The Trade and Industry Committee has agreed to the following Report:—

Ilisu Dam

5. The Turkish Government has for many years been developing ambitious plans for hydro-electric power generation in South-Eastern Anatolia.[1] Rapidly growing demand for electricity as a result of urbanisation and industrial and commercial development has now led to these plans being implemented.[2] A major dam is planned at Ilisu on the Tigris, 65 kms upstream from the borders with Syria and Iraq. In 1997 the Turkish Government invited Sulzer Hydro of Switzerland to form a consortium to build a power plant there, on the understanding that a 100% debt financing package would be arranged by the consortium and its banking advisers, UBS of Switzerland. The Export Credit Agencies (ECAs) of the main countries represented in the consortium have been approached for credits.[3]

6. Construction is due to start in late 2000 and be completed in around seven years. The sponsors of the project are the Turkish Government, through the Agency for State Hydraulic Works (Devlet Su Isleri or "DSI"). The total cost is likely to be around $2 billion, half of which would be for imported elements. Balfour Beatty were invited to lead the Civil Works Joint Venture. Their share of the contract value is around $300 million; $200 million from the UK and $100 million from its US subsidiary.[4] Much of the $200 million will be spent on equipment and services to be exported from the UK.

Ministerial Involvement

  7. In June 1998 Balfour Beatty first approached ECGD.[5] Discussions between the various ECAs proceeded for the rest of the year and into 1999. It was apparently not until March 1999 that DTI Ministers became aware of the project;[6] at that time several parliamentary questions were put down, and answered by the then Minister for Trade. In April and May 1999, Ministers commissioned two reports through ECGD: an independent evaluation by ERM (a firm of environmental consultants) of the environmental components of the original Environmental Impact Assessment Report (EIAR) commissioned by Sulzer, and a report on the resettlement issues by Dr Morvaridi (an academic at the University of Bradford).[7] On 21 December 1999, in a Press Release, the Secretary of State released the reports and announced that he was

"minded to grant export credit .... conditional on the Turkish authorities agreeing to address the concerns we have about the environmental and social impact of the project."

The concerns were briefly set out as "areas where changes would be required before the British could consider export credit support. These are the need to

• draw up a resettlement programme which reflects internationally accepted practice and includes independent monitoring;
• make provision for upstream water treatment plants capable of ensuring that water quality is maintained;
• give an assurance that adequate downstream water flows will be maintained at all times; and
• produce a detailed plan to preserve as much of the archaeological heritage of Hasenkeyf as possible."[8]

We are surprised that DTI Ministers were not made aware of this controversial project until March 1999.

Inquiry

  8. In July 1999 the Secretary of State for Trade and Industry announced a fundamental review of the Mission and Status of the Export Credit Guarantees Department (ECGD). We undertook a parallel inquiry in the autumn. In the course of our inquiry the Ilisu Dam project was brought to our attention as an example of a contentious project for which export credit had been sought, and which was in a sense a test case of ECGD's observance of social, environmental and developmental standards. In our Report agreed on 11 January 2000 and published on 20 January 2000, we announced that we intended to pursue the question in the near future.[9] We heard oral evidence on 26 January 2000 from Balfour Beatty and from the Kurdish Human Rights Project (KHRP), and received a number of written submissions. On 15 February 2000 we heard oral evidence from the Secretary of State on the subject, following a session devoted to a range of other DTI matters. On 1 February 2000 the International Development Committee heard oral evidence from the Minister of Trade and ECGD officials as part of its inquiry into " ECGD — Developmental Issues and the Ilisu Dam".[10] On 15 February 2000 there was a debate on the Ilisu Dam in Westminster Hall secured by Mr Kevin McNamara MP, and responded to by the Minister for Small Business and E-commerce.[11]

Debate

  9. Ministers have given an undertaking that if export credit cover were granted, a statement would be made to the House.[12] That is rather too late in the process. A debate in the period between production and publication of the revised full Environmental Impact Assessment Report, which is anticipated around Easter 2000, and the Secretary of State's decision required by the summer, would provide the House with an opportunity for a constructive debate.[13] This Report, and the Government's Reply, would provide a useful peg for such a debate. We recommend a debate in advance, rather than in the wake, of a Ministerial decision on export credit.

2  Ev, p 48, 2: p 1 para 2 Back

3  These include Switzerland, UK, USA, Germany, Italy, Portugal and Sweden Back

4  Ev, p 1 , para 5: Qq 2-3, 7 Back

5  HC Deb, 29 Nov 99, col 23w Back

6  Q 118 Back

7  See Ev pp30-32 for selected extracts from the latter report and pp 33-40 for the former report Back

8  For full text, see Ev, pp 25-26 Back

9  Third Report, The Future of the Export Credits Guarantee Department, HC 52, para 55 Back

10  This evidence is on the internet at www.parliament.uk/commons/selcom/indhome.htm It is referred to hereafter as "IDC, Q.." Back

11  HC Deb, 15 Feb 00, cols 155-175 WH. The Minister is referred to in this Report as "the Minister of State". Back

12  HC Deb, 15 Feb 00, col 175 WH: also IDC, Qq 30, 64, 66  Back

13  Q 28; Ev, p 3 , para 15 Back