Rick Wilson (O'Connor, Liberal Party) Share this | Hansard source

I speak today in support of the Export Finance and Insurance Corporation Amendment (Direct Lending and Other Measures) Bill 2014. This bill will amend the Efic Act to lift the restrictions on direct lending to allow Efic to provide loans to exporters of both capital and non-capital goods. It is unambiguously a good bill for small business.

Previously, we heard the member for Canberra waxing lyrically about Labor's proud record on small business and talking up its record on the Export Market Development Grants Scheme. In fact, Labor gutted the Export Market Development Grants Scheme. It took $25 million of funding out of that scheme, and the coalition has delivered on its election promise to put $50 million back into that scheme.

In terms of small business, Labor also presided over 500 job losses in the small to medium enterprise sector. It introduced a huge number of small business-unfriendly acts such as expanding the reach of the so-called unfair dismissal laws. It also introduced the carbon tax, which had a deleterious impact across a whole range of small and medium exporters.

But I go back to the bill. Currently, the Efic Act only allows for the lending of money to support the export of capital goods. Capital goods are defined as goods which are used to produce other goods, rather than the end product. They include machinery and goods used to manufacture products. Capital goods currently make up only five per cent of Australia's exports. Some suggest that capital goods producers may be better placed to fund their own export endeavours than those seeking to export non-capital goods. Non-capital goods, on the other hand, are end products or consumer goods.

Currently, when an exporter requires funds for the export of non-capital goods, Efic cannot lend to them directly but can facilitate a loan by providing a guarantee to the exporter's bank. This often results in duplication of paperwork, multiple or increased fees and extended loan-processing times. Small- to medium-sized enterprises, SMEs, are the main producers of non-capital goods and thus bear the brunt of these inefficiencies and extra costs.

Small to medium enterprises, by definition, are businesses employing less than100 people or with a turnover of less than $100 million. They make up the majority of the enterprises in my electorate of O'Connor. This bill, when passed, will permit Efic to lend directly to small to medium enterprises and will allow SMEs to capitalise on global trade opportunities. For the primary producers of my electorate of O'Connor, these legislative changes will have a significant impact.

Non-capital, or consumer goods, are largely the realm of rural and regional areas. These include beef, sheep meat, livestock, fibre, horticulture, wine, grains, flour, milk and dairy produce. These primary producers are usually SMEs who are often most hampered in their efforts to secure export finance through conventional lenders like the banks.

Banks are traditionally dependent upon security, which is often lacking in export contracts, particularly for first-time exporters or for those exporting to emerging markets. Many of my constituents relay stories of waiting times of over a year to have bank finance approved or, worse still, to have their finance knocked back. Many have received sound and helpful advice from Efic and welcome the opportunity these amendments will afford them to engage directly with Efic for the financial support of their export endeavours. This amendment bill, when passed, will enable Efic to lend for the other 95 per cent of exported goods and therefore improve SME export potential and advance regional and rural economies.

In my electorate, there are many SMEs kicking goals in export markets, and I am proud to announce that one of this year's big winners in the recent Western Australian Industry and Export Awards came from the horticultural food bowl of my electorate of Manjimup. I congratulate the Truffle & Wine Company on being awarded both the Premier's Award for Excellence and the Regional Exporter of the Year Award. They produce over five tonnes of premium tuber melanosporum, or black winter truffles, of which over 95 per cent are exported. They are keenly sought after by top chefs and Michelin-starred restaurants worldwide. The Truffle & Wine Company is the single largest producer of black winter truffles in the world and benefits from being able to supply counterseasonal produce to the lucrative and growing European and Asian markets.

I take this opportunity to thank Cassandra McCredden and Stuart Hutchinson for their hospitality on my recent visit to their Manjimup truffiere and I wish the team at the Truffle & Wine Company every success in the coming 52nd Australian Export Awards on 27th November.

I would like to further acknowledge O'Connor's burgeoning truffle industry with the Manjimup area alone having over 30 truffieres producing over 80 per cent of Australia's truffles. Truffle Producers of Western Australia's Chairman, Mark Horwood, maintains our WA product is lauded in Europe but the industry has so far been unable to crack the Chinese market. Mr Horwood believes that the recent China-Australia Free Trade Agreement will give the Australian produce the seal of approval that Chinese buyers need and anticipates that truffle production will treble in the next five years.

Another former winner of the WA export industry award for agribusiness is Ferngrove Vineyards in the Franklin River winegrowing region in my electorate. Ferngrove is a large exporter of premium wines to China and I do not doubt their business will also be further enhanced by last week's signing of the China-Australia Free Trade Agreement.

