Ian Macdonald (Queensland, Liberal Party) Share this | Link to this | Hansard source

I relish joining this debate on the Asian Infrastructure Investment Bank Bill. Senator Lambie was the last speaker on this just before question time. I am not quite sure who writes Senator Lambie's speeches, but I cannot believe that she believes the words she said in her speech—that this bank is like the Chinese military taking over the world or an attempt by the Chinese government to expand communism. I think those were the words she used.

Sarah Hanson-Young (SA, Australian Greens) Share this | Link to this | Hansard source

I raise a point of order, Acting Deputy President. I would like clarification as to who Senator 'lammie' is—perhaps you meant Senator Lambie, Senator Macdonald. I am not sure. But referring to people by their correct name would probably be helpful.

Deborah O'Neill (NSW, Australian Labor Party) Share this | Link to this | Hansard source

There is no point of order.

Ian Macdonald (Queensland, Liberal Party) Share this | Link to this | Hansard source

Senator Lambie was, in her speech, likening the Asian Infrastructure Investment Bank Bill to the communist Chinese government expanding communism. I cannot believe that even Senator Lambie would believe that.

This bill will help Australia be part of the Asian Infrastructure Investment Bank. It provides the parliament's authority for Australia's involvement and also an appropriation for the payment of Australia's capital contribution to the Asian Infrastructure Investment Bank. Why do we want to become part of this bank? Why does Australia think that this is a good idea and wants to be part of it? It is because the establishment of this bank, and Australia's part in it, will be good for Australia and for Australian jobs. Following completion of all the necessary ratification processes, Australia will lodge its instrument of ratification with the bank's depository, which is in China, and Australia's membership of the bank will become effective on the latter of the date of lodgement or on the day on which the bank is established. The commencement set out in the bill addresses the situation of the bill having received royal assent and the bank not yet having been established. That is provided for in the bill itself.

Once the bill does become law, Australia will be obligated to pay for the cost of our shareholding, of making our contribution to the ownership of the bank. Payments that Australia must make for subscription of shares of the capital stock of the bank are authorised by section 5. Section 7 authorises the consolidated revenue fund to be appropriated for the purposes of purchasing Australia's share subscription. That sets out the method by which Australia will become part of this bank process. Australia's total shareholding will be US$3.7 billion. That is about A$4½ billion, or a little bit more. It is part of the total of the approximately A$932 million paid up capital of the bank. The remaining US$2.9 billion will be callable capital, which is a contingent liability against the authority. The Treasurer, who is the responsible minister, may issue promissory notes and will have certain technical ways of providing the money for our investment in this bank.

It is important to understand how Australia benefits from becoming a member of this bank. The key benefit to our country is that the bank will improve infrastructure throughout the Asian region. That, of course, provides great opportunities for Australian trade and business. Our prosperity and our economic growth are very closely tied to the Asian region. That is of course why the coalition government has fought very hard to achieve remarkable success, I might say, in sealing and completing free trade agreements with Japan and Korea. And all credit to Mr Andrew Robb for the work he has done. I know that the previous Labor minister said that he was trying for six years to achieve those two free trade agreements. They never seemed to happen, so I am just a little surprised that effectively within 12 months of becoming the minster Mr Robb had been able to do the work and complete the agreement. We are very much part of Asia. We are very much part of this part of the world, and our free trade agreements conclusively prove and assist our involvement with all the countries of East Asia.

Regretfully, I have had to say in other debates today that I simply cannot understand the Labor Party's approach to the third of these very important free trade agreements, the free trade agreement that has been negotiated with one of the biggest economies in the world, China. Here we have a wonderful opportunity to increase trade, not just in goods but also in services, to a country that is already our biggest trading partner. The removal of tariffs both ways will increase that trade. Everybody knows what a huge economy it is, how many hundreds of millions of people there are in China, many of them moving into what is loosely described as the middle classes and wanting a better standard of accommodation, transport, clothing and, importantly for Australia, food. Here we have this great opportunity to increase this trade. I understand that very soon a bill will come before this parliament that will provide the mechanics of reducing tariffs and effectively ensuring the reduction of tariffs two ways in Australia's trade with China. That can only be good for Australia.

You have heard time and time again examples of how Australians have already made a mark in the Chinese markets, but those first steps, as we could call them, are certain to multiply with the endorsement of this free trade agreement. If, by chance, the Labor Party is able to convince the Greens political party and enough of the crossbenchers that this is not a good deal, then not only will that prevent Australia from having the wonderful opportunities that the free trade agreement would provide but also it will be, quite frankly—and I do not like saying this—an insult to the Chinese negotiators who have made concessions to Australia to get us to where we are at. I note that Mr Robb said some other time that if the deal does not go ahead this time then there may not be another time.

