Chapter 3 - Provisions of the Bill
3.1
In keeping with the findings of the Uhrig report, the
provisions of the bill are designed to restructure the commission to fit the
executive management template. Both the explanatory memorandum and the minister
in his second reading speech note that the changes introduced in the bill form
part of the implementation of the government's response to the Uhrig review.
The Minister for Trade told the House:
The government is reviewing all statutory agencies in the
context of the review recommendations, to ensure that we have the most
effective accountability and governance structures across the whole of
government.[36]
Abolition of Austrade's board and the creation of a CEO
3.2
The Australian Trade Commission is a body corporate
created under the Australian Trade
Commission Act 1985. The act also establishes an Australian Trade
Commission Board which consists of:
-
a Chairperson;
-
a Deputy Chairperson;
-
the Managing Director;
-
the Managing Director of Export Finance and Insurance
Corporation (EFIC);
-
government members; and
-
such number of other members, being not fewer
than 4 nor more than 6, as the Minister determines, in writing, to be
appropriate.[37]
3.3
Members of the board, other than the Managing Director
and the Managing Director of EFIC, are appointed by the Minister and hold the
office as part-time members. The Managing Director and Deputy Managing Director
hold office on a full-time basis and at the pleasure of the Board.[38]
3.4
The bill repeals the Commission's body corporate status
and its ability to acquire, hold and dispose of real and personal property.[39] The CAC Act is no longer to apply to
the Commission.[40] The Explanatory
Memorandum made plain that:
The Commission is not a body corporate and has no legal
personality separate from the Commonwealth.[41]
3.5
New section 7 proposes to remove the governing board
and create in its stead a statutory agency without such a board.[42] In keeping with the executive
management governance structure, section 7 is to establish a CEO as the head of
the body.[43] Proposed subsection 60(2)
clearly stipulates that the CEO and the staff of the Commission together
constitute a Statutory Agency.[44]
Response to the intention to remove
the Austrade board
3.6
Professor Wettenhall
noted that the intention to abolish the board is consistent with Mr
Uhrig's recommendation but he could find no
particular explanation of the need for change. He looked at the initial grounds
for establishing Austrade in 1985 as a corporate board with a governing board.
He noted that at that time, the government had extensive consultations with a
broad cross-section of business leaders and major industry organisations on the
proposed structure and activities of the Commission. In considering the
structure of the Commission in 1985, significant weight was given to the value
of having an independent authority with a board drawn largely from the private
sector. Indeed, the then Minister for Trade told the House:
By establishing the Australian Trade Commission as a body
corporate, the Bill will enable the Commission
to have sufficient flexibility and independence of management to respond
quickly to changes in international market conditions. It will also be a source
of valuable advice for the Government and provide an early warning mechanism on
international changes and trends affecting Australia's
trade...
The government holds strongly to the view that very significant
benefits will come from the guidance of a board of directors drawn principally
from the private sector. Indeed, I am heartened by the very favourable reception
that the interim board of the Commission...has received. The business qualities
of that board indicate the seriousness with which the Government is going about
the task of putting the activities of the Trade portfolio on a more
commercially oriented basis.[45]
3.7
Professor Wettenhall
asserted that Austrade's establishment as a body corporate was justified in
1985 in order that the Commission would 'have sufficient flexibility and
independence of management to respond quickly to changes in international
market conditions'. He concluded:
I find no argument here to show that there are changed
conditions that invalidate that reasoning.[46]
3.8
DFAT and Austrade argued that the abolition of the
board 'does not impact the capacity of government to seek the input of industry
to Austrade's operations.' They stated further:
A range of non-legislated
mechanisms for consultation with industry continue to operate. These include
the Free Trade Agreement Export Advisory Panel and the Trade Promotion Advisory
Committee. The amendments proposed in the...bill
do not impact these consultation mechanisms, or the capacity to modify or
establish additional or revised processes as required.[47]
3.9
Furthermore, DFAT and Austrade informed the committee
that the chair of Austrade's Board had informed the Deputy Prime Minister of
the Board's unanimous acceptance of the assessment's recommendations (see
paragraph 2.30).[48]
Committee
view
3.10
The committee notes DFAT's assertion that the removal
of the board does not influence the capacity of the government to obtain
independent advice or assistance from industry.
