Concetta Fierravanti-Wells (NSW, Liberal Party) Share this | Hansard source

The Export Finance and Insurance Corporation Amendment (Equity Investments and Other Measures) Bill 2021 grants Export Finance Australia the power to make equity investments. The intention is to enhance the ability of EFA and the government to support important overseas infrastructure investments and export-linked projects in Australia. The equity power will also be made available to the Australian Infrastructure Financing Facility for the Pacific, supposedly to further support Australia's Pacific step-up. The bill will also grant EFA the ability to provide stand-alone guarantees to oversee infrastructure transactions, improving EFA's and the facility's overseas infrastructure financing capabilities.

I think, though, it is important to put this bill into its proper historical context. It is important that there be investment in the Pacific countries to provide sustainable growth and to respond, most importantly, to the core priorities of Pacific island people. But equally important is that they not be saddled with heavy debt burdens. Development partners need to take into account the economic vulnerabilities of the region, as many countries have small formal economies.

Countries like Australia and Japan are committed to high standards of transparency in our overseas development assistance, and we encourage the same of all donors, including China. Our primary concern is to encourage effective ODA delivery that supports sustainable growth but does not impose heavy debt burdens. Whilst debt sustainability has made it on to the regional agenda, regrettably the debt-to-GDP ratios of Pacific island countries have deteriorated. When I became Minister for International Development and the Pacific in January 2016, it was very evident that Australia's soft power in the Pacific had steadily deteriorated. The Pacific should have been front and centre of our foreign policy. It is our neighbourhood, and our allies had expected that our focus should have been firmly in the Pacific. Regrettably, we dropped the ball. For example, under the coalition, vital short-wave radio services were cut. While some islanders had access to internet and FM, electricity is the first thing to go down in a cyclone, a tsunami or an earthquake, resulting in communication gaps. The stability, security and prosperity of our region should remain the primary objective of Australia, second only to the defence of Australia.

I pushed very strongly for the Pacific to be one of the five priorities in the Foreign policy white paper. Having travelled extensively in the Pacific—I did about 35 trips—I came to understand firsthand the talanoa and the importance of respecting the established regional framework of the Pacific Islands Forum and other bodies in the Pacific. Most especially, it became important that any unilateral action not cut across regional initiatives and hence jeopardise support for what we may want to do. Above all, I was careful that Australia was not seen as patronising. I took my guide from the great work Australia had achieved through RAMSI. I also strongly advocated for Australia to shift its overseas development assistance footprint to the Pacific. Indeed, while I was minister we had a record spend of $1.3 billion for aid in the Pacific. I advocated for us to spend a higher portion of our ODA in the region, including extending our diplomatic posts in each Pacific island country, given the vast distances and travel challenges that exist in the Pacific.

My activities and observations on my many trips and during my many conversations were well documented, including the necessary debriefings upon my return. I saw firsthand what the communist regime was doing in the Pacific. My honest and forthright public comments in January 2018 about debt-trap diplomacy and the CCP's activities not only started an international debate but highlighted that the Pacific is where the difficult and complex issues are and where the focus of our diplomacy should have been. Rather than heeding my prescient warnings, those driving our foreign, trade and defence policy chose to ignore Beijing's skulduggery in favour of a policy of appeasement of the communist regime.

My comments about debt distress in the Pacific reflected concerns raised by the IMF, academics and commentators. At that time, the external debt to GDP ratios of these vulnerable economies ranged from 25 to 90 per cent. At the time I was minister, the debt level in the Pacific was about $5.5 billion, of which about $2 billion was owed to international banks, and about $1.5 billion was owed to China and Chinese banks. At the time, the Lowy Institute released its Pacific map which showed that Australia remained the highest grants donor in the Pacific. About 70 per cent of China's aid was in the form of loans, and little was known about the arrangements of these opaque debts, including how many were debt for equity, like the Port of Hambantota in Sri Lanka.

Whilst every country has the sovereign right to borrow, invest and run their own economies, debts need to be repaid when they become due. This means that scarce government resources have to be diverted to debt repayment and away from critical spending such as health and education. When a vulnerable country with limited resources owes such vast sums to one country, it places the country in a vulnerable position. We have seen that Beijing has not been forthcoming in forgiving debts. We have seen countries in the Pacific with large debts due. Some have had interest concessions from Beijing, but they have been forced to sign up for the Belt and Road Initiative.

