Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Foreign Affairs, Defence and Trade Legislation Committee
01/06/2018
Estimates
FOREIGN AFFAIRS AND TRADE PORTFOLIO
Export Finance and Insurance Corporation

Export Finance and Insurance Corporation

[15:58]

ACTING CHAIR: I welcome Ms Swati Dave, Managing Director and Chief Executive Officer of Efic, and officers from the organisation. Do you have an opening statement, Ms Dave?

Ms Dave : I don't, thank you.

ACTING CHAIR: Okay. In that case, I'll start with the questions. How many end-of-year functions does Efic host, or how many did you host last year?

Ms Dave : I might ask my colleague Stuart Neilson to answer that.

Mr Neilson : Are you talking about client events or staff events, Senator?

ACTING CHAIR: Christmas functions.

Mr Neilson : We had one end-of-year Christmas function for our staff and we had one Christmas function for our clients.

ACTING CHAIR: So you didn't have a Christmas function in Perth, Melbourne, Brisbane, Adelaide and Sydney?

Mr Neilson : There may have been some smaller functions for our SME business in those locations, but that would have been quite a small function, as opposed to the major functions that we would have, which would be in Sydney.

ACTING CHAIR: You're saying you're not aware? Didn't anybody attend these functions? A Perth Christmas function at the botanical on 30 November 2017; at the Riverside on 29 November 2017; at Mr & Mrs G, whoever that is, 23 November 2017; my old favourite restaurant in Adelaide, Enzo's, 30 November 2017; and a Sydney function on 30 November. Have you no knowledge of these functions?

Mr Neilson : We do have knowledge of those.

ACTING CHAIR: You're the chief financial officer. What was the total value of those functions?

Mr Neilson : I'd have to take that on notice.

ACTING CHAIR: I can tell you it was $30,762. Is it an appropriate use of taxpayer funds, to have five Christmas parties around the country at various amounts of money: $13,972 in Sydney, $7½ thousand in Melbourne, $3,300 in Brisbane, $3,200 in Perth, and Adelaide's always the cheapest at $2,700.

Mr Neilson : It is normal business to have functions with clients. That was a function that we would have had at the end of the year. Clients would have been attending. There would be budgets set for each of those within the line of business. As I said, I can take further questions on notice.

ACTING CHAIR: I would like to know on notice, did no-one here at the table attend these functions?

Ms Dave : We would have been to the Sydney one.

ACTING CHAIR: So the others were organised by who? Do you have offices in all these places?

Mr Neilson : We co-share offices with Austrade in the interstate locations. Those events would have been hosted by our SME team and by the respective person who looks after SME business in those states. So it may not have directly been attended by anybody at this table today.

ACTING CHAIR: It's highly unusual in my experience, and that might be limited—you did mention clients—Westpac, ANZ, HSBC Bank, NAB Bank, Bendigo Bank, Commonwealth Bank, Westpac, Commonwealth, Bank of Melbourne. Are these your customers?

Mr Neilson : We get a lot of referrals.

ACTING CHAIR: Do you need to buy them a drink at Christmas? This is taxpayers' money.

Mr Neilson : I understand.

ACTING CHAIR: There is a royal commission into banking behaviour and we have an export financial corporation that's hosting Christmas parties and among the attendees who you allege are customers are the biggest banks in this part of the world.

Mr Neilson : As I said, we engage with banks and they give us referral business. We talk regularly with the banks, and at the end of the year when we have our function they would be regarded as being a client for the purposes of the business that they may have referred to us.

ACTING CHAIR: So you're saying that the banks were invited to your Christmas function because they refer you customers?

Mr Neilson : That's part of the reason, yes.

ACTING CHAIR: Ms Dave, is this an appropriate use of taxpayers' funds—to be hosting Christmas functions inviting banks along?

Ms Dave : It's not unusual, when you're dealing with the commercial market, to have these kinds of functions where you deal with people that are referring transactions to you. One of our mandates is to work with the private sector to deliver solutions for exporters. If I think about the way business operates, it's not an unusual way of conducting business.

ACTING CHAIR: In a private sector business with shareholders and full disclosure, no problem: have a party, do whatever you like, tell your shareholders what you're doing. But, in a taxpayer funded area, it could be seen by people as extraordinary largesse, and they wouldn't think that the major banking institutions of this country needed to go to a Christmas party with Efic. Do you get invited to their Christmas party? Do you get invited to the National Australia Bank board Christmas party?

Mr Neilson : No, I haven't been.

ACTING CHAIR: I just think it's quite extraordinary. We would like to know, on notice, the decision-making process that underpins this spend. Presumably, there is a decision-making process that underpins this spend?

Mr Neilson : Yes, there would be.

ACTING CHAIR: Is this a one-off? Was this only this year, or is this a past performance thing and you're just carrying on what someone else was doing last year?

Mr Neilson : I'd like to take that on notice, if I could.

ACTING CHAIR: Thank you very much—if you could. How many staff do you have in Sydney?

Mr Neilson : Approximately 85.

ACTING CHAIR: Eighty-five. The spend in Sydney included $2,200 for entertainment, music, and for catering the total cost was $13,972. I haven't done the sums, but what does that come out to per head for 85 people?

Mr Neilson : It'd be about $80 a head, if my maths is correct.

ACTING CHAIR: But that was only for your staff? No, you had the ANZ, the Commonwealth Bank, Westpac, Rabobank and NAB at that as well. Interesting. I'd really appreciate some additional information, and, in particular, how the organisation makes the decision to carry out these functions—because I will, obviously, be painting the worst picture possible here, but it's quite easy to do. It's not hard to do. Going to another area of interest to the taxpayer, we know that people earn remuneration and also bonuses. How many executives does Efic have?

