HIPC debt deal unlikely at summit

by Eric Johnston

Jubilee 2000 seeks action before 2001 but doubts Japan’s sincerity Staff writer After two years of vain efforts to get the Group of Seven countries to cancel all debt owed by Third World countries, the organizers of Jubilee 2000 plan one last push at the upcoming Okinawa summit.

With only six months of the campaign remaining, however, they are not optimistic that the Okinawa Group of Eight summit will produce any new initiatives.

Earlier this week, the London-based Jubilee 2000 campaign issued a report criticizing G7 leaders for failing to tackle the debt cancellation issue, attacking the Okinawa summit as little more than a tropical vacation. Leaders of the Jubilee Japan 2000 campaign also handed the report to Finance Minister Kiichi Miyazawa on Thursday.

“Unlike the 1998 Birmingham (England G7) Summit or last year’s Cologne (Germany G7) summit, where serious attempts were made to deal with the debt crisis, this year, the G7 leaders are just gathering on a remote tropical resort island to relax.

“Japan hopes that by holding the summit in faraway Okinawa, fewer people who are calling for the cancellation of all debt will make the trip,” said John Garrett, a senior researcher for the Jubilee 2000 campaign in London who recently compiled a report on Japan’s Third World loans. “The Japanese government even joked about the shark-infested waters of Okinawa keeping away potential demonstrators.”

The Jubilee 2000 campaign began in Britain in 1998. It has since attracted the support of a wide variety of people around the world, including Archbishop Desmond Tutu of South Africa, finance experts such as Harvard economist Jeffrey Sachs, celebrities, and — most importantly — the G7 leaders themselves.

At the G7 summit in Cologne last year, it was agreed that $70 billion in debt would be canceled under a plan known as the heavily indebted poor countries initiative, led by the International Monetary Fund and the World Bank. HIPCs would be eligible for the relief only if certain requirements were met.

To qualify as a HIPC, numerous macroeconomic conditions need to be fulfilled and countries have to agree to carry out IMF structural adjustments. The G7 has identified 41 countries as being eligible for the initiative.

Jubilee organizers, however, say the HIPC initiative imposes harsh conditions on countries that apply, making them divert money that could be spent on health care and education. In addition, they say the minimum income levels needed to qualify as a HIPC are too low.

By Jubilee 2000′s estimation, 52 countries are in need of debt relief, with the majority in sub-Saharan Africa. Their total cumulative debt is about $376 billion, about half of which is owed to individual, primarily G7, countries.

About 40 percent is owed to the World Bank and the IMF, while private banks are owed the remaining 10 percent.

Progress since the promises made in Cologne has been slow. As of spring, only five countries — Uganda, Bolivia, Mauritania, Mozambique and Tanzania — that applied for the HIPC initiative had been granted debt relief.

They did not have all of their debts canceled, however. This prompted criticism from U.N. Secretary General Kofi Annan, who noted that the deeper, faster and broader debt relief promised at Cologne had yet to materialize.

“By the time of the Okinawa summit, we expect that another five countries, including Honduras, Senegal, Burkina Faso, Benin and Mali, will also be granted some debt relief. But it will still mean partial, not full, debt cancellation,” Garrett said.

Jubilee estimates the canceled debt of the 10 countries will be just over $9 billion, barely 10 percent of the Cologne summit’s promise of $70 billion.

There is also growing concern that the $100 billion figure — which combined the Cologne summit’s pledge and the figure previously promised at the 1994 Naples summit — may be optimistic.

Jubilee organizers expect that, even assuming all 41 countries deemed eligible receive the promised relief, only $90 billion will actually be canceled. Jubilee has also complained that it will take until at least 2005 for all countries to receive that relief.

After Jubilee 2000 made its objections to the terms of the HIPC initiative known, international pressure on the G7 member states — the United States, Great Britain, Canada, Italy, Germany, France and Japan — to go beyond the promises of the Cologne summit increased, and the U.S. announced late last year that it would cancel all debts owed by the poorest countries. Other G7 countries soon followed suit.

In April, Japan became the last G7 country to agree to waive all outstanding loans, of about $1.5 billion in unofficial development assistance, while also promising to contribute $200 million toward the HIPC Trust Fund, which was set up at the Cologne summit to write off debts due to international organizations like the IMF and the World Bank.

The latter action is one that other G7 members, especially the U.S., refuse to consider until the IMF agrees to certain internal changes.

“That’s just a drop in the bucket, but it’s more than many other G7 countries are doing,” Garrett said in reference to Japan’s pledge.

For Japan, completely adhering to the Cologne agreement means canceling bilateral ODA debts valued at about $4 billion.

Japan’s announcement, however, has been criticized by Jubilee 2000. Representatives of the organization’s Japan chapter charge that, rather than cancellation, all Tokyo is doing is rescheduling debt over a 40-year period. When a country sends in its annual payment to Japan, it makes a grant to the country for the same amount in yen.

However, the condition of the grant, Jubilee Japan representatives charge, is that the country must use the money to purchase imports, often from Japan.

Tokyo denies that the ODA aid is tied to the purchase of Japanese goods, but Jubilee organizers say that suspicions remain.

‘We’ve asked the government of Japan to provide a breakdown of figures as to how and where the grant money was spent, but they haven’t done so,” Garrett said. In their report issued this week, Jubilee 2000 also said the Japanese government threatened Benin, Ghana, Laos and Malawi with reduced ODA funding if they applied for the HIPC initiative, which caused those countries to think twice.

Despite the threats, Jubilee said it is likely that both Benin and Malawi will apply for the initiative. Ghana and Laos, however, have said they will not proceed. As host of this year’s G7 gatherings, Japan has the right to set the agenda. The specific issue of total debt cancellation, however, is not on the official schedule.

“Providing assistance to halt the spread of infectious diseases is one of the items on the agenda, which will help many poorer countries indirectly. Jubilee Japan members want further action, and will hopefully meet top officials during both the finance ministers’ summit in Fukuoka and the Okinawa summit,” said Teruyo Otsuka of the Jubilee Japan 2000 campaign.

In a recent letter to Yoshiji Nogami, Japan’s sherpa, or government representative, during the G7 planning process, Jubilee Japan 2000 members called for the debt issue to be included as a separate agenda. By then, however, the official agenda for the Okinawa G8 summit had been set and Jubilee’s request was turned down.

In addition, Jubilee Japan members say that political support in Japan for total debt cancellation is limited primarily to the opposition parties.

“At the moment, we have about 50 Diet members from both the Upper and Lower House who are supporting our cause, about half of whom are from the Democratic Party of Japan,” Otsuka said.

As a result of the foot-dragging and debate among G7 leaders over calls for total debt cancellation, and despite public support for such waivers, Jubilee representatives in both London and Tokyo say their December deadline will not be met.

They added, however, that they will continue to bring the issue up at future G7 meetings.

“After 2000, we’ll have to rearrange our organization a bit. But we do plan to continue, regardless of the outcome in Okinawa,” Otsuka said.