Export guarantees `should not insure bribes for orders'

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A FORMER senior Treasury official has called for the Export Credit Guarantee Department to stop providing British companies with insurance cover for bribes paid to win export contracts.

In a paper submitted to the current review of the ECGD, the department which insures exports to risky markets such as China, Indonesia and Russia, Huw Evans, a former Treasury Deputy Secretary, also criticises it for giving too much support to exports for which there is little hope the bills will ever be paid.

Mr Evans writes: "The value of exports covered by ECGD includes commissions - including bribes - paid to intermediaries. There is a high level of corruption in many of ECGD's main markets."

The UK has already signed up to an OECD agreement to end the tax deductibility of bribes. Businesses can no longer set such payments against their tax bill, so the fact that the ECGD still provides cover for bribes is a clear anomaly.

He argues that the department,which reports to the Department of Trade and Industry, is too vulnerable to intensive lobbying of ministers by big companies and ought to be turned into an independent agency with less scope for political interference. Writing in a personal capacity, he points out that the British government has taken a lead in reducing the burden of Third World debt which excessive ECGD export support had helped create in the first place. Other mistakes he lists include sizeable export credits to Iraq in the years before the Gulf War, when it was clear these could never be repaid; support for arms sales to Indonesia; and credits for the controversial Pergau dam project in Malaysia.

The department had, as a result, a cumulative cash deficit of pounds 2.8bn by March 1998. Its budget for credits to the so-called "amber zone" of the riskiest countries has grown by two-fifths between 1993-94 and 1997- 98 - a pace of increase for which Mr Evans argues there is "no justification".

He concludes the department should be turned into an agency, with a responsibility for explaining potentially controversial decisions in public. The paper says: "Such an arrangement would remove ministers, and officials responsible to them, from day-to-day decision making."

Stephen Byers, the Trade Secretary, announced last summer a thorough review of the ECGD, and also called in consultants to review its procedures. The results are due to be published by the end of March.