Export Credit Agencies Challenged on Corruption

The OECD convention to combat corruption, which entered into force in February 1999, makes bribing foreign government officials a criminal offence. In their letter to OECD Secretary General Donald Johnston, the Berne Declaration and Crocevia, two advocacy organizations from Switzerland and Italy, maintain that official export credit agencies have so far not implemented this convention in practice. Many export credit agencies have insufficient or no regulations in place which would prevent corruption in the contracts which they fund. Others do have policies in place, but do not adher to them in practice. The Berne Declaration and Crocevia point out that in Indonesia and Lesotho, export credit agencies have not taken any measures to investigate corruption in projects which they financed, or are even pressurizing the Indonesian authorities not to do so.

The NGO letter, which was endorsed by 81 groups from 33 countries, puts forward seven recommendations. Most importantly, the letter proposes that official export credits or guarantees should be declared void if corruption is discovered in the contracts covered by them, and that companies involved in illegal payments related to such contracts should be debarred from receiving further credits or guarantees for five years. Further, the NGOs ask that export credit agencies should not cover commissions as parts of the contracts which they fund, should work together with borrowing governments in investigating evidence regarding corruption, and should suspend credits or guarantees while such investigations are carried out.

A new report published by the Berne Declaration documents that in Indonesia, export credit agencies guaranteed several power plant contracts which were ridden with corruption during the Suharto years. The bribes which were offered to friends and relatives of General Suharto resulted in power plants which were highly overpriced or which produced electricity which the country did not need. Yet when the new government started to investigate the contracts and to challenge some of them in court, the export credit agencies from Germany, Japan, Switzerland and the U.S. pressurized Indonesia to recognize the contracts irrespective of whether or not they involved corruption. Peter Bosshard of the Berne Declaration, the author of the new report, says: „Export credit agencies have so far not managed to reach an international agreement on how to prevent corruption in their contracts. It is a shame that at the same time, they are resorting to collective pressure tactics against a newly elected government which tries to overcome the legacy of corruption.“

The Export Credit Group, which consists of the export credit agencies of all OECD countries, meets in Paris on 16/17 November in order to discuss measures to combat corruption. Francesco Martone of Crocevia says: „If expect export credit agencies are not prepared to adopt clear and binding policies to combat corruption, the good-governance rhetorics of their governments will be exposed as void and hypocritical.“