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Thursday, 16 May 1985
Page: 2062


Senator McKIERNAN(1.03) —I raise in this public interest debate a matter which, at the moment, does not have a controversial nature. Some people say that it is a pie in the sky but I believe that it has the potential to become very controversial and very divisive in our community. I refer to the report in the West Australian newspaper on 16 April 1985 relating to the barter deal alleged to have been signed between Lang Hancock, that well known Western Australian entrepreneur, and the Romanians to develop an iron ore mine in the Pilbara region of Western Australia.

The deal as I understand it is fraught with many difficulties. Firstly, how great a benefit will Australia receive from the development of the Marandoo project if Romania is to provide $100m worth of mining equipment, railway rolling stock and other plant, machinery which is already manufactured successfully in Australia and which was targeted in the recently published report of the National Export Marketing Strategy Panel, the Ferris report, as not yet having been exploited to its full export potential? Secondly, in considering the barter deal concept, how can this arrangement succeed when hard cash is obviously needed to pay workers in the temporary construction phase? In this temporary phase we are looking at up to 2,000 jobs. Thirdly, the arrangement between the partners, Conzinc Riotinto of Australia Ltd and Lang Hancock, over the development of Marandoo is reminiscent of the ANZUS Treaty in that it is an arrangement in principle only, with no concrete details having been drafted between the partners. The direct benefit in terms of jobs from the development of the Marandoo project appears at this stage-it is only in the temporary construction phase-to be about 2,000 jobs. The real job benefits would come in the manufacturing sector and only if we produced the mining equipment, rolling stock and other plant in this country.

Hancock's deal seeks to exclude the Australian manufacturing industry, in particular a section of that industry which is widely recognised, right across the world, as being technically advanced, producing a competitive product and which, as I have said, has been targetted by the Ferris report as having great export potential. This section of the Australian manufacturing industry already services the world's largest hard ore mine, yet Hancock is looking to Romania to supply such equipment and machinery when the Romanians are well known as suppliers to a soft ore industry. There are characteristics differences, relating to specifications and other things, between hard ore and soft ore. The Australian Financial Review editorial on 17 April 1985 also questioned the deal. It posed a question for the Australian Government as to our role in sanctioning such a deal on the grounds of national trade policy or other policies.

The question begs: What is the barter deal concept? It can be described as a method or type of trading that overcomes problems associated with earning sufficient foreign exchange that would inhibit countries with such problems from trading in a conventional manner. It is often used by countries with products which are difficult to sell on the world market or are in oversupply. Partners at the receiving end of a barter deal often have problems finding somewhere to sell the goods acquired in that deal.

This brings me specifically to the Hancock-Romanian barter deal. Firstly, as established in the National Times article by Duncan Graham in the 10-16 May 1985 edition, 'hard cash to pay the workers has to come from somewhere'. Hancock has reportedly taken a 23 per cent controlling interest in a Hong Kong trading company, Burwill International Pty Ltd, and through this company will attempt to sell throughout the world the extra Romanian goods exchanged in the barter deal for Marandoo ore. The implication is that this will enable Hancock to pay the workers' wages in the construction period only. How can this be if the Romanians cannot trade their own goods on the world market in the conventional manner at the moment? They have to resort to barter deals to do so. Another cost from the Marandoo-Hancock-Romanian barter deal is to be seen in the limited choice of capital equipment. Again I must emphasise Australia's proven capacity to produce such equipment, and the possibility open to us as exporters of such equipment.

The ANZUS-like agreement in principle between partners CRA and Hancock throws another aspersion on the Marandoo, Hancock-Romanian barter deal. It has been widely reported that CRA would prefer a cash rather than a barter deal. The West Australian of 17 April reported that CRA claimed that the Marandoo deposits would eventually be developed. Right now it appears that CRA needs to be satisfied with the nature of all arrangements for the project and talks will continue to establish a mutually satisfactory agreement upon which the project could proceed. It appears that CRA has doubts about the efficiency of the Romanian equipment. It should be remembered that the Australian industry is tailored for hard core ores and that Romanian experience is with soft core ores.

It has been noted that CRA was absent from the contract signing-yet it is Hancock's partner. According to Graham's article in the National Times, from which I quoted earlier, Hancock says that a letter from CRA in 1984 confirms that it has agreed to develop the mine. As I noted earlier, the West Australian suggests that the Marandoo project will eventually be developed. It is the proposed development now, with all the costs, public and hidden, of the Romanian barter deal that is to be questioned. Graham's article adds:

Each party cannot be prejudiced by the collateral arrangements of the other-a clear reference to concern about the barter deal and the Romanian built equipment rolling down Hamersley railroads.

Hamersley Iron Pty Ltd, incidently, is owned by CRA. In considering the impact on the Australian manufacturing industry of Hancock's barter deal with the Romanians, I have sought to emphasise jobs for Australians in the manufacturing sector and the potential for exporting in mining equipment, railway rolling stock and other plant, which we already manufacture successfully. There are obvious parallels in my concern over the development of Marandoo and the push for a maximised Australian content in the second phase of the North West Shelf project.