Again, the Senate has heard any number of times just how important it is that this free trade arrangement is completed through the parliamentary process prior to the end of this year. If it is not, the concessions that we get on tariffs will be put back another year. That will make us that much less competitive with our competitors in the goods and services we export than we are this year. So, it is absolutely essential that we do that. And if you ask any farmer, anyone in the service industries, they will tell you the absolutely essential nature of immediate action on this free trade bill.

It has been inquired to death. It has been looked at by everybody, and everybody in this chamber, with the exception of the Labor Party, seems to think it is a good idea. It is not a political issue because like the coalition, most of the luminaries in the Labor Party—such as Hawke, Keating, Bob Carr and the premiers of the various Labor states—support the free trade agreements. It is completely ridiculous and it is difficult to understand why the Labor Party in this chamber are opposing the free trade agreement.

The Labor Party talk about certain provisions for allowing workers in that will not have Australian standards, and this has been said time and time again on the public record—here in this chamber and in question time—but it has been proven to be a lie, a furphy and a complete misinterpretation of the facts. Do not take the words of Senator Abetz or of Senator Payne about this; take the words of Bob Hawke, of Bob Carr, of Premier Weatherill and of the Premier of Victoria—they are the ones that are saying it. Why are they saying that? Because they know that the provisions relating to employment are the same in these agreements as they were in one of the agreements that the Australian Labor Party managed to sign up with one of the South American countries during their term of office. They are exactly the same as the Labor Party has used, so why are they opposed to it? I hate to think it and I certainly do not believe it myself, but tell me another reason apart from being the old White Australia policy coming back into the Labor Party. I am sure that is not the way, but I cannot see any other reason why the Labor Party, in this chamber in particular, oppose it.

This Asian Infrastructure Investment Bank bill brings us closer to Asia and provides those opportunities for Australian trade and business, just like the free trade agreements. Not only does greater infrastructure and investment mean greater demand for Australian commodities, such as metals, and not only does it mean greater investment in ports and rail in emerging markets, but it will also create new opportunities for Australian companies. The bill also provides an opportunity to deepen our relationship with our largest trading partner and the region's largest economy, along with up to 55 other member countries in the Asia-Pacific region, which include India, Korea, France and other major economies.

The question has been raised: will Australian companies be able to be bid for projects? Of course, the answer is yes. The bank will have an open procurement model, meaning that companies from any country—not just the member countries—can bid for contracts. Australia, as a member of the bank, will be able to benefit from up-to-date knowledge of the opportunities available to Australian companies. If Australian companies can take advantage of those opportunities, then that means jobs for Australians and wealth for Australia. And who could be opposed to that? Australian companies have won contracts from other multilateral banks, such as the Asian Development Bank, so we are pretty well positioned. We have a track record to be able to make strong bids for contracts from the Asian Infrastructure Investment Bank.

Some people have asked me whether the bank would be able to invest in Australia. According to the articles agreement, that is not precluded. However, I would expect that the bank will initially focus on infrastructure in developing countries in the Asian region, where it will be able to play a more important role in encouraging private-sector funding, financing and infrastructure.

I have previously mentioned what Australia's investment and contribution will be. I understand from the bill that the authorised capital is some US$100 billion and about US$20 billion is being paid in. Clearly, it is a move that will be very much in Australia's interest because we are an important player in this East-Asia region. Any development of infrastructure in any of the countries in this region can only be good for the region and consequently good for Australia.

Those of us who have had the privilege of travelling in the Asia-Pacific region understand that, whilst some Asian countries have some of the very best infrastructure going—have a look at some of the trains in Japan for example, and while I have never been to China I believe some of their trains are very good too—other Asian countries are not quite so fortunate at the present time. There is clearly a lot that can be done in the way of infrastructure. We all know that infrastructure builds the economy. That is why, I might say as an aside, the coalition government has placed such significant importance on infrastructure in northern Australia. Although I would not classify northern Australia in the same category as some of the developing countries in Asia, clearly northern Australia is a part of our country that could well do with significant infrastructure investment. The northern Australian White Paper launched by the coalition government in June makes that commitment. In fact, it not only makes that commitment but also it provided the money for it in this year's budget.

