TRADE RETHINK COULD KILL SUPPORT FOR TURKISH DAM

Michael White

Guardian, August 2, 1999   

The government is preparing to abandon its support for the controversial £1bn Ilisu dam project in Turkey as part of a wide-ranging review of its export credit policies, which will also see cancellation of Mozambique's debts to Britain.

The trade secretary, Stephen Byers, will today signal a change of direction aimed at using export credit to British businesses to nurture environmentally sustainable development - rather than risky hi-tech projects - and at easing third world debt burdens, a key theme in Labour foreign policy.

The review comes as ministers face sustained criticism from MPs and aid agencies - as well as from Turkey's downstream neighbours - over the huge project in Turkey's Kurdish south-east border region to dam the Tigris river. Those consulted will include exporters, investors, insurers and other interested parties.

Balfour Beattie, the British construction company, is leading a consortium to build the dam, which Turkey hopes will provide prosperity for a dry and troubled area. The company has been seeking support from the Export Credit Guarantee Department (ECGD), which routinely guarantees the loans which British firms make to states buying such expensive development projects.

If the debtor fails to pay - a frequent phenomenon - the taxpayer underwrites the company's loss via the ECGD. In this instance there have been doubts in Whitehall and the project is under review. Syria, Iraq and Jordan have protested at the threat to their vital water supplies. Some defence analysts have predicted it could lead Nato into a regional war.

As a symbol of good intent the review will today also see Mr Byers write off virtually all Mozambique's debt to Britain - $112 million dollars (around £70 million). This is consistent with policies advanced by both Clare Short, the international development secretary, and the chancellor, Gordon Brown.

"I want this review to look at how it (ECGD) can help the government achieve its wider, sustainable development objectives, and to ensure that the UK can play a leading role in helping countries to emerge from debt and poverty burdens, to rejoin the international trading community," Mr Byers said last night.

Ministers see such gestures as enlightened self-interest in allowing countries emerging from appalling poverty, exacerbated by war, to be relieved of costly debt-servicing, freeing up money which may benefit British exporters in other ways. In Mozambique's case it also fulfils "good government" criteria, in its democratic orientation.

Only last week Ms Short warned the EU that it must do better in focusing its aid on the poorest countries, not the intermediate states, many of which are close to Europe's southern flank and include Turkey.