Back to All News

Budget estimates - Lee questions Dept of Foreign Affairs about funding from the Direct Aid Program for mining companies

Spokesperson for overseas aid Senator Lee Rhiannon questions the Minister and representatives from the Dept of Foreign Affairs about funding through DFAT's Direct Aid Program for mining companies.

Senate Estimates - Thursday 14 February 2013

FOREIGN AFFAIRS DEFENCE AND TRADE COMMITTEE

Senator RHIANNON: I have some questions about the direct aid program. Just picking up on one of the issues we spoke about when we were last together, Paladin Energy has received DAP funds. When we spoke before it was Ms Bird who answered it, and she said, 'I am not aware of whether there are any at all,' referring to potential breaches. So it comes across that you were not aware of some of the criticisms that have been ongoing about how this company operates. There now have been concerns raised about the lawyers these companies are using against Australian organisations. Have AusAID acquainted themselves, since you spoke in October, about these criticisms? Have you tracked further criticisms of how Paladin is operating? And has AusAID reassessed its partnership with this company?

Mr Baxter : The direct aid program is under the administration and management of the Department of Foreign Affairs and Trade, not AusAID. We do not have a relationship with Paladin. We certainly have not looked into those matters, because they do not relate to AusAID's programs. They relate to the direct aid program which is administered and managed by DFAT.

Senator RHIANNON: Yes, I was hoping you might have been able to help me out. You hand over the cheques. I know we have spoken about this before, but just to check. You hand over the cheques, but they do the decisions on what projects will be in assessments and all those sorts of things.

Mr Baxter : We do not hand over the cheques, even.

Senator RHIANNON: You do not?

Mr Baxter : DFAT get an allocation of the ODA budget and they then distribute that to their posts around the world according to their own formulation. They have their own guidelines that they apply those to the use of that funding and then they will ultimately report to us that they have expended it.

Senator RHIANNON: So you hand over one big cheque. Is that it?

Mr Baxter : It is a transfer as part of the budget process.

Senator RHIANNON: What guidelines exist for reviewing current environmental and social impact assessments for mining companies AusAID choose to partner with?

Mr Baxter : We do not partner with any mining companies in the sense that they are working with them on the operations of their mines in any place. Our cooperation with the mining sector is around how we can help governments in developing countries to improve the management and the outcomes that they get from their own natural resources. So we are about working with governments to help those governments understand what is involved in running a sustainable and an environmentally sensible mining sector that brings broad based benefits to the populations of the countries where the mining is concerned. We do not fund mining companies. We certainly cooperate with mining companies, and we will continue to do that through our mining for development program in areas like running study tours for members of government who want to see a well-run mining industry in action. We certainly work with the mining industry in terms of looking at what kinds of skills transfer programs we can operate, because giving countries the capacity to have their own nationals employed in their mining sector is important from an employment perspective. But we do not do things that are related to the actual operations of Australian mining companies anywhere.

Senator RHIANNON: Thanks for that response. So if the aim of this work, particularly the Mining for Development Initiative, is to help resource-rich developing countries create sustainable economic development and avoid social and environmental risks—

Mr Baxter : That is right.

Senator RHIANNON: Is the government also considering, or maybe already doing, partnering with local organisations to ensure that affected citizens and groups are informed and able to participate in decision-making about mining?

Mr Baxter : Certainly community based development in areas that are impacted by mining is one of the aspects of our work. We have a number of aspects to our work: providing governments with skills and capacity to negotiate with mining companies on an even footing, strengthening environmental and social safeguards, improving the transparency of payments made from the mining sector, reducing opportunities for corruption and improving governance and supporting governments to better regulate and monitor mining. In May of this year, Australia will host the global conference of the Extractive Industries Transparency Initiative, which is the first time that that conference has been held in the Southern Hemisphere and it is a recognition of the work that we have been doing to promote transparency in the mining sector.

Senator RHIANNON: You spoke about community based development being one aspect of your work. Of the finding that goes towards mining related work, how much of that money goes towards community-based development funding?

