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Tuesday, 30 October 2012
Page: 8476

Senator RHIANNON (New South Wales) (18:56): I move:

That the Senate take note of the document.

The minister tabled the EFIC annual report for 2011-12 yesterday. It is important to note from the report that the EFIC financed up to $1 billion worth of projects in the year 2011-12. However, it is questionable whether this money is well spent in the interests of the Australian economy and the developing countries that are affected by these projects. From the report, $195.5 million of the $1 billion facility provided by EFIC are given to the small and medium-sized enterprises. That means that close to 80 per cent of the project financing by EFIC is used to support large corporations. This looks more like a corporate welfare program than what EFIC is meant to do, which is support the growth of the export industry. Large corporations which EFIC supported have the financial wherewithal to seek financing from banks and other financial bodies. The report released by the Productivity Commission in June this year has shown that most of the time a large corporation seeks help from EFIC because it is convenient and cheaper to do so. This does not mean that there is a market failure with regard to export financing that warrants EFIC 's intervention. More often than not the high cost of financing for these large firms only reflects market value. Large corporations can afford them but choose not to and as a result it overcrowds EFIC's financing, which resulted in close to 80 per cent of their financing going to large corporations.

The Greens argue that this is unacceptable. Why is Australian public money going to loans given to large corporations that do not need help in the first place? Shouldn't EFIC support more small and medium sized enterprises in their financing? SMEs are more sustainable economically because they are adaptable and home-grown and bear the potential of being a huge source of employment for the economy. Despite the benefits associated with supporting home-grown SMEs, they receive less than 20 per cent of EFIC 's financial support. This may be brought about by a couple of reasons. It may be because the application process for EFIC funding is prohibitively difficult for SMEs to gain approval, or it may be that the application processes are systematically biased towards large corporations. Hence it is important that in light of this report the government reviews the EFIC financing process and addresses the stark imbalance between the amounts of money SMEs get compared to the large proportion received by large corporations.

Another major concern that the EFIC annual report failed to address adequately is the environmental and social impacts of the projects it financed in developing countries. This is particularly worrying as it is disclosed in the report that 60 per cent of the financing is given to the mining industry. EFIC says that it advances corporate responsibility and puts in place safeguards to manage the environmental and social impacts of the projects it finances overseas. However, there are major concerns by civil society organisations, like Jubilee Australia, that the safeguards that mining companies and EFIC say are in place are in fact inadequate.

Take, for example, the Oyu Tolgoi mines project, a mine owned by Rio Tinto, which is a category A project under EFIC. Insufficient time was given by EFIC for the civil society organisations to canvass the project impacts. This mine is in Mongolia, and while there was some extension of time, certainly from reports I received, many organisations still regarded it as inadequate.

Another controversial project which EFIC supported is the LNG project in PNG. That has been reported extensively, and it again highlights the problem that EFIC is confronting when it moves in to provide the assistance to mining companies.

The annual report reflects on the reputation of EFIC. There is a need for greater transparency of EFIC's corporate safeguards. More explanations and more readily accessible reports need to be disclosed by EFIC. We need greater oversight of EFIC and the projects that it supports. I feel that this annual report does not answer substantially the impact EFIC has on low-income countries with respect to environmental and social impacts.

Question agreed to.