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Wednesday, 16 November 1983
Page: 2762


Mr JACOBI(11.25) —It is with pleasure that I support the Export Finance and Insurance Corporation Amendment Bill. The main purpose of the Bill is to give the Export Finance and Insurance Corporation authority to provide subsidies to lenders where the Corporation guarantees the repayment of loans made by lending institutions to overseas buyers of Australian capital goods and related services. It has particular application where foreign currency is being used to finance such loans. To some extent the amendments in the Bill are rather technical but necessary. In order to enable the Corporation to keep abreast of current trade financing techniques, particularly in smaller transactions, the Bill broadens the existing definition of a loan or the lending of money to include the provision of finance in any form. Finally, the Bill gives effect to the Government's decision to remove the restrictions which generally limit the Corporation's services to those not normally available in the private sector. In summary, it can be said that the Export Finance and Insurance Corporation provides export credit insurance and guarantee facilities, insurance cover for direct investment overseas against non-commercial risks, and where necessary, export finance for medium and long term credit sales of capital goods. It plays, and has done since its inception, an extremely important role. Formerly, as is known by all honourable members, it was known as the Export Payments Insurance Corporation.

No private sector competitors provide the range of services currently offered by the Corporation. Some private insurers may provide some of the insurance facilities provided by the Corporation, but on an extremely limited scale. I think we all understand that the Corporation's operations cover a number of critically important areas: Firstly, insurance of exporters against non-payment by overseas buyers; secondly, provision of guarantees to Australian banks in respect of finance which they provide to Australian exporters; thirdly, insurance of investment by Australian firms and enterprises in foreign countries against the risk of loss from expropriation, war damage or exchange transfer delays; and fourthly, the indemnification of banks and insurance companies against loss arising in respect of various types of bonding facilities related to exports.

The total business transacted by the Corporation amounted to $1.3 billion in 1979. Its business is primarily concentrated in areas of insurance of payments for exports of raw materials, primary products and consumer goods and services sold on the short term market, on short term credit. It also provides subsidised finance facilities to exporters to match the support given overseas to their competitors. Initially $4m was advanced by the Commonwealth to provide funds for the set lending facilities and at the end of 1979 subsidies paid by the Commonwealth Government for such lending amounted to around $1.73m. The Corporation, in addition to its other activities, acts as the agent of the Commonwealth Government in the administration of insurance facilities where a proposal is not considered to be commercially acceptable but where cover may be desirable in the national interests. These are propositions which the Corporation does not consider to be commercially acceptable for its normal credit insurance cover. In such cases the Corporation refers the proposals to the Commonwealth Government for consideration in the national interest and, if approved, takes a share of the commitment.

In deciding whether insurance cover will be given in the national interest the following considerations are relevant: Firstly, whether the proposition holds promise of opening up worthwhile new export markets for Australian products; secondly, whether the transaction is important for a particular Australian area or industry, for example, in relation to employment and development; and, finally, whether the transaction would confer such obvious and significant benefits for Australia's commercial and other relations with the countries concerned. I wish to develop that aspect a little later as, although it is not pertinent to the Bill, it is pertinent to industry as a whole.

Between the introduction of the national interest provisions in 1961 and March 1980, liability totalling a little over $1 billion was undertaken under the national interest arrangements. Of this figure, $49m represented overseas investment insurance which until 1975 could be underwritten only under the national interest provisions. To that extent it has played more than a critically important role. Over the 12 months to March 1980, total liability assumed amounted to $272m, none of which involved overseas investment insurance.

I now pass to some observations made by the Campbell Committee of Inquiry into the Australian Financial System. In its report, it indicated that the Corporation:

. . . has a general charter to encourage international trade and commerce by developing and expanding its business. Through government ownership it provides specialised facilities not normally obtainable in commercial markets.

It recognised that the Corporation:

. . . operates in a unique market environment. The participation of EFIC (and its counterpart institutions in other countries) may, for example, yield important economic externalities in respect of Australia's export performance and world trade more generally.

I believe it took us a little too long to get the Corporation off the ground. The report continued:

Usage of EFIC's direct lending and related buyer credit guarantee facilities is confined to situations where there is a clear market gap--

I want to come back to that shortly-

in the financing options open to Australian exporters. These facilities are partly, if not solely, a response to the actions of other governments and can best be provided through a government-owned institution.

Similarly, EFIC's export payments insurance and associated operations offer protection for Australia's international trade and commerce against both political, non-commercial risks and commercial risks of default by overseas importers. The Committee is satisfied that here too EFIC fills a market gap; it can fulfil these functions more effectively because it is owned by government.

I want to come back to that point in a few moments. To continue:

Moreover, there would not appear to be a more cost-effective way of securing the associated externalities or responding to the international market imperfection. It is unlikely that EFIC is pre-emptive of viable private financial enterprises in Australia performing the same function.

. . . .

The Committee's concern relates only to the adequate disclosure of the true and total cost to the Government of the facilities. Accordingly, it suggests that the accounts should note any shortfall in achieved premiums and, whenever possible, the total cost of Government assistance.

We ought to note what the Deputy Prime Minister and Minister for Trade (Mr Lionel Bowen) has remarked on a number of occasions. He has said that Australia' s position in world trade is regrettably declining. The measures in this Bill will be out of step towards redressing the decline, but we need to do more.

The Deputy Prime Minister, in a statement when opening the World Trade Centre recently, said:

I am sure that everyone here today realises the importance of international trade to Australia. I regret that Australia's trade performance has been in a serious decline with our share of world exports falling from 1.7 per cent in 1970 to 1.3 per cent in 1982. Australia has slipped from thirteenth to sixteenth place as a world trading nation in the same period.

