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The World Bank repays debt: Failed fishery project secured Norwegian jobs.

In the early 80's, 8 trawlers/purse seiners built at Norwegian shipyards were sold to Ghana. The delivery were a part of the Ship Export campaign, and received a loan of almost 200 million NOK. Initially, NORAD (Norwegian Agency for Development Co-operation) would not approve the developing element of the sale, but yielded to strong pressure in order to secure Norwegian jobs. The boats were a financial disaster for the recipient, Ghana, and today the World Bank is in effect paying the loan. The boats are more less all laid up - only one of the boats are partly in activity.
Artikkelen er mer enn to år gammel. Ting kan ha endret seg.
In the early 80's, 8 trawlers/purse seiners built at Norwegian shipyards were sold to Ghana. The delivery were a part of the Ship Export campaign, and received a loan of almost 200 million NOK. Initially, NORAD (Norwegian Agency for Development Co-operation) would not approve the developing element of the sale, but yielded to strong pressure in order to secure Norwegian jobs. The boats were a financial disaster for the recipient, Ghana, and today the World Bank is in effect paying the loan. The boats are more less all laid up - only one of the boats are partly in activity.


By Morten Rønning
Norwatch

The Ship Export campaign during the 70's and the 80's was a sheer rescue operation for Norwegian ship building industry. Similar measures were initiated in other countries. Still, there were set a requirement for NORAD approval for export to developing countries. It appears, though, that NORAD had no real influence on the projects, and that they were forced to approve projects they had insufficient knowledge about. Today, Ghana is still repaying the loan that was used for saving Norwegian shipbuilding industry.

Per Hærnes and Jarle Simensen at the University of Trondheim who have been taking a close look at Norwegian fishery aid to Ghana. The co-operation goes back to the -60's.

Large disagreements.
The Ghanaian shipping company Mankoadze was the buyer of the 8 fishing vessels, four of which were built at Sterkoder Mekaniske Verksted and Haugesund Slip respectively. Already during the negotiations, there were large disagreements between the experts who were consulted. Mankoadze wanted larger ships than both NORAD and the Norwegian Ocean Research Institute (Havforskningsinstituttet) recommended. At the same time, there was disagreements with regard to the resource basis for the boats. The boats were to be built for combination fishery in addition to tuna fishery. The catch prognoses which were the basis for the project were partly founded on fishery also in foreign waters, which was dependent on agreements between the various countries. The project was also dependent on export, as both foreign personnel and equipment could not be paid with Ghanaian currency which was non-convertible.
More than 15 years later it appears that the sceptics were right. In Ghana, as in many other countries, trawler fishery competes with traditional coastal fishery. In a 1993 report from the Ghanaian department of fishery, it is described how the trawler fishery threatens the existence of the canoe fishery, the reason being that the catch in Ghanaian waters has reached its maximum. Due to lacking control, many trawlers follow the fish towards the coast and operates in areas previously dominated by the canoe fishermen. This trawler fishery also destroys the equipment used by the coastal fishermen.

«We wish to continue to believe that the plan was to help a poor country, not to dump useless equipment and work on us.»
R. Ocran, Mankoadze, 1982
.

More and more expensive
Exportfinans (owned by the largest Norwegian banks) provided the financing of the boats with guarantees from Garanti-instituttet for Eksportkreditt (The Guarantee Institute for Export Credit - GIEK). In Ghana, the government guaranteed for Mankoadze. Several modifications were done during the construction of the boats, and the final cost rose to close to 300 million NOK. NORAD was pulled into this situation and was subject to a massive local political pressure. The fact that Mankoadze's representative in Norway, Hallbjørn Hareide, threatened to arrange both construction and financing of the boats in Germany contributed to this.

Dr. philos. Per O. Hærnes at the University of Trondheim has studied the sale of the trawlers to Mankoadze. He claims that the reason why NORAD allowed themselves to be subject to this pressure was partly due to a press campaign initiated by Hareide, where NORAD's proceedings were subject to potent criticism, and partly due to a political pressure related to local business interests. Sources NorWatch has been in contact with indicates that this pressure is mostly related to the four boats being built at Sterkoder.

