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The Department for Dodgy Deals

 

"Imagine you went to your bank manager and said, can you lend me a few hundred million for a project that is environmentally unsound, highly corrupt, and unlikely even to materialise?"
~ Professor Noreena Hertz, Economist and Author, Cambridge University 

Sounds like a pretty ridiculous question doesn’t it? Unfortunately, it’s an accurate summary of how a little known government department - the Export Credit Guarantee Department - operates.

So what is the Export Credit Guarantee Department and why should we care?

The ECGD is a government department that helps exporters invest in ‘high risk’ projects by providing a form of insurance. When projects go wrong, the ECGD pays out the exporter and charges the country in which the project took place for the bill of their bail out. By guaranteeing the investment of the exporter the ECGD protects businesses against non-payment by the indebted country whilst creating mountains of new debt for developing nations.

On Thursday, the Jubilee Debt Campaign publicly launched their report on the Export Credit Guarantee Department. Better known as ‘The Department for Dodgy Deals’ the report ‘exposes a history of backing projects by large corporations’ that have led to human rights abuses, environmental destruction and corruption in the developing world.

Little is known about the Department or the work they do.
Today, the ECGD is the biggest holder of Third World debt owed to the British government. Developing countries currently owe the ECGD approximately £2 billion. The majority of this debt is deeply unjust coming from unpaid loans that harmed the people or the environment of the country in which the projects took place. Jubilee Debt Campaign defines this debt as toxic debt and is calling on the UK government to cancel the debts created by these deals.

As discussed in our previous blog, this is fundamentally a matter of injustice. It is a debt that oppresses people.

To take one example.

Indonesia owes the UK £500 million. This debt can be attributed to arms sales made by the UK government to the brutal military dictatorship of General Suharto. During the three decades he spent in power Suharto presided over a famously corrupt regime, amassing billions of dollars in illegal wealth. This money could have directly addressed Indonesia’s widespread poverty and social problems.

Today, 61% of the Indonesian population still lives on less than $2 a day. And its these people, the people of Indonesia, who are now paying us back for arms used against them. At the moment, nearly 20% of its budget goes on debt service, more than on education (17.2%). In 2008 Indonesia paid $22 billion in debt service – over $2.5 million every hour – of which $5.6 billion was interest.

If this wasn’t bad enough, since the financial crisis, rather than tightening up ECGD rules to promote responsible finance, the UK has relaxed them even further. Lowering the ECGD’s ethical and environmental standards to that set by the OECD on the grounds of competitiveness means that, for projects costing under £10 million the department will no longer screen their social or environmental impact.

It’s time for the unjust debts owed to the ECGD to be dropped. Demanding a country pay back its debt at incredibly high interest rates impedes the realisation of the human rights of its citizens. It also profoundly impacts its ability to provide basic services in health, education, housing, water and sanitation.

Join the Jubilee Debt Campaign in calling to end Britain’s Dodgy Deals.

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