I also commend the Deputy Prime Minister for his initiative as set out in a statement dated 3 November:

Australia needs to set up an overseas trading company to boost its role in world trade, the Deputy Prime Minister urged yesterday. An overseas trading company controlled by the private sector would offer a much needed valuable trade outlet for Australian small manufacturers, he told the World Trade Centre in Melbourne yesterday.

I compliment the Deputy Prime Minister for his initiative. I deviate from the provisions of the Bill to touch on an issue which the Leader of the National Party (Mr Anthony) indicated but did not tackle. Honourable members will have noticed that there appears on the Notice Paper today Question No. 813 from me to the Minister representing the Minister for Industry and Commerce (Senator Button ). It asked:

(1) Has his attention been drawn to recent statements of the Foreign Investments Review Board particularly as they relate to invisible payments.

(2) What was the value of investment approved by the Board in 1982-83 which was expected to be directed towards the services and real estate industries and what proportion was this of total investment approved.

(3) What has been (a) the value and (b) the proportion, of invisible payments in (i) Australian current account balances and (ii) global current account balances in each year since 1972-73.

If one studies those figures one finds that regrettably there is a marked decline in invisibles returns in this country. I further asked:

(4) What forms of assistance are provided to Australian business in searching for possibilities for trade with other countries.

(5) Is the Government involved in any form of market research about trade possibilities for Australian companies; if so, how is the information disseminated.

(6) What assistance is given to Australian companies involved in the provision of services to companies and governments overseas.

This measure before the House is one small segment of that. To continue:

(7) Are there gaps in the provision of the support mentioned in parts (4) to (6 ).

The answer is obviously yes. To continue:

(8) Is there an urgent need for statistical information in the trade area, particularly if markets within the Asian area are to be penetrated and developed .

The answer is that there is a vital need for statistical information if we are to penetrate the Asian market. We have the information, but it is fragmented all over the place. I further asked:

(9) Is it a fact that without statistical information and support, small trading companies are at a distinct disadvantage.

Let me expand on that question. I do not think there is any doubt at all that large multinational trading corporations-I use that term in a constructive sense -are more than aptly equipped with the statistical information to know world marketing trends in their specific area of interest. They keep this information up to date and, in most cases, they have extrapolations for from 10 to 50 years. Smaller Australian companies are not in that position. They are at a distinct disadvantage. I notice that a former Prime Minister proposed the same sort of thing except that he wanted a bureau of statistics confined principally to the private sector. My last question was:

(10) Will he-

the Minister-

take steps to set up a Bureau of Statistical Studies as a joint venture between the Government and private enterprise.

That is long overdue. We have been obliged to do this in the area of finance and insurance, but we need to expand it to the area of trade if we are to overcome the problem of our invisibles deficit. If anybody takes the time to study this, I do not think there is any doubt that he or she will come up with the conclusion that a great deal of statistical information is available. It is in a great number of government departments, semi-government and private organisations as well as private corporations. A few of those are the Australian Bureau of Statistics, the Department of Industry and Commerce, the Department of Primary Industry, trade and industry departments in the States throughout Australia, the State Agents-General, the wool, wheat, coal and dairy boards, the Australian Chamber of Commerce and foreign chambers of commerce in this country, other trade associations such as shipping conferences and chambers of manufactures and individual companies such as the Australian banks, the Broken Hill Proprietary Co. Ltd and Wormald International Ltd. In addition to that, a lot is held by international organisations such as the International Monetary Fund, the World Bank, the International Bank of Settlements, and the International Chamber of Commerce centred in Paris. The difficulty is that so much of the information is located in so many different places. It is inordinately fragmented. For instance, there are in Australia a register of company and business names and standard industrial classifications. The Reserve Bank has details of who imports what from where and who exports what to where.

The guide book to export incentive grants in Australia shows that the Export Market Development Grants Act of 1974 and the Expansion Grants Act of 1978 provide grants for a diverse range of activities, including market research and the obtaining of market information for a large number of diverse enterprises. But the tragic fact is that in this country we have no facility for bringing together all of this statistical data in order to analyse and disseminate it and thus enable small companies, in particular Australian-based, to understand which markets they can penetrate and what chance they have of operating profitably in them. The sooner we set up a bureau of statistical information, which the Government ought to take the initiative in planning and setting up, the better. If we are to increase our export potential we can only do so by providing companies with the necessary information. I refer particularly to those companies that, for a variety of reasons, including not having the required facilities, are not able to collect information. The Corporation has proved a success down the years. It has proved an enormous security for companies that wish to participate in the export market. We ought to do more than we are in that direction. The Corporation has a limited role. We need a complementary organisation to bring together statistics and other useful information so that companies may be assisted.

Without doubt one of the weaknesses from which the mining sector has suffered down the years is the fact that small companies cannot compete with large transnational corporations. I can remember, as will the Deputy Prime Minister-it is perhaps a small example but a very telling one-that when Labor was in Government between 1972 and 1975 certain action was taken by the former honourable member for Cunningham, Mr Connor, to whom history will doubtless be a lot kinder than were his contemporaries. Coal exporters were being carved up in their attempts to obtain a reasonable return for their product in Japan. The weakness was that in those days the Government never really had the information that it ought to have had. Finally, it was obtained and, rather than individual corporations having to compete against the rational structures in Japan, the position changed. Connor went to Japan and came back with a far better deal than the ordinary Australian companies could glean. We were able to compile the statistics necessary to match the Japanese on the question of contract prices. We can, as a government do better for companies in this country if we look to the area of trade through the activities of this Corporation. I commend the Deputy Prime Minister upon his initiative in this area and sincerely trust that the Minister for Industry and Commerce (Senator Button) will at least study seriously the initiative that I have placed on the Notice Paper today.