Our Italian Counter Balance friends and colleagues CRBM are blogging as well.
The pic shows not some modern-day cannon, but pipes waiting to go into the ground on a 150 kilometre pipeline from the “Monti Alpi” oil storage plant to the coastal city of Taranto, in the southern Apennine mountains of the Val d’Agri area in southern Italy - part of oil projects that received over half a billion euros in loans from the EIB between 1996 and 2000.
In a sign of the times, London’s mayor Boris Johnson has been mouthing off about the London underground PPPs as:
“a system that has not been remotely protective of taxpayer value”.
And mouth off he should, as an elected official who’s probably had it up to here listening to constituents who’ve had it up to here.
The news report in Public: Private Finance last week elaborates that: “In a report setting out plans for London transport, Mr Johnson also warned that Tube Lines’ PPP contract could suffer “contractual problems and cost overruns”.”
We’ve talked before at People outside glass houses about the EIB’s involvement in London underground’s diabolical PPP experience, where Metronet collapsed and the risk ended up in public hands (does this sound familiar?).
Slightly surreally (the normal state of affairs in PPP-land, alas), at the same time as the PPP organ was reporting Boris Johnson’s trenchant views, an opposite view was being offered by the looming headline “New construction body backs plans to accelerate PPPs“:
“The [Construction Council], which represents 24 big construction firms, said schemes such as Building Schools for the Future and NHS Lift could help counter the economic downturn.” [my emphasis]
How bad have things got? Maybe not bad enough yet? As Galbraith wrote in The Great Crash in 1955:
“As in all periods of speculation … men sought not to be persuaded of the reality of things but to find excuses for escaping into the new world of fantasy.”
In spite of the vast sums involved, and other than some of the fairly radical “get the vote out” spots, the US presidential race has brought little in the way of innovative TV advertising. One issue for pro-Republicans to try to get innovative on is the ultra-sensitive race issue, as this ad from last week attempts to do.
You can see what they’re trying to do, and aside from the unsavoury undertones (dragging MLK into the mire too) it falls down on account of sheer lack of content. But on an emotional level, it may resonate with white guys apprehensive about denying a black guy their vote because it could make them look like racists. The elements are there: a black guy reinforcing himself by invoking Martin Luther King - you just need a slither of savvy to know what’s going on.
The “climate change” tick-box elements are certainly present in this EIB advert that appeared in Environmental Finance magazine in May. But something appears to have gone badly wrong…
Before I go on, I should point out that as far as I’m aware this is not a spoof. The text in the grey box (bloody scanner) reads: We finance climate change and clean energy projects in support of environmentally and socially sustainable development throughout the world.
What on earth is that penguin doing there though, basking in the sun, on a detached piece of icecap? It seems to be getting much needed ventilation from the turbines. Did someone at the agency fall for Terry Jones’ penguin April Fool last year?
At least it’s honest: since the adoption of the Kyoto protocol in 1997 the EIB has pumped over 17 billion euros into fossil fuel projects both inside and outside the EU. In 2007 alone it loaned over 3 billion euros for fossil fuels. The EIB needs to get out of fossils, for the sake of penguins and us all.
All of a sudden, the EIB has shot to the top of everyone’s Christmas card list.
European Commission president Barroso is flagging the EIB as part of a European framework to deal with the economic crisis.
Industry commissioner Verheugen wants a EUR 40 billion “soft loan” package from the EIB to help the European car industry belatedly gets its act together on CO2 emissions (T&E comprehensively rebutted Verheugen’s “no subsidies” apologia on Wednesday, but no sign of a link to their release).
And UK finance minister Darling has been pushing UK banks to make the most of the EIB’s increased global loans facility.
Only you don’t hear mention of “global loans” in such coverage, but there’s a lot of money getting talked up, there are clearly a lot of needy SMEs out there - so let’s get the money out the door as quickly as we can, no messing about. Which sums up the way global loans at the EIB have been done for many years, as this new clip from Counter Balance depicts. The cartoon’s focus is on outside EU lending, but the same applies within the EU.
RELEASE!
