I am the Coordinator of the Halifax Initiative. The Halifax Initiative is a coalition of 14 Canadian NGOs deeply concerned about the policies and practices of the international financial institutions. Since 1995, we have joined efforts to push for reforms at the World Bank and the International Monetary Fund, reforms which will make these institutions protect human rights and the environment, reduce poverty and increase equity among people.
In the last couple of years, we have realized that even what little progress has been made at the Bank and the Fund towards these goals is being threatened and undermined by export credit agencies, including the EDC. Collectively, export credit agencies hold more debt of developing countries than the World Bank and the IMF. Export credit agencies are also the single largest public financiers of large_scale infrastructure projects in the developing world, exceeding the total annual infrastructure investments of MDBs and bilateral aid agencies. In the last decade marked by dropping aid levels, export credit loans and guarantees increased four-fold.
Whereas the World Bank has developed social and environmental guidelines, an appeal process, contractual obligations for the protection of two core labour rights and made strides in levels of transparency and disclosure; ECAs, with the exception of the US ECAs, work in secrecy and in what amounts to a social and environmental policy vacuum. And, unlike the World Bank, export credit agencies themselves have not taken any responsibility for the debt crisis of the highly indebted and poor countries.
Many of the NGOs testifying before you today are part of a twelve member Working Group on the EDC hosted by the Halifax Initiative. Today we will argue, among other things, that:
- Canadian foreign policy commitments to sustainable development and international labour, human rights and environment conventions should be ensured by requiring EDC to minimize environmental impacts, respect human rights and take into account social needs of communities, such as health, livelihoods and the right to voluntary resettlement.
- External accountability mechanisms should be put in place to assist in ensuring adherence to these policy commitments.
- Accountability to the public should be promoted through policies that require adequate disclosure.
When engaging with the poorest countries, EDC should take particular care not to exacerbate their indebtedness, which has placed them in an economic and social crisis.
In the areas that concern us, the Gowlings report makes some recommendations that we support, others we would strengthen. It does not discuss the debt-creating aspects of the EDC, nor the need to protect the social needs of communities affected by EDC-financed or guaranteed projects. I will focus on these two areas.
After the Mexican debt crisis, ECAs, as the IMF noted, stepped in where commercial banks fear to tread. ECAs now hold 56% of the debts Third World countries. The level of external debt of the highly indebted and poor countries is now widely recognized as a key impediment to their economic and social progress.
Unlike commercial bank loans. EDC lending may result in private debts being transformed into public ones. The guarantees that are provided by the host government create, in effect, subsidies to Canadian businesses seeking to export, encouraging them to engage in trade and exports that would otherwise be economically not viable. To an extent, the increase in export credit lending reflects an \export driven\ desire for expanded business rather than a need for funding on the part of the borrower. This encourages a process of excessive and unproductive lending, unchecked by a lack of transparency and responsibility to local communities.
The poorest people in the world owe Canada through the EDC about 2.5 billion dollars. Of these debts, $76 million is in arrears - debt that is unpayable by these countries and uncollectable by EDC.
The Corporation has written off commercial debts that it cannot collect, but the situation is different for sovereign loans. EDC relies on the government of Canada to cover its losses.
We recommend that new sovereign loans by the EDC should not be made with the expectation of reimbursement by the GOC. This will in effect require EDC to include the highly indebted nature of the poorest countries in its risk assessment of projects.
We also recommend that EDC take into account socio-economic conditions of communities, by defining social issues and adopting policies to address them. The definition in CEEA, "any change that the project may cause in the environment, including any effect of any such change on health and socioeconomic conditions, on physical and cultural heritage, on the current use of lands and resources for traditional purposes by aboriginal persons, or on any structure, site or thing that is of historical, archaeological, paleontological or architectural significance", and World Bank policies on indigenous people’s, safeguarding cultural property and involuntary resettlement could act as baselines. The Export Development Act should be amended to require social considerations of the EDC.
In conclusion, EDC has argued that it is up to the host country to protect its people and the environment. But it is not up to the host country to ensure that EDC’s public policy mandate be made consistent with other Canadian public policies, interests and values. It is up to you, the Canadian Government.