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Tuesday, 31 March 1987
Page: 1833

(Question No. 4988)

Mr Hunt asked the Minister for Primary Industry, upon notice, on 28 November 1986:

(1) Was the recovery of the moneys owing to the Australian dairy industry for raw materials supplied to PT Indomilk made at the expense of the loss of the industry's shareholding in PT Indomilk; if not, what sum was received by the Australian Dairy Corporation for its shareholding in PT Indomilk.

(2) What has been the additional interest cost which the dairy industry has had to pay through the export pools on the outstanding money owed by PT Indomilk since January 1983.

(3) Is he able to say what legal costs were incurred by Asian Dairy Industry Hong Kong Ltd and the Corporation since 1982 in the disputes and negotiations involved in the sale of its 50% shareholding.

(4) What is the estimated overall loss incurred by the dairy industry in the disposal of its assets in Indonesia, including the loss of $2.1 million absorbed by the dairy industry representing unpaid technical fees and interest.

Mr Kerin —The answer to the honourable member's question is as follows:

(1) There were two separate aspects regarding the recent finalisation of matters relating to the involvement of the Australian Dairy Corporation and its subsidiary Asia Dairy Industries with PT Indomilk. These were the payment for dairy products supplied to PT Indomilk and the sale of the Australian Dairy Corporation's shareholding in the company.

In relation to dairy products, Asia Dairy Industries accepted a total of $US8,150,000 through a factoring arrangement under which the full debt for raw materials, technical fees and interest, which was owning by PT Indomilk, was assigned to the Indonesian company Satwikar Sinar Mas. This allowed Asia Dairy Industries to pay the Australian Dairy Corporation in full for the raw materials supplied to PT Indomilk.

In respect of the shareholding, the Australian Dairy Corporation on 31 October 1986 received a payment of $US348,000 for the sale of its full shareholding in PT Indomilk to Satwikar Sinar Mas.

(2) Interest on amounts owing to the Australian Dairy Corporation since January 1983 has been paid in full with the exception of an opportunity cost of interest during an interest moratorium period granted by the Australian Dairy Corporation. This opportunity cost is of the order of $A1.6 million and should be seen as part of the overall arrangements referred to in the answer to question 4.

(3) The total legal costs incurred in finalising financial and legal matters concerning PT Indomilk amounted to $A371,445. Separate accounting was not maintained in respect of the sale of the shares.

(4) It is extremely difficult to calculate the extent of any loss incurred by the dairy industry as a result of its sale of the PT Indomilk shareholding. The sale commenced in 1981 and was finalised in 1986. During this period there were a number of events which substantially affected the performance of PT Indomilk and hence the value of the company. Examples of these are the decline in the Indonesian economy as a result of the world oil price collapse and devaluations of the Indonesian currency. The effect of these events on the company caused the ADC to write off the entire value of the investment in that company, amounting to $A339,000. As the shares were subsequently sold for $A552,000, a notional book profit of $A213,000 could be calculated.

Offsetting the opportunity interest costs and the legal fees referred to earlier is the income resulting from five years of raw material supply, technical fees and interest. A component of this income was utilised to cover the write-off by Asia Dairy Industries of approximately A$2.1 million, representing unpaid technical fees and interest.

The Australian Dairy Industry Conference (ADIC) has expressed its satisfaction with the outcome of the Australian Dairy Corporation's sale of its shareholding, which according to a press release by the ADIC on 5 November 1986 was seen as avoiding ``a very real possibility of losing up to $14 million''. All money owing to the industry product pools in respect of dairy raw materials supplied to PT Indomilk have been paid in full.