By Shalmali Guttal  
Briefing notes o­n New Forms of Debt at the Asia Pacific Assembly o­n Debt and Development Bangkok, Thailand, October 8-12, 2000

One of the most distinct characteristics of economic globalisation in developing and transitional countries has been the gradual withdrawal of the state from acting o­n behalf of the public interest; structural adjustment policies and the entire package of neo-liberal reforms that gained currency at the o­nset of the debt crisis in the 1980s have been intended to minimise the role of the state in regulating and protecting the domestic economy, and providing essential goods and services o­n which majority populations depend.
This has involved a range of measures: privatising public goods, services and state assets; deregulating markets; restructuring/removing subsidies for health, education and basic food items; slashing social spending; introducing and increasing user charges for basic services/utilities, dismantling mechanisms for labour and environmental protection; decreasing or completely eliminating minimum wages; liberalising trade, investment and finance, etc. But o­n closer examination, it is not so much that the role and power of the state has been diminished; rather, it is that its role and power has been redefined and reconstructed to protect a different group of interests: those institutions and actors that advocate the unfettered expansion of a free market that has some imagined ability to allocate resources more efficiently than the state, and that will somehow create wealth and prosperity for all.
The argument offered by promoters of the neo-liberal and free-market agendas is that the state has neither the management capability, nor legitimate authority to run the economy: state planning, ownership of industries, provision of social and welfare programmes, regulation of wages and of national economic policy undermine entrepreneurial activity and lead to inefficient use of resources.

Therefore, the state must redirect its efforts towards establishing, promoting and enforcing mechanisms and regulations that permit markets to function without barriers or constraints. (There is an irony here, that the so-called “free” market needs the protection of “inefficient” and cumbersome states). Putting free market policies into practice has required removing the government from “excessive involvement in the economy.” Acting o­n behalf of the creditor nations of the north, the IMF and World Bank have used the debt crisis of the 1980s and more recently, the financial crises of the mid 1990s, to impose structural adjustment programmes (SAPs), austerity measures and sectoral reforms o­n debtor countries as the price of getting further credit; these credits have created more debts that need to be serviced, which require more credits and adjustment, and so o­n and so forth. Regional development banks such as the Asian Development Bank, the African Development Bank and the Inter-American Development Bank have mirrored more or less the same policies in their respective areas of operation. At national and international levels, the process of redirecting the power and spending of the state has been largely to the benefit of the private sector, especially transnational corporations (TNCs); not o­nly have ordinary citizens been compelled to pick up the bill for this redirection, but also, their ability to define, negotiate, promote and protect the public interest has been severely undermined.
More and more, productive sectors, and the creation of wealth, goods and services are no longer public domain, but in the hands of large multinational groups in both the north and south. This reworking of the state from protector of the public to protector of free markets has also strengthened the power of northern countries to intervene in the economic and political affairs of the indebted countries of the south and former Soviet bloc, and emerging markets across the world. Private corporate gain is most profitably pursued at public expense, through various forms. In order to attract capital, governments in developing and transitional countries have been encouraged, bribed and seduced by institutions such as multilateral development banks and their masters to attract foreign private investment into their countries by creating “enabling” and “attractive” policy environments: this has required the dismantling of social, environmental and financial controls that might increase the cost of doing business in capital deficit countries.
As a result, the longer term social, environmental and economic costs of projects and investments have been externalised, again to be borne by the general populations in countries of operation: the costs of environmental pollution, dislocation and migration of working class populations who can no longer make a living wage, reduced food and physical security, decreased access to health care, education and clean water, etc., are not borne by the corporations who gain from “race to the bottom” policy climates, but by governments and people who have to bear the brunt of these policies. Then there is the financing of such practices: northern corporations and financial institutions operating abroad have always had access to a range of financial and insurance services, which help them to offload the commercial risks of business abroad o­nto taxpayers in both, their own countries, as well as in the countries where they do business.
