Page 55 - bne_Magazine_March_2018

bne March 2018
Opinion 55
tigation led to accusations that two managers at the Export Guarantee and Insurance Corporation, the second arm of the Czech ECA, falsified information in order to move the project ahead. The project lost €30mn when the construction failed.
In another case, the construction of a second coal power plant at Pljevlja in Montenegro was nearly disastrous for the Czech Republic. From its inception, the project has had its fair share of scandal, with the Montenegrin government, under pressure from lobbyists, adopting a special law in order to select a single Czech supplier, Skoda Praha, without conducting a proper ten- der. In spite of repeated warnings from Czech and international groups about the project’s economic infeasibility, the Czech Export Bank threw its hat in the ring, but ultimately withdrew its support after admitting that Pljevlja II was too risky.
ECAs have signed up to the so-called Common Approaches developed by the OECD, in an effort to standardise social, environmental and transparency screenings precisely to avoid such risky forms of financing. But this normative framework has not done enough to ensure that these agencies pass on dodgy investments. Adherence to the Common Approaches
is voluntary and there are no sanctions in cases of non- compliance. Moreover, due to its very general provisions, even those attempting to comply end up pursuing investments with dire results.
For example, in the case of the Ilisu dam in Turkey, it was clear from the outset that construction would drastically affect the local environment and population, among other things, by relocating no fewer than 199 settlements and destroying the
“it was clear from the outset that construction would drastically affect the local environment and population”
ancient city of Hasankeyf. NGOs and media pushed Austria’s OEKB and other ECAs to withdraw from the project, but the agencies decided instead to try to bring the project in line with international standards instead.
OEKB, together with Germany’s Euler Hermes and the Swiss SERV, negotiated 153 conditions with the Turkish govern- ment in an attempt to guarantee social, environmental and cultural heritage impact measures, including an exit clause in case these conditions were not fulfilled. However these were unlikely to succeed given that there was still insufficient data available on the project’s impact at this point, and the fact that the project was taking place in a strongly Kurdish region of Turkey where human rights violations were known to be ongoing, thus rendering any kind of open public consultation impossible.
After numerous clear violations of the conditions, OEKB and the other ECAs finally withdrew from financing the dam. Properly examining the project before the start of implementation and taking a less naive approach regarding human rights could have helped the ECAs avoid backing such a damaging project in its early stages.
Loopholes
The Common Approaches do require that information is disclosed for projects with a repayment period longer than two years. But this provision has created a loophole for a large number of projects financed by ECAs to remain secret. For example, Romania’s Eximbank has said that it has never supported a project with a repayment period longer than two years, so in theory the ECA has no reason to disclose any information about any of the projects it support.
Difficulties in obtaining information about ECA-backed projects have led to a variety of court cases. In Croatia, Slovakia and Hungary, a number of court rulings have supported the idea that that, as publicly backed institutions, ECAs have an obligation to disclose public information about their activities.
While the name explicitly implies support for companies that export, ECAs have been involved in domestic controversies as well. In Hungary, Eximbank provided loans for residential developments in Budapest and the purchase of a national television station – deals which were criticised as not being linked to the bank’s mission. In Croatia, an assistant to the Minister of Finance benefitted from loans from HBOR, and employees of HBOR also received loans to finance their homes. Media reports exposed the scandals, demonstrating that the public does not have sufficient insights into how HBOR works.
The list of recommendations for improvement is long. ECAs have a long way to go before adhering to even those standards followed at international financial institutions such as the European Investment Bank, which does a very similar job but has much more specific rules and requirements (and still they have proven to be insufficient to prevent environmental and socially damaging projects being financed).
The next step in ensuring more responsible financing should be the active publication of information about projects sup- ported by ECAs.
Another crucial tool for oversight of ECA operations is the adoption of easily accessible compliance mechanisms, where complaints of wrongdoing can be submitted by ECA contrac- tors as well as the general public, both in the home country and the destination country of the project.
To avoid the most problematic projects, ECAs should develop an exclusion list that prohibits support for projects that contra- vene international covenants and agreements that nations sign
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