Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Government in the Senate) Share this | Hansard source

I give notice that, on the next day of sitting, I shall move:

That the provisions of paragraphs (5) to (8) of standing order 111 not apply to the International Financial Institutions Legislation Amendment Bill 2010, allowing it to be considered during this period of sittings.

I also table a statement of reasons justifying the need for this bill to be considered during these sittings and seek leave to have the statement incorporated in Hansard.

Leave granted.

The statement read as follows—

Purpose of the Bill

The purpose of this Bill is to amend the International Monetary Agreements Act (IMA) 1947 to authorise the subscription by Australia to additional shares in the capital stock at the International Bank for Reconstruction and Development (IBRD). The purpose of the Bill is also to amend the International Finance Corporation (IFC) Act 1955 to allow Australia to adopt a proposed amendment to the Articles of Agreement of the International Finance Corporation (IFC) and to amend the Multilateral Investment Guarantee Agency (MIGA) Act 1997 to adopt four amendments to the Multilateral Investment Guarantee Agency (MICA) Convention which have been recently adopted by the MICA Council of Governors.

The IMA Act 1947 established Australia’s membership of the International Monetary Fund (IMF) and the IBRD (part of the World Bank Group) and makes provisions which allow Australia to meet obligations that may arise by virtue of our membership of these institutions. The proposed amendments to the IMA Act 1947 will authorise the subscription by Australia to additional shares in the capital stock at the IBRD.

The IFC Act 1955 and the MICA Act 1997 established Australia’s membership of the IFC and MICA respectively and makes provisions which allow Australia to meet obligations that may arise by virtue of our membership of these institutions. The proposed amendments do not alter these provisions and therefore introduce no substantive changes to Australia’s obligations to the IFC or MIGA.

The proposed amendment to the Articles of Agreement of the IFC aims to improve the voice and participation of developing and transition economies in the World Bank by increasing their basic votes, implementing the 020 commitment. This will increase the effectiveness and legitimacy of the World Bank as the leading global development institution and enhance the influence that developing and transition countries have over governance, policies and decision making in the World Bank. The proposed voice reform also allows shareholders to achieve voting power adjustments in both the IBRD and the IFC, taking into account different levels of shareholder interest in and support for the different institutions.

The four amendments to the MIGA Convention recently adopted by MIGA’s Council of Governors will modernise MIGA’ s mandate and expand the Agency’s scope, allowing a greater range of projects to be eligible for MIGA coverage. The amendments will permit the Agency to: provide coverage for stand-alone debt; broaden the process for investor registration; broaden the scope for coverage for existing assets; and eliminate the requirement of a joint application by the investor

and the host country to authorise coverage for specific additional non-commercial risks. The amendments do not alter the Agency’s core mandate but are aimed at reducing transaction costs and enabling MICA to insure political risk for projects based on actuarial qualities rather than excluding projects with particular financing structures.

The Treasurer, as Australia’s Governor to the World Bank, is required to vote on any proposed changes to the IFC Articles of Agreement or the MICA Convention. Under Treaty obligations, IFC and MICA members are bound by amendments to the Articles of Agreement and Convention respectively when they enter into force. Any amendment to either institution constitutes a variation in Australia’s treaty obligations and will therefore be considered by the Joint Standing Committee on Treaties.

Reasons for Urgency

Timely passage of the legislation is necessary for Australia to meet the G20 Pittsburgh and Toronto Summit commitments of ensuring that international financial institutions have appropriate capital for their resourcing needs, ensuring developing countries increase their voting power and modernising the World Bank. It is important that Australia demonstrates its commitment to the G20 agenda by ensuring prompt implementation of these reforms.

Australia’s subscription to the capital increase, whilst not impacting the Budget, will enable the IBRD to provide the lending levels necessary to assist developing countries in their post-crisis recovery whilst maintaining appropriate prudential standards. This additional lending will help developing and transition countries with the finance needed to assist their recovery from the global financial crisis.

Australia, through the G20, has committed to: ensuring that international financial institutions have appropriate capital for their resourcing needs; enhancing developing countries’ voice and influence in these institutions, including through increases in their voting power; and modernising the international financial institutions to foster sustainable development and poverty reduction. Early subscription of capital stock and passage of amendments to increase the voting power of developing countries in the IFC, and amendments to modernise the MICA Convention will demonstrate Australia’s leadership in this important area.

Failure to subscribe to an increase in capital stock early would limit the IBRD’s ability to rebuild its balance sheet and restore lending commitments to pre-crisis levels. The inability of developing countries to increase global growth may significantly impact on the world’s ability to recover from the global financial crisis.