Last week Australia’s export credit agency, EFIC, released the updated version of its Policy for Environmental and Social Review of Transactions. Jubilee’s long-term engagement in monitoring the activity of EFIC, and our continued calls for greater transparency paid dividends when the launch confirmed the adoption of new reporting and auditing procedures that go a considerable way to making the agency’s decisions more accessible and accountable to the public, including a commitment to arrange an independent audit of its adherence to the Policy every two years by an independent expert.

The updated Policy and Procedure launched on May 4, sets out how EFIC will review export finance applications for likely social and environmental impacts. When an Australian exporter applies to EFIC for financial assistance, whether the company is seeking a loan, guarantee or other such product to assist it in winning business in an overseas markets, EFIC is obliged to review the application for its likely social and environmental impacts, thanks to efforts by campaigners in Australia to make sure EFIC adopted an Environment Policy back in 2000. Given that EFIC financing of mines and other extractive projects in the Pacific and Africa is on the increase, this process is of vital importance, especially for communities living in surrounding areas, whose very livelihoods are affected by these projects.

In 2010 EFIC undertook a review of its Environment Policy, coinciding with the release of Jubilee’s Risky Business report (December 2009) case studying EFIC involvement in the gold mine in Solomon Islands and the PNG LNG project. The report successfully drew the attention of other civil society groups, individuals, academics and members of parliament to the high stakes of EFIC finance decisions for communities in the Pacific.

As part of the Review, EFIC considered the views of civil society organisations including Jubilee Australia and Oxfam Australia. EFIC even agreed to host a full day independently facilitated workshop in December 2010 to discuss CSO recommendations.

“We congratulate EFIC on making changes to the Policy and Procedure for Environmental and Social Review of transactions that demonstrate a genuine intention to find a more appropriate balance between public accountability and the commercial interests of Australian corporations,” said Adele Webb, Jubilee Australia Director. 

“Looking to the future, there is still more work to be done by governments around the world, including Australia, to ensure their national export credit agencies do not facilitate irreversible environmental damage, social unrest and the violation of human rights in less-developed countries.”

Last month, the UK government made permanent its landmark law to protect the poorest countries in the world from profiteering by so-called vulture funds (more from Jubilee Debt Campaign UK).

Vulture Funds sue some of the world's poorest countries for full repayment of debts they buy up cheaply. In April 2010 an Act of Parliament - the Debt Relief (Developing Countries) Act - was passed which restricts the ability of Vulture Funds to sue the poorest countries in UK courts, a favourite jurisdiction of the funds. The Act represents the first of its kind anywhere in the world, and attracted cross-party support in the UK.

Without such legislation enacted in Australia, these so called ‘Vulture Funds’ are free to profiteer from poor country debts in our courts. Last year one did just that in New South Wales.

The global financial crisis has exposed an international financial system that urgently needs cleaning up. Combating Vulture Funds is a practical first step toward a global economy that works for the majority of people, not a small number of unethical investors.

Learn more, and do something to help Jubilee Australia Stop the Debt Vultures.

Download FACT SHEET: VULTURE FUNDS

As a series of bailout packages have been negotiated with Greece, Ireland and soon Portugal, it is time to examine the global orthodoxy in dealing with debt. In mid-May a bailout, expected to equal approximately €80 billion, with the European Union and the International Monetary Fund, is set to be agreed upon with Portugal. The package will see ordinary people bear the greater burden of reform as a program of shock therapy, involving large spending cuts, tax increases and labour market reforms, is introduced. Those banks largely responsible for the reckless private lending which spawned the current crisis are set to be the largest benefactors. 

Increasing resistance to the bailouts has been felt across Europe as nationals express their opposition to paying for the excesses of their banking elite. In Iceland, voters recently rejected a government-backed deal to repay Britain and the Netherlands following the collapse of Icelandic banks in 2008. The decision will not be without consequence for the country, which faces an impending court case by the UK and the Netherlands, the potential block to its bid to join the European Union and a lowering of its credit rating on international markets. In Greece, hundreds of academics, politicians and activists have called for a debt audit commission to examine the legitimacy of the country’s debt, in the hope of holding to account those responsible.

The European debt crisis points to a greater systemic problem of dealing with debt. Across the Global South, the IMF has repeatedly negotiated ‘emergency’ packages, which have seen foreign banks bailed out, while the governments themselves spiral down deeper into debt, at great cost to citizens who had nothing to do with causing the crisis. The European crisis is an opportunity for leaders to challenge the global mechanism for dealing with debt. Our attention is on these leaders as developments continue to unfold. 

Controversy surrounding the PNG LNG project is intensifying with heightened security threats, unfulfilled landowner contracts and allegations of corruption causing increased tensions.  

On April 12, security concerns were raised by the shooting of an expatriate Australian Oil Search employee at the Kutubu oil fields in the Southern Highland province. The expatriate was driving along the access routes to the project site when he was fired upon by thugs hiding in the bushes. The incident has raised alarm over the security of staff and management of Oil Search, which operates both the Kutubu and the neighbouring Hides gas fields. 