3.11
It appreciates, however, the value that an independent
board comprising experienced people who are held in high regard in the trade
and commercial sector bring to an organisation such as Austrade. It agrees with
Professor Wettenhall
that the explanatory memorandum or the second reading speech could have
provided more detailed reasons and explanations for removing Austrade's board.
3.12
The committee believes that a statement from the
government explaining the need to re-organise Austrade would provide Senators
with a better understanding of the proposal to abolish Austrade's board and
further assist them when considering the proposed legislation. The value of
such an explanation is evident in light of the recognition given to the
importance attached to having an independent board at the time of Austrade's
establishment. Keeping in mind that the Uhrig report did not consider the
governance structure of Austrade, the committee is of the view that a reliance on
this report to justify the re-structuring of Austrade only partially explains
the need for the proposed changes.
3.13
Austrade and DFAT's assurance that there already exists
a range of non-legislated mechanisms for consultation with industry is vague. The
committee would like more definite information on the mechanisms that Austrade
will use to make up for the loss of its board and to ensure that it has the
expert advice it needs to assist Australian business in developing export
trade.
Recommendation 1
3.14
The committee recommends that the government provide
parliament with a statement of reasons for abolishing the board which
recognises the initial justification for establishing the board in 1985 and the
changed circumstances giving rise to the proposed legislation.
3.15
Professor Wettenhall
also argued that the continued use of the name 'Australian Trade Commission' would cause confusion if the board is eliminated and
the commission becomes a single-headed statutory body under a CEO. He
noted further that 'there seems to be no problem in referring to such single
heads elsewhere as 'Commissioners' eg Commissioner for Superannuation,
Commissioner of Taxation.' He stated further that 'I don't think we now refer
to senior overseas trade representatives as 'trade commissioner', so there
should be no ambiguity if this were done here'. The committee suggests that naming
the CEO 'Commissioner for Trade' may also be a matter worthy of further
consideration by the Parliament.
The CEO's terms of engagement
3.16
The CEO is to be appointed by the Minister by written
instrument and holds office on a full-time basis for the period specified in
the instrument. The period, however, must not exceed 5 years though the
provision does not intend to limit the application of the Acts Interpretation
Act 1901 that allows the ability to re-appoint.[49] The Remuneration Tribunal is to
determine the CEO's remuneration. If no determination by the Tribunal of that
remuneration is in operation, the CEO is to be paid the remuneration that is
prescribed.[50]
3.17
The Minister may terminate the appointment of the CEO
for misbehaviour or physical or mental incapacity. He or she may also terminate
the appointment of the CEO if:
- the CEO:
- becomes bankrupt; or
- applies to take the benefit of any law for the relief
of bankrupt or insolvent debtors;
- or compounds with his or her creditors; or
- makes
an assignment of his or her remuneration for the benefit of his or her
creditors; or
- the CEO is absent, except on leave of absence, for 14
consecutive days or for 28 days in any 12 months; or
- the CEO engages, except with the Minister's approval in
paid employment outside the duties of his or her office.
3.18
Although the circumstances for terminating the CEO's
appointment remain the same as those stipulated in the current act for
appointed members of the board, the terminology has been changed. In the
circumstances given immediately above the Minister 'may' not 'shall' terminate
the appointment. The explanatory memorandum offers no explanation for the change.
