Development & Human Rights • 21 Mar 2009
Re-directing the EIB's tide of moneyBack to overview
The European Investment Bank (EIB) might be the most important public lender in the world. After all, it approved almost €60 billion in loans in 2008, well over twice the volume of the World Bank. It operates in key sectors of the global economy – in 2006, 58% of all support from international financial institutions (IFIs) to the oil and gas sectors came from the EIB, according to Bank Information Center figures – and its approval of €6.2 billion worth of loans outside the EU in 2008 makes the EIB one of the biggest public players in the developing world: the de facto development-finance institution for the European Union.
Unfortunately, the EIB is uniquely ill-qualified for its development role. Traditionally used to rectify imbalances between the member states, the EIB blinks awkwardly in the bright lights of development lending. Its staff is tiny compared to that of other IFIs and is largely composed of old-style bankers with little experience in appraising and monitoring projects for their social, environmental and developmental impacts. As the EU’s house bank, the EIB should exemplify the environmental and human-rights principles that the Union advocates.
Yet it is alone among IFIs in having neither binding operational standards nor an independent accountability mechanism for people affected by its policies. The result is that the EIB has supported a string of disastrous projects that other IFIs either will not touch or have pulled out of: examples include the Tenke Fungurume mine in the Democratic Republic of Congo, the Chad-Cameroon oil pipeline, the Gibel Gibe dam in Ethiopia, all of whose primary beneficiaries are major Western conglomerates rather than local businesses.
A chance for a fresh start...
There is, though, a chance to get the EIB to play a better role in the developing world. In November 2008, the European Court of Justice (ECJ) annulled the EIB’s main mandate to lend outside the EU, ruling that any new mandate should be based on a section of the Treaty establishing the European Community (EC Treaty) that requires “the sustainable economic and social development of the developing countries, and more particularly the most disadvantaged among them … the campaign against poverty in developing countries … consolidating democracy and the rule of law… [and] respecting human rights and fundamental freedoms.”
The ECJ also gave the European Parliament the right to co-decide the new mandate alongside the European Commission, citing “the fundamental democratic principle that the people should participate in the exercise of power through the intermediary of a representative assembly.”
Yet both the Commission and the Parliament seem determined to undermine the ECJ’s assertion that democracy and development criteria should be core elements of the EIB’s lending policy. The Commission has wasted little time since November’s judgment in putting forward precisely the same mandate as that which was explicitly annulled by the Court – and, according to sharp comments from the chair of the European Parliament’s budgets committee in a public session three weeks ago, it and the EIB itself have exerted intense pressure on the Parliament to put this legally and socially unacceptable lending framework back into law. While this undermining of EU policies on human rights and the environment is disgraceful, it is hardly unexpected, given its provenance.
The Parliament’s reaction, however, has not been much better. Its initial version of a new mandate, the Seppanen report, made no explicit reference to development criteria – an extraordinary omission given the clarity of the ECJ’s request. While the vote in the budgets committee last month approved a small number of amendments that go some way towards making up this shortfall, most of the thrust of the ECJ judgment has gone missing.
...but might it go begging?
Why this failure of the Parliament to take advantage of such a clear and rare opportunity to exert its democratic authority? It’s mainly due, predictably, to the upcoming elections: many MEPs profess not to want to saddle the incoming Parliament with a supposedly ‘radical’ change in policy. How the enactment of the founding principles of the EC Treaty into actual practice can be described as a ‘radical’ shift is unclear – unless parliamentarians think that enforcing commitments to democracy and development must always remain mere rhetorical justifications for the kind of European self-interest the EIB excels in subsidising?
There is no justification for the EIB to lend to major Western corporations to extract resources from southern countries: large dams, mines and pipelines are ‘enclave’ investments that provide marginal benefits to the wider economy while damaging the environment and providing precious little revenue to host countries. (In the case of the Mopani copper mine in Zambia, where the EIB has provided €50 million to the Swiss mining firm Glencore, the Zambian state receives a risible 0.7% of revenues.) Moreover, in the present economic climate the value of EIB loans and bonds has risen immensely, since the bank is guaranteed by the 27 member states and cannot, unlike so many private financial institutions, collapse.
In other words, both opportunity and rationale exist for the European Parliament to make an enormous difference to the use of billions of euros of EU taxpayer-backed money and to the lives of millions of people in poor countries. What is the Parliament waiting for?
There is a plenary vote on the Seppanen report on 23 March. The Parliament should take full advantage of this rare chance to make a real difference to the social, economic and political development of the countries to which the EIB lends money.
Anders Lustgarten represents Counter Balance: Challenging the European Investment Bank, a coalition of European NGOs that have tracked the EIB’s investment activities in recent years.