As a nation we understand that infrastructure is important to grow the country, to grow the economy, to create jobs, to create wealth and to make Australia a better place and the living standards of all Australians even better. The same applies to infrastructure investment in Asia, not only because it is good economic sense but because as a global citizen in this part of the world Australia wants to do the right thing by providing funding for infrastructure in the Asian region.

I do not think time is going to allow me to tell the Senate of some of the third-party endorsements—from people like the Chair of Industry Super Australia, Mr Peter Collins; the executive director of the Business Council of Australia; or the group chief executive of the Australian Industry Group—but all of them are on record as strongly supporting Australia's investment in the Asian Infrastructure Investment Bank.

It is said that the investment will be a huge fillip for Australian expertise in funds management, engineering, construction, architecture and legal services which could be applied to projects financed by the bank. It provides new opportunities to deploy capital as well as to export the funds know-how in connecting pension savings to bankable projects, and that is very, very important for Australia. The resources of the Asian Infrastructure Investment Bank will increase the scope for pension and sovereign wealth funds to invest in long-term productive assets in this region.

Australia, like Asia, is dealing with challenges in the area of infrastructure and others. This bank will help meet them, and I am delighted that Australia will be part of that. I commend this bill to the Senate.

Christopher Back (WA, Liberal Party) Share this | Link to this | Hansard source

Last night, a billion people around the world went to bed hungry, many of them children, most of them in our region, and tonight they will go to bed hungry again. The reason why I support so strongly the Asian Infrastructure Investment Bank Bill 2015 is that it is a mechanism by or a conduit through which Australia can play a role in reducing that frightful figure of a billion people going to bed this evening without having had sufficient food. We will have 1.9 billion more people in this region by 2050—again, a challenge Australia can be part of in terms of a solution. I do not want to focus just on China, but it is illustrative of Asia. In Indonesia, the figures can be similar, as they can for other countries within the Asian region.

You and I, Mr Acting Deputy President Whish-Wilson—you, in your case, having come from Western Australia originally and me, in my case, still coming from Western Australia—understand very clearly the fact that our state is Asia centric, whereas most of the east coast is still Pacific centric. Fifty per cent of the world's population now live within two hours of either side of Western Australia's time zone. We already play a significant role in this country, and this bill and the actions that flow from it will give us the opportunity to play an even more significant role.

I turn to China for a moment to speak about urbanisation. In the last 15 years, they have gone from being 35 per cent urban to 50 per cent urban and, in another 15 years, they will go to 65 per cent urban. They do not have sufficient land or sufficient water to be able to provide nourishment for their people. Using China as an example again, because it speaks to the importance of our involvement in the Asian Infrastructure Investment Bank, in the 10 years of the presidency of Hu Jintao, the per capita income in China went from US$1,000 per year to US$5,000 per year—from US$1,000 to US$5,000 in 10 years. The last time there was a fivefold increase in per capita income anywhere in the world was during the Industrial Revolution of the 18th and 19th centuries, and that took 100 years, not 10. Therein lies the challenge.

What is the impact of this? As we all know, it is an increased demand for protein foods over staple foods as a community of people move higher socioeconomically, into the middle class, and an absolute emphasis on safe food and the reliable supply of food. Military leaders around the world have said since time immemorial that people go to war when there is a fear of inadequate, unsafe food and a lack of water—examples of which exist today. People want a better lifestyle. We saw this in the 10 years I spent working in India, where there was a burgeoning development of the middle class. It leads to a greater demand for services and a greater demand for better government management of the people's needs. Again, India is a prime example. In the city of Mumbai, no building has access to water 24 hours a day. Every building, be it a house, a leading hotel or a business, has a water tank on top so they get water for a certain number of hours a day, and power—unreliable power.

Why do I make these points so strongly? It is because Asia faces a major infrastructure financing gap estimated to be worth US$8 trillion over the next decade, and this Asian Infrastructure Investment Bank will be the mechanism by which we and they can start to address these issues. For water, including harvesting water, storing water, delivering water and ensuring water is safe for potable purposes and of course for irrigation and others; and for power, including generation of power, distribution of power, safe and economical consumption of power—all these require infrastructure.

When we speak of the delivery of goods, a statistic that is not commonly known but should be is that it is estimated that more than 40 per cent of all food produced in the world is not consumed—40 per cent of food produced in the world is not consumed—due to poor delivery; poor infrastructure; poor storage, such as a lack of refrigeration so the food spoils; poor transport; vermin, such as rats; or being wasted. And our own developed world is no orphan, as we know, when it comes to the food wastage that comes out of our own homes. This is not just a developing world problem or an underdeveloped world problem. But what it does point to is the need for infrastructure, the need for supply chains, the need for logistics and the need for investment.

