights, the environment and the social needs of communities”. (END/IPS/IF/EN/gm/da/00)