Chapter 2
The Management and Implimentation of the Government's
Decision to Terminate the DIFF Scheme
2.1 There was much forensic time and effort devoted to the examination
of the conduct of the Foreign Minister, the Honourable Mr Alexander
Downer, in implementing and managing the Government's decision to terminate
the DIFF scheme as of 1 July 1996.
2.2 One of the issues singled out in a questionnaire designed and distributed
to company representatives by Western Australian ALP Senator Peter Cook
related to the adequacy of notification of the scheme's termination.
As acknowledged by the Opposition Senators, Mr Peter Costello's press
release of 15 February 1996, Meeting Our Commitments, clearly articulated
the Coalition's intention to terminate the scheme if in Government.
The Development Import Finance Facility (DIFF) is a form of tied
aid. In effect, it is a subsidy paid to domestic business. The Coalition
will discontinue the program. Export credits will remain available for
concessional loans to recipient countries to finance projects. An emphasis
on loans versus grants will encourage recipient countries to maximise
the effectiveness of assistance. [1]
2.3 The Coalition's intention to terminate the DIFF scheme was confirmed
by the then Shadow Minister for Foreign Affairs, Mr Alexander Downer,
in public statements during the election campaign. Further references
were made in public meetings relating to the refocussing of Australia's
aid program towards direct poverty alleviation and community based development.
2.4 The Minister for Foreign Affairs received advice as to how best
to implement the decision to terminate the DIFF scheme from AusAID.
In providing this advice, AusAID consulted with the Department of Foreign
Affairs, the Department of Science, Industry and Tourism, EFIC and Austrade.
2.5 On 8 May 1996 Mr Downer announced the manner in which the DIFF
scheme was to be terminated. Mr Downer decided that:
- (T)he DIFF scheme would terminate from the beginning of 1996-97;
- the Government would fund projects with companies that hold DIFF
Letters of Formal Offer. The Government earmarked funds in 1995-96
and 1996-97 for this purpose; and
- in the current budgetary circumstances, the Government could not introduce
any alternative mixed credit arrangement in place of DIFF. The possibility
of a smaller, reformed mixed credit arrangement could be considered
in the future, but probably not before 1997-98 at the earliest. [2]
2.6 AusAID implemented the Government's decision by setting in place
arrangements to notify concurrently recipient governments, Australian
companies and embassy representatives who had an interest in the DIFF
scheme.
2.7 On 26 March 1996, AusAID received written legal advice from the
Attorney General's Department regarding any legal consequences arising
from the circumstances in which parties were involved in the DIFF selection
process at the time of its termination.
2.8 All AusAID/DFAT posts in countries directly involved with DIFF
operations, individual applicants to be affected by the decision, representatives
from embassies in Canberra and overseas Australian ambassadors were
notified on the scheme's termination between 16-17 May 1996.
2.9 Parliamentary Secretary to the Minister for Foreign Affairs, Mr
Andrew Thomson, notified in writing all Australian companies which held
Letters of Advice and Letters of Formal Offer of the scheme's termination
on 16 May 1996.
2.10 A senior representative of AusAID, Deputy Director General Dr
McCawley, visited Indonesia, China and the Philippines from 9-16 June
1996 to further explain the Government's termination of the DIFF scheme.
2.11 Further, both the Foreign Minister, the Honourable Mr Alexander
Downer and the Prime Minister, the Honourable Mr John Howard have subsequently
visited many of the countries affected by the decision to terminate
the DIFF scheme.
| Finding: That in a press release, Meeting
Our Commitments, released prior to the election on
2 March 1996, the Government clearly stated its intention, if
elected, to terminate the DIFF scheme and subsequently took
reasonable steps to notify those affected by the decision to
terminate the scheme as at 1 July 1996. |
2.12 The decision to terminate the DIFF scheme as of 1 July 1996 was
not made in a policy vacuum but undertaken in response to an immediate
fiscal crisis inherited by the Government on coming to Office on 2 March
1996. The reduction in the level of Government expenditure was required
in order to decrease Australia's seasonally adjusted current account
deficit of $1512 million, decrease interest rates, increase money available
for private sector spending and increase the level of net savings. As
announced by the Treasurer, the termination of the scheme will result
in savings over the three year period 1996-97 to 1988-98 of approximately
$382.9 million.
2.13 Whilst the Government was conscious that the decision to terminate
the DIFF scheme would reduce Australia's total Overseas Development
Assistance to 0.29% of GNP it maintains that:
The reduction in Australia's ODA directly reflects Australia's
reduced capacity to provide assistance due to the urgent need to address
Australia's budget deficit problem. While the Government supports, in
principle, the United Nations goal of providing 0.7% of gross national
product as aid, the Government believes that Australia must put its
own economic house in order first before it can achieve higher aid levels
in the future. [3]
2.14 Given across the board cuts necessary to achieve a balanced budget
within three years, as supported by the Labor Opposition, it is not possible
nor desirable to exempt the aid budget whilst other departments and programs
are required to make sacrifices. [4]
2.15 In accordance with the Government's primary aid policy refocus,
outlined by the Minister for Foreign Affairs in an address to the Crawford
Fund on 28 May 1996 and documented in the 1996-97 Budget, the DIFF scheme,
as it operated between 1982 and 1996, was not considered integral to
the Government's delivery of aid refocussed on direct poverty alleviation
and community based development.
| Finding: That the decision to terminate the
DIFF scheme was a response to the fiscal crisis inherited by
the Government and it was appropriate that some contribution
be made from the aid budget to contribute to the reduction of
the deficit and towards the production of a balanced Budget.
|
2.16 There was much forensic time and effort devoted to the examination
of the conduct of the Foreign Minister, Mr Alexander Downer in his management
of the Government's decision to terminate the DIFF scheme.