Whether in the name of development assistance or financial services, institutions such as Multilateral Development Banks (MDBs), bilateral aid agencies, Export Credit Agencies (ECAs), and Investment Insurance Agencies (IIAs) have all, in o­ne way or another, helped northern companies get rich at the cost of the populations in the host countries.
The above measures have had many serious effects: 1) Dramatic increase in the public debt burdens of developing and transition countries: in addition to official credits from bilateral and multilateral sources, debts incurred by northern private banks and financiers are converted to official debts that add to the public debt stocks of borrowing countries; in many countries, significant portions of the public debt are held by domestic private financial institutions who are able to stash their profits in offshore accounts.
2) An eroding away of local and national capacities for economic and political sovereignty: not o­nly are southern governments directing spending away from the public to private sectors, but also, there are few efforts by foreign investors to build technological, productive and management capacity in-country; this carries the danger of entrenching dependency o­n foreign capital, technology and know how. There is also the probem of a weakened and unprotected labour force, whose capacity and potential is suppressed by domestic policy environments designed to attract and favour foreign investment.
3) Stripping domestic economies of natural resources, and local and national assets: many TNC investments are geared towards physical infrastructure development, resource extraction, the export of natural resources and primary commodities, and manufacturing in the apparel sector. Such investments expropriate the natural wealth of the host countries, mandate the privatisation of state enterprises and utilities, and the restructuring of land and resource tenure arrangements to the benefit of private corporate interests (both domestic and foreign).
4) The creation of moral hazard and its promotion as the preferred business climate: by underwriting investments without proper economic, social and environmental assessments, MDBs, ECAs and other IFIs encourage and facilitate investors to act irresponsibly and take unwarranted risks; they thus create moral hazard; even worse, these business and investment practices are then promoted as the normal (and even desired) ways of doing business. Lets take a look at some of the state-supported mechanisms by which corporations have been able to convert public money to private gain: Multilateral Development Banks (MDBs) and Institutions
1. Historically, MDBs have been the largest source of public money for projects in developing countries and more recently, also in Eastern Europe. Northern based (mostly western) companies have benefited a great deal from the huge infrastructure development programmes funded through the World Bank group over the last 40-50 years. These include toll roads, dams, bridges, telecommunications facilities, irrigation schemes, waste management projects, etc.
2. Much of the $ approximately 25 billion lent each year by the World Bank to southern governments for development projects and policy reforms is returned to the north in form of construction contracts and consultancies.
3. In 1992, over half the money lent by the International Development Association (IDA) went to companies in ten of the richest countries as payment for goods and services; UK topped the list with $ 285 million, more than went to Bangladesh in official IDA credits. In 1994, World Bank contracts awarded to UK companies totaled 961 million pounds, about 700 million pounds more than Britain subscribed to the Bank in annual capital input.
4. Between 1993 and 1995, almost $ 5 billion was channeled to U.S. firms by the MDBs. Caterpillar made in $ 250 million a year in export sales of construction equipment as a result of MFB supported infrastructure projects.
5. More recently, the MDBs have started to support private sector involvement in the provision of utilities (such as electricity, fuel and gas) and social infrastructure as well (such as schools, healthcare facilities, clean water, etc.)
6. All these contracts are awarded by governments, but financed through the MDBs, either directly through loans, or through the underwriting of investments through sovereign guarantees.
7. The Multilateral Investment Guarantee Association (MIGA) was established in 1985 by the World Bank Board of Governors to provide political risk insurance for investment in countries that are excluded by the policies of national insurers. They serve investors who can access no other political risk insurance, and also provide coverage to investors of different nationalities in multinational syndicate, thus affording convenience in both contracting and claims settlement. MIGA also provides technical assistance to governments in how to develop risk management capacity, domestic economic environments that are conducive to risk taking by foreign investors, etc.
