The previous post looked at debt owed to the UK government via DFID and CDC. Below is the result of a Freedom of Information request on debt owed to the UK export credit department run by the DTI. Most signifiantly is the percentage of Indonesian debt owed for arms related trade. While no breakdowns are given for specific debts the fact that roughly 75% of Indonesian debt owed to the UK is arms related is utterly shocking. As before any comments…
LESOTHO, INDONESIA, KENYA AND TANZANIA
UK ECGD DEBT
a) Lesotho
1. How much outstanding debt is owed to ECGD?
The Government of Lesotho does not owe any debt to ECGD.
2. Is the ECGD currently owed debt by the Lesotho government regarding the Lesotho Highlands Water project?
No.
b) Indonesia
1. How much debt does Indonesia currently owe ECGD?
The Government of Indonesia owes £507,353,037.91 and US$399,251,3113,93 [sic. We assume this should read $399,251,313.93 which is broadly consistent with other sources: see Jeremy Corbyn PQ] of debt to ECGD under the current UK/Indonesia Debt Agreement.
2. How much of this is for arms related equipment?
ECGD is not able to provide a precise answer to this question. Please see the answer to Question 3 for further details. ECGD’s best estimate, based on researching a 150-page report produced by a former IT system and making intuitive estimates of which original debts were a rms-related, is approximately 75 percent.
3. How much is currently owed concerning the sale of
– 16 Hawk-209 aircraft in November 1996
– 50 Alvis Scorpion and Stormer vehicles in 1996
ECGD is not able to answer Question 3 and the last two points in Question 4. Sums recovered from Indonesia under Paris Club debt agreements are not recovered against specific contracts, but against tranches of debt consolidated in rescheduling agreements. Each such rescheduling agreement takes the form of a Bilateral Debt Agreement between the Governments of the United Kingdom and Indonesia; a number of such agreements have been entered into over the past forty years to give effect to Paris Club debt arrangements involving Indonesia. ECGD’s IT systems do not keep track of details of specific debts falling within each Paris Club rescheduling. Accordingly, it is not possible to obtain the information you request in Question 3.
4. For these debts please detail the following information:
Date of contract
Hawks: 6 February 1996
Alvis vehicles: 19 August 1996
Name of exporter/company
Hawks: BAE Systems Defence Ltd
Alvis vehicles: Alvis Vehicles Ltd
Exported goods or services
Hawks: Hawk aircraft
Alvis vehicles: Scorpion family vehicles and associated support
Name of importer
Hawks: The Republic of Indonesia through the Ministry of Defence and Security
Alvis vehicles: The Republic of Indonesia through the Ministry of Defence and Security
What type of backing was provided by ECGD (Insurance, guarantee or loan) Hawks: Buyer Credit
Alvis vehicles: Buyer Credit
Amount recovered on contract
Amount outstanding owed to ECGD
See answer to Question 3.
c) Kenya
1. How much debt does Kenya currently owe ECGD?
The Government of Kenya currently owes ECGD approximately £19.5m under the UK/Kenya Bilateral Debt Agreement.
2. What proportion of this debt is owed concerning
-
-
– Turkwell Gorge Dam
-
– Ewaso Ngiro project
-
ECGD’s records contain details of an unidentified hydro-electric dam project in Kenya. This project may be the Turkwell Gorge Dam, although it is not specifically so identified. For the purposes of this response we have assumed that this is indeed the case, and the related details are accordingly provided here.
While case support was given in respect of a contract awarded to Knight Piesold on the Ewaso Ngiro project, it is not possible to trace an amount of Paris Club debt back to individual contracts. Please see the response to b) 3 above for the reason for this.
3. For debts concerning these two projects please detail the following information:
Date of contract
Ewaso Ngiro: 20 July 1990
‘Hydro-electric dam’: 14 August 1986
Name of exporter/company
Ewaso Ngiro: Knight Pieshold & Partners
‘Hydro-electric dam’: Scott Wilson Pieshold Ltd
Exported goods or services
Ewaso Ngiro: A consultancy contract.