Mr Neilson : We currently have four, plus the CEO.

ACTING CHAIR: Is their employment contracted or is it permanent?

Mr Neilson : Contracted.

ACTING CHAIR: Four-year, two-year, one-year contracts?

Mr Neilson : Five years.

ACTING CHAIR: Five-year contracts. What is the highest executive amount paid?

Mr Hopkins : I assume it's the CEO's salary, which is set by the Remuneration Tribunal.

ACTING CHAIR: Okay. Is it $495,287?

Mr Hopkins : If that is the amount in the Remuneration Tribunal statement, that's correct, yes.

ACTING CHAIR: So why are you shy about saying that? Anybody can draw that up.

Mr Hopkins : I don't know the exact figure.

ACTING CHAIR: You don't have it with you?

Mr Hopkins : I don't have it with me.

ACTING CHAIR: You don't have this sheet here, which is 'Remuneration paid to executives in 2016-17 financial year'. You don't have that sheet?

Mr Hopkins : 2016-17? Not in front of me, no.

ACTING CHAIR: Well, I'll refer to it, and if it's incorrect you can come back to me. So it's $495,287. You're not disagreeing with that?

Mr Hopkins : I'm not the CEO of the organisation.

Ms Dave : We don't know if that's the old or the new. We're not sure what that—

ACTING CHAIR: Let's hope it's the old, because the new one would only be higher. So the highest amount on my sheet is $495,000. What would the lowest amount be? You're saying you don't know. Out of the four executives, what's the lowest amount?

Mr Hopkins : We don't generally comment on the salaries of employees of the organisation. There were certainly some disclosures made in our annual report in previous years about remuneration for senior executives, and we have followed that guidance in terms of our reporting of those salaries.

ACTING CHAIR: Are there other types of remuneration beyond salary?

Mr Hopkins : There is a bonus component that is available to staff in the organisation as part of their contracts, and that is a discretionary payment.

ACTING CHAIR: Before I go to the bonuses, are there cars? Is there the provision of a vehicle?

Mr Neilson : If there were, that would be part of the salary package, so it would not be an additional amount.

ACTING CHAIR: Not an additional amount. What is the criterion for bonuses?

Ms Dave : The normal criterion for bonuses is achievement of KPIs that were set at the beginning of the plan year.

ACTING CHAIR: Could we, on notice, get a look at those KPIs?

Mr Neilson : The KPIs are outlined in the corporate plan, which is a public document.

ACTING CHAIR: Is it true that your bonuses in the 2016-17 year totalled $460,000?

Mr Neilson : I'd have to take that question on notice, sorry.

ACTING CHAIR: Who got $155,016 as a bonus?

Mr Hopkins : You'd appreciate there are some confidentiality issues around disclosure of income for certain individuals in the organisation. As I said, in terms of our requirements to provide remuneration details, they're provided in the annual report.

ACTING CHAIR: Maybe I'm quoting from the annual report. We've got a situation where a bonus of $155,000 has been paid, on top of a reported salary of $495,000. Is that factual or not?

Mr Hopkins : It may well be. As executives of the organisation—well, certainly in my position—that information is not shared widely with the organisation. It's shared sometimes with our CEO and often with our board.

ACTING CHAIR: What about the taxpayer? Can the taxpayer not see this?

Mr Hopkins : As I said to you before, the details that we're required to produce are produced in our annual report and in our financial statements.

ACTING CHAIR: Okay. I would like you to confirm, on notice, the executive salaries and the bonuses paid to them in the last financial year.

Mr Hopkins : We'll take that question on notice, thanks.

ACTING CHAIR: And the criteria are published criteria—of KPIs?

Mr Hopkins : As my colleague previously said, that information is available in our corporate plan.

ACTING CHAIR: Right. Who makes the assessment as to whether or not an executive should receive a bonus?

Mr Neilson : The board would make a determination for the CEO, and the CEO would make recommendations to the board for the executive.

ACTING CHAIR: Is it an internal or external assessment?

Mr Neilson : An internal assessment.

ACTING CHAIR: How does that work? If I'm the CEO, and you're the chief financial officer, who actually does the internal assessment that you've earned a bonus?

Mr Neilson : The CEO would do an assessment based on feedback on my performance in relation to the KPIs that had been set for me personally and for the department.

ACTING CHAIR: Okay. Now, who assesses the CEO?

Mr Neilson : The board.

Ms Dave : It's the board.

ACTING CHAIR: Does the minister sign off on these bonuses?

Senator McGrath: Are you asking me or the officers?

ACTING CHAIR: I don't know who—

Mr Hopkins : It's at the board's discretion, for the CEO.

ACTING CHAIR: Is the minister formally informed—that's an interesting expression!—of these bonuses in any way other than in the annual report?

Mr Hopkins : The minister has access—

ACTING CHAIR: Does he get a direction or a note?

Mr Hopkins : The terms of the CEO's salary are set by the Remuneration Tribunal, so the minister is aware of those details via that report.

ACTING CHAIR: So the Remuneration Tribunal sets the salary, and the KPIs that entitle people to a bonus?

Mr Hopkins : My understanding is that the Remuneration Tribunal sets the salary guidelines for the CEO of Efic, which the board complies with.

ACTING CHAIR: Who ticks off on the CEO getting the bonus—the board?

Mr Hopkins : The board.

ACTING CHAIR: Is there a—what would you call it—remuneration subcommittee?

Mr Hopkins : There is an annual managing directors remuneration review, which is a line item in our board meeting every August.