Steve Kretzmann at Oil Change International has gone for the World Bank’s jugular with some unrelenting exegesis of the Bank’s 2007-2008 energy lending: World Bank Group lending to coal, oil and gas is up 94 percent from 2007, comprising over 3 billion dollars of public subsidiy. The global climate change prize fighter’s lending on coal has rocketed by 256 percent in the last year. Once Steve’s finished conducting some real world auditing of the Bank’s commitments to renewables in FY2008, he arrives at 280 million dollars.
The analysis from Oil Change and other NGOs relies on the World Bank’s own figures. What to make, then, of one footnote in the ever-expanding bailout? The EIB’s Global Loan system of lending via commercial banks to small and medium-sized enterprises is to be “front-loaded” (Gordon Brown’s phraseology) with 30 billion euros, representing a doubling of the bank’s lending to SMEs.
Such a sum may not strike you as so exceptional in the current economic climate. And, for the time being, SMEs have just about nowhere else to turn to for credit. But with ever more put-upon taxpayers naturally demanding greater democratic control of economic life (”May we respectfully inquire about what strings are attached to this latest multi-billion public money hand-out?”), just what kind of businesses are going to benefit from this 30 billion euro EIB package?
As things stand, not only are there no guiding thematic principles (eg preferences for green technology) underpinning the EIB’s Global Loans mechanism, the EIB itself does not know where the billions are ending up. Bankwatch has tried to determine if good things are getting funded under EIB Global Loans, but the system spat us out fairly comprehensively. In a recent drive to gain more transparency publicity than the latest celebrity see-through dress, the EIB has agreed to ensure that SME beneficiaries now know that their credit line has indeed originated in Luxembourg. Other than that, we’re all in the dark - so if you work for or know of an SME that has enjoyed an EIB loan or is looking for one, comments below please.
Front-loading the EIB in such opaque circumstances appears to do little to dispel public concerns about corporate free-loading. How prudent is that?
With comments such as “very vague” and stressing the need for “greater detail” in how the EIB will exercise its “discretion to apply EU standards or social standards, or not” (emphasis added), the International Finance Corporation (the World Bank’s private lending arm) has provided its input to the EIB’s public consultation on its currently draft Environmental and Social Statement.
The IFC’s comments are not long, they are brutally concise. They succeed in unravelling some reasonably aspirational proposals on social protection that the EIB is attempting to finesse, unfortunately, with its trademark discretionary language. As IFC notes:
“The effect of these things might mean that you simply would not apply social standards in a majority of your projects outside EU, potentially because you do not ordinarily require the discipline of due diligence on social issues within EU, and hence your internal capacity simply dictates what is possible or not in the emerging markets (but mostly not possible).”
Ouch. A revised draft of the statement, featuring hopefully some fundamentally revised thinking and language, is due soon. A range of inputs to the first draft is available on the EIB website, but oddly lacking are contributions from business. Are we to believe that the EIB’s principal beneficiaries had nowt to say on the new statement, a statement which:
Commercial confidentiality surely has no application in the shaping of shared environmental objectives.
Over at European Tribune, Jerome (an investment banker, previously with an oil portfolio including the Baku-Tbilisi-Ceyhan pipeline and now focusing on wind projects) lays out how in times of plenty the public gets hit, and when things get tight or exceedingly tight the public gets hit. For “gets hit” read “fleeced”. So how to interpret a new – as far as I’m aware – description of the European Investment Bank, that of an anti public-fleecing agent?
The EIB has been touted in the last week as a subsidy vehicle for the roll-out of carbon capture and storage demonstration plants across Europe. According to the European Parliament’s rapporteur on CCS, Liberal Democrat MEP Chris Davies, the necessary EU subsidies for CCS of as much as 10 billion euros would have to be monitored – and stepping into the breach would be the EIB to run tenders for the plants that would ensure that the public was not being “fleeced”.
When it comes to tendering processes, EIB rigour can hardly be guaranteed. Take the London Underground PPP, where in 2002 the UK government Select Committee on Transport, the Environment and the Regions concluded: “It was not possible to establish that the PPP offered value for money.” Yet in 2002 and 2003 the EIB loaned a total of 1.3 billion euros to the two consortia Metronet and Tube Lines.
