Norway cancels Illegitimate Debts

Subject: [50Years] Norway cancels illegitimate debts

NORWEGIAN GOVERNMENT CANCELS ILLEGITIMATE DEBT,
SETTING SIGNIFICANT NEW PRECEDENT

On Tuesday, October 2, the Norwegian government
took the unprecedented step of canceling debt it
claimed of several countries on the grounds that
it was incurred illegitimately. The debts were
incurred in the late 1970s, when Norway was
trying to salvage its own ship-making industry by
offering credit to South countries which could
then use it to purchase the ships.

It is quite unusual for a non-revolutionary
government to repudiate the actions and policies
of its predecessors (the U.S., for example, is
still debating whether to apologize for
slavery.). It is even more unusual for a
government to take practical steps to rectify the
consequences of those actions. (It is, however,
not clear if the Norwegian government intends to
refund the payments already made on these debts.)

What is most important, as the Norwegian Jubilee
campaign pointed out in its press release, is
that “Norway has now broken the unspoken rule of
creditor solidarity. Creditors have until now
banded together to insist that poor countries
repay their debts and have refused to admit that
they share some responsibility for having
extended loans irresponsibly, often for geopolitical strategic purposes.”

The usual vehicle for creditor countries is the
“Paris Club” of wealthy countries that meets in
virtually constant session to set policy on
bilateral debts. It reviews countries on a
case-by-case basis and comes up with collective
determinations on how to deal with debt problems.
While it often cancels large percentages of the
debt, it never cancels 100%, and it certainly
never questions the legitimacy of the original
loans or the system that has perpetrated the debt crises for 30 years.

As the annex to the government’s press release
states, “The unilateral cancellation of the ship
export debt will be implemented outside the
cooperative framework of the Paris Club of
creditor countries. In this particular case the
Government finds that there is good reason for
Norway to take an independent stand.”

Unfortunately, but unsurprisingly, the document
goes on to say that this is a one-time
occurrence, and that the Norwegian government
will continue to participate in and abide by
Paris Club decisions on “all future debt forgiveness.”

The Norwegian government has been careful to
avoid the use of terms like “illegitimate” or
“odious” or “illegal” to describe the debt it is
canceling, which is unfortunate, as it would have
made the precedent a stronger and more useful one
for debt campaigners. But although it doesn’t use
the terms, it uses the logic of illegitimacy, and
in that regard sets what is still a very valuable
precedent, and one that campaigners will be using
to pressure other bilateral and multilateral creditors as they go forward.

Below are

(1) The press release from the
Norwegian government;

(2) The press release from
the Norwegian Jubilee campaign; and

(3) The annex to the Norwegian government’s press release (described as a factsheet).

[Soren Ambrose for 50 Years Is Enough Network]

(1) Press release [Norwegian Foreign Ministry] No.: 118/06
Date: 02.10.06

Cancellation of debts resulting from the
Norwegian Ship Export Campaign (1976-80)

In its forthcoming national budget for 2007 the
Norwegian government will propose to the
Parliament (Stortinget) to cancel NOK 520 million
of official debts from Ecuador, Egypt, Jamaica, Peru and Sierra Leone.

The claims originate from the Norwegian Ship Export Campaign (1976-80).

– This campaign represented a development policy
failure. As a creditor country Norway has a
shared responsibility for the debts that
followed. In cancelling these claims Norway takes
the responsibility for allowing these five
countries to terminate their remaining repayments
on these debts, says Minister of International Development, Erik Solheim.

The Government proposes that these claims be
cancelled unilaterally and unconditionally,
without budgetary allocation and without
reporting the cancelled amounts as Official
Development Assistance (ODA) to the OECD. The
debt cancellation will, in other words, be additional to Norway’s ordinary ODA.

(2) Press release from The Norwegian Campaign for Debt Cancellation
(Jubilee Norway/SLUG)
Date: 02.10.06

Norway cancels illegitimate debt and takes
co-responsibility for failed development policy ­

A historic victory for the debt movement

Norway’s Minister of International Development
Erik Solheim announced today that Norway is
unilaterally and without conditions cancelling
US$80 million in illegitimate debts owed by 5
countries: Egypt, Ecuador, Peru, Jamaica and Sierra Leone.

