Chapter 1

Inquiry into the Abolition of the Development Import Finance Facility

Chapter 1

Introduction

1.1 On 26 June 1996, the Senate Foreign Affairs, Defence and Trade References Committee was directed to inquire into the proposed abolition of the Development Import Finance Facility (DIFF) scheme, with particular reference to:

1.2 Following 60 submissions, in excess of 28 hours of oral evidence from upward of 45 witnesses and two extensions to its reporting deadline, the report was tabled on 15 October 1996.

1.3 The degree of controversy which characterised operations of the DIFF scheme between 1982 and 1996 was mirrored in the Committee's Inquiry into its abolition. Much of the controversy generated by the Inquiry was the product of one of two factors.

1.4 Firstly, the efforts of Committee Members in constructively commenting on the development and commercial impacts of DIFF were hampered by the absence of any comprehensive and definitive assessment of DIFF conducted after the Helsinki Guidelines took effect. In the absence of any such review, Committee Members were required to draw conclusions regarding the impacts of DIFF based on a plethora of outdated reviews and commentaries. [1]

1.5 Secondly, the apparent intent of the non-Government Members to use the Inquiry in an attempt to discredit the Minister for Foreign Affairs, the Honourable Mr Alexander Downer, distracted the Committee from investigating thoroughly the role and scope of concessional finance schemes within Australia's aid program.

1.6 It was disappointing that the repeated media leaks, including the release of the Opposition's Majority draft report to the media on 10 September 1996, inhibited any potential for multi-partisan deliberations into the effectiveness of tied soft loan schemes in delivering aid with a clear humanitarian focus.

1.7 As the Senate Reference Committee failed to defuse, to any considerable degree, the controversy surrounding the operation and termination of the DIFF scheme, the Government Members recommend that the independent review of Australia's aid program, to be chaired by Mr Paul Simons, incorporate a substantive review of the effectiveness of aid delivered via concessional finance schemes within its terms of reference to meet the following objective:

1.8 The Simons Aid Review is to make recommendations on how the following goals can best be achieved.

1.9 Whilst the Majority Report adequately describes the scheme's history and evolution, the manner in which the non-Government Members have interpreted aspects of the evidence fails to take into account both the breadth of evidence presented to the Committee and the economic imperatives underpinning the decision to terminate the scheme.

1.10 The Government Members' Minority Report addresses five major issues, namely:

Acknowledgements

1.11 The Government Members wish to acknowledge the oral and written contributions made to the Inquiry from organisations, industry groups, non-government aid agencies and government departments. Senior Officers from AusAID and DFAT appearing before the Committee on four separate occasions deserve special thanks for their cooperation.

Footnotes

[1] Refer to the list of reviews and commentaries outlined in the Majority Report, Chapter 2, page 6, at point 2.29.

[2] Australia's Overseas Aid Program 1996-97. Budget Paper. August 20, 1996, p. iv.

[3] A Confident Australia. Policies for a Coalition Government, p. 29.