Local fertiliser manufacturers Australian Mineral Fertilisers recently shared with me their story of the financial barriers they faced when their small regional manufacturing plant tried to break into the lucrative export market. AMF are an innovative SME in the Great Southern region of WA. They produce high-performance, non-toxic fertilisers through the blending of essential minerals and specially coated soil microbes to create a powerful 'living' fertiliser for both domestic and export markets. AMF ultimately secured bank finance through a long and frustrating process, complicated by the low value of their landholding intended as security and the uncertainty of emerging markets that they sought to export into; yet their product is non-toxic, is certified organic and fetches a premium in an increasingly environmentally conscious consumer market. Surely, these are the sorts of producers we should be supporting. CEO and ex-local farmer Rob Edkins firmly believes in regional enterprise and seeks to continue to provide his small regional community with sustainable employment opportunities through expanding the export aspect of his Tenterden based business.

Last month, I was joined by the Minister for Small Business, the Hon. Bruce Billson, on a tour of Kalgoorlie drilling component manufacturer Harlsan Industries. Brothers and co-owners Harley and Dean Hollier received advice from Efic which assisted them in securing independent funding for the export of their RC drilling equipment. Together, they welcome any legislative changes that would simplify the funding of their exports into the developing markets of Africa, South America, Mongolia and South-East Asia.

Many other SMEs in my electorate have expressed the opinion that there appears to be considerable risk aversion and bias against lending by traditional institutions and that establishing markets in developing countries is not secure enough for most banks. Efic's 'capability based' approach supports loans based on an exporter's ability to meet their contract, rather than the traditional bank approach to lending to SMEs with the most tangible security. It therefore currently supports enterprises that can demonstrate the best business practice in the export of their capital goods. Expanding this approach to the producers of non-capital goods will only enhance the potential of SMEs to export our premium primary produce to the world.

Wellard Rural Exports is one of the world's leading livestock exporters and transports a large proportion of the cattle and sheep originating from my electorate to distant markets.

A division having been called in the House of Representatives—

Sitting suspended from 11:53 to 12:07

Recently, Efic assisted Wellard to facilitate the export of 2,000 quality dairy cattle to Sri Lanka as part of their commitment to help establish a 22,500-head high-production dairy herd in that country. To fulfil the initial contract, Wellard was required to arrange finance for the buyer. Sri Lanka was still dealing with the aftermath of civil war and found themselves with limited access to foreign capital. Given the general unwillingness of the private sector to fund exports into some emerging frontier markets, Efic stepped in to provide a guarantee to an international bank to provide a loan or buyer finance to the Sri Lankan government. The success of this first contract has led Wellard to winning more substantial contracts in Sri Lanka. Wellard similarly maintain, and I quote from a recent personal communication:

EFIC has been a very good supporter of the development of the live export industry … when developing the beef breeder and dairy heifer market in China."

EFIC also provided a credit facility to an Eastern European cattle importer to import Australian beef breeding cattle.

As a young farmer I had a considerable amount of income exposed to an Iraqi wheat debt incurred from the sale of wheat by the Australian Wheat Board to Iraq on credit terms over the period 1988-90. Efic agreed to insure between 70 and 80 per cent of any payment default on these wheat exports to Iraq, with the Australian Wheat Board bearing the remaining exposure. Following its invasion of Kuwait in 1990 and the subsequent imposition of United Nations economic sanctions, Iraq defaulted on payments. Efic subsequently paid credit insurance claims. After the fall of Saddam Hussein's regime, the international community decided to support Iraq's economic recovery. ln November 2004, the Paris Club of creditors agreed to provide Iraq with 80 per cent debt forgiveness. The remaining debt stock is scheduled to be repaid over the 17 years from 2011. To date, Iraq has paid all principal and interest instalments in full and on time. Efic receives these repayments from Iraq semi-annually, and passes the wheat growers' portion to Agrium Asia Pacific, or APPI, which now owns the Australian Wheat Board's assets. APPI then distributes the proceeds to the Australian farmers. Overall, wheat farmers are likely to recover about 84 per cent of the original contract value, comprising the Efic claim payment of around 80 per cent and the Paris Club recovery of 20 per cent of the remaining uninsured exposure.

Efic is managing this process with Iraq to ensure that Australian wheat farmers like me will receive their entitled share of repayments. I make note that Efic no longer provides short-term trade credit insurance, having sold this aspect of the business to the private sector in 2003. I thank the House for indulging me in recounting my personal story and use it to reiterate that Efic has already played an important role in maximising Australia's trade potential.

The changes proposed in this amendment bill will expand upon and enhance the ability of Efic to ensure that no Australian enterprise where they produce a capital product, such as a piece of mining or manufacturing equipment, or a non-capital good, such as O'Connor's renowned primary produce, will be denied the opportunity to grow their business overseas simply because they are unable to access finance. These new direct lending arrangements will remove the need for exporters of non-capital goods to obtain a guarantee from Efic before they can secure funds from a bank. This doubled the due diligence processing time and required duplication of documentation and considerable additional legal fees. This will become a real benefit to all exporters by reducing the time and paperwork required to access Efic support. This will ensure that Efic is able to provide products and services that will match the evolving needs of modern businesses.

This bill forms an integral part of Minister Robb's refocus on providing financial service to SMEs seeking to capitalise on global trade opportunities, so I give today's Export Finance and Insurance Corporation Amendment (Direct Lending and Other Measures) Bill 2014 my unreserved support.

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