8. Large dams are a very good example of how public subsidies support private gain; most dams are such white elephants, that without a complex system of guarantees and subsidies, they would never be built: large, lucrative contracts for construction and technical services go to external private companies; financing is mobilised through private sources, but with active intervention from donor and recipient governments (ODA, public subsidies, preferential contracts, investment guarantees and counter-guarantees, price and purchase assurances, etc.); domestic and foreign corporations and political elites in power benefit from side industries such as logging, extraction of forest resources, commercial contracts o­n fisheries, etc.; However, the long term project costs in terms of displacement, debt, cutbacks in social expenditure, social and environmental mitigation is borne by the ordinary citizens of the recipient country.
9. A good example of multinational investment is the Nam Theun 2 hydro-electric dam in the Lao PDR. MIGA offered a political risk guarantee to a consortium of developers from Australia, France and Thailand for a project that all assessments deemed risky and uneconomic; under the terms of the guarantee, in case of default, costs would be assumed by MIGA, which would then schedule repayment from the Lao PDR o­n usual World bank terms; also, under the guarantee, the Lao PDR would be the last in of all the investors to recoup their investment (which is financed through an IDA loan); the revenues from the project (if any!) would go to what is called an “enclave” account, which would be jointly managed by the World Bank and the government to ensure that the government does not default o­n its agreements.
10. The International Finance Corporation (IFC) is also part of the World Bank Group, and its primary purpose is to encourage and support the growth of the private sector in less developed countries through providing direct financing, mobilising financing through third party sources, and helping borrowing governments to put in place the policy measures considered attractive for the expansion of the private sector.
11. However, the World Bank has limited abilities to directly fund private sector projects; also, it is not supposed to back arms sales, projects linked with weapons proliferation, or with nuclear power. These limitations are overcome by measures offered through other institutions such as export credit agencies and investment guarantee institutions.

The Asian Development Bank (AsDB) and Co-Financing
1. The AsDB is o­ne of the largest sources of development finance in the region. Its institutional structure and methods of operation are similar to that of the World Bank. The AsDB’s overall approach to development market oriented and its assistance (whether in the form of grants, technical assistance, or loans) comes with a package of macroeconomic and sectoral reforms that emphasise: liberalisation of all key sectors (from agriculture, trade, investment, etc.), macroeconomic management, strong debt servicing, the development of domestic capital markets and enhanced access to international capital markets, etc.
2. Expanding the role of the private sector in the provision of public goods and services is an extremely important component of the AsDB’s’ strategy for the region, and includes:
ใ Commercialisation of public services, particularly the introduction of full cost recovery and user fees;
ใ Contracting out the production, management and operations of public goods and services (including social infrastructure such as schools, hospitals, etc.);
ใ The “unbundling” and eventual privatisation of public utilities such as water, electricity, gas, etc;
ใ Establishment and strengthening of regulatory frameworks for private sector activity;
ใ Decentralisation of fiscal and administrative functions of government departments;
ใ Increased private sector involvement in the planning, construction, operations and management of physical infrastructure through Build-Operate-Transfer (BOT) and Build-Own-Operate (BOO) schemes.
ใ The development of policies, capacity and institutions in DMCs that facilitate BOT, BOO and other variations thereof.

3. As part of its privatisation strategy, the AsDB is increasingly involved in mobilising funds from private banks, export credit agencies (ECAs), market institutions, bilateral and multilateral aid agencies; this is called co-financing; the funds may be in the form of loans, grants and equity investments.
4. Funds from different sources can be pooled together with co-financiers agreeing to follow the AsDB’s procurement and operational guidelines (joint funding), or components of a project budget can be divided between co-financiers who each follow their own procurement and operational policies (parallel funding).
5. Co-financing from official sources (bilateral and multilateral aid agencies) is usually o­n grant or concessionaire terms and usually reserved for the AsDB’s Developing Member Countries (DMCs) who are eligible for Asian Development Fund (ADF) lending.
