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Thursday, 17 October 1974
Page: 1821


The PRESIDENT -Is leave granted? There being no objection, leave is granted. (The speech read as follows)-

This Bill seeks the approval of Parliament to the provision of contractual guarantees by the Australian Government for overseas borrowings by the Papua New Guinea Government in foreign currencies not exceeding the equivalent of $A20m prior to achievement of independence in 1974-75. The proceeds of the loans will be used by the Papua New Guinea Government to finance public works and services. In the 1 972-73 financial year the Papua New Guinea Government made its first overseas borrowing on the international capital market. This borrowing, which was guaranteed by the Australian Government under legislation similar to that now before the Senate, was for an amount of 50 million Deutsche marks. Under the Papua New Guinea Loans Guarantee Act 1973 guarantee for loans of 5 billion yen and 50 million Swiss francs have also been given. Parliament has also, on a number of previous occasions, approved similar contractual guarantees by the Australian Government in respect of loans to Papua New Guinea from the International Bank for Reconstruction and Development and the Asian Development Bank.

It is proposed that arrangements for the borrowings for which this Bill provides contractual guarantees will be concluded prior to the achievement of independence by Papua New

Guinea. Loan possibilities on overseas markets are currently being investigated by the Papua New Guinea Government. The form of guarantee that is customarily required in international capital markets is similar to those that have been given to the International Bank for Reconstruction and Development and to the Asian Development Bank in respect of borrowings by Papua New Guinea from those institutions. The borrower and the guarantor would also both be required to give customary undertakings to the effect that interest payments and repayment of the loan would be made without deduction for taxes and would also be free of exchange control restrictions. The Bill accordingly provides for such undertakings to be given.

The Bill is purposely couched in general terms in respect of the currencies and the precise forms of the proposed borrowings so as not to restrict the Papua New Guinea Government's choice as to the particular overseas markets in which it finally decides to arrange the loans. The provision of contractual guarantees by the Australian Government will materially assist Papua New Guinea in negotiating favourable terms for the borrowings as well as enhancing its status as a borrower on overseas capital markets. I commend the Bill to honourable senators.







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