This Bill has several weaknesses that should be addressed before it is passed by the Parliament.
First, there is a risk that the Efic reforms will give a green light to Australian businesses to push projects in neighbouring countries, regardless of whether it is in the best interest of the country in question. The risk is that proponents with better connections, rather than better projects, will be funded, and that good governance will be undermined.
Furthermore, what really matters for infrastructure success is not financing availability but the domestic policy framework. If that policy framework is sound, financing will follow. If it is not, no amount of official financing will lead to sustainable development. This Bill does nothing to address the fundamental issues constraining infrastructure development.
Efic should be required to certify that the policy framework for any infrastructure project it supports is satisfactory before approving an investment. If it is able to do this, and if the project is commercially viable, then we will know that the project is in the interests of the recipient. Absent a satisfactory policy framework, even commercially viable projects may not be in the interests of the recipient.
Efic could possibly be allowed to certify that the policy framework would be satisfactory if a number of agreed policy reforms are made. Such an approach adds the risk that the policy reforms won’t actually be made, but is consistent with the practices of the multilateral banks. It would also encourage the country in question to create the necessary policy frameworks.
Recommendation
Amend the definition of "overseas infrastructure financing" to "lending money to support overseas infrastructure development, if EFIC reasonably believes that lending the money is likely to result in an Australian benefit and there is an appropriate domestic policy framework for the infrastructure development''.
The Efic legislation does not mandate tying to Australian producers, but it does require that benefits to Australia be maximised. There is no requirement that competitive tendering be used. This will be bad for the Pacific, and bad for Australia’s reputation. At fora such as G20 and APEC, we will continue to promote the virtues of open markets and competition. But in practice, we will be putting pressure on potential recipients to maximise Australian content in return for Australian financing.
This issue should be addressed by removing the requirement for Efic to perform its overseas infrastructure financing functions in such a manner as Efic reasonably believes is likely to result in the ''maximum Australian benefits''.
Recommendation
Remove "maximum Australian benefits" requirement by deleting subsection 5(4).
Under Article 2 of the Paris Agreement, Australia committed to "making finance flows consistent with a pathway towards low greenhouse gas emissions and climate resilient development". Any investments Efic makes under these new arrangements should be consistent with this commitment.
Recommendation
Amend Bill to require any infrastructure financing undertaken by EFIC to be consistent with the aims and objectives of the Paris Agreement.