Ian Goodenough (Moore, Liberal Party) Share this | Hansard source

I rise to speak in support of the Asian Infrastructure Investment Bank Bill 2015, which is the enabling legislation for Australia's membership of the Asian Infrastructure Investment Bank. The bank is an international financial institution initiated by the Chinese government and is supported by 57 nations—37 regional and 20 nonregional—which are signatories as prospective founding members. The objective is to assist in funding major infrastructure projects throughout Asia and the Pacific.

Australia is not alone in supporting this multilateral international financing initiative. Representatives from the 57 prospective founding member-states gathered at the Great Hall of the People in Beijing on 29 June 2015 at a signing ceremony for the bank's articles of agreement. The Treasurer became the first signatory of the articles on behalf of Australia, and he was followed by the representatives of 49 other nations who signed the articles, which I will name for the record: Austria, Azerbaijan, Bangladesh, Brazil, Brunei Darussalam, Cambodia, China, Egypt, Finland, France, Georgia, Germany, Iceland, India, Indonesia, Iran, Israel, Italy, Jordan, Kazakhstan, Republic of Korea, Kyrgyz Republic, Lao Peoples Democratic Republic, Luxembourg, the Maldives, Malta, Mongolia, Myanmar, Nepal, the Netherlands, New Zealand, Norway, Oman, Pakistan, Portugal, Qatar, Russia, Saudi Arabia, Singapore, Spain, Sri Lanka, Sweden, Switzerland, Tajikistan, Turkey, the United Arab Emirates, the United Kingdom, Uzbekistan and Vietnam. This represents a truly international venture. The Asian Infrastructure Investment Bank will focus on the development of infrastructure and other productive sectors in Asia, including energy and power supply, transportation and telecommunications, rural infrastructure and agricultural development, water supply and sanitation, environmental protection, urban development and logistics.

Prior to entering parliament, I was involved in a multimillion dollar international financing contract with Chinese investors for a successful commercial development in Western Australia. Today, more than 100 people are employed from within the buildings that were constructed as a result of this international investment. Investment in infrastructure creates long-term sustainable jobs.

The recent experience of many developing countries in the 1990s and the first decade of the 21st century indicates that short-term export-driven domestic consumption development models favoured by mainstream neoclassical economists have not achieved successful results, giving rise to the notion that long-term economic growth can only be achieved through massive, systematic broad based investments in infrastructure assets. Accordingly, it is estimated that an infrastructure funding gap of US$8 trillion exists in the Asian region in the current decade. With initial authorised capital of US$100 billion, the AIIB will be part of the solution to closing this gap.

The AIIB will complement and cooperate with the existing multilateral development banks such as the International Monetary Fund, the World Bank and the Asian Development Bank to jointly address the large-scale infrastructure needs in Asia. Investment opportunities within the emerging economies of the Asia-Pacific region are expanding, in infrastructure as well as in new technologies, new products, new business patterns and new business models. The establishment of a multilateral trading system within the Asia-Pacific free trade zone, together with comprehensive regional economic partnerships, will serve to boost economic and financial cooperation, promoting economic development through industrialisation and regional integration.

Joining the AIIB presents Australia with opportunities to work with our regional neighbours and trading partners to drive economic growth and jobs. Australian expertise in funds management, engineering, construction, architecture and legal services could be widely applied to projects financed by the AIIB. There will be open procurement processes which Australian companies can participate in and a channel to connect Australian equity and industry superannuation funds to bankable projects overseas.

The government, working closely with the private sector, will allow Australian businesses to take advantage of the growth in infrastructure in our region. Australian companies will benefit from opportunities to participate in developing and building new infrastructure financed by the bank, as well as having access to improved infrastructure which facilitates trade in the region. For example, Australian iron ore may be utilised in the construction of railways and bridges, and these more efficient transportation linkages will in turn service the logistics of distributing Australian sourced goods into export markets.

Participation within the AIIB will improve trade relations with other nations and provide valuable commercial intelligence and market research information for Australian firms to utilise in entering the marketplace. A more diversified Australian economy will be less susceptible to the cyclical effects within sectors of the economy. The economic development of Asian nations will promote prosperity and in turn generate new consumer markets for Australian goods and services as wealth and spending increases. We are witnessing the phenomenon of the rising Asian middle class seeking to purchase premium quality Australian exports, sending their children to Australia for an education, and visiting Australia as tourists.