3.19
Proposed Part 6 of the bill, directs that the Minister
'must' terminate the appointment of the CEO if, in the Minister's opinion, the
performance of the CEO has been unsatisfactory for a significant period of
time. It should be noted that the proposal puts in no doubt that the CEO's
appointment under these circumstances is to be terminated. This is a stronger
direction than that given in the current act which states that the Minister
'may' terminate the appointment of an appointed member to the board under such
circumstances.[51]
Functions of the newly created CEO
3.20
The Act requires Austrade to perform the following
functions:
- to facilitate and encourage trade between Australia
and foreign countries (in this section referred to as Australian export trade)
by:
- representing the trading and commercial interests of Australia
in foreign countries;
- assisting, directly or indirectly, Australian
organisations in trade negotiations;
- promoting,
or participating in or co-ordinating projects to promote, Australian export
trade;
- obtaining,
and making available to Australian organisations, information relating to
current or future opportunities for Australian export trade, including opportunities
for involvement in overseas development projects;
- supporting and facilitating investment in foreign countries,
and facilitating investment in Australia,
where that investment is likely to enhance opportunities for Australian export
trade;
- carrying
out, or assisting other persons to carry out, or participating with other
persons in carrying out, in whole or in part, overseas development projects, in
circumstances where that course of action will benefit Australian
organisations;
- administering
the Export Market Development Grants Act 1997;
- developing
and administering schemes to provide assistance in the development of markets
in foreign countries; and
- facilitating
access by persons to Departments of State of the Commonwealth or of a State and
to instrumentalities established by or under a law of the Commonwealth or of a
State where that access is likely to enhance opportunities for Australian
export trade;
- to do any other act or thing required by this Act or by
any other Act to be done by the Commission; and
- to act, outside Australia,
as agent for Departments of State of the Commonwealth or for instrumentalities
established by or under a law of the Commonwealth.[52]
3.21
Under the proposed legislation the functions and powers
of the current Commission are to be vested in the new Commission. The
explanatory memorandum makes clear that there is no intention to amend any
functions of Austrade.
3.22
Proposed section 7A of the bill stipulates that the
function of the Commission (other than the CEO) is to assist the CEO in the
performance of his or her functions. The Explanatory Memorandum notes that this
amendment is necessary 'because other provisions of the Bill
vest the statutory functions held by the old Commission in the CEO'.[53]
Duties of the Commission
3.23
In performing its functions, the current Commission
shall:
- comply with any directions given to it under section
10; and
- have regard to:
- the desirability of improving and extending the range and
accessibility of advice, assistance and financial support available (whether
through the Commission or otherwise) to persons involved, or likely to be
involved, either directly or indirectly, in trade between Australia
and foreign countries;
- the need to provide its services as efficiently and economically
as possible; and
- Australia’s
obligations under international agreements.[54]
3.24
Proposed section 9 simply confers on the CEO the duties
of the old Commission. It should be noted, however, that the language used in
the bill is more direct in that the new Commission 'must' not 'shall' perform
his or her duties in such a manner that will best assist in the development of
trade between Australia and other countries.[55]
3.25
Proposed section 9A allows the CEO to exercise his or
her powers, on behalf of the Commonwealth, in Australia
or elsewhere and section 9B allows him or her to charge fees for services.[56]
3.26
The bill also repeals Part IV of the current act which
sets down the general powers and duties of the current Commission. As it now
stands, the Act allows the Commission 'to do all things necessary or convenient
to be done or in connection with, or as incidental to, the performance of its
functions under the Act'.[57] The Explanatory
Memorandum noted the reasons that made this no longer necessary:
As part of the Commonwealth, the CEO will exercise the executive
power of the Commonwealth in delivering these functions and does not require
prescribed powers.[58]
3.27
For clarity, it explained that section 9 of the act and
the proposed changes to that section specifically confer additional powers on
the CEO that are required for the effective, ongoing operations of the
Commission.[59]
Power of Minister to give directions
3.28
Under subsection 10(1) of the current act, the Minister
may give to the Commission, in writing, such directions with respect to the
performance of its functions, and the exercise of its powers, under the act, as
appear to the Minister to be necessary. It goes on to state inter alia that:
Nothing in this subsection shall be construed as empowering the Minister
to determine that the Commission should deal in a particular manner with a
particular person, or with a particular claim or application for a grant or
other benefit, under the Export Market Development Grants Act 1997 or under a
scheme approved by the Minister under section 30 of this Act.