6. More than 50 % of the AsDB’s loans go towards public infrastructure projects, particularly in power, communications, water supply and waste disposal. Co-financing is used mostly for traditional infrastructure projects in energy, transport, agriculture and natural resource sectors. These sectors account for 75 % of the funds mobilised for co-financing by the AsDB between 1970 and 1998.
7. Co-financing has almost doubled over the last 5 years, from $ 1.5 billion in 1994 to $ 2.9 billion in 1998, and now equals 50 % of the AsDB’s total lending. Japan dominates official co-financing and contributed 53 % of official co-financing from 1994-1998, and 84 % in 1998. However, the AsDB is clearly moving towards increasing the share of private capital in co-financing (also called commercial co-financing); in 1998, commercial co-financing ($ 1.8 billion) exceeded official co-financing ($ 0.99 billion).
8. The AsDB’s rationale for promoting co-financing is that the infrastructure requirements over the next 10 years in the Asia-Pacific region will be approximately $ 130 billion per year; this is far more than the amounts DMCs are able to mobilise through their domestic sources; also, ODA is o­n the decline both in absolute terms, as well as in proportion to international capital flows to the DMCs; finally, the economic crisis has heightened the perceptions of risk for investment in the region, and reduced DMC’s access to international capital markets since the o­nset of the crisis.
9. In general, the AsDB’s DMCs are reducing their role in the financing, implementation and operation of physical infrastructure projects. The AsDB is encouraging its DMCs to create an “enabling environment” for private sector involvement in infrastructure development through public-private partnerships; commercialisation, corporatisation and eventual privatisation of public utilities; changes in policy and regulatory frameworks to make them more private sector “friendly,” and; support for BOO and BOT infrastructure projects.
10. Under the AsDB’s framework, the role of the government shifts from owner-producer-provider of public goods to that of facilitator-regulator of goods and services delivered primarily through the private sector.
11. The AsDB provides two types of guarantees financiers to reduce private investor’s exposure to risks:
ใ Partial credit guarantee: covers part of the interest payment and/or repayment of the principal regardless of the cause of default; so no matter what problems the project faces, the AsDB will pay the lender (financier) a previously agreed upon portion of the principal and interest; such guarantees are provided for both private and public sector projects.
ใ Partial risk guarantee: covers specified risks for private sector projects, known as sovereign risks; sovereign risks include nationalisation, currency convertibility and transferability, strikes and civil disturbances, and non-performance by governments for contractual obligations such as non-delivery of inputs, or non-payment of outputs.
ใ In both the above cases, the AsDB requires a counter-guarantee from the host government, which includes an agreed set of penalties for non-compliance with project agreements, and is negotiated by the AsDB and the host government at the start of the project. 12. Major Implications of the AsDB’s co-financing arrangements for borrowing countries:
ใ Increased debt servicing for loans made o­n commercial terms; countries that have little access to international capital markets will be more dependant o­n funding from the AsDB through mobilised capital and loans; it cannot be said for certain that all low-income countries in the region will be able to rely o­n concessionary finance from the AsDB since ADF funds are becoming more restricted;
ใ Escalation of export-oriented (and usually unsustainable) resource extraction to meet debt servicing requirements; for example, the AsDB’s promotion of sub-regional economic zones (such as the GMS and the golden quadrangle) are oriented towards natural resource exports in order to increase foreign earnings;
ใ Socialisation of commercial, private sector risk to public risk (through the terms of guarantees and counter-guarantees); this is particularly the case in infrastructure projects that involve commercial co-financing; AsDB policies require that the host government is an equity holder in the project through public-private partnerships; the counter-guarantee demanded by the AsDB from the host government in such projects usually protects the private sector by transferring the burden of risk and the costs of social and environmental mitigation o­nto the government.
ใ Increased financial burden: public-private partnerships usually demand that the government guarantee a fixed quantity of the project output (e.g., electricity), at a pre-set price and payment conditions regardless of national/domestic conditions or needs; further, such relationships usually mandate that the private partners and lenders are permitted to recoup their investments ahead of the government.
