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 Friday, 20 December, 2002, 12:22 GMT
Nestle offers Ethiopia refund deal
Ethiopian famine victim
Ethiopia faces critical food shortages
The Swiss-based food giant, Nestle, has moved to resolve a dispute with Ethiopia over compensation it is demanding from the poverty-stricken country.

A Nestle spokesman on Tuesday told the BBC the company would invest any compensation back into Ethiopia.

And he said Nestle might accept less than the $6m it says it is owed.

Nestle is willing to be flexible on a great number of points, such as amounts, such as timing, such as modality

Francois Perroud
Nestle
Nestle has faced severe criticism from aid agencies after demanding the compensation for a company that Ethiopia nationalised in the 1970s.

The company was owned by Germany's Schweisfurth Group, a Nestle subsidiary, before being nationalised by the former communist regime in 1975.

According to poverty relief organisation Oxfam, the Ethiopian Government has offered to pay Nestle about $1.5m - a figure based on the current exchange rate between the dollar and the Ethiopian birr.

Ethiopia is currently hit by a serious food crisis after failed rains. It has warned that up to 11 million could need food aid.

Foreign investment

"Nestle is willing to be flexible on a great number of points, such as amounts, such as timing, such as modality," company spokesman Francois Perroud told the BBC.

But he said that Nestle insisted on the principle that if a government expropriated a company, it must pay compensation.

Nestle's headquarters in Switzerland
Nestle has been offered $1.5 m so far

"One of the problems that Ethiopia is facing right now is the lack of foreign direct investment and that is clearly due to the fact that there are 40 or 50 cases like ours that have not been settled yet," Mr Perroud said.

Oxfam has condemned Nestle's stance, saying there is no justification for diverting Ethiopian Government money to a multinational which made profits of about $3.9bn in the first six months of this year.

"This is a company that has said publicly that one of the things it wants to do in the world is to help make poor people better off. This is a company that is trying to squeeze out of one of the poorest countries in the world $6m," said Oxfam's director of policy in the UK, Justin Forsyth.

Famine fear

Ethiopia, with average gross domestic product per person of just $100 a year, faces the prospect of its most serious famine since 1984 after drought caused widespread crop failures earlier this year.

Ethiopian Prime Minister Meles Zenawi recently described the situation as a nightmare "too ghastly to contemplate".

Government revenues have been seriously depleted by a slump in the world price of coffee, the country's principal export.

The World Bank's investment arm is taking part in negotiations between Nestle and the Ethiopian officials.

"This $1m in our opinion is justifiable. But this is not the point of view of Nestle. They are trying to get as much as they can," said a World Bank spokesman.

  WATCH/LISTEN
  ON THIS STORY
  The BBC's Mike Thomson
speaks to the Ethiopian prime minister
  Nestle spokesman Francois Pierroud
"Nestle is willing to be flexible"

Talking PointTALKING POINT
 Nestle claim
How should firms operate in famine conditions?
See also:

18 Dec 02 | Business
07 Dec 02 | Africa
28 Nov 02 | England
02 Sep 02 | Business
28 Feb 02 | Business
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