GIEK's new environmental guidelines: Exclude guarantees to the Three Gorges project

By Morten Rønning
Norwatch

Early this year, GIEK was instructed by the Ministry of Trade and Industry (NHD) to work out a proposal of environmental guidelines for the guarantee institute. The guidelines, which were adopted by the GIEK board of directors in October/November this year, are a result of a struggle between NHD and GIEK, and also a result of the international efforts to co-ordinate such guidelines within the OECD. The guidelines say, among other things, that environmental risks are to be treated on par with all other risks, and that GIEK can instruct applicants to present reports and documentation on environmental aspects.
 
"The Three Gorges development is an example of a project which would probably not be given a GIEK export guarantee, in accordance with the new environmental guidelines."
Parliamentary Secretary Harriet Berg in NHD to NorWatch 18.12.98

No support
Now NHD has stated that with these guidelines in place, earlier GIEK guarantees would probably not have been given to Kværner Energy and Advisory Group of Norway for deliveries to the Three Gorges project in China.

- The Three Gorges development is an example of a project which would probably not be given a GIEK export guarantee, in accordance with the new environmental guidelines, Parliamentary Secretary Harriet Berg confirms.

When these guarantees were made public last summer, the then Minister of Trade and Industry, Grete Knudsen, did not want to comment on the case at all.

Spokesman of the Ministry of Foreign Affairs (UD), Ingvard Havnen, said to NorWatch that the UD had no restrictions on trade with China, and that GIEK's decisions were based on this assessment. Havnen further emphasized that Norwegian authorities were satisfied with the dialogue which had been established with China.

Both Erik Solheim of the Socialist Left Party (SV) and now prime minister Kjell Magne Bondevik of the Christian People's Party (KrF), then in opposition, said that they wanted to raise the question of GIEK's guarantees in Parliament.

When the Association for International Water and Forest Studies (FIVAS) later asked prime minister Bondevik what he would do about the guarantees, he maintained his criticism of the project, but stressed that a change of government could not reverse a pledge.

Kværner
Kværner Energy lost the really big contract in the project, estimated at about 3.5 billion kroner. Such a contract would have implied a total GIEK guarantee of almost 500 million kroner. However, Kværner was given a contract of sub-deliveries worth around 280 million kroner. The exact sum of GIEK's guarantee is unknown. Both of Kværner's estimates were pledged guarantees from GIEK. Kværner's work is done both in Norway and in China.

Then managing director of Kværner Energy, Otto Søberg, said to the Norwegian newspaper
Dagbladet that Kværner is not involved in politics.

- The result of the project is definitely positive, said Søberg.

AGN
Advisory Group of Norway has, through AS Veidekke's subsidiary Korsbrekke and Lorck, delivered an asphalt core machine to the project worth 4.7 million kroner. This delivery also has a GIEK guarantee.

Last summer Nils Scwartz said to NorWatch that AGN themselves had not made any assessment of the pros and cons of construction.

- We understand the Chinese authorities' arguments about need for flood control and energy, said Scwartz.

To NorWatch, managing director of GIEK, Erling Naper, gave the following reasons for the institute's guarantees:

- Human rights and environmental concerns are relevant to our assessment only when they affect the credit-worthiness.

Old dream
China has been considering the construction of the Three Gorges for more than fifty years. The decision to start construction works was made in April 1992. The dam project will turn 600 kilometres of the river Yangtse into a huge lake which, among other things, will overflow large areas of agricultural land. Approximately 326 towns and villages will be overflowed, many of which possess inestimable historic values. The forced movement of the inconceivable number of 1.3-1.4 million people has already started. The main dam will be 185 metres high and produce 18,200 MW of electricity. At the same time, the river will be made navigable for larger ships.

In addition to the massive movement of people, probably the world's largest as a result of the construction of a hydroelectric power station, the damming up of the river will also threaten some already endangered species of animals. The World Wildlife Fund is, among other things, concerned about the future of the big panda, the Chinese river dolphin, the Chinese alligator, and the Siberian white crane. Chinese environmental groups, supported by international milieus, have for a long time stressed that there are more reasonable and less destructive alternatives to the development.

The guidelines
Thus the guidelines instruct GIEK to assess environmental risks on par with other risks in their credit assessment. It is also emphasized that the guidelines should be in accordance with similar measures in other countries, as Norwegian companies must not be in a weaker export situation than their competitors.

Point three says:

- GIEK should be instrumental in making Norwegian exports and investments respect the development of an environmentally sustainable social and economic development in foreign markets where Norwegian business interests are involved.

It is further said that GIEK can instruct those who apply for guarantees to present reports and documentation on environmental aspects. If satisfactory information is not presented, the application may be rejected, says Point four.

Point seven further states that GIEK shall respect their applicants' legitimate demands for confidentiality. With regard to this, the need for openness around applications for guarantees has been pointed out, both in the Norwegian debate, and in the international work for environmental guidelines for export guarantee institutions. To give the public opinion a fair chance of influencing the process in GIEK, applications must be made public. However, it is not necessary to publish all the details. A publication of pledges has been pointed out as the absolute minimum, if the opposition is to have an opportunity of assessing the effect of the guidelines.

The consequence of this point, as well as the fact that guidelines which included human rights were abandoned at an early stage of the process, is that the national and international public opinion will have to continue their work to improve the export guarantee arrangements.

Norwatch Newsletter 23/98