Counter Balance has documented the improprieties at the heart of the Gilgel Gibe dam project in Ethiopia, where the contract for phase two of the dam was awarded without tender to the Italian firm Salini, which is now under criminal investigation by the anti-Mafia department of the Roman magistrates. While the World Bank has walked away from financing phase three, the EIB is the only public bank still considering it, having already backed phase two.
Just two weeks ago, Friends of the Earth-CEPA (Bankwatch’s Slovak member group) raised the alarm about some interesting tendering processes running through major new road infrastruture construction – a letter to EIB president Maystadt, inquiring whether the bank intends to tolerate such practices via a multi-million euro loan, awaits a response.
When it comes to CCS itself, one of the first mainstream media mentions came in a Times article of May 2004 where people who were asked for the first time about this particular technofix “said it sounded dangerous and unnecessary… They don’t like the idea of a quick fix or burying the problem. Most people would rather see a move to renewables and improved energy efficiency.” Since then industry has heftily ratcheted up the promotion of CCS, though usually neglecting to add in the bit about oil recovery, where the carbon dioxide pumped into ageing oil wells makes more oil recoverable.
It’s debatable whether the wool – or the fleece – has been removed from or pulled more tightly over the public’s eyes when it comes to CCS. With current CO2 emissions provoking further alarm among the climate scientists – with emissions in 2007 up 2.9 percent on 2006 levels – it seems curious that CCS is receiving such forward-thinking leeway (and proposed heavy public subsidy investment) when the ready-made renewable alternatives are staring us in the face, and are more than likely taking a notable hit right about now as a result of the Wall Street meltdown.
And when you stand back from the carbon headlines – as some peer-reviewed science on CCS recently did – consider this: a CO2-burying plant may emit between 71 and 78 percent less CO2, but to get this level the nitrogen oxide and sulphur oxide emissions are up to 40 percent worse than at a standard coal plant. That means more acid rain, more ozone destruction, and more water pollution – and that is quite a hit to take from one of the preeminent climate change solutions of the day.
Earlier this week, as Wall Street’s toxic debt addicts failed to find the adrenalin syringe after yet more bingeing, an inevitable if somewhat later than expected initiative involving long-term debt financing was unveiled by the EIB and the European Commission. The European PPP Expertise Centre (EPEC), to be housed in the EIB, intends to “enable public authorities in the EU Member and Candidate Countries to become more effective participants in PPP transactions”.
The EIB media pack on this included what appears to be a ready-made editorial piece on the EIB’s PPP track record. No mention, of course, of such EIB-backed PPP exemplars as the Skye Bridge and Metronet London Underground projects in the UK, and the Trakia Highway in Bulgaria. And when you consider that PPP might as well stand for paedophile, Pinochet and plague in the minds of the public that has had the schemes inflicted on them the most (the British, and here’s how the Scots are attempting to ditch the reviled PPP brand), the EIB’s public mantra on PPP is as credible as a white-haired American politician’s reassurances about the fundamentals of the US economy.
Here’s Andy Carty, one of the new EPEC executive team members, from the blurb to a PPP primer: “The PPP landscape across Europe is evolving rapidly. The issues today are much less about ‘why’ and much more about ‘how’.”
The long list of whys, of course, has not disappeared, and as Armin Reiss, Deputy Head of the Economic and Financial Studies Division of the EIB, puts it, there has been (to put it mildly) “a sometimes uncritical, if not ideological presumption that private sector participation in the provision of public services can do no harm”.
But getting back to the ‘how’, which is what – on paper at least – EPEC seems to be all about, a need to seriously ramp up public sector management know-how on notoriously complex PPP deal structures has been identified – and once achieved, so the theory as outlined in the EIB media pack goes, PPP costs will be reduced and deal flows will increase. Yet despite an incubation period of over 20 years now in the UK, these “collaborations” between the public and private sectors are still not being well managed. So said the Public Accounts Committee of the UK parliament just a few weeks ago, noting that “a third of contract managers at PFI hospitals and a sixth of contract managers of PFI schools have described their teams as ‘under-resourced’”.
The scheme’s legendary efficiency savings come home to roost, then, for the very people that are trying to get their heads round them. And other than the stench of hubris attached to this “increased deal flow” goal, isn’t such a goal surprising anyway for a bank that is at pains to point out it has no “policy preference for PPPs”? As the bank’s own literature points out, however, “there has been, since 1999, a clear policy from the European Commission to increase the level of private funding of infrastructure, eg in the transport sector, and the PPP structure is one way of achieving that policy objective.” The EIB has a tendency to follow Commission policy.