ACTING CHAIR: So we would need to look at the board of Efic as the approver. You're actually saying that the KPIs are in the corporate plan. Is that correct?

Mr Hopkins : That's correct, yes.

ACTING CHAIR: And that the bonuses are in there as well?

Mr Hopkins : No.

ACTING CHAIR: Okay. Are you saying that there are specified KPIs in the plan, or just KPIs?

Mr Neilson : There are KPIs broadly for the corporation in relation to profit or particular levels of activity. Within each individual executive there will be specific KPIs that will be set, but one of those KPIs would be including the corporate KPIs.

ACTING CHAIR: Is there is maximum bonus that you could achieve, or a minimum? If I look at the information that's been provided to me, the bonuses range between $20,000, $31,000, $50,000, $52,000, $55,000, $73,000 and then bingo—there is a $155,000 bonus!

Mr Neilson : My understanding is: the maximum bonus for executive staff is 20 per cent, and there is a higher amount available for the CEO.

ACTING CHAIR: Twenty per cent. What is it for a CEO?

Mr Neilson : That's a matter for the board.

ACTING CHAIR: Jolly good!

Mr Neilson : I might add that, if you're looking at bonus numbers, there may be an element of bonuses that have been deferred from previous years.

ACTING CHAIR: I'd just like clarity. We've got information here. You've answered questions. We've put questions back to you about whether the KPIs are clearly identified in the plan, and they don't appear to be—they're there, but broadly speaking. We would like to see this in much finer detail, including the process for approval of the bonuses, whether it's at the CEO level, which I can see and understand, or whether it's at the remuneration-subcommittee-of-the-board level, or the full board, or the chairman. We'd like to see some clarity on all of that. But a $155,016 bonus for 2016-17 and a total of $460,000 worth of bonuses in that year probably wants to be underpinned by some really good, rational, evidence-based KPI performance and achievement which would satisfy the average taxpayer. I've got people looking at the paperwork that you put out, and they're saying that the bonus is not specifically mentioned or explained. These figures are there. I've got limited time because I know other people want to get on to this. So, there we go: Christmas parties and bonuses. Can I just clear up one thing very, very quickly. You have a major loan to Nyrstar. Is that right?

Ms Dave : Yes, that's correct.

ACTING CHAIR: What's the value of that loan? Is it $291 million or thereabouts?

Ms Dave : Could I get John Pacey to explain?

Mr Pacey : That amount is correct—in that vicinity.

ACTING CHAIR: There has been some media on this, in South Australia particularly, recently. The media reports have said that Nyrstar has been delayed or late in paying quite considerable amounts of money under the terms of their agreement. How does it work? Do you manage that?

Mr Pacey : EFIC is managing the exposure on behalf of the South Australian government. EFIC is taking the credit risk of the South Australian government. Given it's a complex structure and we have experience in managing this type of transaction, we're performing that role.

ACTING CHAIR: You've taken the credit-risk exposure of the South Australian government?

Mr Pacey : That's correct.

ACTING CHAIR: Things are going, I think, in the right direction, and certainly everybody in South Australia hopes they continue in that direction. If they were to go in the other direction, what does that mean—that you've taken the credit risk of the South Australian government?

Mr Pacey : EFIC is exposed to the payment risk of the South Australian government.

ACTING CHAIR: So, if it all goes pear-shaped, where's the $291 million recovered from?

Mr Pacey : From our stand point, the South Australian government is in compliance with its terms and conditions. If you have further questions on the structure, I think they're best answered by the South Australian government.

ACTING CHAIR: There's no exposure for EFIC?

Mr Pacey : We do have the credit risk of the South Australian government.

ACTING CHAIR: Do you manage the payment cycles? Do they pay you? How does it work? All I can see is that a payment wasn't made on time and then it was made on a subsequent date.

Mr Pacey : There is an agency bank, which is part of the structure, which is managing the payments.

ACTING CHAIR: Who is the agency bank?

Mr Pacey : We'd have to take that on notice.

ACTING CHAIR: I'd like some clarity on this position as to where EFIC stands and where whoever has underwritten the risk stands. Fingers and toes crossed, it's moving in the right direction. I think it's been a very successful redevelopment of that business and is likely to power ahead, but there is some negative media about it at the moment. So, on notice, if you could give us a one-page snapshot of how a layperson should be looking at this arrangement, that would be very helpful.

Mr Pacey : Okay, thank you.

ACTING CHAIR: Can I go to offshore loans. The offshore loans ability was subject to an amendment, I think. Is that a fair assumption?

Ms Dave : Do you mean domestic loans?

ACTING CHAIR: I'm trying to understand if EFIC is applying the legislation which passed the parliament in September 2017. It allowed EFIC to fund the expansion of Australian companies overseas as long as the applicant certified that it would create jobs here in Australia.

Ms Dave : Overseas direct investment.

ACTING CHAIR: And large Australian businesses could not offshore a substantial part of the existing business to a third party to whom they contract. In a nutshell, that legislation has passed and that's allowed you to do that?

Ms Dave : Yes, that was passed, I believe, in October.

ACTING CHAIR: When did the legislative change take effect within your practices?

Mr Hopkins : From the date that the legislation passed. That said, we were sensitive to transactions that may or may not have been in the pipeline at the time to ensure that, if there were issues that we needed to manage in terms of getting relevant certificates for job creation or no job creation, they would've been in place. I'd have to go back and check, but I'm not sure whether there was anything that fell within that period. But we were sensitive to it.

ACTING CHAIR: Did you publicly advertise the change?

Mr Hopkins : Did we advertise it publicly? Well, it became part of our offering in terms of our website and certainly our communications at the time.

