Odious Debts Online

October 6, 2006

In a stunning move, the Norwegian government has become the first creditor country to implicitly acknowledge that some of its Third World debt claims are illegitimate and says it will cancel such debts outright and unilaterally. The Norwegian Parliament must now approve the government’s debt cancellation plan, details of which are contained in the government’s budget being submitted to Parliament today. If the plan is accepted, five countries – Ecuador, Egypt, Jamaica, Peru and Sierra Leone – will be relieved of some $80 million they owe Norway.

The debts date back to 1976, when Norway exported 156 ships to a number of countries as part of a Shipping Export Credit Campaign to boost Norway’s shipping exports during a time of crisis for the country’s shipbuilding industry. The exports were financed through the Norwegian export credit agency, known as the Guarantee Institute for Export Credits (GIEK).

In a press release last week, the Royal Norwegian Ministry of Foreign Affairs explained that “a great many of these projects proved to be economically unsustainable, so that government guarantees were triggered and the Norwegian Government became the creditor.” Between 1988 and 1989, the Brundtland government conducted an evaluation of the Ship Export Campaign, and criticized it for “inadequate needs analysis and risk assessments.”

“The main conclusions,” said the Ministry of Foreign Affairs’ statement, was that “this kind of campaign should not be repeated.”

“It is now generally agreed that the Ship Export Campaign was a development policy failure,” said the Ministry statement forthrightly. “As creditor, Norway shares part of the responsibility for the resulting debts. By cancelling these claims, Norway takes responsibility for allowing Ecuador, Egypt, Jamaica, Peru and Sierra Leone no longer to be obliged to service the remainder of these debts.”

By wiping the slate clean Norway may also be avoiding further bad press. A joint investigation into the ship deal by Ecuadorian human rights and economic researchers (the Centro de Derechos Económicos y Sociales, CDES) and a constitutionally-mandated anti-corruption watchdog (the Commission for the Civil Control of Corruption, CCCC) revealed that the original private debt of US$13.6 million had ballooned into a $50 million public debt against the government of Ecuador, though no direct benefits to the population of Ecuador could be identified. Furthermore, said CDES in a 2002 report, the whereabouts of the object of the loan – the four ships an Ecuadorian firm purchased from Norway – “is unknown.” “The use to which the ships have been put to date and who derived benefits from this use,” is also unknown. This loan, CDES argued, “fits clearly into the category of an illegitimate debt.” Ecuador’s anti-corruption Commission subsequently demanded that the Ecuadorian government require the government of Norway to terminate the debt.

Norway’s announcement this week that it will, indeed, terminate the ship export debt has been applauded by debt campaigners.

Kjetil G. Abildsnes of Jubilee Norway said that by taking co-responsibility in this way, “Norway has now become the first country which by action confirms lender responsibility by cancelling illegitimate debt.”

Gail Hurley of the European NGO Eurodad highlighted the unfairness of “corrupt, negligent and politically motivated lending” and hailed the Norwegian decision as breaking a ‘silence’ that she urged other creditor countries to emulate by following Norway’s ‘bold lead.’

Patricia Adams of the Canadian-based NGO Probe International and author of Odious Debts: Loose Lending, Corruption and the Third World’s Environmental Legacy, said that the decision “most significantly represents the first time a First World creditor has acknowledged responsibility, indeed negligence, as a lender,” adding that it is also the ‘tip of the iceberg.’

“This underscores the desperate need for forensic audits of all export credit and multilateral development bank debt claims against Third World countries to determine their legitimacy,” she said.

Related Articles

Cancellation of debts resulting from the Norwegian Ship Export Campaign (1976-80)
Press Release by the Ministry of Foreign Affairs (Norway), October 2, 2006

Norway debt write-off a $190m saving for Jamaica
by Camilo Thame, Jamaica Gleaner, October 4, 2006

Norway makes groundbreaking decision to cancel illegitimate debt
Eurodad, October 3, 2006

A historic step
Norwegian Church Aid, October 4, 2006

Upheaval in the back yard: illegitimate debts and human rights – the case of Ecuador-Norway
Centro de Derechos Económicos y Sociales, November 2002
Read here