“Norway now cancelling illegitimate debt and
admitting co-responsibility for a failed
development initiative is simply historic”, says
Kjetil G. Abildsnes, Chair of Jubilee Norway.

“Solheim shows political courage that won’t go unnoticed”, he said.

Norway will then have settled an ugly chapter in
Norwegian aid history ­ the Ship Export Campaign
(1976-80).This unfortunate episode in Norway’s
aid history had the effect of cranking up debts in 21 countries.

“This is clearly a case of illegitimate debt.
Norway broke its own rules by not assessing the
development needs of the countries we were
exporting our ships to”, says Abildsnes.

“But Solheim is now cancelling all of this debt.
This is a historic victory for us,” says
Abildsnes. “It’s the end of an embarrassing story
for Norway. We applaud Solheim for this bold step”.

Burma and Sudan who also have loans to Norway
after the Ship Export Campaign will not receive
any cancellation until the situation in the two
countries change. We expect these countries to
also get their debts cancelled when there is a change in their situation.

The reason given by Norway for this unprecedented
unilateral cancellation is a failed development
policy lacking proper needs assessment and a proper risk analysis.

“This campaign represented a development policy
failure. As a creditor country Norway has a
shared responsibility for the debts that
followed. In cancelling these claims Norway takes
the responsibility for allowing these five
countries to terminate their remaining repayments
on these debts”, said Minister of International
Development, Erik Solheim today. “Cancelling
these debts will have consequences for how we
think about responsible lending in the future,” he continues.

The debt movement has long said that debt
incurred by dictators, for failed projects, or
where money have disappeared in corruption is
illegitimate and not the responsibility of the
people. By cancelling these claims Norway is
taking another step towards defining the concept of illegitimate debt.

“That Norway takes co-responsibility in this way
is unique in the world. Norway has now become the
first country which by action confirms lender
responsibility by cancelling illegitimate debt”, says Abildsnes.

Norway has now broken the unspoken rule of creditor solidarity.

Creditors have until now banded together to
insist that poor countries repay their debts and
have refused to admit that they share some
responsibility for having extended loans
irresponsibly, often for geopolitical strategic
purposes. This has been at the expense of poor
countries. Norway is setting an example and
creates a precedent that other countries surely
must follow. Norway is now in a position to
demand action from other countries and
international institutions on this issue.

“By cancelling these debts we want to give rise
to an international debate on lender responsibility”, says Solheim.

“The debt crisis is not over. We will make sure
that Norway continues to push for a just
international monetary system where debts are
legitimate and responsible lending the norm, not
the exception”, says Abildsnes Kjetil Abildsnes,
SLUG (Norwegian Jubilee Campaign)

(3) Annex to press Release No 118/06 02.10.06 (Norwegian Foreign Ministry)

Cancellation of debts incurred as a result of the
Norwegian Ship Export Campaign (1976-80)

Norway’s claims vis-à-vis developing countries
amount to approximately NOK 4,4 billion.

Approximately NOK 2.9 billion of the debt owed by
developing countries to Norway (including accrued
interest on arrears) is related to the Norwegian
Ship Export Campaign (1976-80), under which
Norway exported 156 vessels and ship’s equipment
totaling NOK3.7 billion to 21 countries.

The campaign was financed through the Norwegian
Guarantee Institute for Export Credits’ (GIEK)
old general guarantee scheme and its old special
scheme for developing countries. A great many of
these projects proved to be economically
unsustainable, so that government guarantees were
triggered and the Norwegian Government became creditor.

In 1988-89, the Brundtland Government conducted
an evaluation of the Ship Export Campaign, in
which the campaign was criticized for inadequate
needs analyses and risk assessments. The main
conclusion was that this kind of campaign should not be repeated.

A little more than NOK 1.1 billion of this debt
has been cancelled previously, primarily in
connection with Norway’s follow-up to the debt
relief initiative for the poorest countries
(Heavily Indebted Poor Countries, HIPC).

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

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About Sabine Kurjo McNeill

I'm a mathematician and system analyst formerly at CERN in Geneva and became an event organiser, software designer, independent web publisher and online promoter of Open Justice. My most significant scientific contribution is www.smartknowledge.space
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