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The European Investment Bank in the South: In whose interest?

Jaroslava Colajacomo

Friends of the Earth International, Campagna per la Riforma Della Banca Mondiale, CEE Bankwatch Network, World Economy, Ecology & Development

January 2006

SARPN acknowledges the CEE Bankwatch Network as the source of this document: www.bankwatch.org
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Introduction

While activities in the global south are still a relatively minor part of the overall portfolio of the EIB – which continues to operate mainly within the Member States of the European Union (EU) – they have, nevertheless, resulted in the EIB being among the main players within the Union’s external development and economic co-operation programmes. Accordingly, the European Parliament and the European Commission are called upon to exercise their institutional powers1 whenever the EIB is acting on behalf of the European Community and towards the advancement of the political objectives of the European Union.

In its Development Policy Statement of 2000, the European Commission tried to reorient its cooperation with non-EU countries towards poverty alleviation. It prioritised the promotion of equitable access to social services, transport, food security, sustainable rural development and institutional capacity-building, particularly in the area of good governance and the rule of law.2 The European Investment Bank is supposed to follow this EU development strategy. Specifically, the EIB operates in the global south under the EU-ACP Cotonou Agreement and within the framework of EU Council Resolutions.

This report3 analyses the real poverty alleviation impact of EIB lending operations in African, Caribbean, Pacific, Asian and Latin American countries. It illustrates how European companies are the main beneficiaries of EIB loans, exposes the significant social and environmental problems surrounding EIB’s projects, details various instances of fundamental policy incoherence and highlights the serious non-transparency and the systematic lack of development impact assessments of the EIB’s lending in the global south.

This report provides an overview of eight projects funded by the EIB in Zambia, Chad, Cameroon, the Philippines, Indonesia, Laos, Mexico and Brazil. The projects cover a variety of sectors, including oil, gas, mining, water, the car industry, and pulp and paper. In most of these cases, requests by local and/or international civil society for pre- and postappraisal studies, monitoring reports and project evaluations were rejected by the EIB on the grounds of confidentiality requirements. This report highlights that in general, civil society did not have – and was actively denied - a voice in any decisionmaking procedures concerning these projects, even though the EIB claims civil society has been among the main beneficiaries of the projects.

The World Bank’s 2003 Extractive Industries Review4 found that large-scale oil, mining and gas projects are not likely to contribute to poverty alleviation in countries that are corrupt, do not have law enforcement mechanisms in place, and do not respect human rights. These governance elements are lacking in many countries in Africa, Asia and Latin America where the EIB is active in these sectors. In 2000, the prestigious World Commission on Dams5 already presented similar findings for large-scale hydro dams, recommending among its seven strategic priorities, the principle of “gaining public acceptance” before any new dam is built. Both studies recommended obtaining consent from indigenous and local communities before pushing ahead with large-scale pipelines, oil extraction, mines or large dams. This report illustrates how the EIB actually failed to obtain communities’ consent for such projects.

If the Millennium Development Goals6 are to be achieved, involving local communities in development projects and analysing the impacts of development lending are of critical importance. This is particularly true for scarce public financial resources that should be directed to their best use. Moreover, lending to southern countries’ governments contributes to the creation of debt and must therefore be carefully evaluated against its benefits if principles of poverty eradication and sustainable development are to provide the basis for EIB’s lending outside Europe.

The EIB has an opportunity to avoid the mistakes made by its sister organisation, the World Bank, whose controversial projects and policies in southern countries around the world have generated widespread outrage and protest. As the EIB is setting out to revise its mandates outside the European Union (its present mandates expire in 2007), this report highlights critical mistakes to avoid in the future, and steps the EIB could take to do things better.


Footnotes:
  1. For an assessment and monitoring of EIB operations by the European Parliament and the Commission see Chapter 1.
  2. Subsequently, these priorities (with the exception of access to social services) have been reaffirmed in the revised Development Policy Statement “The European Consensus on Development” in November 2005.
  3. Based on the European Parliament study by CRBM see footnote 1.
  4. The Extractive Industries Review by the World Bank Group assessed the World Bank’s future role in extractive industries. The EIR report “Striking a better balance”, December 2003, can be found at the World Bank’s web site: http://ifcln1.ifc.org/ifcext/eir.nsf/Content/Home
  5. The WCD was an independent process sponsored by the World Bank and the World Conservation Union (IUCN), which addressed controversial issues associated with large dams. The WCD’s report, “Dams and Development: A New Framework for Decision-Making” (2000) identifies core values and a framework for decision-making to ensure that dams do not impose excessive social environmental costs. For more information on WCD see www.dams.org.
  6. The eight Millennium Development Goals (MDGs) – which range from halving extreme poverty to halting the spread of HIV/AIDS and providing universal primary education, all by the target date of 2015 – form a blueprint agreed to by all the world’s countries and the world’s leading development institutions. http://www.un.org/millenniumgoals.


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