Others have inferred other motives for the EIB’s unabashed penchant for PPPs. It’s only a wonder they haven’t gone for a more pertinent, creamier acronym for the new centre. What will feature on EPEC’s curriculum? Hopefully just in time for the first seminar, Bankwatch will shortly be issuing a guide that nails the key myths surrounding PPPs and focuses on the experience to date with these schemes in central and eastern Europe, often made possible with the backing of public banks like the EIB. Here, for the PPP wonks, is just one recommendation from the new guide:
The international financial institutions need to be more pro-active in ensuring that an affordability assessment and Public Sector Comparator calculation is carried out for PPPs and that these rely on reasonable assumptions.
Quite simple really. Public institutions, like the EIB, should actively ensure that the public sector obtains value for money.
According to an EIB press release in 2001, the 4.2 billion dollar Chad-Cameroon pipeline project was all about securing “a real breakthrough for Chad, one of the least developed countries in the world.”
Judge for yourself the merits of that prediction with today’s news that the World Bank has pulled out of the project citing the Chadian government’s failure to honour an agreement to use some oil revenues for poverty reduction.
The EIB has provided the project with 144 million euro financing, and its intentions remain unclear. Having “aligned” itself with the World Bank when Paul Wolfowitz oversaw the bank’s pioneering initiative in Chad disastrously and predictably unravel in early 2006, the EIB suspended co-operation on any new public sector projects in Chad. But expect the EIB to keep its head down here: it will be busy considering whether the project’s “social and environmental concerns have been met” (in the language of a European Parliament resolution from 2000 – strange language at that, you almost know what they mean). As Korinna Horta of Environmental Defense Fund writes of the project, however, in Counter Balance’s Citizens’ Guide to the European Investment Bank:
“It has fuelled violence, impoverished people in the oil fields, and along the pipeline route it has exacerbated pressures on indigenous peoples and created new environmental problems. At the same time, with about 118 million barrels of oil produced by September 30, 2005, ExxonMobil, the leader of the oil consortium and the world’s largest oil company, has registered record profits.”
Well over half of the EIB’s lending for the project went to the oil consortium.
More EIB involvement in dirty energy projects in Africa looks likely following the announcement this week of a one billion dollar EU aid package to expand Africa’s energy sector. Oil and gas pipelines between African countries feature heavily (along with “transparency”) in this Africa-EU partnership, as does the Europe-bound nine billion euro Trans-Sahara Gas Pipeline. Exactly what the bank “promoting EU climate change and energy objectives” is being lined up for in all of this will be something to watch.
The European parliament last week demonstrated its growing vigilance over the activities of the EIB with a vote related to the bank’s expansion into Central Asia that insists on any EIB loans to the region’s states being conditional upon their progress in establishing the rule of law and in respecting human rights and fundamental freedoms.
A Green amendment to disallow Uzbekistan from receiving EIB financing until such time as EU sanctions against the repressive Karimov regime are lifted received overwhelming parliamentary support. In a European Voice opinion piece in July, our Counter Balance colleague Desi cited the European parliament’s point to the European Council and the European Commission from earlier this year: “human-rights issues should carry equal weight with the EU’s robust approach to energy, security and trade”
A landmark day, then, for the EIB – human rights conditions look set to play a part in its operations for the first time, and on top of this the resolution explicitly stipulates that individual projects receiving EIB support in Central Asia are subject to a Sustainability Impact Assessment carried out independently of the project sponsors and the EIB.
But what was behind the Commission’s original, condition-free proposal that now goes to a Council decision in this beefed-up form? It originally had no qualms about lumping Uzbekistan in with the other four states. And despite a tabled Green amendment (defeated) to restrict EIB loans to non-state sponsored projects only in Turkmenistan, President Berdymukhammedov may just have some inkling about why his tough guy approach to democracy is being tolerated in a “development funding” context by Brussels. Commissioner Piebalgs and the EIB are singing from the same hymn sheet at any rate.
Welcome, incidentally, to Counter Balance’s new blog.
