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DAM-L UK Guardian and Independent on WCD and Balfour Beatty (fwd)
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Subject: UK Guardian and Independent on WCD and Balfour Beatty
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Dam finally breaks for Balfour Beatty's Welton
Public Relations; Unlearned lessons
Independent
14 November 2001
Friends of the Earth and other non-government organisations (NGOs) were
hailing it as a famous victory. Balfour Beatty was meanwhile insisting that
its decision to withdraw from the Ilisu Dam project, in eastern Turkey, had
little to do with the highly active campaign to have the whole thing
ditched, and everything to do with long, professional and careful
consideration, resulting in a decision taken largely on commercial grounds,
after due process and exhaustive study.
Mike Welton, Balfour's chief executive, deserves some kind of an award for
doggedly refusing to let the campaigners bulldoze him into early
submission, but the fact of the matter is that this was a contract that his
company should probably never have become involved in in the first place
and certainly should have abandoned a long time ago. "Due process" is an
admirable thing, but you have to wonder whether it was wholly necessary
given the blindingly obvious conclusions it came to.
As controversial projects in the developing world go, this one had it all.
The Turkish government wants to dam the Tigris river in eastern Turkey,
throwing up to 25,000, mainly Kurdish, people out of their homes and
completely changing the nature of the surrounding environment. Some see the
project as part of a wider programme of ethnic cleansing in an area already
devastated by years of armed conflict between ethnic Kurds and the Turkish
state. Enough said?
There's more. The dam would also flood an area rich in archeological
treasures, some of them dating back 10,000 years, and enable Turkey to
control more than half the downstream flow of the river into Iraq and
Syria, thus threatening the whole region with repeated conflict over water
flows to neighbours.
Small wonder that Balfour Beatty, which was asking the Government for $200m
of export guarantees for its own relatively small part in the project,
found itself the butt of some at times vicious campaigning. Normally
agnostic institutional shareholders were galvanised into asking whether the
contract was really worth the candle. The Government could have put paid to
the whole thing ages ago by simply refusing to approve the credit, but
found the goals of its own "ethical foreign policy" somewhat at odds with
its parallel desire to look business friendly and toady up to the Turks
So under the then Secretary of State for Trade and Industry, the hapless
Stephen Byers, the issue was fudged by imposing four conditions on export
aid. Balfour Beatty has taken two years to decide the conditions are too
onerous to make participation possible. The Government is off the hook and
Balfour Beatty is left looking a right old Charlie.
It's all a bit of a shame really. Dams are an area of particular expertise
for Balfour Beatty but, for all the reasons highlighted by the Ilisu dam
controversy, not many of them are these days built outside the totalitarian
regimes of China, Africa, and the Far East, where concern over humanitarian
displacement, the protection of antiquities, river flow to neighbours,
environmental damage and all the rest don't figure highly on the list of
priorities.
A mighty tome published last year by the United Nations-sponsored "World
Commission on Dams" made their construction that much more difficult still
by listing an astonishing 26 guideline conditions. If by any chance you
manage to satisfy the first 25, you'll certainly get fouled on the 26th.
None of this means Ilisu won't happen. The Brits and Italians are now out,
but local contractors are still very much in, as are the lead French and
Swiss contractors for the turbines, generators and related electrical
equipment.
Public Relations
The Financial Services Authority is turning its attention to City public
relations firms. This formerly lucrative cottage industry already has
plenty to worry about, now the boom in mega mergers and new issues is dead
and gone. The FSA wants to use its formidable new powers to make the
industry clean up its act as well.
Aside from being the whipping boy when things go wrong, part of the
financial PR's lot is to say the things that companies can't be seen to be
saying or that bankers aren't allowed to since spindoctors do not require
FSA authorisation to conduct their business. The FSA worries that this
often amounts to market manipulation, which is against the law. PRs, it
believes, are frequently instrumental in disseminating inaccurate puff or
slander about companies, and that they allow good information to get into
the wrong hands before it gets out into the market.
Perhaps surprisingly, the FSA professes to be unconcerned about the most
potent weapon in the spindoctors' arsenal, the "drop" of tomorrow's press
release to an anointed hack, invariably in the expectation of a favourable
slant being put on the story. As long as the material appears
coincidentally with the formal announcement, then there isn't a problem,
the FSA says.
In which case it is hard to see where the FSA is coming from. The City is
filled with a thousand different gossips and voices, many of them badly or
mis-informed, but nearly all of them with some sort of an axe to grind. It
is part of the journalist's and analyst's job to sort the wheat from the
chaff and to disentangle the spin from the truth. Those who don't are soon
found out and ignored. It is likewise always going to be next to impossible
to regulate an industry whose raison d'etre is to manipulate information,
thereby to bolster and defuse its effect according to instructions. The FSA
can try all it likes to close down the flow of good and bad information,
but as long as there's a market, it will never succeed.