‘Hydro-electric dam’: Design and construction of a hydro-electric dam
Name of importer
Ewaso Ngiro: The Kenya Power Company Ltd
‘Hydro-electric dam’: Kerio Valley Development Authority
What type of backing was provided by ECGD (Insurance, guarantee or loan)
Ewaso Ngiro: Buyer Credit
‘Hydro-electric dam’: Unknown
Amount recovered on contract
Amount outstanding owed to ECGD
Please see answer to b)3 and c)2 above in respect of the assumed Turkwell Gorge Dam project and to b)3 above in respect of the Ewaso Ngiro project.
d) Tanzania
-
1. How much debt does Tanzania owe ECGD?
The Government of Tanzania does not owe any debt to ECGD.
-
2. Did ECGD insure or guarantee BAE systems concerning the sale of an Air traffic control system in 2002 that is currently under investigation by the Serious Fraud Office?
No.
️Breaking News: The government has just given the go ahead for
Shocking indeed, those data on Indonesia’s debt to ECGD. Total military debt would be more than US$ 1.000 million.
It is interesting that reference is made to a number of Paris Club rescheduling agreements in recent years. If ECGD went by the rules of the OECD-DAC, at least 75% of the debt relief offered to Indonesia ought not to have been reported as ODA. It would be good to verify whether this really happened!
Wiert Wiertsema
Both ENDS
Amsterdam
I am nearly certain that cancelled ECGD military debts are being treated as ODA! UK cancels ECGD debts for countries that graduate from HIPC, and I have never seen any indication that the full value of the ECGD debt is not being cited as ODA. The only way the UK might not be violating DAC rules is if none of the HIPC countries actually had any military debts outstanding to the UK. I would love to believe that this is true… however…
Can you post up a link to the relevant document on the OECD-DAC site? I want to look into this further.
Also, we’ve been reading your ECGD paper which mentions OECD guidelines that premiums should be set at a level sufficient to meet long term running costs, and we’re VERY interested as it seems cancellation of EC debts should come from the premiums — and not from DAC. Do you have any more analysis on the current premium levels?
Ben,
References to the cancellation of military debt not being reportable as ODA you find in the HANDBOOK FOR REPORTING DEBT REORGANISATION ON THE DAC QUESTIONNAIRE (http://www.oecd.org/dataoecd/44/22/1894838.pdf).
Relevant quotes (CAPITALS are mine):
9. Debt cancellation occurs when there is an agreement between the debtor and the creditor that an outstanding debt no longer needs to be repaid. In DAC statistics, debt cancellation is reported as debt forgiveness, provided that it happens in the framework of a bilateral agreement and that it is implemented for the purpose of promoting the development or welfare of the recipient. The agreement may or may not be part of a multilateral Paris Club arrangement. THE ONLY EXCEPTION TO THIS RULE IS CANCELLATION OF MILITARY DEBT, WHICH IS NOT REPORTABLE AS DEBT FORGIVENESS, BUT SHOULD BE REPORTED AS AN OOF [Other Official Flows] GRANT.
The same is repeated in para 34.
In the glossary, Annex 2, you will read:
Debt forgiveness
In DAC statistics debt forgiveness covers both debt cancelled by agreement between debtor and creditor and a reduction in the net present value of non-ODA debt achieved by concessional rescheduling or
refinancing. Examples of the latter are Paris Club Debt Service Reduction and Capitalisation of Moratorium Interest options. (No debt forgiveness is deemed to occur when the net present value of ODA debt is reduced through rescheduling or refinancing). HOWEVER, CANCELLATION OR REDUCTION IN NET PRESENT VALUE OF MILITARY DEBT IS NEVER REPOTABLE IN DAC STATISTICS AS DEBT FORGIVENESS, BUT SHOULD BE REPORTED AS AN OOF GRANT.
Other Official Flows (OOF)
Grants or loans from public sources, other than Official Development Assistance. Transactions for military purposes and transfers to private individuals are excluded. Official rescheduling of private debt is
classified as OOF.
As to your question on premiums. OECD, WTO and EU guidelines require ECAs to break even in the long run. This means that losses due to the cancellation of export credit debt should be accounted for by the income ECAs have from premiums and recoveries. I have no information (nor opinion) on premium levels. I would never argue that they should be higher to be able to account for debt cancellation. If you look at the recent recoveries (arrear payments) and the premiums, I have no doubt there is enough money to pay for the debt cancellation agreements of the Paris Club.
best wishes,
Wiert