Export Guarantee Insurance

As a result of campaigning by anti-corruption groups, attention has recently focussed on the Export Guarantee Agencies of a number of Western countries. These agencies provide taxpayer backed insurance for domestic companies undertaking business in high-risk areas abroad. In the total contract fee insured hidden bribes or semi legal fees and commission are covered.

The blatant contradictions of the British official attitude to bribery overseas has been pointed out by the Cornerhouse group. They have analysed two suspect cases in detail in their recent ) report. They summarise allegations of bribery and financial mismanagement surrounding two proposed hydropower schemes in East Africa. The UK ECGD provided financial backing for Knight Piesold initial consultancy role in the proposed Ewaso Ngiro (South) hydropower scheme in Kenya and was considering support for the proposed Bujagali Dam in Uganda. It is not within the remit of this report to prove the allegations, that role rests in a court of law.

However, it is believed there is sufficient reason to warrant further investigations into the possibility of financial mismanagement in several aspects of the contract allocation for both the Ewaso Ngiro and Bujagali proposals. In 1992 a World Bank study team reported that initial feasibility studies by Knight Piesold were five times what such services would normally cost. They report that at least £15.3m had been paid up front to Knight Piesold even though the project was not due to come on stream for another 10 years. The exorbitant cost of this contract together with the high level of up-front payments?.even before the feasibility study has been completed,raise fundamental questions about procurement practices and financial management.
These findings certainly raise concern over the operation of the UK matters that the British Government are beginning to recognize. Under criticism, implemented new guidelines in September 2000. These require all companies seeking to cover to sign a declaration that no person associated with the contract has been, or will be , involved in any Corrupt Activity either in the UK or elsewhere. Cornerhouse believe that further criteria need to be introduced by the ECGD to deter corruption.

The British experience is in no way unique and these contradictions are reflected in many of the Export Guarantee Agencies covered by this. The illegal commission quotient of contracts can amount to 30%. Figures are hard to come by but a French secret service report said the official export credit agency paid around $2 bn in bribes to foreign purchasers of defense equipment.