Export credit agency finance in Indonesia

Export credit agency finance in Indonesia

Export Credit Agencies activities are destructive: an Indonesian case study

This article is very critical of the role of ECAs in Indonesia, past and future. In the Suharto era, export credit agencies (ECAs) played a major role in financing environmentally and socially unsustainable investments that have depleted Indonesia’s extraordinary natural wealth. Investment projects such as factories, plantations, and mines not only destroyed natural resources, but also gave rise to other significant environmental and social impacts including the destruction of the livelihoods of the local peoples who owned, managed, and utilized these resources. In short ECAs are described as embodying a form of corrupt, untransparent, environmentally and socially destructive globalization.

This article suggests the following reforms to ECAs:

  • transparency, public access to information and consultation with civil society and affected people in both OECD and recipient countries at three levels: in the assessment of ongoing and future investments and projects supported by individual ECAs; in the preparation within national ECAs of new procedures and standards; and in the negotiation within the OECD and other fora of common approaches and guidelines. Binding common environmental and social guidelines and standards no lower and less rigorous than existing international procedures and standards for public international finance such as those of the World Bank Group and OECD Development Assistance Committee. In addition ECAs must conduct full, transparent accounting for climate change impacts and move to increase investments in sustainable renewable energy
  • the adoption of explicit human rights criteria guiding the operations of ECAs. This should be done in consultation with affected people and civil society, and based onexisting regional and international human rights conventions. In Indonesia and elsewhere ECAs have not only supported arms exports directly linked to egregious humanrights abuses, their support for mining, paper and pulp mills and other major infrastructure investments often has been accompanied by destruction of indigenous and local peoples' rights to land and livelihood resources, armed suppression of dissent, and suppression of press freedom to criticize such abuses
  • the adoption of binding criteria and guidelines to end ECAs' abetting of corruption
  • ECAs must cease financing non-productive investments. The massive ECA support for military purchases and white elephant projects, such as nuclear power plants, that would be rejected by OECD bilateral aid agencies and multilateral development agencies such as the World Bank must end
  • the cancellation of ECA debt for the poorest countries, much of which has been incurred for economically unproductive purposes

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