An article in the business magazine Økonomisk Rapport (Economic Report) 11/78 concludes that the potential uncertainty in the project «...should come to the benefit of Norwegian jobs.»

The whole project was worth around 1000 Norwegian man-labour years, and at a time when most of the world's shipyard industry was struggling, this was a too big a contract to lose. At delivery, the cost of the boats were approximately 190 million NOK, in addition to a «gift» of 80 million NOK in the form of interest subsidies.

Modifications and repairs of the boats, in addition to loss of income (the catch in 1986 was 13% of the predictions), led Mankoadze to require an additional loan of 32 million NOK. Again, there was disagreement between various experts in Norway, but the international reputation of the Norwegian shipbuilding industry weighed heavily in the balance. The Ghanaians claimed that many of the problems were due to poor quality of the boats as well as a lack of follow up of the project from Norwegian side. The founder of Mankoadze, R. Ocran, complained in 1982 in a note to GIEK:

"Norwegian ship building expertise, controlled by Det Norske Veritas and Skipskontrollen (The Ship Control), and with Skipstekniske as consultant, controlled the construction of the boats. We wish to continue to believe that the plan was to help a poor country, not to dump useless equipment and work on us; and that Norwegian authorities has a moral obligation to straighten out the situation."

Poor follow up.
The boats had problems already when they were delivered, and some of them were returned to Norway for modifications and improvements. Mankoadze did not have the economy nor the access to spare parts, and the Norwegian shipyards were less than enthusiastic to comply. The company soon came into economic difficulties, partly due to lack of sales of fish in other countries, which could provide foreign currency, partly due to reduced fish prices. Consequently the company applied to Eksportfinans for an extension of the interest free period, an application that was never properly treated and responded to. Instead, Eksportfinans and GIEK did some serious thinking. Meanwhile, the loan was defaulted.

It was decided to establish a steering committee in June 1986. In order to secure Norwegian interests in the project, the steering committee had a Norwegian representative. In a report from the committee, August 1987, the situation is described as follows: «..the condition of the fleet is bordering on bankruptcy. Due to a lack of financing as well as spare parts, the technical condition of the boats has deteriorated considerably, and some of them are hardly operative any longer.»

The lack of spare parts necessitated cannibalism of some boats for the benefit of a few, something which reduced the chances of a return to an operative state for the rest. The summer of 1988, the Norwegian representative in the committee, Einar Vindenes, gave up his role and characterised the situation as «as good as hopeless.»

In 1989, the debt had increased to 270 million NOK, due to added interest on overdue payments and a withdrawal of the interest subsidy. The Ghanaian state applied for a moratorium, i.e. a cancelling of the entire debt, but this was rejected by GIEK. Instead the loan was re-negotiated and reduced with approximately 90 million NOK in 1989.

The loan was last re-negotiated in 1996, when the Ghanaian state got it reduced to between 80 and 100 million NOK. Today, it is virtually entirely paid by the International Monetary Fund. Ghana, which the World Bank describes as «one of the best pupils in the class» in Africa, receives large sums from this fund today.

«Ghana's building up of a tuna fish fleet should be based on a more realistic economic assessment, and on smaller and cheaper units than those which have been proposed.»
D. Larsson, business advisor NORAD, 9th June 1978

The Ship Export Campaign
The Ship Export Campaign, 1977-1981, was evaluated by the Parliamentary Bill 25, 1988-89. In this it is stated that «An unfortunate consequence of ... the employment situation ... was that the contracts went to shipyards that were not necessarily the best qualified. The quality of the products that were delivered from Norwegian side were not always satisfactorily.»

Further it states that «Very many of the projects that were initiated did not, however, lead to economic growth in the recipient country. The projects were not sufficiently modified for the target country.»

About the project risk it says that «Most of the cases (projects) would have been rejected had ordinary risk assessment been applied.»

The campaign is summed up as follows: «In hindsight, it must be asserted that the Ship Export Campaign, as it was executed, had limited importance as development aid.»

The campaign had its afterplay in Parliament, where the conservatives submitted a motion for vote of no confidence towards minister of commerce, Halvard Bakke. The motion was not carried out.

Norwatch Newsletter 4/97