ใ Reducing national sovereignty in economic and social policy planning: the use of AsDB guarantees and contract conditions preempt modifications or changes in policies or regulations that might “hurt” current projects; contract conditions are usually not made public and conflicts between the contract parties (of which the government is usually an equity holder) may o­nly be adjudicated in third country courts.
ใ Increased dependence o­n imported, capital intensive technologies as a consequence of “tied aid,” i.e., credits and grants from official sources require that the borrowing country purchase technology, equipment and consultancy services from the donor country; in the “Mekong countries” of mainland Southeast Asia, France and Japan are major channels of ODA; both these countries have been the most resistant among the OECD countries to dismantle tied aid; the Nordic countries have been significant contributors to tied aid in hydropower projects.
ใ Decrease in the technical, economic and institutional capacity of governments to deliver affordable and appropriate social and physical infrastructure. Key Problems with BOT and BOOT Projects
1. BOT/BOOT projects are a mode of infrastructure development in which private investors (the “sponsors”) receive a concession from a government to finance, build and operate a facility for a specified length of time; in return, the project sponsors are permitted to charge the users of that facility at a rate that makes the investment commercially viable. At the end of the concession period, the facility is turned over to the state.
2. The BOT/BOOT mode of privatisation is promoted as a way by which governments can obtain quality infrastructure facilities with greater efficiency and speed with minimum financial obligations and risks. In reality, the risks of such projects are largely borne by the public in the form of increased user fees and other levies, as well as the mitigation of side-effects of such projects which are not included in project costs.
3. BOT /BOOT projects are highly complex in finance and management; to make the project work, the host government must establish an environment conducive to risk-taking by private sector sponsors and financiers, who usually have very different ideas from the host government about acceptable levels of risk and reward.
4. Competing interests: compared with traditional methods of infrastructure development, BOT/BOOT projects involve a large number of interested participants from the private sector and the state, who are likely to not have the same reasons for pursuing the project.
5. Governments often proceed with BOT/BOOT projects without sufficient understanding of the project modalities; since they are often unable to establish an appropriate environment for risk taking by the private partners, they often provide subsidies to the private partners and assume project risks themselves.
6. Governments take o­n unforeseen financial burdens by assuming the costs of social and environmental mitigation, and also guaranteeing a fixed revenue over time to the project sponsors in order to make the project more attractive. Thus, they prioritise private sector gain over public needs and affordability.
7. BOT/BOOT projects are expected to pay for themselves. However, in low income countries (such as the Lao PDR and Vietnam), the user fees for such facilities often exceed the ability of the users to pay. As a result, the state has to either provide subsidies to the project operators to make the facility/service affordable, or make up the deficit in the agreed contract through supplementary payments.
8. BOT/BOOT projects involve project-finance methods that require direct financing and/or risk insurance, which in turn usually come from foreign governments through their export credit agencies or foreign investment insurance corporations; again, the issue of competing interests emerges, where the principal goal of the (official) financier may be to sell equipment and services to the recipient country rather than develop and manage quality infrastructure for the recipient country in the longer term.
9. Private financiers, export credit agencies and investment corporations usually do not have internationally acceptable social, environmental and human rights standards. As a result, the “fall-out” from such projects are likely to be high, the costs of which will be borne by the public of the recipient country.
10. Since investments are insured from both commercial risks, there is a strong possibility of moral hazard; the economic viability of the project may not be assessed properly and fully, thus exposing the recipient governments to unnecessary financial risks; in the case of official investment insurance (from a bilateral or multilateral source) the risk covered is sovereign or political risk, which converts shortfalls in project revenues into public debt.

Export Credit Agencies
1. Export Credit Agencies (ECAs) were set up to assist companies to export capital and project related goods and services.
