IFC and China Exim to co-finance investments in Africa

18 June 2007

Many question banks' rhetoric of "support[ing] environmentally and socially sustainable investment" on the continent, citing dubious track records.

Reuters reports that the heads of the International Finance Corporation (IFC) and the Export-Import Bank of China (China Exim) - China's official export credit agency - signed an agreement to provide joint financing "to support environmentally and socially sustainable investment in emerging markets," mainly in Africa. China Exim's Vice President Li Jun told Reuters that he hoped to provide $20 billion worth of project financing to the continent over the next three years.

Many observers contend that neither bank is in a position to ensure the environmental and social sustainability of their projects. Although the IFC presents itself as the world's lead institution on sustainable banking, many in civil society are skeptical of IFC’s commitment, arguing that the IFC has failed to practice what it preaches in its own operations. While the IFC may deserve some credit for its role in promoting safeguards at private banks through the Equator Principles, absent effective enforcement mechanisms, the “sustainable banking” push at the world’s leading financial institutions may amount to little more than rhetoric.

Both the IFC and China Exim have questionable track records when it comes to the impacts of their investments on people and the environment. China Exim has invested heavily in the highly controversial Merowe Dam in Sudan, where opponents of the project have been attacked, over 10,000 residents have been displaced to date without receiving adequate compensation, and environmental consequences are expected to be severe. Meanwhile, the IFC has attracted criticism for its increasing role in extractive industries, including lucrative oil investments and destructive mining projects, which have significant adverse environmental and social impacts.

The IFC-China Exim agreement represents the latest formal collaboration between the World Bank Group and the rapidly growing Chinese lender. Last month, the World Bank and China Exim signed a memorandum of understanding to provide joint financing on public sector projects.

Resources

• World Bank and China Exim bank team up on lending to Africa, Bank Information Center, June 4, 2007 (BIC website)
• China ExIm Bank, IFC seal joint emerging mkt investment pact, Reuters, June 1, 2007 (Reuters website)
• Merowe Dam Campaign page (IRN website)
• African and Chinese CSOs discuss China in Africa by Hakima Abbass, Pambazuka News, May 31, 2007 (Pambazuka website)