`Equator Principles won't hurt investment'
Dadan Wijaksana, The Jakarta Post, Jakarta
The decision by the world's leading commercial banks to apply environmental principles when financing projects in developing countries would not dampen investment prospects in Indonesia, an expert said.
"Frankly speaking, I do not think that it will discourage investment here because at the implementation level there is going to be -- to some extent -- a sort of compromise to strike a balance between the interests of creditors and debtors.
"This means that the loans will continue, but there will be agreed action plans or efforts to reduce and minimize the adverse impacts of the projects on the environment," Citibank economist Anton Gunawan told The Jakarta Post on Friday.
Anton was commenting on a joint statement issued earlier by the World Bank stating that ten major banks from seven countries would adopt a series of guidelines on social and environmental issues in loans to developing nations.
The banks will apply the agreement -- known as the "Equator Principles" -- for financing purposes in all industrial sectors, including mining, oil and gas, and forestry.
The ten banks are ABN AMRO Bank and Rabobank of the Netherlands; Barclays Plc. and Royal Bank of Scotland of Britain; U.S.-based Citigroup Inc.; French-based Credit Lyonnais; Credit Suisse Group of Switzerland; HVB Group and WestLB AG of Germany; and Westpac Banking Corporation of Australia.
According to the World Bank, these banks extended a total of US$14.5 billion in project loans in 2002 worldwide, with 30 percent of those going to developing countries.
Anton said that the initiative had been under discussion for some time in various international economic forums, including the World Trade Organization and Asia Pacific Economic Cooperation forum.
"They have been asking for more participation from the private sector to help create sustainable (economic) development. So, this should serve as a response," he added.
He admitted that the adoption of the agreement would raise costs on the part of borrowers, but not to a level that would discourage investment.
"All they (borrowers) have to do is to make a proper assessment on the possible impacts of the project on the social and environmental sectors. The cost should not be that high."
Key points in Equator Principles
1. The borrower has to make assessments on such issues as sustainable development and the use of renewable natural resources; protection of human health, cultural properties, and biodiversity; avoiding the use of dangerous substances; socioeconomic impacts.
2. The assessment will be conducted in compliance with the applicable host country laws, regulations and permits required by the project.
3. The borrower has to covenant to provide regular reports, prepared by in-house staff or third party experts, on compliance with the Environmental Management Plan (EMP).
4. As necessary, lenders can appoint an independent environmental expert to provide additional monitoring and reporting services.
5. The principles apply to projects with a total capital cost of US$50 million or more.