After leaving the role in August 2018, we started to see the rollout of some of the extensive work that I had started as a minister. However, Scott Morrison's downgrading of the role to an assistant minister, and the subsequent revolving door of L-platers, has seen us lose the momentum that I had generated over my constant engagement and interaction. Indeed, I was very surprised by the announcement of the $3 billion Pacific step-up, of which $2 billion was for the Australian Infrastructure Financing Facility for the Pacific. It had three components: this facility, the export financing component and grants. It was supposed to be for the Pacific. However, I note that the goalposts have now shifted, and the government is now focusing on the Indo-Pacific rather than just on the Pacific, which is what it was intended for. In all the work I did as a minister, this facility was never raised with me. Given my public comments about debt levels in the Pacific, I certainly have grave concerns about increasing those debt levels through more lending. It seems that this was another thought bubble emanating from the 'prime marketing office', with little regard to its application and how such unilateral decision-making would be received by our Pacific neighbours. I labelled it the 'DFAT bank'. One thing DFAT should never do is run a bank!

I said that I would put this in a historical context. I go back to the Pacific Island Forum in 2016, where we committed to a framework for regional disaster preparedness and development, and its key component, the Pacific Resilience Fund. I advocated that this would be an independent fund that Australia and other key development partners should contribute to capitalising—in short, a fund that Pacific island countries can draw on without owing one country. The fund would enable Pacific island countries to borrow small amounts at very concessional levels to do basic climate-proofing of vital community infrastructure such as schools, community halls and hospitals. This is the critical infrastructure so vital to the life of small island communities. Hence, it makes much better sense to weatherproof them before they are damaged or destroyed.

The Pacific is one of the most disaster-prone areas in the world. Seven of the 10 most disaster-prone countries are in our region. Adverse climatic events exacerbate existing development challenges. They constrain economic growth, affect oceans, fisheries, marine and coastal ecosystems, and have the potential to affect the stability and security of the region. There will always be another cyclone or tsunami. This is the reality of the Pacific and climate cycles. Surely we can assist our neighbours to weatherproof the region as best we can so that critical infrastructure can be preserved rather than having to expend funds to rebuild post cyclone or tsunami.

Now, the Pacific Resilience Fund remains a key regional priority driven by the Pacific Islands Forum, and it is clear, from my many discussions with key Pacific stakeholders, that this was what the Pacific needed, and we should have been responding accordingly. Capitalisation of the fund would require about $1.5 billion. The fund would be independent, transparent and ensure that Pacific Island countries who borrow from the fund would not be beholden to one country.

It is eminently more preferable for us to be contributing to this fund rather than international climate funds or Beijing's Asian Infrastructure Investment Bank, to which we also contributed $1 billion, and its associated Belt and Road initiatives. I have argued that Australia, as a key partner, should lead the way and not only commit a substantial initial capitalisation of the fund but encourage other development partners in our region to do likewise. A better option would have been to use a sizeable portion of the $3 billion Pacific step-up to contribute towards capitalisation of the fund, rather than saddling the Pacific with more debt through the more dubious $2 billion so-called Australian Infrastructure Financing Facility for the Pacific.

It is all very well to support the development of large infrastructure, but, before you do so, you need to secure basic infrastructure like schools, hospitals and community halls so that they remain intact during storms and cyclones. This critical infrastructure is vital to building resilience in villages on those small islands in those communities right across the Pacific. Neighbours need our help in practical and meaningful ways. The Pacific Resilience Fund is a far more sensible and practical way of helping the people of the Pacific as they face the day-to-day challenges of storms and cyclones.

Now, the other key component of the $3 billion Pacific step-up was the allocation of $1 billion in callable capital to the export financing agency. One of the challenges in the Pacific is private sector investment. Opening up markets and greater business expansion is good for Australia and Pacific island countries. I supported this component of the step-up because it will enable Australia to support investments effectively as a guarantor to private enterprise and afford more innovative financing options rather than impose greater debt.

The establishment of the trilateral partnership between the US, Japan and Australia for infrastructure investment, with the objective of mobilising private capital, has also been important, especially in the energy, natural resources and connectivity sectors, where there is private sector interest. The partnership can assist Pacific island countries with the logistics of getting projects up and running—including cost-benefit analysis and all those other things that are important to put deals together. But my concerns remain about this Australian Infrastructure Financing Facility for the Pacific. Thus far, our ODA to the Pacific has been in the form of grants. It still remains unclear how much dialogue, if any, was undertaken with Pacific island countries or the Pacific Islands Forum before the announcement of this loan facility.

Given my past comments, I am conscious that we do not increase debt levels in the Pacific. Loans need to be repaid with interest. Loans are made using Australian taxpayers' money. In view of these existing debt levels, I expect that very few countries can meet the requirements for repayment. So, if you know the debt is not going to be repaid, why are you lending it in the first place? Is it not better to give assistance to our neighbours in the form of ODA and focus on those things that are going to be of greater benefit to a greater number of people across the Pacific and, therefore, support this fund? We all know there will be more adverse weather conditions, and so, in the spirit of talanoa, let's help our neighbours prepare for those events and help communities. Let's help the Pacific to help itself.