A direction of the Minister under this section shall not operate
so as to affect prejudicially an application under the Export Market
Development Grants Act 1997 in relation to a grant year (with the meaning of
that Act) that commenced before the day on which the direction was given.[60]
3.29
Consistent with these existing provisions, the
Minister, under proposed changes, retains the power to issue direction in
writing with regard to the performance of the CEO's functions and the exercise
of his or her powers.
3.30
It should be noted, however, that the phrase 'Or under
a scheme approved by the Minister under section 30 of this Act' is deleted from
subsection 10(3). Section 30 of the act is to be removed and as noted in the
Explanatory Memorandum:
As part of the Commonwealth, the CEO will exercise the executive
power of the Commonwealth and does not require the prescription of powers.[61]
3.31
Also in keeping with current practice, a direction
under the above proposed section is to be included in the annual report.
3.32
The explanatory Memorandum emphasised that the proposed
changes to 10(3):
should not be seen to amend 'the limitation imposed by the Act
on the Minister's power to issue directions that determine the manner in which
a particular person, or a particular claim or application for a grant or other
benefit under the Export Market Development Grants scheme, is to be treated.[62]
The bill also removes subsection 10(2) which states that:
Nothing in subsection (1) shall be construed:
- as requiring the approval of the Minister to the
entry by the Commission into a particular contract or other agreement or arrangement
under this Act or to the giving by the Commission of any particular guarantee
under this Act; or
- as empowering the Minister to determine that the
Commission shall or shall not enter into any particular contract or other
agreement or arrangement or shall or shall not give any particular guarantee;
but the Commission shall not enter into a particular contract or
other agreement or arrangement, or give a particular guarantee, contrary to a
direction by the Minister under this section.
3.33
The Explanation Memorandum noted that;
The Financial Management
and Accountability Act framework will govern the Commission's management of
such affairs and recognising that the Minister retains the broad power of
direction under section 10, and that directions provided under section 10 must
be publicly disclosed in the annual report, this separate provision on limiting
the power of direction from the Minister is no longer necessary.[63]
The Public Service Act and overseas engagement of staff
3.34
New subsection 7(2) states that the Commission is to
consist of the CEO and staff of the Commission who are to be engaged under the Public Service Act 1999.[64] Consistent with the findings of
the Uhrig report, Ms Lynelle Briggs, Public Service Commissioner, supported the
view that public service functions funded by the taxpayer should be subject to
the FMA Act and 'should at the same time have their employment framework
brought within the Public Service Act unless there are impressive reasons for
an alternative position.'[65] She added:
This would add substantially to the coherence of our culture as
well as our governance framework. It would mean that public service values are
applied more consistently to the performance of public service functions and to
the way in which public servants understand themselves and what it is that they
do. They would link the Uhrig review to the second great reform process of our
decade: the focus on substantial cultural reform.[66]
3.35
Under section 74 of the Public Service Act 1999, the CEO may engage persons overseas to
perform duties overseas as employees.[67]
The Explanatory Memorandum noted that subsection 60(2) has been included in the
bill to avoid doubt and reflect the unique role of the Commission in managing
overseas posts. It stated:
The distinctive nature of Austrade's overseas engaged workforce
in size and skill set in noteworthy. Overseas engaged employees comprise over
half of the Commission's staff. There should be no ambiguity that such persons
engaged under section 74 of the Public
Service Act 1999, are part of the staff of the Commission.[68]
3.36
Also under proposed section 90, the Minister may
delegate, in writing, all or any of his or her functions or powers under the Australian Trade Commission Act 1985 or
the Export Market Development Grants Act
1997 to the CEO. In turn, the
section provides that the CEO may delegate in writing, all or any of his or her
functions and powers to staff of the Commission. The Explanatory Memorandum
elaborated further that:
Owing to the relatively small number of staff, geographical
dispersal of the Commission's offices and the frequent instances where overseas
offices do not have Senior Executive Service Officers present, nor in some
instances, do they have a Public Servant presence (a number of posts comprise a
single Overseas Engaged Employee assisting exporters), there is a need for the
efficient functioning of the organisation that appropriate delegations, as and
when required, can be conferred on any staff member. These delegations will
operate in the context of other controls on behaviour such as the Commission's
Fraud Control Policy.