Mr Baxter : Unless my colleague has that figure, we might have to take that on notice.

Senator RHIANNON: Thank you. Did any AusAID officials attend African Mining Indaba in Cape Town, South Africa, last week?

Mr Baxter : Yes, they did.

Senator RHIANNON: How many?

Mr Baxter : I think there were four.

Senator RHIANNON: Were they fly-in or were they locals?

Mr Baxter : A combination.

Senator RHIANNON: Two-two?

Mr Baxter : I will ask my colleague. One-three.

Ms McKinnon : Three were in South Africa.

Mr Baxter : Ms McKinnon was the blow-in from Australia.

Senator RHIANNON: Excellent. Could you outline AusAID's involvement with this event? Were any funds used for what I think was called the 'Australia lounge' or for any networking functions that the government or the Australian mining companies put on?

Ms McKinnon : AusAID was involved in some pre-Indaba events which we co-hosted with the World Bank. They had a mixture of NGOs, African governments and others looking at best practice in infrastructure planning, for instance. I believe the Australia lounge was a function of Austrade. I am not aware of any funding from AusAID going to that.

Senator RHIANNON: How much money did AusAID allocate to this?

Ms McKinnon : For the World Bank seminar?

Senator RHIANNON: For the World Bank seminar and for the participation at this conference? You can take it on notice if you need to.

Ms McKinnon : Certainly, I will take that on notice.

Senator RHIANNON: You might be able to tell us now whether that money came from the Mining for Development Initiative or was it additional money?

Ms McKinnon : It comes from the Mining for Development Initiative, funding the World Bank AusAID joint seminar. The Mining for Development Initiative does not fund the Australia lounge or trade promotion activities.

Senator RHIANNON: Sorry. Were you saying the money for the Australia lounge did not come from the Mining for Development Initiative?

Ms McKinnon : No.

Senator RHIANNON: So it was additional. Could you give us a breakdown of how much money went into African Mining Indaba and what budgets it came from?

Ms McKinnon : Yes.

Mr Baxter : My colleague Mr Gilling has the figures for community based development that you asked for.

Senator RHIANNON: Do we have it as a proportion?

Mr Gilling : Yes. In 2012-13, we anticipate that 20 per cent of the program—that is, the Mining for Development Initiative—will go to direct benefit to communities. This is up from around 16 per cent in 2010-11. If you would like, I can give you some examples of the activities that address this issue of community engagement. The director-general mentioned the EITI, the Extractive Industries Transparency Initiative. One of the important parts of the EITI is not just to publish what is paid by the mining company to governments and published by governments about what they receive from companies; it is also to engage the civil societies of the countries in question in a conversation with mining companies and governments so that all parties and all stakeholders in this sort of arrangement are involved in decision-making.

In terms of other activities that provide direct benefits to communities, up to 30 June 2012 we had some training taking place through our International Mining for Development Centre, which is a cooperation between Queensland university and Western Australia university where about 1,000 mine inspectors were trained. We have also done some baseline assessments of social impacts in mining activities in Mongolia. In this year we are planning to do some research in conjunction with the University of Queensland and the Minerals Council of Australia on gender in mining land use agreements. This builds on some of the important gender based work that has taken place in Melanesia, for example, with Ok Tedi, and in Bougainville. We are very conscious of the importance of that dimension of the initiative.

Senator RHIANNON: You mentioned mining inspectors. Do I understand correctly that that is part of the community base development?

Mr Gilling : That is, indeed, part of the community base development, yes.

Senator RHIANNON: Why would mining inspectors be part of the community base development? Mining inspectors here in Australia are employed, and there is often involvement by the union, whereas I think people would see community base development—and I will bring this question in as well: are we talking about peak organisations or are we talking about local communities who are living beside mines and may have their paths to the local water supply cut of et cetera? Can you elaborate on how that works? I was surprised by that.