You can go further and talk about the development of ports: the efficient and safe movement of goods into a port, through the port, into the supply chain, into storage, into transport—if it is refrigerated or if it is perishable—and on its way to the end consumer. Those of us who have travelled throughout Asia understand very well where those challenges lie.

I want to give recognition to Treasurer Joe Hockey in this whole process. It is Hockey who has led Australia's drive to be part of the inauguration of the Asian Infrastructure Investment Bank. He understands that our prosperity and economic growth in this country are closely tied to the region. I just made the point about our own state of Western Australia and of course it flows through to other states and territories. Senator Macdonald expanded that to the entire north of our country and the opportunity—magnitudes of orders of opportunity into the future. Hockey makes the point that it is important—

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I will pull you up on it this time, Senator Back. You need to address members by their titles: Mr Hockey or Minister Hockey.

Christopher Back (WA, Liberal Party) Share this | Link to this | Hansard source

I will. I will say 'the excellent Treasurer'.

Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

Mr Acting Deputy President, the point of order is that Senator Back has consistently called the Treasurer 'Hockey'. I know that the Treasurer is on the outer and I know that the Treasurer will not be the Treasurer for very long, but he at least deserves the proper title.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

That is not a point of order, thank you, Senator Cameron. I had already pulled up Senator Back.

Christopher Back (WA, Liberal Party) Share this | Link to this | Hansard source

That less than helpful contribution should be ignored, Mr Acting Deputy President. I certainly do give Mr Hockey the accolade and the acclaim, because it was him that saw the importance of us joining the Asian Infrastructure Investment Bank.

Senator Cameron will be delighted to learn that on 29 June this year, Mr Hockey, the excellent Treasurer of Australia, gave effect to the government's commitment to join the Asian Infrastructure Investment Bank by being the first person in the world—I am going to repeat that in case Senator Cameron needs to write it down—the first person in the world to sign the bank's articles of agreement in the Great Hall of the People in Beijing. His signature was followed by representatives of 49 other countries. What a great legacy for that great man. Mr Hockey said:

The decision to join the bank was made following extensive consultations with key partners inside the Asian region and outside the Asian region. This included participating on negotiations on the bank's design with 56 other prospective founding member countries.

It is important to understand that we are the fifth-largest regional shareholder in the bank. In that sense Australia, through the excellence of Mr Hockey, will be able to influence the bank's decisions and strategic direction.

The question was asked in earlier contributions today—I am not sure if it was you, Mr Acting Deputy President Whish-Wilson, or Senator Lambie—about what governance processes were in place. I believe, since you are nodding, Mr Acting Deputy President, that it may have been you. So I have availed myself of this opportunity to inform the Senate of this.

In March of this year the government made clear that the key issues to be resolved before Australia could commit to join the AIIB were that the bank's board of directors would have control over key investment decisions and that no country—and I hope Senator Lambie's staff are listening because she made the observation that China in some way would have some massive influence—will dominate the bank or the decisions of the directors. So, in announcing our decision to sign the articles of agreement in June, again that excellent Treasurer, Mr Hockey, noted that all these criteria have been met and that the governance will be based on best practice, ensuring that all members will be directly involved in the direction and decision making of the bank in an open and transparent matter. I hope that is further discussed when we come to look at some of the amendments.

Mr Acting Deputy President, why do we need to be involved? I cannot go further than the comments of industry leaders. Peter Collins, the chair of Industry Super Australia, made the observation:

This move will be a huge fillip for Australian expertise in funds management, engineering, construction, architecture and legal services which could be widely applied to projects financed by the AIIB.

He also made the observation that not only will they 'provide new opportunities to deploy capital but also export the funds know-how in connecting funds services and savings to bankable projects'. There you have Australian super. I am sure Senator Sinodinos will correct me if I am wrong, but if already have the second-largest or third-largest pool of superannuation investment in the world, and we are rushing to become the second-largest, if not the largest. To have an acknowledgment and an endorsement from the chair of Industry Super Australia has to be seen as a very valuable point. I hope it is a point that is not lost on members of this chamber when they finally come to consider this.

