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Monday, 9 May 1994
Page: 441

Senator SCHACHT (Minister for Small Business, Customs and Construction) (4.39 p.m.) —Senator Spindler has asked some questions which again I think I have probably answered. I have just received some more information which may be of use to Senator Spindler. I want to put this on the record:

When AIDC was originally established in 1970 as a specialist development financier for Australian industry, there was a dearth of financiers providing these services. That is no longer the case.

-  Following the deregulation of the financial markets by this Government, a world class, diversified finance and banking sector has developed in Australia, which is capable of meeting the needs of Australian industrial and resource development—

much further than it was available to help in the 1970s—

-  AIDC has come a long way since its beginning in 1970, from a development bank targeted at industrial and resource development to a multi-disciplined investment house, specialising in project and structured finance, corporate finance and investment and advisory services.

-  Now, in the area of development finance, particularly finance for resource and infrastructure projects, AIDC Ltd actively competes with other private sector financiers.

The sale of AIDC Ltd does not impact negatively on the venture capital market especially at the high risk/SME end of the spectrum nor on infrastructure finance.

—  As the Chairman said in the 1993 Annual Report "The reality is that AIDC was never intended to be in the high risk end of the venture capital market, nor was it established to fund the development of small companies in particular".

AIDC Ltd is a listed company which revolves around delivering profits to its shareholders, both private and Government.

-  It would be irresponsible to force AIDC Ltd to move into areas its Board considered unprofitable and so jeopardise the investments of the private shareholders.

-  With a significant private shareholding already, it is unreasonable to expect AIDC Ltd not to base its decisions on sound commercial principles.

-  Claims that a majority Government share holding should be retained so that infrastructure or venture capital funding can be provided for projects ignore commercial reality.

An examination is to be undertaken to identify the range of issues involved in the sale of the 80.6% interest in AIDC Ltd, and to recommend to the Government the parameters of the sale.

-  The Government's position is that the sale will be effected only at a time when the full value of the underlying assets can be obtained, and that there would be minimal disruption to the operations of the company.

-  Details of the method and timing of the sale are to be determined.

-  The Minister for Finance, Kim Beazley, will be responsible for the sale, which will be managed by the Task Force on Asset Sales within his Department.

As part of the examination to be undertaken, the Government guarantee on the Corporation's liability will also be reviewed.

-  The Government is looking as a matter of priority at its position on the guarantee of future borrowings of the Corporation up to 1 July 1998. The Government will stand behind its existing commitments.

I trust that information is of more use to Senator Spindler. He asked a question about the composition of the board. Yes, it is a fact that the head of the Department of Industry, Science and Technology is a member of the board. His predecessor has been a member of the AIDC. That has been a standard practice. I have to point out that, as a member of that board, that person has to accept the fiduciary responsibility and the due diligence that goes with being a director of such an organisation.

  It is not a matter of me ringing him up and telling him, `Invest in this. Don't invest in that,' or anything like that at all. That would be a contradiction of his fiducial responsibility and due diligence role, which obviously would draw the attention, I would have thought, of the ASC. Yes, he is on the board. We never denied that. But he is one of five or seven members of the board. As I have just said, the AIDC already has a minority, but a significant private shareholding which starts to affect the judgments that have to be made about commercial investment.