Mr Gilling : Yes, I can. As I am sure you are aware, one of the big challenges in the regulation of mining by governments in the developing world is the environmental standards which are practised by some of the mines. The mining inspectors are important not only for protecting the safety of the community members who may be working in the mine site but also for ensuring that the environmental standards that are maintained as a result of the mining are respectful of the local environment and the areas that the local community needs to take advantage of—natural resources in particular. Although it might sound like a technical and non-community related activity, in fact, one of the purposes of the training is to ensure that this relationship with the community is strengthened.

Senator RHIANNON: Ms McKinnon, I have one more question about the event that you attended. Maybe I will have to ask DFAT, but I will try you. Did AusAID promote Australian mining companies who have received DAP funding at the Indaba event?

Ms McKinnon : AusAID did not promote Australian mining companies that received DAP funding. You are correct, you will have to check with DFAT as to whether that occurred.

Senator RHIANNON: Could you paint a bit of a picture of what you did there? How did you spend your time?

Ms McKinnon : I flew in before the Mining Indaba proper started. I was incorrect, there were six AusAID staff and I was the only Australian based staff member. We hosted a one-day seminar with the World Bank and I left the day after that. Some AusAID staff stayed on because there was a range of African mining ministers attending that and it was a good opportunity to check our Mining for Development program with them and to discuss bilateral programs and priorities for the Mining for Development Initiative with a range of African government officials and ministers.

Mr Baxter : One of the reasons we have had a focus on Africa in our Mining for Development program is the numbers. In 2009, the last year for which we have figures, African natural resource exports were worth $246 billion. That is six times greater than the total official development assistance, or ODA, going to Africa, and it is seven times more than African agricultural exports. You can see from that how important mining is for many poor African countries if they are going to sustainably lift the living standards of their populations.

Senator RHIANNON: Have you looked at those figures to see how much of that money stays in Africa, or are we really talking about the profits of the mining companies?

Mr Baxter : As I mentioned, one of the key aspects of what we are doing in the Mining for Development program is the improving of transparency around payments. I know you are familiar with the Extractive Industries Transparency Initiative; Australia has been one of the largest funders to that program worldwide. It is aimed at ensuring that countries actually receive the proper return for their own resources, and that the profits are not all shipped offshore. Initiatives like Publish What you Pay, Revenue Watch and a whole group of organisations and now governments are part of this. The G8 this year will have a particular focus on issues around tax and transparency, which is, again, similar to the kinds of things we are doing through the Mining for Development Initiative.

Senator RHIANNON: With those figures you gave, could you take on notice and indicate how much of that money stays in the country and how much of the profits go overseas, because the bulk of those mining companies are foreign owned.

Mr Baxter : It is interesting if you look at some other countries. In Mongolia about a third of all government revenue comes from mining. In Papua New Guinea, 72 per cent of export earnings are from the natural resource sector. Again, there are many developing countries that have that profile. Your question is absolutely accurate in trying to ensure that mining systems are set up in ways that benefit the nationals of the country where the activity takes place, that they get their fair share of resources and that that share is very transparent.

Senator RHIANNON: So will you take it on notice?

Mr Baxter : We will try to give you an answer.

Senator RHIANNON: AusAID contributes money to the extractive industries technical advisory fund, which I understand, is a partner of the International Finance Corporation. Is this money being used to help negotiate a deal between Rio Tinto operating as Simfer, IFC, Chalco and the Guinean government for over half of the Simandou iron deposit in Guinea?

Mr Baxter : I will have to take that on notice. I am not aware of it. We do fund the Extractive Industries Technical Advisory Facility. We are providing this financial year $1 million. I would have to take on notice the detail of your question.

Senator RHIANNON: Just to clarify, we agree that AusAID contributes to the extractive industries technical assistance fund but also there is the involvement through the IFC. I wanted to point out those aspects to the question. Thank you for taking it on notice.

How was the decision to reduce the final year's contribution of a three-year commitment to the Global Fund to fight AIDS, TB and malaria by $11 million reached?

Mr Baxter : It was one of a number of decisions that had to be made as part of the reprioritisation. I point out that Australia's contribution to the Global Fund has grown very rapidly over the last four or five years. So while there was a reduction, as you refer to, as a result of the reprioritisation, since 2004 Australia has provided almost $310 million to the Global Fund with a further $100 million committed by December of this year.

