NGOs brand EIB the weakest link in EU development aid efforts

Source: CEE Bankwatch Network, 2007-11-07

At the European Development Days in Lisbon, NGO campaigners concerned about the expanding financing role of the European Investment Bank (EIB) in developing countries have called for the EIB to urgently strengthen its lending standards and procedures.

Magda Stoczkiewicz, Policy coordinator for CEE Bankwatch Network, said: "Its recent big funding increase will make the EIB the largest multilateral lender in developing countries by volume. Yet, compared to other lenders, the EIB’s environmental and social standards and policies leave a lot to be desired. The EIB should adopt policies and procedures that help to uphold strong environmental, social and human rights standards for investments in developing countries, rather than serving as a support bank for European corporations.”

Luisa Morgantini, Vice-president of the European Parliament and member of the European Parliament’s development committee, commented: “We need to ensure that the growing activities of the EIB in developing countries are coupled with clearly spelled out objectives on alleviating poverty and achieving Millennium Development Goals as well as upholding human rights. This is currently not the case. The EIB’s contribution to these objectives should be annually assessed against a set of indicators and the European Parliament should be regularly informed on the progress.”

A new report – commissioned by CEE Bankwatch Network and written by International Rivers – released today details how to date major dam projects financed by the EIB have damaged communities and the environment and have failed to bring development benefits.

The report “Raising the bar on big dams: Making the case for dam policy reform at the European Investment Bank” provides case studies of five controversial dam projects in Africa and one in Laos where the EIB has been involved in the project financing. [1] The report highlights that despite making vague references to the recommendations of the World Commission on Dams (WCD), the EIB currently has no sector policy for dams. The report recommends better analysis of up front options to meet energy and water needs, a key tenet of the WCD.

Lori Pottinger, Africa program director for International Rivers, said: “Our report shows that the EIB has invested more than 400 million euros in projects that have had huge costs on all fronts for poor countries ill-equipped to resolve their problems. EIB-supported dams have pushed species to extinction, led to worsening poverty for people forced out by their huge reservoirs, permanently damaged critical natural systems that support millions, and led to huge debt burdens. The EIB is now investing or considering investing millions more in future problematic dams that are likely to repeat this sorry history. From Ethiopia to Congo, large dams now on the drawing board or under construction with EIB help are setting Africa up for future failure as a changing climate renders them a poor solution for adapting to new hydrological realities.”

A similar picture has also been revealed in a new study from Friends of the Earth France that shows how the EIB is providing important financing to large-scale mining projects in African countries.

Between 2000 and 2006, in Africa, the EIB granted more than EUR 364 million in loans to the mining industries, and since early 2007 the EIB has already approved loans of more than EUR 300 million for two giant mining projects in Madagascar and in the Democratic Republic of Congo. Whereas the effects on poverty alleviation of such projects are very controversial, their devastating consequences on environment and local communities’ lives have been unfortunately amply demonstrated.

Anne-Sophie Simpere, of Friends of the Earth France, said: “Case studies in Zambia have proved that projects financed by the EIB have caused major air and water pollution. The EIB invests in the mining sector only to respond to the needs of its clients, large corporations from rich countries such as BHP Billiton, First Quantum or Freeport McMoran, that want to make the most of the boom in commodities’ prices on the financial markets. Without a sectoral policy for the extractive industries and proper environmental and social guidelines, the EIB should not be touching such a high risk sector.”