2. ECAs provide companies with investment guarantees and insurance against the main commercial and political risks of operating abroad (particular, of not being paid by people they do business with). For e.g.: a private company doing business abroad takes out insurance (also called a credit guarantee) with an ECA, which undertakes to pay this company (the exporter) for the goods/services/capital being exported, should the importer default o­n payment.
3. If the importer defaults and the ECA has to pay up, it passes o­n any debt that is not covered by the insurance premiums to the government of the importing country, adding it to the stock of bilateral debt owed to the ECA’s home government.
4. This debt is then eventually paid by the population of the importing country, either through increased taxes, tariff or service charges, or through reduced public expenditure o­n essential areas such as health, education, food distribution, clean water and basic utilities. 5
. The range of services provided by ECAs:
ใ “Buyer Credits” in the form of 100 % unconditional guarantees to banks who make loans for overseas purchases of goods and services;
ใ Underwriting the losses of commercial banks if the agreed interest rates o­n the loans for overseas projects prove insufficient to cover their costs plus a “reasonable rate of return;”
ใ Covering losses by specific political risks such as the host government confiscating an investment, suddenly imposing restrictions o­n profits leaving the country, and civil war.
6. ECAs are currently the most commonly used avenue of protecting against commercial and political risks in southern countries, especially those with tense or unstable political climates.
7. ECAs are also the largest public financiers of large-scale infrastructure projects in the developing world, exceeding the total annual infrastructure investments of the multilateral development banks (MDBs) and bilateral aid agencies; From 1988 to 1996, the worldwide value of new export credit loans and guarantees increased from $ 26 billion to $ 105 billion a year; by 1996, ECAs were supporting $ 432 billion worth of exports (about 10 % of world total) in the form of insurance, loans and guarantees; a substantial part of this has been for infrastructure projects in power generation, telecommunications and transport, mostly in southern countries.
8. ECAs provide support to a range of other types of projects from arms sales and mining operations to commercial timber and energy projects
9. ECAs operate in highly secretive and non-transparent ways. Despite the fact that they are public agencies, they are not open to public scrutiny, are protective primarily of business interests, and are often unaccountable even to their own governments.
ใ Most ECAs do not generally adhere to internationally accepted social, environmental, political and human rights standards.
ใ ECAs do not even follow the operational guidelines of the World Bank (weak as they are); Most ECAs do not have policies to ensure environmental impact assessments, safety standards for projects that involve hazardous substances and dangerous procedures, proper resettlement and compensation of displaced peoples, consultation or participation with local populations, or public disclosure of project related information.
ใ They often back projects that directly contradict the development and foreign policies of their own countries. For e.g., the UK ECGD has been involved in arms sales to Indonesia, Saudi Arabia and Turkey; is providing support to the Ilisu dam in Turkey; and is underwriting a number of carbon emission heavy coal plants in China (all these projects contravene the stated development and foreign policies of the UK Government.
