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Estimates: Foreign Affairs, Defence and Trade Legislation Committee (Export Finance and Insurance Corporation)

Estimates & Committees
Lee Rhiannon 4 Jun 2015

Senator RHIANNON: Are you monitoring the current developments with the Export-Import Bank of the United States?

Mr Hunter : We are aware of some press and some of the developments there.

Senator RHIANNON: Have you considered the implications for export finance if the US Congress fails to vote to extend the charter of the Export-Import Bank? What do you see those implications as being?

Mr Hunter : What do you mean by 'the implications'? Efic operates under the Efic Act. How we operate really is a matter for government rather than a matter for Efic.

Senator RHIANNON: Considering that often the export finance bodies are involved in projects together, and clearly the Export-Import Bank has been very dominant in this area, surely there are enormous ramifications that I thought you would be considering. I am trying to understand how that works.

Mr Hunter : Efic operates under an act. We also operate under a statement of expectations, which was issued and updated by Minister Robb in November of last year. We responded with a statement of intent in February of this year. We consider all applications for finance on a case-by-case basis. The implications for us of US EXIM's mandate are, frankly, more a matter for government than they are a matter for Efic. We have a very clear purpose, which is to support Australian export opportunities that are commercially viable but have not been able to achieve funding. Whether or not the US EXIM is in those transactions is not necessarily relevant to us.

Senator RHIANNON: How many projects are you currently involved with in association with EXIM?

Mr Hunter : When you say 'involved', do you mean for the future or previously?

Senator RHIANNON: I mean currently-that are currently operating. How many projects?

Mr Hunter : I will take it on notice, but my guess is that it is a handful.

Senator RHIANNON: The export credit group meeting is coming up in June in Paris. Is that still on the agenda? Is that still happening?

Mr Hunter : Which export credit group are you referring to?

Senator RHIANNON: I thought there was an international export credit group due to meet in Paris in June.

Mr Berne : Yes, the OECD export credit group. That is meeting from 6 to 9 June, that is correct.

Senator RHIANNON: Is the issue of the implications of the controversy around the Export-Import Bank expected to be on the agenda?

Mr Berne : I would be surprised if that were the case. That is obviously a matter for US domestic policy and congressional consideration.

Senator RHIANNON: I want to move on to the PNG LNG project that we have discussed previously. Could you provide an update on the current state of this project and the involvement of Efic, please.

Mr Hunter : I would like to call on my colleague, Mr Jan Parsons, at the end of the table, to give you that update.

Senator RHIANNON: Thank you.

Mr Parsons : I can talk to you about the project's operations at the moment. The project is now operating fully. It is not under construction anymore. It started operations at the start of last year. It has been operating for a year. We have an ongoing adviser-an independent, environmental social adviser, D'Appolonia.

Senator RHIANNON: Sorry, did you say a social adviser?

Mr Parsons : An independent, environmental social adviser, who works for the lenders to the project, who is still continuing to visit the project and provide reports to the lenders. At the moment, they are going twice a year.

Senator RHIANNON: What is their job?

Mr Parsons : Their job is to check the project's compliance with the lender's environmental and social requirements as set out in the legal agreement.

Senator RHIANNON: And could you provide a summary of the social requirements, please.

Mr Parsons : The basic requirements are the IFC performance standards. They are basic benchmark that were used by the lenders to assess the project during the due diligence, and they are the basic ones that are being used during the operations as well. They are applicable during construction and operation. When they go and monitor compliance, D'Appolonia monitor compliance against the IFC performance standards.

Senator RHIANNON: When I went back to look at the project, I noted that it was promoted as bringing a cash flow to the economy, and jobs and opportunities for the citizens of PNG. Can you quantify to what degree it has been achieved?

Mr Parsons : Off the top of my head, I cannot. The project actually has a website where it publishes this information-the PNG LNG website. And they publish periodic reports about how much expenditure has gone into the PNG economy, how many workers they have employed over time, how many people they have trained up in various skills. It is all available on their website.

Senator RHIANNON: You have a website under Efic called 'PNG LNG'. Is this a separate website? I could not find any details on your site.

Mr Parsons : We do not have a PNG LNG website on our website.

Senator RHIANNON: Yes. There it is-'Efic PNG LNG'. So that is the-

Mr Parsons : We have a case study. But the PNG LNG project has a separate website-its own website. And they provide a whole lot of information about the project and how its environmental and social commitments are being met. It provided construction reports during construction; it is providing operating reports during operation. Those reports contain details of how much money has gone into the PNG economy and how many people are working on the project.

Senator RHIANNON: Thank you very much. I will check that one out.

Mr Berne : Just to answer your questions, the Asian Development Bank is forecasting GDP growth in PNG for this year of 15 per cent. They are linking that to developments related to the LNG pipeline. That is up from eight per cent in 2014. Admittedly, growth in 2016 is expected to come back to the more normal levels. But there is, I think, prima facie evidence of the expected impact of this project coming through in a macro-economic sense.

Senator RHIANNON: I want to move on to an issue that we have also discussed before-about the landslide. Was the last report produced on that from 2012? Could you just summarise where that came up to in terms of reporting on the causes of the landslide and the response to that? Could you provide the update?

Mr Parsons : We have no further information from that previously provided to the Senate. The matter is a matter for the PNG government to investigate. It is not a project issue to investigate.

Senator RHIANNON: So Efic puts in half a billion dollars to the project, there have been reports that the Exxon staff knew of the threat of the landslide and you are still just leaving it up to the PNG government when they have not actually come forward with the report? We still have no further progress?

Mr Parsons : As I say, the quarry in which the landslide occurred was not part of the project. It had been not used by the project for several months prior to the landslide. It had been rehabilitated after its use and was back in the ownership of the previous quarry operators. So when the landslide occurred it was not part of the project. It is a matter for the PNG government to investigate and to determine the cause of it, and what they should do in response.