The Business Council of Australia, Chief Executive Officer, Jennifer Westacott, welcomed the government's decision to join the bank as a founding member. She made the point that Australia can play a key role in setting the direction of the body, and decisions it will make to finance projections that address Australia's infrastructure gaps. She obviously realises that Australian companies will benefit from the opportunities to participate in developing and building new bank financed infrastructure, as well as having access to improved infrastructure which facilitates trade. As we all know, we are a massive exporter. Our own state exports 95 per cent of the grain it produces. We cannot consume it. We have the land mass of continental America excluding Alaska, and we have the population of Greater New York. I just do not know where those who stand up in this place and talk about Australia not needing to be actively engaged in the world of export get off. I just do not know who they think is going to consume the produce that has made this country great, and will go on making it even greater.

Putting to one side for a moment commodities, which of course will be 99.9 per cent free trade once the China-Australia Free Trade Agreement is in place, the big point that has attracted China to Australia with this FTA is our services sector. Ten years ago, when the negotiations started under the Howard government for the China free trade agreement, the emphasis was on commodities. The Chinese now see themselves going past America as the leading economy in the world but they know they are deficient in a range of areas—in the services sector particularly, and they recognise Australia as a country that may be able to provide those services. How wonderful it will be for us in our employment, in our university sectors, to be able to produce graduates and continue to work in services sectors such as corporate governance, prudential regulation, banking and finance, insurances and extending beyond that. Minister Robb is another excellent trade minister—probably the best in our history; nobody else has produced three free trade agreements within two years—and as he says—

Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

A dud.

Christopher Back (WA, Liberal Party) Share this | Link to this | Hansard source

A dud? I would say, judging from Senator Cameron's appraisals of people, reference to Minister Robb being a dud would be the highest praise that could be accorded.

Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

Mr Acting Deputy President, I rise on a point of order. I did not call Minister Robb a dud—I said the agreement was a dud. But I can add the minister to it if you like.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Senator Cameron, that is not a point of order.

Christopher Back (WA, Liberal Party) Share this | Link to this | Hansard source

Senator Cameron has allowed me time to take a small libation, for which I thank him.

Catryna Bilyk (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

A what?

Christopher Back (WA, Liberal Party) Share this | Link to this | Hansard source

A drink. Minister Robb was telling us—this will be very interesting to people from Tasmania, too, because there are some very good private health providers in Tasmania—that, for the first time, under this free trade agreement, and of course Senator Sinodinos is well aware of this, an Australian-based company could purchase land, build an aged care facility, staff it, manage it and repatriate the funds back to Australia. The same thing could be repeated in the hospitality industry or, for example, in the higher education sector. So there are opportunities in the services sector of the free trade agreement. You might ask where this is relevant to the Asian Infrastructure Investment Bank, and it is relevant because it is building up that level of confidence and that level of interoperability between our Asian neighbours and ourselves, which indeed goes towards complementing this whole activity.

We do know that some in America were concerned about the decision that Australia was making to participate in and become a founding member of the Asian Infrastructure Investment Bank. That is all well and good, but again the question was asked by you, Acting Deputy President Whish-Wilson, when you made your contribution: will this provide the opportunity for Australian investment in infrastructure in Asia. An example is the Thai-Lao Friendship Bridge that was completed in 1994—I believe Mr Keating may have been the Prime Minister at the time—a structure funded by Australia and built by that wonderful Western Australian company John Holland Construction. The impact that that bridge has had socially, culturally, economically and commercially on the border between Laos and Thailand has been phenomenal. It reminds me to make the observation that, because of the intertwining of aid and trade at that time, Thailand was a recipient country—it was receiving aid. But because of the focus of that aid partially at least on the trade space, we now see Thailand no longer as an aid dependent country but as a contributor. That surely must be the goal we move towards. How will this be partially funded? Through the Asian Infrastructure Investment Bank.

Often there is criticism in this place about the efforts of Foreign Minister Bishop, arguably the best foreign minister this country has ever had, certainly for the last decade or so. Minister Bishop's focus in the aid space is twofold.

Senator Cameron interjecting—

I am sure Senator Cameron will want to take notes so he will not make a fool of himself in the future. The first aim is to allocate 20 per cent of the aid budget specifically into the aid for trade sector, emphasising the opportunity for people in developing countries not just to be given aid, not just to be given the fish, but to be taught how to fish. As has happened with Thailand, they can be moved out of that dependence on aid. The second has been the initiative of Minister Bishop, led by Bloomberg, the recently retired mayor of New York, to put together a group who can look at the effectiveness and efficiency of aid expenditure around the world, using Australia as a pilot and hopefully extending that to get much better value for aid recipients.

I am delighted and proud to support this bill and to urge my colleagues in the Senate to give it their full support for the 40- to 50- to 100-year future of our relationship with Asia.