We certainly value our partnership with the Global Fund and we recognise the very good work it does. That is why we have increased our funding so rapidly to the Global Fund. But as with all reprioritisations decisions have to be made and that was one of the decisions.

Senator RHIANNON: I appreciate that it is a much larger amount but even $11 million will go a long way in this important work. Could you outline the likely adverse impact of reducing our three-year commitment by this $11 million in terms of people not receiving treatment and the reduction of planned malaria prevention measures. Could you quantify what we have lost?

Mr Baxter : What the Global Fund does is when it receives funds, it then programs them. It does not program in advance. So, in that sense, no programs that were in existence would have been cut, because they would have applied that money once we had contributed the funding. Undoubtedly, with less money the Global Fund is going to be doing less of its business, but, again, I say, after very substantial increases over the last three or four years, and we are committed to continue to support the Global Fund.

Senator RHIANNON: I think you said at the start of your answer that the money is only allocated for programs once the money is there.

Mr Baxter : Yes.

Senator RHIANNON: But I understand that there was a three-year commitment of $210 million. We make that commitment to a multilateral aid partner—is that correct?

Mr Baxter : Yes, and that is a marked increase on previous contributions, which over the same period were only a small percentage of what we have pledged over the last three years.

Senator RHIANNON: So we have a three-year commitment of $210 million—it is very clear—and then the final year's disbursement is reduced from $70 million to $59 million. That seems to go against your answer to the previous question. I asked what programs we have lost and you said, 'We didn't lose any programs because the money wasn't allocated,' but there was certainly a clear understanding. It had been there for more than two years, because there was—

Mr Baxter : There may have been an expectation, but the Global Fund has gone through a major reform process over the last 18 months, including changes to its funding allocation model. So, undoubtedly, there were plans to spend it, but it was not as if we took money from programs that had been, if you like, rolled out; it just means that, as a result of the reprioritisation, we go down from $70 million a year to a figure that is only slightly less than that.

Senator RHIANNON: When you say there were plans to spend it, what do you understand there were plans to spend that $11 million on?

Mr Baxter : It would have been on the Global Fund's core business of dealing with HIV/AIDS, tuberculosis and malaria.

Senator RHIANNON: Programs like local health clinics—

Mr Baxter : I do not know the details of the particular programs that might have been impacted by this, but, as I said, this was a small reduction following a very significant increase.

Senator RHIANNON: What message does it send our multilateral aid partners with regard to our standing and reliability?

Mr Baxter : Aid donors' budgets go up and down depending on circumstances. They change within themselves as new priorities emerge, as we have seen happen here in Australia. I will give you a couple of examples. The Netherlands has recently announced a very significant cut in its aid program. It was one of the few countries that was above 0.7 per cent of GNI and, as a result of the cuts, it is going to go down below that because of the economic circumstances of that country. The Spanish aid program has been cut by about one-third and Greece and Portugal's by even more. So aid programs do go up and down depending on the financial circumstances of the governments. I know the Global Fund considers Australia to be a very strong supporter, and we will continue to support the Global Fund while ever it achieves good results.

Senator RHIANNON: Thank you. Regarding the aid effectiveness review, how much was spent undertaking the independent review of aid effectiveness and putting in place the new policy framework and the raft of policies associated with this to ensure Australia's aid was effective?

Mr Baxter : I can give you a figure for the cost of the independent review. I do not have that on me because, as Senator Kroger pointed out, it completed its work two years ago. We have put it on the record here at Senate estimates, but I am happy to provide that to you on notice. Regarding the implementation, the implementation costs have been absorbed as part of AusAID's normal running costs, so we did not get a specific allocation to implement the recommendations; we have just incorporated that as part of our work because, most fundamentally, the government agreed in principle to 38 of the 39 recommendations, and they have really become the basis of our new aid policy, Effective Aid.

Senator RHIANNON: Thank you for clarifying.

Back to All News