Tensions in the region have also been high over failure to deliver long-promised catering and maintenance contracts, as well as outstanding payments to landowners. In late March, a landowners’ protest forced work at the Hides 4 site to be shut down. Further disruptions have been threatened unless contracts are negotiated. Outstanding payments of K170 million to landowners for business development grants, ministerial commitments and infrastructural grants have also led to work stoppages at Hides 1. In February, tensions peaked when over 100 landowners stormed Vulupindi Haus in Port Moresby demanding the government pay outstanding business development grants owed to them. Three Petroleum and Energy department officials were held hostage for half an hour before police intervened to rescue them.

A mediation process between Esso Highlands Ltd, a state team and landowners, examining the legality of the PNG LNG Agreement and the ownership of oil and gas resources is currently underway. 

Rising tensions around the PNG LNG project have been accompanied by the added controversy surrounding the findings of official misconduct against Prime Minister Sir Michael Somare. In late March Somare was found guilty of 13 charges of official misconduct after failing to lodge more than a decade’s worth of annual financial returns. The sentence, a 14-day suspension without pay, appears as little more than a ‘slap on the wrist’ for the incumbent PM. The Opposition has lashed out saying it is a mockery of the rule of law in PNG and gives confidence for others to follow suit. 

More encouragingly, the PNG government has approved the establishment of a state working group to investigate the implementation of the Extractive Industries Transparency Initiative (EITI). The EITI is aimed at strengthening governance by providing greater transparency and accountability for receipts and payments associated with the extraction of oil, gas and other mineral resources. Jubilee Australia has been openly critical of the failure of the PNG government to sign the EITI, warning that until the EITI is signed, the positive economic and social projections around the LNG project will not be realised.

The LNG project is expected to deliver its first shipment of gas by late 2014. Current developments have seen the first foundations poured for the LNG Plant. As development progresses, Jubilee Ausralia will continue to monitor the situation and provide regular updates.

One year on from the signing of Papua New Guinea’s largest ever extractive industry project, led by American giant Exxon Mobil and Australian partners Oil Search and Santos, the PNG LNG project has already been linked with a number of worrying incidents, including tribal conflict, local landowner unrest, alleged abuses by the companies involved, and concerns over transparency of government decisions. In recent weeks the project reached boiling point when landowners closed down gas plants and mobilised on project sites following increased discontent over their benefits payments. A National Court Judge has stepped in to stop all LNG payments from banks and to freeze all accounts relating to benefit agreements until proper and transparent processes are set up for the distribution of landowner payments. Jubilee Australia is concerned that this and a number of other developments during the first year of the project warrant serious examination, not least by the Australian government, which has helped finance the project through its largest ever export credit loan.  

The national PNG Government, itself having gone through a complete upheaval in the last two months with its PM exiting and then abruptly returning to power, is responsible for a number of developments related to the LNG project. In October the PM confused onlookers by appointing a new minister to assist on the LNG project, only to dismiss him, and then re-appoint him, within a matter of weeks. There have been a number of public statements of concern over the LNG project by prominent PNG figures, including the former Attorney General, who claims that he was never properly consulted over the signing of the LNG deal in 2009.  Media reports have also detailed accusations between the Cabinet and the former Police Commissioner in relation to LNG operations. Meanwhile, the government discovered that it did not have enough money in its budget to fund preliminary logistical and infrastructure needs related to the LNG project and had to rush through a supplementary budget mid year. Just some examples of the confusion surrounding government involvement in the LNG project.  

While contracts have been awarded and construction has advanced, local landowners in project areas have become increasingly unsettled, with a number of work stoppages occurring throughout 2010 due to attacks on project sites and machinery, with the deaths of local people involved in the conflicts. Since the beginning of 2011, growing discontent in project areas surrounding the Hides gas conditioning plants in the Southern Highlands, has seen groups of landowners gather in their hundreds to stop work on project sites. The latest work stoppage on 22 January was led by an angry group of landowners who mobilised when a local boy lost his life after consuming a toxic substance obtained from one of the project sites. The Hides gas conditioning plant in the Southern Highlands currently remains closed with Exxon Mobil staff having been withdrawn from the site. The angry locals point to unfulfilled promises from the national government and local authorities, relating to benefit funds and business development grants they say they have not yet received. A number of landowner organisations are also asking questions about the payment of business development grants to a select number of landowner corporations that met with government officials in a resort near Port Moresby just after Christmas, rather than conducting a proper consultation process involving the larger group of landowners through the Departments of Petroleum and Energy and Commerce and Industry. 

Media reports have cited the use of mobile unidentified police squads throughout projects sites, and proposals by authorities to establish a Special Operations Group for the LNG project. These developments are eerie reminders of the days of the Bougainville Copper project which saw a number of human rights violations against the local population at the hands of such mobile squads. A special feature story from Dateline in May 2010 reported one incident of local boys being taken away and beaten up by security forces, using a  vehicle owned by Australian company Oil Search. In addition to these issues, wider concerns have arisen as to the effect of making large cash-payments to powerful males in various communities and the impact this has on exacerbating the causes of conflict and disputes between tribes, not to mention the impact on women which must be taken very seriously. 