The provision of delegation will ensure that Commission
employees are also able to exercise powers in a manner that will enable the
efficient delivery of programs, such as the Export Market Development Grants
scheme.[69]
3.37
The committee is concerned that the provisions of the
bill do not appear to provide adequate checks and balances to ensure the
appropriate and proper delegation of power.
Reporting obligations
3.38
Item 35 of the bill is intended to repeal Part VIII of
the act that establishes the financial powers of the Commission. As noted
earlier, the CEO and the Commission will be subject to the FMA Act and the
specific provisions set down in this Part of the Act are no longer required.
Under an amendment to the Financial Management and Accountability Regulations
1997, Austrade will be added to the list of prescribed agencies subject to the
FMA.[70]
3.39
The committee drew attention in the previous chapter to
the Uhrig Report which found that the FMA Act should apply to budget-funded
Commonwealth bodies. The assessment carried out by the Minister for Trade
concluded that Austrade is primarily a service delivery organisation that is
largely budget funded and hence should come under the FMA Act as a prescribed
agency.[71]
3.40
Under the proposed legislation, the CEO must, as soon
as practicable after 30 June in each financial year, prepare and give to the
Minister a report on the Commission's operations during that financial year. It
further stipulates that this annual report must include:
- information about the Commission's operations under the Export Market Development Grants Act
1997;
- particulars of all directions given by the Minister to
the CEO under subsection 10(1), other than any directions that includes a
statement to the effect that the direction is not to be disclosed:
- for reasons of national security; or
- because its disclosures would have an adverse effect on
the financial interests or property interests of the Commonwealth or of an
instrumentality of the Commonwealth.[72]
3.41
The Minister is to ensure that a copy of the annual
report is tabled in each House of the Parliament within 15 sitting days of that
House after the day on which the Minister receives the report.[73]
3.42
These reporting provisions are consistent with those
existing under the current act but, according to the Explanatory Memorandum,
are changed to conform to the requirement that the Commission be subject to the
guidelines for Financial Management and Accountability Act 1997 agencies on
Annual Reports.[74]
3.43
The Department of Foreign Affairs and Trade informed
the committee that Austrade will provide relevant information on its
preparations and performance to the Secretary of DFAT in parallel to
information provided to the Minister for Trade. It stated:
This reflects the DFAT Secretary's overall responsibility to the
Minister for the administration of the foreign affairs and trade portfolio and
DFAT's role as the principal source of advice to the Minister on governance
responsibilities related to Austrade (assisted by advice from Austrade's
executive management).[75]
Conclusion
3.44
As noted earlier, the committee approached a number of
people who had criticised the findings of the Uhrig Report and also bodies with
an interest in corporate governance. The committee noted Professor
Wettenhall's concerns that no commentary
accompanied the bill outlining the reasons for removing the board. The
committee has recommended that, in light of the perceived need for an
independent board of industry experts when Austrade was first established, the
government provide a statement outlining the reasons for the abolition of the
board.
3.45
In general, however, the lack of response to the
committee's invitation to comment on the provisions of the bill indicates that
the proposed restructuring of the Commission to fit the executive management
template developed by the Uhrig Report is appropriate. Indeed, Alan
Oxley, a former Australian Ambassador to the
General Agreement on Tariffs and Trade told the Financial Review that it was important for Austrade to receive
external advice from experts to avoid it being driven by bureaucratic systems.
He argued that Austrade 'should have good external advice from people who have
been successful exporters but you don't need an elaborate structure like the
one they have'.[76] In summary:
They don't need a governance structure pretending to be a proper
company.[77]
3.46
In considering the provisions of the bill and in the
absence of any substantial criticism, the committee is satisfied that the
proposed legislation is appropriate.
Recommendation 2
3.47
The committee recommends that the bill be passed.
SENATOR DAVID JOHNSTON
CHAIR
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