Arthur Sinodinos (NSW, Liberal Party) Share this | Link to this | Hansard source

) ( ): I rise to speak on the Asian Infrastructure Investment Bank Bill 2015. I take the opportunity, as Senator Back has done, to commend the Treasurer, Mr Hockey, for his sponsorship of this proposal. I think he was an early supporter of it. I do not think it is disclosing any secrets to say that the government initially had some reservations about being a founding member of the bank. Those reservations reflected discussions with some of our allies, such as the United States and Japan. However, the decision was taken by the government under the leadership of Tony Abbott, by Mr Abbott and Mr Hockey, to be part of the Asian Infrastructure Investment Bank.

I think that is a good decision. Towards the end of last year I was in Singapore and met with senior government officials, including at their central bank, the Monetary Authority of Singapore. It was clear to me that they thought it was important that they be a founding member of the bank. They said it would be good if we were a founding member of the bank as well. They put the argument that if you are on the ground floor of a new institution like this you have a capacity to influence its governance and structure. There had been reservations about the governance and structure of this institution. I will come back to that later in my speech. But overriding all of those considerations and, I think, the fundamental reason that the Australian government decided to be part of the Asian Infrastructure Investment Bank, is that it is a further evolution of the role of China in the region. It shows China extending its influence in the region, being a player in the region and promoting economic development and growth in the region.

That is important. From a geopolitical perspective it is really important that we continue to encourage China to engage not only in this region but globally and, therefore, to increase its commitment and stake in the global rules of engagement. That is very important. We often express some concern about what will happen to the rules of engagement on trade and investment—which we have had largely since World War II and which were largely a product of American power, particularly in the Asia-Pacific region—if other countries, like China, start to become more important. Will they change the rules of engagement to benefit themselves, and will that be at the expense of other smaller economies, including Australia?

We have come at that in a number of ways. The first is, obviously, to reaffirm our strong alliances in the region and to continue to encourage the United States to engage constructively in the region. But we have also done it by promoting economic development and growth in the region; not only because that will benefit us, but also because rising incomes in those countries and rising engagement in the global economy will encourage amity and cooperation in the region.

From a geopolitical perspective it is very important that we encourage China in these multilateral regional initiatives. It is very important that we engage constructively with China, so I am very happy to support what Australia, under the guidance of the Treasurer, Mr Hockey, is undertaking to do in this particular context of the Asian Infrastructure Investment Bank.

The word 'infrastructure' is in the title advisedly. The Chinese have identified a significant infrastructure gap in the region. It is estimated to be US$8 trillion in Asia in this decade alone. This is a product of economic growth and the need to produce new infrastructure. Infrastructure is very important. Economic infrastructure, in particular, increases your capacity to produce goods and services. It lays the basis for economic growth and development and for rising incomes. This infrastructure gap arises because economic growth is proceeding apace in the region. We need to address the financing gap that opens up as a result. This financing gap can be addressed over time through a combination of public and private contributions. The Asian Infrastructure Investment Bank will mobilise capital in the region, drawing on government contributions, in order to help fill at least part of this gap.

In this context I commend the work that Mr Hockey has done in the context of the G20, where, last year, under the presidency of Australia, the G20 endorsed the idea of a global infrastructure hub. The Global Infrastructure Hub will be based in Sydney and will be a clearing house for experience in addressing infrastructure issues, including matters like public-private partnerships and how to facilitate cross-border cooperation in developing and building infrastructure. That Global Infrastructure Hub is underway. It will be located in Australia and it will complement some of what we are doing here.

We must remember that, when we talk about promoting infrastructure, it is very important to note that we must not always categorise all debt as being bad. There are contexts where providing debt financing, which can be serviced in due course, can be a very appropriate thing to do, as you would understand from your own background, Mr Acting Deputy President Whish-Wilson. We should not be afraid of that. The question is always the rules under which it is done, so we can promote sound investment decisions to get the sort of returns which are needed in order to justify the investment and provide the funds for future investment.