ACTING CHAIR: Was there any expenditure on advertising or was it just a matter of changing your—

Mr Hopkins : It was part of our general collateral changes—nothing that was specific.

ACTING CHAIR: Have any new companies shown interest as a result of the new form? How many new companies have shown interest in this new form of loan application?

Mr Pacey : There have been some, but I'd have to take the exact number on notice.

ACTING CHAIR: Have you assessed a number of applications since the passing of this legislation which would've been previously ineligible?

Mr Pacey : I'm going to have to also take that on notice.

ACTING CHAIR: On notice, how many have been successful and how much and what type of funding has EFIC granted? As part of the passing of the legislation, amendments were made by Labor and supported by the government which required a business to certify that any money spent overseas would create jobs in Australia and stop offshoring. Has that now been implemented in your application system?

Mr Hopkins : Yes.

ACTING CHAIR: Can we see how many businesses have made these certifications in the application of their loan?

Mr Hopkins : We'll take that on notice, but we can provide that information.

ACTING CHAIR: How many instances of finance have EFIC approved which included such a provision by a company—how many have made applications and then how many have gone through to approval? You can take it on notice.

Mr Hopkins : Thank you.

ACTING CHAIR: And which companies have provided this certification? Were any companies found not to be compliant?

Mr Hopkins : I'd have to check for you.

ACTING CHAIR: Have you verified certification?

Mr Hopkins : They give a certification at the beginning, and we need to check the certification at the end. I'm not aware that anyone's been non-compliant, but I'll check for you.

ACTING CHAIR: Okay. And, if they were, what action would you take?

It was your evidence at the last hearing that Efic had made some contact with Adani; correct?

Ms Dave : That's correct.

ACTING CHAIR: It was also your evidence that Efic had helped to fund some smaller businesses associated with the project; that's also correct?

Ms Dave : We had noted that we had been in discussions with some small SMEs.

ACTING CHAIR: Discussions? You hadn't helped to fund small business? That's an incorrect statement?

Ms Dave : We clarified—

Mr Hopkins : I think I answered the question at the time. I said I thought we said we supported a handful of SMEs but I would take the question on notice. When we went back and checked, we discovered we had approved one transaction and we were looking at a couple of others. I can now report that there are no transactions that are proceeding at the moment.

ACTING CHAIR: Okay. Since you last appeared, have you been in official or unofficial contact or discussions with Adani?

Ms Dave : We're not in any active discussions with Adani.

Senator GALLACHER: Okay. To avoid a round of what we went through last time: there have been no official, no unofficial and no discussions with Adani?

Ms Dave : None at all.

Senator GALLACHER: Okay. Have you received any formal or informal application for funding from Adani since we last met?

Ms Dave : No, we haven't.

Senator GALLACHER: Have we had any informal or formal discussions from companies associated with the Carmichael project?

Ms Dave : No, we haven't. We just clarified the SME had previously approved, but that isn't proceeding aside from that, no.

Senator GALLACHER: Have you or are you currently considering applications for funding for companies associated with the Carmichael project?

Ms Dave : No, we're not.

Senator GALLACHER: So you haven't approved any applications for companies on the Carmichael project at all?

Ms Dave : Not beyond the SME that we previously mentioned.

Senator GALLACHER: Okay. What about applications for other projects in the Galilee Basin? Are they coming to you?

Ms Dave : We haven't been approached.

Senator GALLACHER: Have you had any formal or informal discussions with businesses associated with the opening of the Galilee Basin?

Ms Dave : No.

Senator GALLACHER: These are just straightforward questions. Have there been discussions with the minister's office about using the National Interest Account to fund the Adani project?

Ms Dave : No, there haven't.

Senator GALLACHER: Have there been discussions with the minister's office about using the National Interest Account to fund businesses associated with the Adani project?

Ms Dave : No, there haven't.

Senator GALLACHER: Have there been discussions with the minister's office about using the National Interest Account to fund other project to open up the Galilee Basin?

Ms Dave : No, there haven't.

Senator GALLACHER: Have there been any discussions with the minister about using the National Interest Account to fund the Adani project?

Ms Dave : No.

Senator GALLACHER: Have you had any discussions with the minister about using the National Interest Account to fund businesses associated with the Adani project?

Ms Dave : No.

Senator GALLACHER: Finally, have you had discussions with the minister about using the National Interest Account to fund other projects to open up the Galilee Basin?

Ms Dave : No, we haven't.

Senator GALLACHER: I think that's run me through what I had.

CHAIR: I believe it is now Senator Rhiannon.

Senator RHIANNON: I wanted to ask questions about the PNG LNG decision and I need to set out the context for the questions I will ask. On 8 December 2009, the Minister for Trade announced a US$500 million loan to the Exxon Mobil-led PNG LNG project. US$400 million of this was on the National Interest Account, meaning that it was not just an Efic decision but in fact one that the trade minister would have made a decision about, having first been approved by cabinet. On 24 February 2011 at DFAT Senate estimates, Senator Scott Ludlam asked whether a national interest assessment was prepared to justify this loan. The DFAT representative, Mr Tighe, responded that there would have been a national interest proposal on PNG that would have been part of a submission that was put forward to cabinet. Cabinet then considered the submission, I understand, before approving the loan. Senator Ludlam asked that this national interest assessment/cabinet submission be tabled, but DFAT declined to provide it. I understand Efic provided advice on the national interest proposal. On 1 June 2017, you had a long exchange with Senator Ludlam about the risk assessments that you have done for the project. Senator Ludlam asked you to provide the Senate with the written risk assessments that you made about the potential for civil disobedience and armed conflict in the project area. However, in your answers all you did was refer to previous verbal interchanges at Senate estimates. You did not actually provide what the senator had asked for and I understood you took on notice.

