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Race to the Bottom, Take II Race to the Bottom, Take II An Assessment of Sustainable Development Achievements of ECA- Supported Projects Two Years After OECD Common Approaches Rev 6 September 2003 A Publication of ECA-Watch About the Publication This publication has been a Editor: collaborative research effort Gabrielle Watson supported by: BothENDs (The Netherlands), Introduction authors: Doug Norlen, Fraser Reilly-King, Jon Sohn, Emilie Thenard, and Campagna per la riforma della Banca Gabrielle Watson mondiale (Italy), the Cornerhouse (UK), FERN (Brussels), Finnish ECA Case study authors, research and campaign contributors: Campaign (Finland), the NGO Azerbaijan, Georgia & Turkey – BTC Pipeline: Working Group on EDC, a Working Nick Hildyard (Cornerhouse), Anders Lustgarten (Kurdish Human Rights Project), Greg Muttitt (PLATFORM), Yury Urbansky (CEE Group of the Halifax Initiative Bankwatch) and the Baku Ceyhan Campaign. Coalition (Canada), Pacific Environment (US) and Urgewald Brazil – Aracruz Cellulose: (Germany). FASE – Espíritu Santo, Brazil and Tove Selin (Finnish ECA Reform Campaign) ECA Watch is an organizing and outreach feature of the larger China – Three Gorges Dam: Patricia Adams (Probe International); Fraser Reilly-King (NGO international campaign to reform Working Group on EDC, a Working Group of the Halifax Initiative Export Credit, Finance and Insurance Coalition); Grainne Ryder (Probe International); Doris Shen-Hoover Agencies (ECAs). Participants in the (International Rivers Network) and the Three Gorges Probe. campaign include environment, India – Tehri Dam: development, human rights, Patrick McCully (International Rivers Network) and Heffa Schücking community, labor, anti-corruption and (Urgewald). other non-governmental organizations and bodies. The goals of the campaign Lao PDR – Sepon Mine: Rod Harbinson (Friends of the Earth, International) and Kate Walsh are described in the Jakarta (AID/Watch). Declaration on ECA reform (see Appendix). The actions of the ECA Peru – Camisea Oil and Gas: campaign include advocacy, Aaron Goldzimer (Environmental Defense); Nadia Martínez (SEEN); grassroots organizing, lawsuits, Jon Sohn (Friends of the Earth, US) and Atossa Soltani (Amazon Watch). research, education and media engagement. Targets of the ECA Romania – Cernavoda Nuclear Power Plant: campaign include specific ECA- Lavinia Andrei (Terra Milleniul III); Aurel Duta (For Mother Earth); backed projects and ECA policy Dave Martin (Sierra Club Nuclear Campaign); Codruta Nedelcu (Romanian Association of Nature Lovers); Olexi Paysuk (CEE reforms taking place at national and Bankwatch); Fraser Reilly-King (NGO Working Group on EDC, a multilateral levels. For more Working Group of the Halifax Initiative Coalition) and Antonio Tricarico information, see www.eca-watch.org (Campagna per la riforma della Banca mondiale). Russia – Sakhalin II Oil and Gas: Cover Photos: Natalia Barranikova (Sakhalin Environment Watch); Petr Hlobil (CEE Bujagali Woman/Ventana Pictures Bankwatch Network); Dimitry Lisitsyn (Sakhalin Environment Watch); BTC “Pipeline” protest/FoE Ikuko Matusmoto (Friends of the Earth Japan) and Doug Norlen (Pacific Environment). Uganda – Bujagali Dam: Bjørn Ivar Fyksen (FIVAS); Frank Muramuzi (NAPE); Lori Pottinger (International Rivers Network) and Nikki Reisch (Bank Information Center). Race to the Bottom, Take II Table of Contents Introduction 2 Points of Concern in Rev 6 and Recommendations for “Rev 7” 4 Introduction to the Case Studies and Summary of Findings 9 Azerbaijan, Georgia & Turkey – BTC Pipeline 10 Brazil – Aracruz Cellulose Factory C and Plantations 16 China – Three Gorges Dam 23 India – Tehri Dam 29 Lao PDR – Sepon Gold and Copper Mine 34 Peru – Camisea Gas and Gas Liquids Project 40 Romania – Cernavoda 2 Nuclear Reactor 46 Russia – Sakhalin II On and Off-Shore Oil and Gas 53 Uganda – Bujagali Dam 58 Appendix – Jakarta Declaration for the Reform of Official Export Credit and Investment Insurance Agencies 63 Race to the Bottom, Take II Introduction Current OECD guidelines for environmental and meet existing international standards on finance; sustainable development review of export credit the adoption of explicit human rights criteria; the agency-backed projects fail to achieve their cessation of finance to non-productive purpose. Significantly destructive projects that investments, such as military purchases or violate host country law, international nuclear power plants; and the cancellation of environmental standards and international human ECA debt for poor countries. (See Appendix) rights and labor laws continue to be considered Following this declaration, increasing and supported by ECAs. This report presents a international press attention, and ministerial civil society proposal for reforming