The Asian Infrastructure Investment Bank has identified a gap in that regard. It is classified as a multilateral development bank. It is a quasi-commercial bank. What is meant there is that it is neither purely a commercial operation—it is not just a commercial bank which would crowd out private investment—nor purely an aid agency which would provide concessionary finance, grant finance or whatever. What it seeks to do is to earn minimal returns—at least in the sense of breaking even—but some returns in order that it can fill the gap in financing which exists on the continuum between purely aid focused projects and purely commercial projects. It plays a catalytic role. That is, I think, very important. It can play a role in catalysing private investment by topping it up. It can play a role in filling the gap that we have identified in getting infrastructure underway which may not be purely private infrastructure. In other words, it may not be infrastructure that benefits only one particular party that is building it. You could argue then that they capture the private benefits of that infrastructure, so they should pay for all of it. But there will be infrastructure which will have spillover benefits, or benefits which are not captured just by one group—common user infrastructure, for example. That is a good example of where having a group like this can help to fill the financing gap. That is very important. This bank will play an important part in helping to fill that infrastructure gap.

There were some concerns expressed earlier about structure and governance issues to do with the bank. These revolved around issues as to the extent to which the Chinese would have influence over the operations of the bank. It is true to say that for some aspects of the work of the bank there will be a veto. China will have veto power on issues that require a supermajority vote, such as the board, the president and the capital as well as the major operational and financial policies. But issues such as the acceptance of new members and ordinary loan decisions will not require a supermajority. And this particular veto power has been scaled back. I think this is recognition by China that it needed to make its proposal more palatable than might otherwise have been the case, and it may in part have been a reaction to some of the scepticism of the US, Japan and others. I commend the Chinese for being sensitive in that regard.

I spoke about the infrastructure gap in the region. For us the benefits of filling that gap will include a demand for commodities as new infrastructure is rolled out. That in itself is one level of demand. More importantly in a longer run sense, higher incomes in those countries will lead to more demand for a whole slew of Australian goods and services, potentially not just those involving Australian mineral and energy resources. That is very important. So there are benefits in terms of trade opportunities. There are investment opportunities in the sense that there is a capacity for the bank to invest in Australia as well. Interestingly, that could be a conduit for more investment in infrastructure related, for example, to what we are seeking to do in Northern Australia through our Northern Australia policy, which is to promote the development of Northern Australia by working with the Western Australian, Northern Territory and Queensland governments to put together infrastructure projects which will open some of those territories to more economic development. That could be a very important development. It could be a conduit for Chinese investment in Australia, done in a way which may not carry the same connotations as other forms of Chinese investment here do. And of course there will be a capacity for Australian companies to bid for procurement on major projects which are being sponsored and financed by the bank. That is a big opportunity, because from what we understand the procurement process will be a competitive one and we will be able to participate in all of that.

So this infrastructure bank provides an opportunity for us to deepen our relationship with our largest trading partner and the region's largest economy, along with 55 other member countries including India, Korea, the UK, Germany and France. It is very significant that European countries have seen this as an opportunity to participate. They recognise not only, clearly, the rise of China but also the importance of direct engagement. I have always believed that direct engagement is the best way to get other countries to understand you better and to understand them better. That is to the benefit of everybody. We will be committing, in Australian dollar terms, $932 million to the bank. Apart from the benefits I mentioned earlier, it should be noted that, consistent with the budget treatment of Australia's contributions to the other international financial institutions, Australia's paid-in capital will be treated as an investment. It does not come at the cost of other government spending, in that sense, and does not directly add to the budget deficit. So we are not talking here about a situation where we are potentially diverting spending from other, more useful, social purposes.

I mentioned earlier that Australian companies will be able to bid for projects. There will be what is called an open procurement model, meaning that companies from any country—not just member countries—can bid for contracts. Australia as a member of the bank will be able to benefit from up-to-date knowledge of the opportunities available to our companies. Australian companies have won contracts from other multilateral banks such as the Asian Development Bank, so they will be well positioned to make strong bids for contracts from this bank. Australian companies have built up a bank of knowledge in bidding for contracts with the Asian Development Bank and others, and that gives us a capacity to understand the needs of these international financial institutions. That will stand us in good stead, I believe, in bidding in the region. One other area where we can potentially also benefit is in sharing our expertise when it comes to infrastructure financing. Financial institutions such as Macquarie Bank have over the years pioneered all sorts of infrastructure financing models. It would be interesting to see the extent to which they can be adapted for the purposes of the region.

I need in my remarks to also cover a broader issue to do with our relationship with China, which is that we have recently, of course, also been negotiating and have concluded negotiations on a major free trade agreement with China. So what we see is Australia broadening and deepening our relationship with China, giving us the capacity to influence them in a way which could be very useful to the region as a whole. We are in the region, but in some ways we are seen as a bridge to other countries.