Local have reported feeling the effects of inflation on PNG’s economy, with prices for basic staples already being distorted and Port Moresby becoming prohibitively expensive. These and other developments provide cause for concern when predicting the long term effect of the LNG project. 

Meanwhile, plans for the management of project revenues are being advanced. In June 2010 the government announced the creation of a new company, Kroton 2, to manage the State’s interest in the project as well as any future petroleum projects in the country.  Kroton 2 was previously a subsidiary of the Independent Public Business Corporation (IPBC), which itself was a key player in the LNG deal, directed by the Prime Minister’s son, Arthur Somare. 

Announcements at the end of 2010 shed light on the establishment of PNG’s Sovereign Wealth Fund following discussions between the PNG Government, the Australian government and various other international actors. The Sovereign Wealth Fund will hold the revenues from the LNG project in an offshore location, with three main pots of money: A Strategic and Stablisation Fund, a Future Fund and an Infrastructure Fund. How this fund will be governed and the oversight mechanisms that are involved are still to be seen. 

We consider it vital to closely monitor the revenue streams and mechanisms for revenue management throughout the project, especially given past experiences of wealth from large mining projects in PNG failing to translate into progress on human development targets such as life expectancy, education and health services in PNG.

The more recent progress report commissioned by PNG LNG joint venture partners’ (including the Australian government) make no mention of deaths that have occurred due to project-related conflict and only brief mention of grievances and disputes.  The report notes that the Environmental and Social Management Plan (ESMP) for the project went through its first revision in September and a revised plan was presented to the Lenders group.  We would urge lenders, including the Australian government’s export credit agency, EFIC, to make public this updated plan and to take into account the serious developments that are taking place on the LNG project. 

We will continue to monitor the project and related developments, with a 40 page report on the LNG project and management of revenues to be released by Jubilee Australia mid 2011. 

[Media Statement, Jubilee Australia 11 February 2011]

A report released in the last week by New York NGO Human Rights Watch confirms allegations of torture and rape by private security squads at the Porgera Gold mine in Papua New Guinea, the most recent in a spate of evidence implicating Australian companies, Australian banks and even Australian taxpayer funds in the serious violation of the rights of individuals and communities in our region.  

Australian loans made to support mining projects in PNG, deemed in Australia’s ‘national interest’, have been put in the spotlight this week by a visit to Australia by United Nations Independent Expert on Human Rights, Foreign Debt and International Financial Obligations, Dr Cephas Lumina. 

Among other matters, Dr Lumina’s visit to Australia considered the role of lenders such as Australia’s Export Credit Agency (EFIC) in financing projects in countries that face huge social and political challenges with high risk of human rights abuses, conflict and worsening corruption. In a press conference today to conclude his visit, Dr Lumina identified as one of his key concerns the lack of information available to the public about the transactions undertaken by the EFIC. He urged the Australian Government to “ensure accountability and transparency in EFIC’s operations, particularly those undertaken under its National Interest Account.”

One of the latest such deals was a multi-million dollar Australian government loan contract signed in favour of PNG’s largest ever mining venture, a US$15 billion Liquefied Natural Gas (LNG) project led by Exxon Mobil, with Australian companies Santos and Oil Search in toe. More than $300 million will come directly from Australian taxpayers, despite the benefits of the loan concentrating heavily in the bank accounts of the private companies involved. 

Even in the project’s early construction phases there are signs for concern, with unidentified mobile police squads patrolling the areas around the project sites and a number of incidents, including shooting deaths, reported in national media. The entire project came to boiling point in recent weeks with local landowners closing down gas plants and mobilising on project sites after increased discontent over payments owing to them as compensation. 

In the case of the Porgera mine, also in PNG, in the early 1990s the Australian government provided loans worth over $200 to facilitate Australian private sector involved in the controversial project.   

Australia’s export credit agency, EFIC is a statutory authority providing this finance on behalf of Australian citizens and government. Yet the agency hides behind an unusual exemption from the Freedom of Information Act and a lack of scrutiny applied to it by the Trade Minister.  

“Mining projects undertaken by Australian corporations in developing countries have, in many reported cases, had unacceptable consequences, including social unrest, irreversible environmental damage, and the infringement of individual and community human rights”,  said Adele Webb, National Coordinator of Jubilee Australia. 

“While it is not reasonable to expect Australia’s export credit agency to solve these issues, we do expect EFIC not to make them worse”. 

“Australian taxpayers deserve to know what is being done with their money, especially if there is evidence it is financing problem projects in the region. At the very least, the Trade Minister should seriously consider removing EFIC’s exemption from the Freedom of Information provisions, and require the agency to meet more stringent reporting requirements”.

To read the press statement of the UN Independent Expert visit the UNIC site.

To read the report, Gold's Costly Dividend, visit the HRW website.