NCPA - National Center for Policy Analysis

Lobbying Groups Bully Companies in Misguided Efforts to Help the Poor

April 7, 2003

Recently, nongovernmental organizations (NGOs) such as Greenpeace and Oxfam have successfully persuaded foreign creditors to forgive some of the massive debt owed by poor countries.

Much of the money was never used for productive purposes and plenty still sits in the Swiss bank accounts of third-world kleptocrats. Releasing poor countries from misused official loans is sensible, especially in return for economic and legal reforms that benefit the poor.

But now, NGOs have turned their sights to a different sort of debt: corporate compensation claims for assets expropriated years ago. Here, they are doing harm, not good, say observers.

  • Under threat of a public-relations campaign, the Jubilee Debt Campaign forced Big Food, the parent of Iceland, a British supermarket chain, to drop its claim against the government of Guyana for $19 million in compensation for sugar mills seized in the 1970s (and now worth around $1 billion).
  • Nestle, under pressure from Oxfam, decided in January to give up its long-running claim against Ethiopia for assets seized by the country's 1970s Marxist dictatorship.

However, observers say that companies will be reluctant to invest fresh money in countries that fail to protect property rights. Foreign direct investments, which poor countries desperately need, have declined lately.

Instead of allowing NGOs to fight their cause, government s of poor countries would do better to affirm their commitment to property rights and the rule of law, say observers, even by letting foreign companies return to manage and invest in their assets.

Source: "Forgive debt, not theft," Economist, March 28, 2003.

 

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