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:
(a) the impact on existing and potential commitments by Australian
industry under the scheme, including impacts on Australian workers;
(b) the impact on the Australian economy and the economies of those
countries with which Australia has relationships under the scheme;
(c) the effects of the cessation of `Green DIFF' projects;
(d) the impact on Australia's international relations in the Asia-Pacific
region;
(e) the role of concessional finance arrangements in advancing Australia's
overseas development aid objectives and in assisting Australian companies
to win export opportunities in the Asia-Pacific region;
(f) the Government's management and implementation of its decision
to abolish the scheme; and
(g) the extent to which the DIFF could be further refined to assist
developing countries in the reduction of greenhouse gas emissions.
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the impacts of DIFF based on a plethora of outdated reviews and commentaries.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:
...strengthening the focus of Australia's aid program on its
fundamental purpose; namely to assist developing countries to reduce
poverty and improve the standard of living of their people through sustainable
development, and to assist in achieving a more secure and equitable
international order. [2]
1.8 The Simons Aid Review is to make recommendations on how the following
goals can best be achieved.
- Recognition that the primary purpose of foreign aid is assistance
in overcoming humanitarian concerns through permanent outcomes;
- an increase in the proportion of aid allocated to humanitarian and
poverty reduction purposes;
- support for an increased role of non-government organisations, both
Australian and local, in the delivery of Australia's foreign aid;
- significant increase in support for rural development;
- significant increase in focus on assistance projects directed to
the needs and abilities of women and girls;
- institutional support for States in the process of developing democratic
structures;
- preference for the conduct of Australia's aid activities using Australian
goods and services and personnel rather than contracting out to organisations
from any other developed countries; and
- continued support for the United Nations' goal of applying 0.7% of
our gross national product to aid as and when budgetary circumstances
permit. [3]
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:
- the management and implementation of the Government's decision to
terminate the DIFF scheme as of 1 July 1996;
- consideration of pipeline project proposals;
- the economic and commercial benefits generated by the DIFF scheme;
- the impact on Australia's international relations in the Asia-Pacific
region; and
- the prospective role of concessional finance schemes in future Australian
aid programs.
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.