Here is my first question. Once and for all I'd like to ask on the record: do these documents exist? Did you prepare a risk assessment of the PNG LNG project in connection with the minister's decision to approve the project?

Ms Dave : I call on John Pacey to see if he has that relevant history, because I don't.

Mr Pacey : The national interest transactions work such that Efic would refer the matter to the minister. We perform our normal risk assessment on such transactions, including our normal environmental and social risk processes.

Senator RHIANNON: The question was very clear. The question was about providing the documents after they were asked for on notice. Why didn't you provide the documents?

Senator McGrath: Aren't the documents you are referring to cabinet-in-confidence?

Senator RHIANNON: I don't understand that they're cabinet-in-confidence. We are talking about public money here and we're talking about after the fact.

Senator McGrath: I think that the documents were prepared for cabinet and therefore they are cabinet-in-confidence.

Senator RHIANNON: Is that the reason? I've never heard that reason before. Is that the reason that Efic is giving? Are you now saying that they're cabinet-in-confidence and that's why you didn't supply them?

Mr Hopkins : If they are cabinet in confidence, we obviously couldn't provide them, but they wouldn't be our documents to provide. They would be the minister's documents to provide.

Senator RHIANNON: But you've prepared the documents. All we were asking was for the document that you had prepared—

Mr Hopkins : We would have provided input into the national interest assessment, I assume, and, in doing so, that input would have gone into the relevant documents you were referring to, but those documents would be documents for the benefit of the minister.

Senator McGrath: To assist the committee: it was in the previous Labor government when this matter was decided, so it was a previous Labor minister.

Senator RHIANNON: Yes. I'm just asking the questions. I'm particularly interested in the advice that Efic gave DFAT on this matter. Are you now saying—because you haven't said before, everyone though this has been running for years, why you didn't provide the advice. You are now saying it is because it's cabinet-in-confidence now the minister has said, or is it because legally you are not obliged? Are you saying that or are you saying you only provided advice and not the actual document? What's your reason?

Mr Hopkins : When we we're asked to provide information for on the National Interest Account, as my colleague has said, we provide information as part of our normal due diligence, and that information is then taken by the minister and used to make a decision around the national interest.

Senator RHIANNON: So, even if you're not legally obliged, don't you think the Australian public have a right to know that, if their government requests a half-billion-dollar loan be made through Efic to a project that's got all this controversy—and not just controversy about this project. You know the history of some of these mining projects in PNG—it's just massive: people are killed; and there's confusion about where the money goes et cetera. On what basis was the decision made about whether a proper risk analysis was done? I'll say that again: even if you're not legally required, do you think the Australian public have a right to know, if their government requests a half a billion dollar loan through Efic for a project that's mired in controversy, on what basis the loan was made and whether a proper risk analysis was done?

Mr Pacey : We do do extensive due diligence on large projects of the nature of the PNG LNG project. Due diligence encompasses credit analysis, country risk analysis and technical risk analysis, and we do due diligence on environmental and social risks. We also do due diligence around what we call transaction risk assessment, which is know your customer and anti-money-laundering issues. To make such a decision—our processes have extensive due diligence—

Senator McGrath: I might jump in there: it's not up to Efic to decide if the public has a right to know in relation to this. They don't get to decide what is and isn't cabinet in confidence. These documents are cabinet in confidence: they cannot be released.

Senator RHIANNON: Let's move onto due diligence—your comments about the public having a right to know when we're talking about half a billion dollars are interesting but probably not surprising.

Senator McGrath: The documents are cabinet-in confidence-documents.

Senator RHIANNON: Let's move onto due diligence. The responses that have just been given—

Senator McGrath: Are you saying we should release more cabinet-in-confidence documents?

CHAIR: Sorry: you're both talking at once. Senator Rhiannon, you did ask a question and the minister was endeavouring to answer it. So, Minister, if you could finish your answer and then Senator Rhiannon, next question.

Senator McGrath: Cabinet-in-confidence documents are not released. It is not a decision for Efic to decide to release these documents or not, because these documents are cabinet in confidence.

Senator RHIANNON: Moving onto due diligence: when you spoke about due diligence, you did mention social risks and transaction matters. Are you aware that no royalties have been paid to project owners in Hela province, which is the main site of the project, largely because I understand that it's not clear who the landowners are; you haven't worked that out—is that due diligence?

Mr Parsons : We're aware of the processes that have to be followed before royalties can be distributed. That is a matter for the PNG government. The project itself has a whole range of community support initiatives, which it's undertaken under its own banner; however, the matter of royalty payments is purely a matter for the PNG government and is between the PNG government and landowners.

Senator RHIANNON: Seriously, you're saying that it's not your responsibility in any way—and remember we hear all this, I won't say propaganda, information about how this project will be wonderful for PNG with all the benefits it will bring et cetera—and you're just passing the buck over to the PNG government to be responsible. This was one of the major problems with this project—I think they've got hundreds and hundreds of security people because of the unrest. It's really serious.

Mr Parsons : We're aware of the risks associated with the landowner payments, or royalty payments. However, under PNG law, it's a matter for the PNG government; it's not a matter—

Senator RHIANNON: But did you do due diligence on that before we got to this point—did you know that before the project started?

Mr Parsons : We did a range of due diligence and that would have been one of the factors that was considered in the decision-making, yes.

Senator RHIANNON: So you knew at the start that it was not clear who owned the land and therefore who should benefit—because that's how it sounded from your answer?