10. Moves to liberalise the global economy are a key reason for the increased proliferation of ECA activities in the 1990s. Liberalisation has been accompanied by the privatisation of infrastructure development and public services. In the past, infrastructure projects were largely planned, commissioned and financed through public authorities, often with loans from MDBs or bilateral aid agencies. However, now the trend is more and more towards private financing and ownership. ใ In the mid 1990s, the private sector financed about 15-20 % of infrastructure investments in the south; but the World Bank predicted that this would very soon increase to 70 %, given the global economic trends towards rolling back the direct involvement of governments in infrastructure and services. ใ The increasing privatisation of infrastructure development and service provision means that construction and engineering companies take o­n more financial risks than in government sponsored projects (where the risks are borne directly by the state); these risks threaten shareholder and private profit, and make it more difficult to raise project financing. ใ Banks in general are reluctant to back large-scale private infrastructure projects without investment insurance since such projects are increasingly financed o­n a “non-recourse” basis: in case of default, the investors have no claim other than o­n the assets of the project; ใ However, raising investment insurance through the private sector is difficult, especially if the investment is in a country with a low credit rating; as a result, project developers look towards publicly funded bodies such as ECAs and Investment Insurance Agencies (IIAs). 11. ECAs create moral hazard: ใ The very nature of export credits encourages businesses to take risks since they do not suffer the consequences; exporters know that they will be bailed out at public expense. ใ Since most ECA supported projects are not properly assessed for risks and impacts, they do not reflect the real depth of project costs, create an illusion of cheap financing, and encourage unnecessary borrowing; many projects have failed socially, environmentally and financially. 12. ECA operations add significantly to the debt burdens of developing countries. When exporters make claims to the ECAs, most of the losses get passed o­n to the importing country; in effect, northern governments use the resources of developing countries to subsidise the exports of some of the richest companies in the world. 13. Export credit related debts now constitute a major drain o­n the foreign exchange earnings of developing countries. 14. The failure or unanticipated costs of many privately financed, but publicly insured infrastructure projects in the 1990s has the potential to become a serious sovereign debt problem for many southern countries (especially in Southeast Asia and Latin America), similar to the debt crisis of the 1980s that resulted from reckless lending by northern banks. (The Asian economic crisis already triggered many project defaults which so the collapse or sale of private companies in the region at tremendous public cost). 15. In 1999, export guaranteed debt accounted for 56 % of the debts owed by developing countries to official creditors, and 24 % of their total debts (including those owed to private banks). Also, since export credit loans are not usually given at concessional rates, they constitute a significant portion of debt servicing. 16. In 1998-99, 95 % of the debt owed to the UK was export credits debt: Indonesia owed 800 million pounds to the Export Credit Guarantee Department (ECGD), Algeria owed 63 million pounds, China owed 2,352 million pounds and Iraq owed 652 million pounds. 17. The outstanding debt of the HIPC to the ECGD stood at approximately 4,685 million pounds. 1998 figures showed that UK would receive about 923 million pounds in export credit debt servicing between 1998 and 2031 from 26 HIPCs who had agreed o­n servicing schedules (this amount is just the principal; with interest added, the amount would be 1,383 million pounds). 18. The people who bear the brunt of such export credit debts are the more vulnerable populations of the debtor countries: ใ They pay back the debt through higher taxes, tariffs and prices o­n basic goods and services (such as food, water, fuel, etc.), cuts in public expenditure, and often, poorer quality services. ใ Many export credit loans have gone towards natural resource extraction without any environmental or ecological safeguards; this has exacerbated poverty, health and safety risks for local populations, creating further economic pressure o­n societies already burdened by heavy debt repayments. ใ Many ECA loans have gone towards projects where governments have used force to relocate populations (for e.g., India, Indonesia, Turkey, China, Brazil); local populations pay these debts through loss of livelihoods and political repression. 19. There is tremendous reluctance among the ECAs in the OECD towards reform, or the introduction of social, environmental, development, human rights and public disclosure policies in their operations: they argue that any o­ne country introducing such reforms will lose out o­n economic opportunities to other countries (surprisingly, the U.S. Ex-Im Bank and Overseas Private Investment Corporation are two rare cases of ECAs who have such standards, but these are as yet insufficient in preventing the financing of environmentally damaging projects). Conclusion No matter how much the MDBs, the G-7 and OECD countries say that the bad days of structural adjustment are over, and that they are now committed to poverty reduction, the fact is that neo-liberal policies have been put in place through their development programmes, which continue to shift economic and political power away from governments to corporations. The development model promoted by northern powers, and endorsed and advanced by most southern governments has not changed. This model continues to: prioritise export oriented production over strengthening domestic economies; promote capital intensive development that is dependant o­n high finance; mandate the integration of local economies into the global marketplace without sufficient protective mechanisms; erode away local-national capacities for self sufficiency and sovereignty, and; increase dependence o­n the global financial system. The debt crisis is not over; o­n the contrary, debt is created everyday. The debt crisis will never be fully addressed until we radically alter the development model that we have allowed ourselves to become enslaved by.

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