2.17 The claim by the non-Government Members that:
The Committee was obstructed by Mr Downer's lack of co-operation
in providing documents and information intended to elicit relevant
information to help draw the Committee's inquiry to finality
can not be substantiated. Despite exhaustive questioning of
five senior AusAID and DFAT Officials, including an estimated nine
hundred questions over nine hours in four separate sessions, no relevant
additional information came to light that had not been forwarded already
by the Minister in his statement to the Parliament on 26 June 1996
and subsequent letter to the Speaker on 19 July 1996.
2.18 The situations where Mr Downer felt it was inappropriate to provide
information publicly on the grounds of protecting the public and national
interests were noted clearly in a letter to the Chair. That the decision
to maintain confidentiality on sensitive issues relating to Australia's
relations with foreign countries somehow serves "only to encourage
speculation that he (Mr Downer) is attempting to conceal evidence of deliberate
deceit" appears to be an unfounded conclusion which ignores the time
honoured conventions of upholding public interest immunity (previously
referred to as 'executive privilege'). [5]
This term refers to a claim of the executive government to be
immune from being required to present certain documents or information
to the courts or to the Houses of Parliament. [6]
2.19 In addition to the participation of AusAID and DFAT Officials
in four separate sessions over the first three days of the inquiry's
public hearings noted by the Majority Report, Mr Downer asserts:
...a large amount of information on the Government's decision
to terminate the DIFF scheme has now been provided to the Committee.
AusAID and the Department of Foreign Affairs and Trade (DFAT) submitted
a comprehensive 105-page joint submission and the senior officers
of the portfolio including two Deputy Secretaries, a First Assistant
Secretary and two Assistant Secretaries from DFAT, and the Director
General of AusAID, spent a total of up to nine hours each or 34 hours
collectively responding to questions from Committee Members during
public hearings earlier this month.
During that time the Members of the Senate Committee asked
senior portfolio officials approximately 900 questions almost all
of which were answered in full details. The only information not provided
was information which no Government would consider releasing due to
considerations of national interest. Furthermore a considerable amount
of additional material has since been provided in writing by AusAID
and the Department of Foreign Affairs and Trade.
It is clear then that a substantial effort has been made to facilitate
the Committee's deliberations in relation to the DIFF scheme. [7]
| Finding: That the Government has provided extensive
and comprehensive co-operation to the Committee including providing
senior officers from AusAID and DFAT for lengthy and successive
periods of interrogation and provided documents and written
statements from the Minister providing additional information
and clarification. |
| Finding: That certain categories of information
not forthcoming to the Committee were subject to proper claims
of executive privilege and were done in the national interest.
|
| Finding: That the Minister's non appearance
was in accordance with proper procedure and consistent with
the long tradition observed by Governments that Ministers from
the House of Representatives do not appear before Senate Committees.
|
2.20 The decision by the Minister not to appear before the Committee
is in accordance with the former Prime Minister's statement to the House
of Representatives on 4 November 1992 in which he stated:
There will be no House of Representatives Minister appearing
before a Senate Committee of any kind while ever I am Prime Minister,
I can assure you of that
and the motion put forward by Mr Beazley on 7 October 1993 that the
House:
Further resolves that it is not appropriate that any further
member of the House of Representatives be required to appear before
a Committee of the Senate against the Member's will. [8]
| Finding: That no further material was received
in evidence which provided additional or conflicting information
to that contained in the statement made by the Minister to the
Parliament on 26 June 1996, his subsequent letter to the Speaker
on 19 July 1996 and that made available by Senior Officials
of AusAID and DFAT. |
| Finding: That through a statement to the Parliament
on 26 June 1996 and a subsequent letter to the Speaker on 19
July 1996, the Minister has provided a full disclosure of his
knowledge relevant to the issues concerned. |
| Finding: That the Minister's full disclosure
of information was confirmed by the relevant senior officers
of AusAID and DFAT in accordance with their detailed extensive
and careful evidence given to the Committee. |
| Finding: That given the comprehensive disclosure
of information, the interim status of the conclusions reached
by the non-Government Members is unwarranted. |
Footnotes
[1] Peter Costello, "Meeting Our Commitments".
Press Release, 15 February 1996.
[2] AusAID and DFAT Joint Submission. Submission
to the Inquiry. July 1996, p. 24.
[3] Australia's Overseas Aid Program
1996-97. 20 August 1996, p. iv.
[4] Refer to a speech made by Gareth Evans
in which he recommended: “restoring the budget to balance by a
program of moderate measures extending over the full three-year life
of this Parliament”. Hansard, 22 August 1996, p. 2484.
[5] Dwyer, M. Financial Review, 24
September 1996, p. 4.
[6] Evans, H. (ed). Odgers' Australian
Senate Practice. Seventh Edition. AGPS. Canberra. 1995, p. 30.
[7] Letter from the Foreign Affairs Minister,
Mr Downer, to the Chairman of the Senate Foreign Affairs, Defence and
Trade References Committee dated 19 September 1996.
[8] Ibid.