Mr Parsons : There's a process that needs to be followed under PNG legislation. At the time of the due diligence and at the time of the project was decided, we were aware of the processes that had been followed, which were following the requirements under PNG law.

Senator RHIANNON: Have any of the people from Efic here read On shaky ground, the project by Jubilee Australia about the PNG LNG and the consequences of development failure? Has anybody read it?

Mr Day : Yes, we've all read it.

Senator RHIANNON: You've all read it; that's excellent. So, you're aware this document reports increasing acts of violence and landowner disconnect in connection with the project since 2016. We also know that it's been on the front page of the major newspaper, the Post-Courier. Are you also aware that several provincial governors of PNG have come out in support of the On shaky ground report? The report makes for alarming reading; I would hope we could at least agree on that. Those governors have demanded action from the PNG government. Are you aware that is where it's up to with this report?

Ms Dave : We have discussed the report with various stakeholders. Jan, maybe you want to give a bit of an explanation of what we have done?

Senator RHIANNON: Can you say which stakeholders you have discussed it with, please?

Mr Parsons : Firstly, Efic is aware of the situation in Papua New Guinea, not solely on the grounds of that report but through various other measures and reporting that Efic undertakes—monitoring of the project that Efic undertakes. We were aware of the information in that report. We have a regular multi-stakeholder forum. At the moment, we are having that every six months. It's between us and a whole range of stakeholders. We had a meeting of couple of weeks ago with those groups, and we did discuss that report at that time, yes.

Senator RHIANNON: Can you provide a list of the stakeholders, or take it on notice and provide it as soon as possible?

Mr Parsons : We will take that on notice.

Senator RHIANNON: Are you aware of the letter that Jubilee sent to former minister Mr Crean on 27 October 2009? One of the issues that was posed was:

Is there a risk of the project leading to social unrest and even violence?

The answer was most definitely yes. This is from the letter:

Yes. The landowner consultation process has not been handled well.

Are you aware of that letter?

Mr Parsons : I'm not aware of that letter, no.

Mr Hopkins : For 2009—I'm not sure whether we—

Senator RHIANNON: With all due respect, it is a big project. It's half a billion dollars. You're trying to be proud of it; you'd think you would know the history here. So, the answer is no?

Mr Hopkins : Not of that particular letter.

Senator RHIANNON: Going back and putting things in context, you spelled out that a lot of work had been done on due diligence and you spelled out all those different areas: the threat, the technical aspects, environmental and social risks and others as well. When you are doing that work, do you also consider the other big mining projects that have occurred in PNG and the massive disruption that they have caused, largely because of how—this is probably one way of referring to it—the benefits were divided up? I'm referring to the Porgera copper mine, the Panguna one in Bougainville, Ok Tedi—these have been extraordinary developments, and I would have thought that, in terms of due diligence, that is where you can draw experience from. The Porgera one has 400 to 500 security people because there's so much conflict. Within that, in terms of how they operate, they are licensed to use legal force. That's why people are dying.

CHAIR: Senator Rhiannon, I'm not trying to be pedantic, but is there a question in there somewhere?

Senator RHIANNON: The question was in the context of due diligence. There were a whole lot of details given about how that due diligence was one. One aspect of the due diligence is the existing big mines and how they've played out and the impact they've had on landowners and local people.

Mr Parsons : When we work on a large project in any country, the history of that particular industry in that country would be examined as part of our due diligence.

Senator RHIANNON: Were those three mines specifically looked at in you due diligence?

Mr Parsons : As I said, when we work on a project in any big country, we look at the history of that industry in that country. When we were working on PNG LNG projects, we would have looked at the history of relevant projects in Papua New Guinea.

Senator RHIANNON: I note that is not actually a yes, but I will move on. If you want to give us more, I'm happy to, but that was not a yes. The industry is different from those three mines and the experience there. Okay. We didn't have an answer there. I will move on.

CHAIR: Five more minutes, Senator Rhiannon.

Senator RHIANNON: I thought I was going through to the end, Chair.

CHAIR: I have exceeded my time, but I have five minutes or so of questions, so if you—

Senator RHIANNON: Can we split the difference—seven minutes each?

CHAIR: Seven minutes each.

Senator RHIANNON: Okay, I've only got seven minutes. It's been cut down. We could have stayed here until 11 o'clock tonight! So whether you told them or not, what I can take from the evidence here, and previously, is that the minister and the cabinet were aware of the risks?

Mr Parsons : Well obviously Efic—

Senator RHIANNON: Nobody is denying that?

Mr Parsons : Efic can't comment on whatever information the minister and the cabinet used to make a decision.

Senator RHIANNON: But they were supplied with information about the risks. You're not denying that—correct?

Mr Parsons : Efic would have provided the information requested by the minister or by DFAT at the time, yes.

Senator RHIANNON: That includes information on the risks because that's part of the due diligence, that you assess the risks? You're denying that—correct?

Mr Parsons : That's correct.

Senator RHIANNON: Thank you. Yet they proceeded with the project knowing what these risks were. Do you not think there is something wrong with this national interest account process where poor decisions can be made without accountability and yet we're supposed to live with them? We're not even allowed to see what you supplied. We're talking about half a billion dollars—public money, unrest, people die—and it's really hard to get you to even answer the questions with a yes or a no.

Mr Parsons : National interest accounts are not Efic's decision making. That's a matter for government, not for Efic.

Senator RHIANNON: You may say that this is a government matter, but is it not true that 20 per cent—that is, $100 million of this loan—was on Efic's commercial account, which means that it is entirely a matter for the Efic board. Isn't that the case?

Mr Parsons : That's correct, yes.

