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Thursday, 28 March 1968


Mr PEACOCK (Kooyong) - I rise in this debate with the limited time available to me to be openly critical of the Commonwealth Development Bank and its handling of an application by an Australian company for financial assistance which it requires as a result of difficulties encountered quite directly as a result of the present drought. But in so criticising the Development Bank I should say at the outset that I do not direct my criticism to the Prime Minister (Mr Gorton), the Treasurer (Mr McMahon) or to the Minister assisting the Minister for Trade and Industry (Mr Sinclair) who on all occasions, when the particular company about which I shall be talking went to them or their departments with representations seeking financial assistance during their difficult financial period, were most co-operative. The policy of the Government is not to interfere directly in the Development Bank's deliberations. My criticism is directed to the Bank itself and not to the Ministers or the Departments referred to.

The company to which I refer accepted the Government's proposal to form international joint ventures with overseas capital for the purpose of exporting partly processed primary products. Honourable members may recall that this is the sort of venture about which the Prime Minister spoke last Monday when he exhorted Australian manufacturers to engage in these ventures in Asia. Two mills were built, one in Peru and the other in Malaysia, to complete the processing of packaged rolled oats. The Commonwealth Development Bank, after intensive research, decided that the future of such ventures was excellent and loaned the company $100,000. The Melbourne Harbour Trust spent a still larger amount in building silos at 23 Victoria Dock to facilitate handling. This was to enable the company to obtain reduced freights by shipping in bulk. The Peruvian and Malaysian governments gave the mills very satisfactory tariff protection. They particularly wanted these industries as it was food and also helped to create employment and facilitate their plans for industrial development. The Federal Government further assisted by subsidising a regular shipping service to South America. Both these markets became what is known as captive markets, that is, the company had secured an order to supply 100% of both these countries' requirements, the total of which was 34,000 tons per annum of the finished product.

The mills abroad were built, the local mill extended, and operations were commenced in August 1967. It was found that 50,000 tons of Victorian and Riverina oats were required annually. This meant that the company was now - I emphasise this - the second largest mill in the world with a foreign currency intake estimated at $3m per annum. That for Australia was $3tn in export income. This is what the Federal Government apparently wants and what the Government apparently wanted at the time when the company decided to engage in this venture. But what happened? We are all conversant with and cognisant of the effects of the present drought. Perhaps many of us are too much aware of the effect of drought on primary producers and how necessary is the alleviation of their difficulties, but wc tend to forget about the difficulties of secondary industries also affected by drought. This is the worst drought ever experienced in South East Australia. Prices of oats jumped over 80%, but the company was forced to supply both the overseas mills as otherwise the protective tariffs would be cancelled by reason of its failure to supply 100% of the semiraw material and, once cancelled, the tariff protection would never be reimposed.

I do not think it is an exaggeration to state that this great Australian enterprise, the sort of activity which we request companies to enter, lauded internationally as an example for others to follow, looked as if it was to become a failure. The Department of Trade and Industry, aware of the development programme of the company, strongly supported a search for a solution through available Government machinery. The Treasury and the Prime Minister himself put forward propositions for the company to be afforded, if possible, every degree of assistance that the Commonwealth Development Bank could see its way clear to give. The Department of Trade and Industry envisaged that assistance should be forthcoming through the Commonwealth Development Bank. Having set out what Government policy is in encouraging industry, I remind the House that this Bank is a body with autonomous rights and, therefore, is not required to follow Government requests. In fact it refused on two occasions to assist. The Bank advised the company that - I quote from its letter:

.   . the conclusion reached was that in a banking sense the request for additional assistance was not one that the Bank would be justified in approving.

I did not know what would be the strict definition of 'in a banking sense' so I took steps to contact the Assistant General Manager of the Commonwealth Development Bank. He was most courteous in replying to the approach I made. I asked him whether it was security alone that the Bank considered when dealing with these applications and he said: 'No, not alone' and added that there were other factors.

However, he would not tell me what these other factors were. One could assume from that banking terminology that the question of security is one aspect of the matter considered. I do not know what the other reasons were; they were not given to the company. But if it was a question of security it means that the Bank was not endeavouring to provide assistance in accordance with section 73 of the Commonwealth Banks Act, which states:

In determining whether or not finance shall be provided for a person, the Development Bank shall have regard primarily to the prospects of the operations of that person becoming, or continuing to be, successful and shall not necessarily have regard to the value of the security available in respect of that finance.

The company has accomplished everything that it promised to undertake. The present prospects in fact are far better than they appeared to be when the Commonwealth Development Bank first advanced $100,000 on nothing but a plan and a well prepared estimate of the future potential of the company.

The mill in Peru, after only 6 months of operation, shows a return of 34% on capital for that period and this is taking into account a non-recurring loss due to devaluation of the Peruvian currency. The Malaysian mill, although having had problems as a result of the Australian drought, is now operating successfully. The three mills are built in accordance with the highest and most modern standards. The board and management are well known and apparently successful businessmen whose well prepared plans appeared to be coming to fruition until the drought occurred.

In the short time left to me I wish to express the gravest concern and disappointment at the Government's decision not to examine closely hardships caused by the British devaluation or to set up a special committee so that where hardship is proved the Government can provide assistance. But on the other hand, in a situation such as I have outlined today, where a disaster is the result of nature and is not man made, no such committee has been envisaged. No further study is being made and export income may be lost, never to be recuperated. The efforts of dedicated men may come to nought because of the negative attitude of those who should make the appropriate decisions. It appears as though the Commonwealth Development Bank opposes, or at least restricts, Government policy on exports as is shown in the case of this company.

I have not named the company. The directors of the company requested that I do so, but I prefer not to do so. Those who may follow my speech at a later date will know to which company I am referring. In conclusion, may I just say that I am gravely disappointed at the Bank's attitude and gravely disappointed that the Bank refuses to support an application. Despite the fact that it was directly the result of the drought that the financial predicament occurred, the Bank was not prepared to give the company the financial assistance it desperately required.







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