Tuesday, May 5, 2015

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BAE Systems Retains Control of Money it Owes the Tanzanian People

The $47 million that BAE has been ordered to pay to the "Tanzanian people" will be dispersed via selected NGOs, rather than to the government.
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A delegation of seven Tanzanian MPs arrived in London last week to pursue the $47 million that a British court ruled should be paid to “the Tanzanian people”. The UK Department for International Development and the Tanzanian government had formed plans to invest the money in Tanzania’s education system. However, BAE Systems, the global defense and security company, is now “holding the sum as a fund in a treasury account”. They propose to allocate this fund to NGOs working in the country. The “Advisory Board”, which includes four BAE executives, intends to guide the company on how best to spend the money for the benefit of the Tanzanian people. BAE Systems is under pressure to pay the specified sum directly to the government, as part of the defense group’s bribery settlement.

Radar controversy

BAE Systems controversially provided radar equipment to the Tanzanian government in 2000/01. This decision was made just after a debt relief deal had been agreed, to enable the country to devote funds to its education system. At the time Tanzania had the status of a ‘Heavily Indebted Poor Country’. Yet despite the fact the nation only had a small collection of military aircraft, and although the World Bank and the IMF suggested a civilian radar system could be bought for $16 million, Tanzania proceeded to buy a $45 million radar system from BAE Systems. The final deal was closed after BAE was granted an export license to provide the radar system. As a result, the deal erased around two thirds of the budget savings Tanzania would make following the Heavily Indebted Poor Countries (HIPC) initiative. Due to cases such as this, Oxfam wants an arms export bill that determines clear criteria for vetoing any contracts likely to undermine poverty reduction programs in developing countries.

Last December, BAE was fined for making payments to a marketing adviser in Tanzania, who was involved in the deal. The company admitted it had failed to account for the $12.4 million payment it made to Shailesh Vithlani. BAE Systems has been accused of hiding this transaction by making it through two of the firms that Vithlani controlled. The Serious Fraud Office (SFO) and BAE claimed the only offence was to portray the payments to Mr Vithlani as being for “technical services”. However the “obvious inference”, according to a Southwark Crown Court judge, is that the secret payment was used as a “bribe” to win the $45 million military radar contract, for which Mr Vithlani is understood to have lobbied.

The radar equipment was funded through a loan that Barclays Bank provided to the Tanzanian government. Due to its existing debts, $3 billion of which had just been written off by creditors, the country was not supposed to borrow on commercial terms: the rules of the Heavily Indebted Poor Countries initiative do not allow countries receiving debt relief to take commercial loans. Both the World Bank and the IMF had refused to provide funding for the civil-military air traffic control system.

British MP Norman Lamb suggested that Barclays' decision to provide the loan may have been connected to a banking license granted in October 2000, which allowed Barclays to operate in Tanzania. The NGO Global Witness has called on The House of Commons International Development Committee to investigate Barclays’ role, as the committee conducts an inquiry into BAE’s deal with Tanzania. The government is now said to regret its decision to purchase one of the radar systems, that BAE claims are “second to none”.

The granting of loans to sovereign governments is, “a completely unregulated area”, Anthea Lawston, a senior investigator for Global Witness, told Think Africa Press. “Corrupt deals and wrong deals cannot go without two aspects – the company and the money”. Global Witness believes “banks should be required by law to disclose loans made to sovereign governments or state owned companies”, and that details of loan proposals should be published well in advance, to allow time for parliamentary scrutiny. The UK based NGO is also calling for anti-money laundering laws to be implemented more rigorously.

History of allegations

BAE Systems has a history of corruption allegations over defense contracts in South Africa, Chile, the Czech Republic, Romania and Qatar. However, most notable are the specific accusations of bribery in regard to the Al Yamamah arms agreement with the Saudi Arabian Government. Controversially, the SFO’s inquiry into this case was discontinued in December 2006, citing a need to safeguard national and international security, a decision that was backed by former prime minister, Tony Blair.

There continues to be a lack of clarity over quite how BAE Systems are going to deliver their ex-gratia payment. The company’s own website states they will need to confirm whether their plans are “consistent with the settlement agreement”, suggesting that they too are unclear as to whether their plans to allocate the money to NGOs in Tanzania through an advisory board will be allowed to stand.

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BAE won't pay back what it took,
The courts say they should, they say 'look,
Tanzania's bankrupt
But we know they're corrupt
Because we paid the bribes which they took.'