Senator RHIANNON: Okay, so you've agreed that it's actually a matter for the Efic board. Can you not see the danger to Efic's reputation regardless of how much Efic is involved in final decisions like this? This shaky ground and what it reveals about the PNG LNG, that's hanging over you like a really bad smell. It's really affecting your reputation. Aren't they things that you consider and reassess?

Mr Parsons : As I said earlier, that report did not introduce any new risks or issues that we weren't already fully aware of, so it's your opinion whether that's affected Efic's reputation or not. The risk and issues raised in the report were fully aware and fully known by Efic.

Senator RHIANNON: Thank you. I will move on to a few questions about Adani. There's analysis by Environmental Justice Australia, and it's found that if Efic funds Adani's Carmichael coal mine, it will expose Efic's directors to significant legal and political risk. Is that your assessment?

Ms Dave : I don't know how I can answer that. Is there a—

Mr Hopkins : It's a hypothetical set of facts—

Senator RHIANNON: No, it's not hypothetical. Environmental Justice have done a report on this. So you're not aware of that report?

Mr Hopkins : I'm aware that APRA has raised some issues more broadly for directors around their directors making decisions to support projects that may have a climate change impact. Our board have discussed that report, as I'm sure many boards have across Australia, as part of their ongoing education and due diligence as a board.

Senator RHIANNON: Okay. You answered some questions previously about Efic and Adani. You spoke about an SME that's involved. Is that where you've been in discussions about providing concessional support to a company in Adani's supply chain? Is that what you're referring to when you refer to this SME?

Ms Dave : Can I just clarify that we don't provide any concessional financing. I guess our mandate is to provide commercial financing—

Senator RHIANNON: Okay, I will drop the word 'concessional'.

Ms Dave : Thank you.

Senator RHIANNON: Let's just take the word 'concessional' out. I'm trying to understand this. You spoke about the SME. Was that a company in Adani's supply chain that you were referring to?

Ms Dave : It was a very small SME that would be providing some services.

Senator RHIANNON: So it's part of Adani's supply chain? That must be how it works; Adani needs them.

Mr Hopkins : We need that link in order to create an export opportunity so that Efic can be involved. So, yes, they'd have to be in that supply chain if Adani was going to export something.

Senator RHIANNON: I understand that the trade minister can direct Efic to support Adani's project via the National Interest Account but such a direction must not be unreasonable. I understand that what that means is that a project must be commercially viable, in the national interest and in the public interest. Is that a fair way to describe how it works?

Mr Hopkins : That's a fair assessment. Although, I'm not privy to the discussions of cabinet and the minister when making these decisions around what the national interest is.

Senator RHIANNON: Is Efic's board subject to stricter obligations than the directors of Australian companies? I understand that you must act ethically as well as with care and diligence, so are you under stricter obligations than directors of Australian companies?

Mr Hopkins : Directors of the majority of Australian companies have to comply with provisions in the Corporations Act. Efic, as a corporate Commonwealth entity, has to comply with the provisions in the PGPA Act. There are many similarities between those two pieces of legislation, but there are slight differences. Arguably you could say that directors of government entities may be held to a higher standard than those in the private sector, but that is an arguable point.

Senator RHIANNON: That's an interesting argument. I understand that Efic did not publically provide its board's assessment of the Adani project. Isn't this in contravention of section 9 of the Efic Act?

Mr Hopkins : We have not considered providing support to the Adani project.

Senator RHIANNON: You don't have anything that should be released publicly or anything about Adani that you've worked on?

Mr Hopkins : We answered a series of questions earlier to Senator Gallacher—

Senator RHIANNON: I'm just checking.

Mr Hopkins : We stand by those statements.

Senator MOORE: I will just acknowledge that this is probably Senator Rhiannon's last Senate estimates. I wanted to put that on record and my deep respect for the interest that she has always shown in the estimates process.

Senator McGrath: We'll miss you, Senator.

Senator MOORE: Thank you very much, Senator.

CHAIR: Thank you very much, Senator Moore, for that reminder. I too would like to extend my thanks to Senator Rhiannon. It is always interesting and challenging—and there are sometimes philosophically diverse discussions—but you've always been incredibly professional and courteous of the chairs, and it's been a great pleasure working with you. As I said on social media, I will see you on the other side of the street.

I'll ask a couple of questions on issues—a couple of them are ones that I have pursued before with Efic and a couple of newer ones. I was having a talk to Austrade about what they're doing on rare earth and tech minerals like lithium. I was very pleased to hear that they're doing a lot of very proactive work here and overseas. So either through mining or through production, is this an industry that Efic has been involved in to date?

Ms Dave : Since we've had the ability to support domestic resource projects, we have spoken to a number of companies around specific projects, which included rare earths and lithium. As you would know, these projects require quite a lot of complex due diligence and—

CHAIR: And capital.

Ms Dave : And capital. In some cases they don't proceed, either because they've still got a lot more work to do or because they've got alternative sources of finance. Where we've been tracking some of these transactions, we haven't been able to secure an ongoing role for Efic for a range of reasons.

CHAIR: I do a lot of work with industry in Western Australia, the lithium industry and other industries—rare-earth areas—so it might be something that I could go back and suggest, because some of them might not think to approach Efic with these sorts of projects. Could you take on notice that question more generally, in terms of what you're currently doing, or with that industry as it's now developing, and if there are other opportunities—and companies could perhaps approach you.

Ms Dave : Thank you. We will.

CHAIR: That's the first one. The next one is the Defence Export Strategy and the work that Defence, the department of industry and DFAT also now touch on. Is that a strategy that Efic has been involved in, in terms of assistance or inquiries from companies?