Unlearned lessons
In any previous business downturn, a basket case as bad as Marconi would by
now already have been in administration. The banks or bondholders would
have pulled the plug, there would be a fire sale of assets going on and it
would all be over for this one time stalwart of corporate Britain. This
time around it's different. All the effort is going into keeping the
casualties alive, through debt restructuring or in BT's case by arm
twisting the City into supporting a rescue rights issue. In the old days,
they would have been put down. Now they are kept on life support.
It is not altogether clear this is the right approach. In theory, the
financial pain isn't as bad, or at least it tends to get more broadly
spread, but the lessons are swept under the carpet and as a result the
wrecklessness that allowed this to happen will return sooner than we would
wish. The old way was more brutal, but it was profoundly more corrective in
its effect.
The writedowns announced by Marconi yesterday, for which read the
difference between what Marconi paid for these businesses and what they are
now worth, defy belief, but the failure in management and controls that
allowed it to happen are already water under the bridge, and the value
destruction involved just another of those things. In another time and
another company, the "impairment charge" announced yesterday by
Vodafone an astonishing £4.5bn would have caused a boardroom and banking
crisis. Today it takes second place to Ebitda and didn't even merit a
mention in the Reuters report on the figures. No one likes to admit the
boom is over, but this looks more and more like denial.
j.warner@independent.co.uk
--------------------------------------------
Ilisu dam in jeopardy as Balfour drops out
Mortal blow for controversial £1.25bn project flooding Kurds' land
Paul Brown, environment correspondent
Guardian
Wednesday November 14, 2001
The controversial Ilisu dam project in Turkey, personally backed by Tony
Blair, has been dropped by Balfour Beatty, the company that led the
international consortium which would have drowned the Kurdish homelands.
The £1.25bn project to dam the Tigris, first revealed in the Guardian in
March 1999, needed the backing of the export credit departments of nine
countries to make it viable, with the UK in the lead.
The giant construction firm said yesterday it had decided to pull out
because the "commercial, social and environmental" issues were unlikely to
be resolved soon.
Balfour Beatty's Italian partner, Impregilo, also abandoned the project
yesterday. Environmental and human rights groups were jubilant.
The surprise announcement follows speculation last week that the prime
minister was resolutely behind the Ilisu dam, partly because of pressure
from the Turkish government, which wanted a reward for its help in
providing bases for the bombing of Afghanistan.
Robin Cook, who at the time of the original proposal was foreign secretary,
was among cabinet members reportedly opposed to it.
The project had provoked an international outcry by environmental and human
rights groups, and diplomatic objections from Syria and Iraq, which claimed
it interferred with their rights to water from the river Tigris and that
they had not been consulted.
The Arab League warned the British government against backing the project.
In response to pressure, the government set four conditions before it would
back the project to the tune of £300m. These were a proper resettlement
programme for 50,000 displaced Kurds, consultation with Syria and Iraq,
archaeology rescue plans for the 2,000-year-old city of Hasankeyf and
preservation of the 100,000 years of history in the region, and
environmental improvements including sewage works.
After the independent World Commission on Dams report earlier this year,
which set high standards for building similar projects, Skanska, the
Swedish member of the consortium, pulled out.
Stephen Byers, then at the Department of Trade and Industry, dropped strong
hints that the government was also to abandon the project but was overruled
by No 10. Balfour Beatty is involved in a number of private finance
initiatives with the government.
A report on Ilisu this July on how the four conditions were being met, said
the human rights issues and consultations with downstream neighbours were
still unresolved.
Mike Welton, chief executive of Balfour Beatty, yesterday said that with
the issues still unsecured and no early resolution likely, it was not in
the best interests of the company to continue. It believed the project
could only proceed with substantial extra work and expense and it would
suffer considerable further delay.
Kerim Yildiz, spokesman for the Kurdish Human Rights Project, said: "We are
delighted. We were not expecting this, because Balfour Beatty was fighting
hard for the dam.
"This Ilisu campaign is a great example of environment and human rights
groups fighting together to be effective."
Charles Secrett, director of Friends of the Earth, said: "This is a
tremendous win against a disastrous project. The story of the Ilisu dam
shows the need for laws which require British firms to adopt clear ethical
and environmental standards in their work abroad as well as at home."
The Department of Trade and Industry and the export credit guarantee
department were saying little yesterday. The official line was that the
"decision is a commercial matter for the company". But it was clear there
will be relief that such a potential political disaster has gone. The
government faced a judicial review over human rights and breaches of
international law if it had gone ahead.
Though this means the scheme is now effectively dead, the Turkish
government has always said it would continue with the project whether or
not it got the foreign backing. It intends to issue a statement.
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