Senator RHIANNON: You have acknowledged that it had been used, and a lot of that is in dispute. But also there have been subsequent and quite recent reports that Exxon insisted that they had to keep the project on track and on time, and that the roads that were necessary for the mine were built over the area where people where buried-so built over the bodies of the 60-plus villagers. Was that considered by Efic at any stage in terms of responsibility given that Australian public money had gone into this project, there was a disaster and people's lives were lost and that there needed to be some transparency and response here? Was that considered when that information about the road came forward?

Mr Parsons : The road you are referring to, I think, is actually a public PNG road owned and operated, or maintained, by the PNG government or the relevant local government. It was not a specific project road. Any remediation of the road would have been done by the PNG government or the relevant local government there.

Senator RHIANNON: I actually understood that Exxon built the road and that they were insisting it had to be built in that area to keep the project on track. Is that incorrect?

Mr Parsons : Exxon had some agreements with the government to maintain the highway-I forget the name of highway-which goes from the project through to the coast. That may have been part of that highway which Exxon was doing work on for the government under a separate agreement with the government. That may be what you are referring to.

Senator RHIANNON: Moving on to some updates on the figures of Efic, on your website you detail that you partner with banks to provide financial solutions and you list four categories: SMEs, Australian companies in an export supply chain, Australian companies looking to expand their business operations overseas and Australian companies operating in emerging and frontier markets. You say you provide financial solutions for those. Do the solutions include money for loans for all of them, or is it just advice for some of them? I am trying to understand the process that you are setting up.

Mr Hunter : The two principal products and services that we provide are guarantees and working capital. For SMEs, principally they come to us for working capital solutions. They also come to us for bonding-it could be advance payment bonds; it could be warranty bonds for the warranty of work that they have completed under a particular project. They are the two main projects that we provide. We are able to lend money directly; we are also able to provide guarantees. Advice is not a standard product for Efic.

Senator RHIANNON: I was interested in all four categories. Are the guarantees and working capital available for all four categories that you list?

Mr Hunter : That is right.

Senator RHIANNON: What is your definition of SME? You have probably given it to me before, but I have forgotten. How many employees is it?

Mr Hunter : Our definition of SME is those enterprises having under 100 employees and a turnover of A$150 million.

Senator RHIANNON: Would you take this on notice: over the past 10 years, can you list the top 10 companies according to the money received from Efic?

Mr Hunter : I will take that on notice, yes.

Senator RHIANNON: Thank you very much.

Mr Hunter : Could I clarify that question, because there is some confusion sometimes about our mandate. You say money received-when Efic provides its financial solutions and services, it is off the back of Australian content. Where you referring to the providers of the Australian content or to the project? For example, we could provide money to a buyer like the Sri Lankan government to buy dairy cattle. Is the client that you are asking about the provider of the dairy cattle or the Sri Lankan government?

Senator RHIANNON: The provider.

Mr Hunter : Sure, we can do that.

Senator RHIANNON: I will quote an estimates transcript from 2013. I asked a question and Ms Piggott answered:

... part of EFIC's considerations in looking at projects and agreeing to them or not includes social and environmental considerations along with the financial criteria.
Keeping that in mind, I want to revisit the Productivity Commission-I was looking at it again and I am still surprised by your resistance to picking up on some of those recommendations. One of the recommendations was that 'the minister release a national interest statement to be tabled in parliament for all ministerial directions for transactions on the national interest account'. That was rejected. It seems to me that the national interest statement is so similar to what Ms Piggott set out. Could you explain why that recommendation was not accepted?

Mr Hunter : Firstly, I am not familiar with who Ms Piggott is, but, that aside, we will take that question on notice because the national interest account is an account that Efic manages on behalf of the government, so what it chooses to disclose and not disclose is really a matter for government.

Mr Berne : If I may, we do publish details of NIA transactions in the department's portfolio budget statements.

Senator RHIANNON: It was recommendation 9.5 of the Productivity Commission's report. Has there been any revisiting of the Productivity Commission's report? They clearly put a lot of work into your work and made some very considered recommendations. Have you revisited it at all?

Mr Hunter : Yes, we took the Productivity Commission review very seriously, as we should. The current government, in the issue of its statement of expectations, adopted many of the recommendations put forward by the Productivity Commission. In fact, if I could share with you some of those-firstly, a focus on SMEs. I think that is quite evident from the signings that Efic is producing this year.

Senator RHIANNON: Would you comment on the ones you did not accept at the time. We know the ones you accepted, but please comment on the ones you did not accept and whether you have revisited them.

Mr Hunter : I will take that on notice. I do not have a full copy of the Productivity Commission review in front of me and, therefore, I do not know which ones we have not adopted and which ones we have.

Senator RHIANNON: To put it generally, in recent times-this year maybe-have you revisited a consideration of the Productivity Commission recommendations?

Mr Berne : The Productivity Commission review was done in 2012 under former government. As Mr Hunter has indicated, certain of those recommendations resemble decisions taken by the current government with respect to Efic, including pulling back support for large resource transactions onshore and improving the focus on the market gap. But there have been some new measures, I would say, which are reflected most recently in the amendment to the EFIC Act, which took place this year, and that includes a more concerted focus on SMEs. So there have been a number of influences that have come to bear on Efic's operations most recently-not just in the act but, as Mr Hunter said, from the minister's statement of expectations, which is listed on the Efic website.

Senator RHIANNON: In your answer to question No. 76 from February 2015, you provided some figures comparing the transactions both in dollar terms and in percentage terms, and also numbers of transactions, again making the comparison in numbers and percentages. Would you update those figures and on a financial year basis, please.


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