Ms Dave : Yes. As you know, we've been asked by the minister to administer the Defence Export Facility. That's a $3.8 billion facility. I think it's important to clarify that it's an upper limit, so we don't have money sitting with us that we are using or not using, and that the facility's going to be held on the national interest account. The way we're approaching the facility is that we are talking to a range of SMEs in the defence sector and we're also talking to a range of more significant prime contractors. As you mentioned earlier, we've been working very closely with Austrade, Industry, the Department of Defence and DFAT on how we make people aware of this facility and how we get more people to apply for it. To date we haven't done any transactions, but we have some in the pipeline. What we're finding is that some of the smaller SMEs have faced some challenges such as whether they have an immediate export link. That principally arises where they don't have existing arrangements with ADF, so, in their ability to try and seek exports, they haven't been seen to have shown the credibility.

CHAIR: That's a very interesting point, because, certainly with defence industry that I have been dealing with in WA and also here, that is a common issue. Firstly, they don't know where to go, and they're certainly not yet aware of Efic, in terms of some of these companies. But, given the challenges in the past of getting into the domestic defence supply chain, for a lot of them, even though they've got interest from overseas, the first question is: 'Why isn't the ADF supporting or using your capabilities?' Is that something that you've also found?

Ms Dave : Yes, that's certainly something we've been finding. The other challenge we've found is that quite a lot of these SMEs are still at a stage where they need equity as opposed to commercial debt financing, so there is that gap in terms of what their aspirations are and what we can do to help them.

CHAIR: That well-document valley of death for small companies.

Ms Dave : Yes.

CHAIR: Could you perhaps take this on notice, because I'm very conscious of time. This is something that I'd like to explore further with you and the other agencies—and it might be something that this committee wants to have a look at as well. There are so many fingers in this pie, and to me it doesn't seem like it's very joined up yet. So, from a commercial perspective, there's no one-stop shop. Would that be a fair assessment?

Ms Dave : I think in terms of—

CHAIR: It's not a criticism; it's just an assessment of where the process is up to.

Ms Dave : I would say the missing link is the equity piece, which isn't covered by the facility, so, potentially, that's something that we could look at: who do we partner with to try and get that equity capability available?

CHAIR: That actually segues very nicely into my last two minutes. This is an issue that I will again put on notice, but it is one I would very much like to explore further with Efic and Austrade and others more widely—that is, the role of EFIC itself. Obviously when Efic was set up the world we live in, in terms of industries, trades and global finance, was quite different to what it is today. So—what are they called? ECAs?

Ms Dave : Export credit agencies—

CHAIR: I got the acronym right! So, obviously the way Efic operates can be quite different from how ECAs in other countries now operate. Have you done any work, or have any studies been done—I guess, some blue-sky work—in terms of what Efic, if we were setting it up today, would look like?

I suspect the answer would be quite different from the legislation and from the way it operates today. Has Efic had the time, space or ability to do some of that blue-sky thinking?

Ms Dave : We have, as part of our strategy discussions, been thinking about what that might look like. It's fair to say we haven't formed any conclusions. But it's certainly in the context of how we ensure that Efic is achieving its mandate and how we can ensure that Efic is actually very supportive and relevant for the exporters. It's been in that context, and also in the context of operating in a financial services environment where there's been a lot of change, too. How do we link in all those providers?

CHAIR: I have seen this issue a lot, particularly in Western Australia, where we've got some very large, very successful fabricators—everything from luxury yachts to all sorts of things. They get to a point where they don't have a sovereign wealth fund or any other facility to bond—we've discussed this with Efic before. So quite a lot of contracts—in fact, I've counted probably a few billion dollars worth of manufacturing contracts—have not come to Western Australia because they can't get that bonding or the guarantees because the banks don't understand it; they're not willing to assume the risk or they don't understand the risk. In that larger space, there's not necessarily something that is within your legislative charter, but is that something that Efic has had a look at or think about—that scope beyond what you currently do?

Ms Dave : I think the way to answer that is to say we are trying to work out what it is we can do from a product capability perspective relative to what other ECAs do. We have a similar product suite, but how do we have a mandate that allows us to apply that product suite for a range of requirements in Australia?

CHAIR: Unlike a commercial operation, you're obviously very constrained—well, 'very' is my term. I see Efic as being very constrained by legislation that was developed for a different global market. Is that too harsh a comment?

Ms Dave : We work within the legislative requirements and the statement of expectations that we have, so I guess the question is: what else can Efic do that's appropriate for the context we're in now?

CHAIR: That might be a good question for a committee. Noting that I've now taken us three minutes over our deadline, could I ask you to take that question on notice. Specifically, not your current mandate, but if you have information on what other ECAs globally do—perhaps some of the ones that support our main competitors—and if there are any other reports or global papers on what it is, so that as a committee we can look and see whether we can't do some considerations of benchmarking Efic. It's easier sometimes, I think, for committees to do some of these blue-sky discussions than governments of the day. Are you able to take that on notice?

Ms Dave : Yes.

CHAIR: Thank you very much. That concludes the committee's examination of the Export Finance and Insurance Corporation and, indeed, the entire Foreign Affairs and Trade portfolio. I sincerely thank all of the ministers who have supported it over the last two days, and, of course, all of the departmental and agency officials. To Hansard and Broadcasting, for your endurance and getting through some of the technical issues that we had, thank you very much. Last but not least, thanks to our wonderful secretariat staff, who provide amazing support to the committee. For your patience, good humour and endurance, thank you. I wish everybody a great long weekend, if you are lucky enough to be in a state that has one. This hearing is now officially adjourned.

Committee adjourned at 17 : 04