Participation in the AIIB is complementary with the coalition government's white papers on developing northern Australia and agriculture, as the existence of demand-driven emerging markets is essential. The development of roads, rail, bridges, ports, refineries, smelters, factories, water treatment plants, electricity generation and transmission infrastructure will see living standards rise. Overall, this strategic investment is positive for Australian mining exports, energy exports in the form of coal and liquefied natural gas, agricultural exports, agribusiness and food manufacturing.

The development of Asia will also generate more demand for professional services in architecture and design, engineering, construction, project management, quantity surveying, legal services, contract administration, transport and logistics. It will create opportunities for the development of domestic tourism, international education and health care.

Australia's participation in the AIIB has been generally endorsed by a number of industry leaders. Peter Collins, Chair of Industry Super Australia said:

The resources of the Asian Infrastructure Investment Bank will increase scope for pension and sovereign wealth funds to invest in long term, productive assets in the region.

Similarly, Jennifer Westacott, CEO of the Business Council of Australia said:

As a founding member Australia can play a key role in setting the direction of this body and the decisions it will make to finance projects that address Asia's infrastructure gaps.

Innes Willox, CEO of the Australian Industry Group said.

... the AIIB's objective of financing infrastructure development in the Asia-Pacific region will foster greater trade and economic development in the region of Australia's closest and most important economic partners.

The government's decision to join the bank has been made after key governance conditions have been satisfied as to world's best practice. The government will continue to work with other bank members to establish a governance framework that is effective, accountable and transparent, meets prudential standards and complements the work of other multilateral development banks. Consultation has also occurred with the states and territories, which are broadly supportive and did not raise concerns.

As a result of contributing approximately A$932 million in paid-up capital to the bank, to be paid over a period of five years, Australia is expected to become the sixth largest shareholder in the AIIB and secure a seat on the board. As a member, Australia will have input into key investment decisions. The articles of agreement will form the legal basis for the bank. The bank's governance structure is composed of a board of governors as the top-level and highest decision-making body; the board of directors as the middle level; and the management team which is at the bottom of decision-making pyramidal structure. No single member will control the bank, with major decisions requiring a super majority.

Upon membership Australia will be obligated to provide a capital contribution reflecting Australia's total shareholding of US$3.7 billion, which equates to approximately A$4.6 billion based on the exchange rate, comprising US$738 million or approximately A$932 million in paid-up capital. Paid-up capital will be made in five equal annual instalments with the first payment of US$148 million expected to be made on 1 January 2016. The remaining US$2.9 billion, equating to approximately A$3.7 billion, will be classified as callable capital, which represents a contingent liability against the Commonwealth. There will be no direct impact on the underlying cash balance, fiscal balance or net debt, as using cash reserves to purchase shares represents a change in the composition of the Australian government's assets.

Australia's participation as a founding member of the AIIB complements our nation's free trade agreements, particularly those in the Asia-Pacific region. Australia has nine FTAs currently in force with New Zealand, Singapore, Thailand, the United States of America, Chile, the Association of South East Asian Nations, Malaysia, Korea and Japan. The countries covered by these free trade agreements account for 42 per cent of Australia's total trade. Australia is currently engaged in six other free trade negotiations—two bilateral free trade agreements with India and Indonesia and four multilateral free trade agreements: the Trans-Pacific Partnership Agreement, the Gulf Cooperation Council, the Pacific Trade and Economic Agreement and the Regional Comprehensive Economic Partnership Agreement. The additional countries covered by these negotiations account for a further six per cent of Australia's total trade.

In summary, Australia is part of a group of 57 nations participating in the establishment of the Asian Infrastructure Investment Bank. This initiative is designed to fund much needed infrastructure in the emerging economies of the Asia-Pacific region, for which it is estimated there exists an US$8 trillion infrastructure funding gap in the current decade. This initiative will drive economic growth and jobs in our region by delivering much needed infrastructure, providing great opportunities for Australian trade and businesses.

Passage of this bill is required by 3 December 2015 to ensure that Australia is able to formally participate in the management of the AIIB, when it commences operations by the end of 2015. If the bill is not passed by the end of this year, there is a risk the AIIB will begin operations before Australia formally becomes a member, which could result in Australia being unable to participate in key decisions taken by the management of the AIIB in its formative stages. I commend the bill to the House.

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