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Thursday, 15 September 1983
Page: 911

Mr MacKELLAR(4.12) —The International Development Association ( Special Contribution) Bill 1983 demonstrates the problems which ensue from ill- informed propaganda attacking the effectiveness of foreign aid programs. Honourable members will know that the World Bank has two lending systems. Hard loans at commercial interest rates are provided from funds obtained in the financial market. Funds for soft loans are provided to the World Bank's subsidiary, the International Development Association, by grants from governments. The IDA advances capital to the poorer countries in flexible and softer terms than does the International Bank for Reconstruction and Development .

Unfortunately, in the United States Congressional opinion has been very reluctant to support a system of grants to the IDA. As the Minister for Foreign Affairs (Mr Hayden) pointed out in his second reading speech, the Reagan Administration has decided to stretch its total contribution to the sixth replenishment over four years instead of three. Australia and other Western countries have decided to sustain the reputation of IDA by making special contributions to offset the loss of United States funding. As the Minister points out, there are some 20 donors to this special action including Japan, the Federal Republic of Germany, the United Kingdom, France, Canada, Denmark, Italy, Norway, Sweden and New Zealand. As the Minister indicates, the commitment to do this was made in 1982 under the previous Government. This legislation is consequential to that commitment.

In Australia we see a great deal of the kind of criticism which gives foreign aid programs a bad name. This is not a perfect world and mistakes will always be made. A number of free wheeling comments are to hand in Australia, which proceed more from a desire for some groups to increase government subvention to their operations than it does from an objective and fair-minded view. Some very inappropriate language is used to describe the criticism of major programs. ' Trickle down effect' seems to be the only term used to describe large programs, with long term effects. The complaint is that the poor people for whom it is and should be intended do not get a benefit. This is countered by the argument that the benefits of the aid trickle down. The critics argue that aid should be organised on the basis of a welfare system, aiding the needy directly. I believe that this kind of discussion is sterile but highly popular with the critics, as much because the judgments are elusive as because they are facile.

IDA aid places emphasis on building infrastructure on which to support sophisticated development programs. Major rearrangements in the world economy, precipitated by the quadrupling of oil prices, has put economic development in the poorer countries under considerable pressure. Money for development has been diverted to energy bills. Against this background it became important to sustain the work of IDA to ensure a stable program to develop the infrastructure of the poorer countries. Therefore, special action is being taken by Australia by way of this Bill, along with other countries-some of whom I mentioned-to maintain the program of IDA commitments. Many IDA recipients do not have alternative sources of finance and commercial bankers avoid the most heavily disadvantaged countries. There can be no doubt that the anti-aid lobby has been a force in this drawing back by the United States.

India and China are both recipients of IDA financial assistance. China has only recently become a recipient, but it is clear that with the entry of China into the world bank system there will be considerable pressure on that system. It could be demonstrated that the development program increases imports from developed countries. But the United States does not get the feedback from IDA which other developed countries obtain. Australia has not entered the system to calculate indirect benefits in trade. Clearly, a country which has neighbours such as India and China has much to gain from a continuing stability in economic development programs. India has invested a great deal in infrastructure skills. This has paid off in the progress that India has made in food self-sufficiency. Much of the success has been due to the adaptation of the new rice strains. But, to do this, developmental research and developmental administration had to provide an exceptionally wide range of skills to adopt Indian agriculture to the new strains. This came from the infrastructure programs.

There can be no doubt that development assistance has to show dramatic advances to compete with the problems of the accelerated growths in population. This population growth in the under-developed countries will continue dramatically to the end of the century. That such notable progress has been made in agriculture in India is a very real achievement indeed. Food production has a direct effect on the capacity of the country to meet the needs of the poor. But the results from infrastructure programs of necessity have to be measured in the long term and the benefits and mistakes cannot be demonstrated on the basis of an annual estimate. Clearly, therefore, a negative view of aid assistance is premature.

We face mammoth human problems and there can be no certainties in the answers attempted. The destruction of the aid incentive can be just as certain if the blows come from pro-aid critics or from anti-aid critics. Governments have a job maintaining public confidence in its enterprise in this area. It is a timely development that the previous Fraser Government invited Sir Gordon Jackson to make himself available to head up an inquiry into Australia's foreign aid program. I was very pleased to see that the Minister for Foreign Affairs, as one of his early decisions, proceeded to establish the inquiry, which I understand will report early next year. I assure the Minister that we on this side of the House look forward to a constructive relationship under the Government on this important issue.

The Asian Development Bank (Additional Subscription) Bill 1983 seeks parliamentary approval for Australia to take up its entitlement to subscribe to additional shares in the capital stock of the Asian Development Bank. Just as background, the governors of the Bank approved in April a resolution increasing the authorised capital stock of the Bank by 105 per cent or approximately $US9 billion. Such a capital increase will enable the Bank to continue its assistance to developing member countries in the Asian region.

Australia's current contributions comprise paid-in capital of $US17m and contributions to the Asian Development Bank fund totalling $US151m. Australia's entitlement under the resolution is an additional 52,433 shares, which represents $72m in Australian currency, of which the paid-in element amounts to $36m Australian. Forty per cent of the paid-in element will be paid in cash in five equal instalments of about $2.9m per year and the remaining 60 per cent will be paid in the form of five promissory notes. The last capital increase from Australia to the Bank occurred in 1977. We in the Opposition support the Bill in view of Australia's role as an active supporter of the Bank and the priority we attach to the needs of developing countries within our region.

The third Bill is the International Monetary Fund (Quota Increase) Bill 1983. The purpose of this Bill is to authorise an increase in Australia's International Monetary Fund quota. It also provides for payment of the quota increase. Of course, this increase follows the eighth general revenue of quotas agreed to in March by the Fund's Board of Governors. The March resolution proposed a 47.5 per cent increase in the aggregate level of fund quotas to special drawing rights to the value of $90 billion. The increase in Australia's quota proposed under the review is from SDR 1,185m to SDR 1,619.2m. The Australian additional quota subscription will have no effect on Budget outlays or on the Consolidated Revenue Fund. But the increased quotas will help augment the Fund's financial resources, which have been depleted by a high level of drawing by its member countries over the past year. They will also provide temporary balance of payments assistance to members facing serious debt and external payments problems. Again the Opposition, taking a positive attitude to these matters, supports the Bills.