the OECD mandates from the Organization for Economic Common Approaches on Environment and Cooperation and Development (OECD) and the supports the proposal with nine case studies of Group of Eight largest economies (G-8), policy ECA-backed projects from all over the world. negotiations on environmental issues began at the OECD Working Party on Export Credits and Background to OECD Common Credit Guarantees (otherwise known as the Export Credit Group, or ECG). In December Approaches Rev 6 2001, the members of the ECG finalized a Export Credit Agencies (ECAs) are publicly- proposed common set of environmental mandated institutions that provide government- guidelines for ECAs: “Draft Recommendation backed loans, guarantees and insurance to for Common Approaches on Environment and companies from their home country in an effort Officially Supported Export Credits: Revision 6” to promote trade and investment, often in (“Common Approaches” or “Rev 6”). developing and emerging markets. ECAs rank Rev 6 was intended in part to meet the OECD among the largest source of public international ministers’ mandate that export credit policy finance, committing over $500 billion in trade “contribute positively to sustainable finance in 2001 and supporting approximately development and should be coherent with its 10% of world trade. But this investment has not objective,” but also to level the playing field for necessarily brought positive benefits to, and has ECAs and avoid a ‘race to the bottom’ in which in some cases harmed, the affected communities ECAs compete against each other to lower and recipient countries. environmental and other standards in search of Over the past fifty years, ECAs have supported more competitive advantages for their countless projects in the mining, nuclear, pulp companies. Yet Rev 6 has fallen far short of and paper, oil, coal and gas sectors, which have these objectives. had devastating environmental, social and human Despite broad agreement among most ECAs on rights impacts. Consequently, since 1997, an Rev 6, the United States (US) rightly refused to international coalition of Non-Governmental endorse the document. The US judged Rev 6 to Organizations (NGOs) has been drawing public be insufficient on two counts: its weak scrutiny on the adverse consequences of these information disclosure requirements, and its ECA-backed activities. “benchmarking” approach of choosing relevant In May 2000, 347 NGOs from 45 countries standards and procedures on a case-by-case basis called for ECA reform in a statement called the instead of using one common baseline Jakarta Declaration. The declaration demands requirement. Nevertheless, the rest of the ECG greater transparency, public access to members decided to adopt the text on a voluntary information and consultation with civil society basis, and all agreed to review the and affected people; binding common implementation of Rev 6 within two years, in environmental and social guidelines and that 2003. In April 2003, the chair of the ECG 2 Introduction announced that the group was going to reopen the negotiations in an attempt to come to a consensus agreement with all the members, including the US. Since its adoption, NGOs have been very critical of Rev 6 due to its inability to reduce the negative impacts of ECA-backed projects on the ground and to protect the environment and project-affected people’s human and labor rights. Race to the Bottom, Take II 3 Points of Concern in Rev 6 and Recommendations for “Rev 7” Below is a detailed analysis of the key factors leading to the failure of Rev 6 to comply with the OECD and G-8 mandates and government commitments to promoting sustainable development. Specific proposals on how this can be corrected are presented. See the full text of NGO-recommended changes to the OECD Common Approaches Rev 6, dubbed the NGO Rev 7 Proposal, at www.eca-watch.org. 1. Lack of Commitment to Sustainable Development Critique: Proposal: When the OECD Common Approaches were Rev 6 should be revised to include in its first developed during months of closed-door objectives, standards and procedures a discussions, the government negotiators sought commitment to sustainable development consensus by identifying minimum guidelines all encompassing economic, social, cultural and could agree to. For this reason, Rev 6 focuses environmental factors as stated in numerous primarily on environmental issues. At the same multilateral meetings and agreements since the time, controversy over ECA support for the Ilisu Rio Earth Summit in 1992. dam in Turkey existed, focusing attention on the The NGO Rev 7 Proposal replaces the current fate of 75,000 Kurdish and other minorities who focus on environmental review with the broader were to be displaced. This project led the and
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