I remember working in the Howard government when we were bidding for major gas projects in China. Australian companies were bidding against British and other companies. What was important then was that the Chinese not only thought of us as potentially a major supplier of all sorts of different resources and commodities, but also saw the awarding of contracts to Australian companies as a way of sending us a signal that they saw us a valued partner in the region, an interlocutor who could also have influence with other partners in the region and outside the region, including the United States. Sometimes the Chinese used the Australian channel to get messages to our alliance partners.

There are a number of levels on which our relationship with China is developing. We have the free trade agreement. We have investment in the Asian Infrastructure Investment Bank. On top of that we have the people-to-people movements: the ways in which we are reforming our international education to make it as good as it can be and having high-quality national education to make the experience as good as it can be in Australia. Now, particularly with a lower dollar, our tourism sector is really starting to revive and be stimulated. The Chinese will also play a major role in that regard.

The need to generate returns at the bank raises a key question regarding how the bank will balance its funding of infrastructure projects with practical considerations. Infrastructure development is known for long funding cycles, low interest rates and the potential for waste and corruption. If the bank is to grant loans that other banks reject for good reasons, it would assume major risks, especially in less developed Asian countries with volatile domestic economies and unstable governments. How the recipients will repay loans is a major question for any bank, including this bank. But I am heartened that the governance and structure being put in place will give the bank a capacity to draw on the experience of other multilateral development banks in particular. As I said before, because they will operate not to seek high returns but to break even or to earn minimal profits, they will have that quasi-commercial focus, which I think will allow them to very well fill a gap that has opened up in the infrastructure financing chain.

With regard to our relationship with China more broadly, let me also say that it is clear from the way the Chinese economy is now developing that the rebalancing which is underway means that there will be an increasing focus in China itself on economic growth being driven by consumption rather than infrastructure investment and exports. China has had a very significant and very impressive export led growth model, but that is changing. They are rebalancing their economy to put more focus on consumption. That will also lead, of course, to greater demand for a whole array of goods and services from countries like Australia. We are well placed to meet much of that demand, not just because of the free trade agreement but also because of the wide array of goods and services produced by the Australian economy. I think it is very important that we do what we can to continue to promote the competitiveness of our economy, because while we are very good at producing a whole array of goods—whether you go through the agricultural chain, where we are very efficient in physical terms, or you go through to a whole array of advanced services that we are now able to generate—it is very important for us to maintain our competitiveness in the region. As I have said so many times, our competitors in the region are not waiting for us to be competitive. They continue to be competitive and to increase their competitiveness. They face their own pressures. In many ways we need to run faster just to stay in the one spot.

It is very important for us to recognise that when we contribute to these sorts of international organisations—even though we will be eligible in terms of being able to bid for the procurement on projects—we have to be competitive, not just drawing on our experience in dealing with other multilateral development banks but also recognising that we need to be innovative, we need to be productive and we need to keep our costs under control so that we can be cost-effective, have an edge and maintain an edge over our competitors. That whole innovation agenda is a topic for another day, but that is an important part of being a good partner—(Time expired)

Nigel Scullion (NT, Country Liberal Party, Minister for Indigenous Affairs) Share this | Link to this | Hansard source

I understand there are some Greens amendments to this.

Christopher Back (WA, Liberal Party) Share this | Link to this | Hansard source

There are indeed.

Nigel Scullion (NT, Country Liberal Party, Minister for Indigenous Affairs) Share this | Link to this | Hansard source

I was not sure whether or not they were going to be dealt with in committee now.

Christopher Back (WA, Liberal Party) Share this | Link to this | Hansard source

We have to finish the second reading debate. I will then call for a vote on the second reading amendment.

Nigel Scullion (NT, Country Liberal Party, Minister for Indigenous Affairs) Share this | Link to this | Hansard source

Firstly, I would like to thank those senators who have contributed to this debate. In summation, this bill is necessary for Australia to become a founding member of the Asian Infrastructure Investment Bank. This new international financial institution will drive economic growth and jobs in our region by funding major infrastructure projects. Australia's prosperity and economic growth is closely tied to the region. Australia's economy will benefit from improved infrastructure in Asia. Over 70 per cent of our merchandise exports go to the Asian region. Australia's membership of the Asian Infrastructure Investment Bank and stronger economies in Asia will provide great opportunities for Australian trade and business. I look forward to the day when the Asian Infrastructure Investment Bank might invest in infrastructure here at home. I commend this bill to the Senate.

Gavin Marshall (Victoria, Deputy-President) Share this | Link to this | Hansard source

The question is that the second reading amendment moved by Senator Whish-Wilson be agreed to.