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Tuesday, 25 March 1980
Page: 954

Senator CARRICK (New South WalesMinister for National Development and Energy) - I move:

That the Bill be now read a second time.

The purpose of this Bill is to authorise a contribution by Australia of $A203.53m towards the sixth replenishment of the resources of the International Development Association or IDA as it is commonly called. The IDA, established in 1 960, is an affiliate of the World Bank, and assists its poorest member countries by providing long term interest-free credits for sound development projects, utilising grant funds provided by its developed member countries. The Association has, therefore, made available to the poorest countries a financial facility from which they can prudently borrow in pursuing their developmental goals.

The IDA continues to be the largest and most effective concessional lending institution in the world today. Membership has increased from 68 countries originally to 122 at the present time, while the number of contributors also has grown from 17 to 33 countries which have agreed to contribute to the sixth replenishment.

Honourable senators might note that the IDA is an efficient institution capable of undertaking large scale projects in a technically proficient way and that, although the Association offers long term interest-free credits, the projects which it finances are subject to the same rigorous standards of appraisal that the World Bank applies to its own lending operations. IDA systematically monitors and evaluates its projects and uses the lessons of experience to improve further the quality of assistance it provides.

Taking into account the initial subscriptions made in 1960 and thereafter, together with five subsequent replenishments of its resources as at 30 June 1979, IDA has been provided with a total from all sources of some $US20.9 billion for lending to the poorest developing countries. At the same date it had funded 900 development credits totalling more than $US16.7 billion in 73 countries for all the major sectors of the economy.

The types of projects financed by IDA have covered a wide range of activities, including developing agriculture, improving education, increasing electric power output, expanding industry, creating better urban facilities, promoting family planning, extending telecommunications networks, modernising transportation systems, improving water supply and sewerage systems, and establishing medical care. Because IDA funds are allocated to the poorest countries where the majority of the people live in rural areas, IDA lending has increasingly been devoted to agricultural and rural development. In the last 2 years over 40 per cent of IDA 's funds were committed to projects in this sector. These projects take many forms. Some provide basic infrastructure. Others are designed to expand production of a single subsistence commodity. Others, comprehensive multisectoral projects, are designed to bring a range of non-agricultural benefits including improved education, health services, housing, drinkable water, rural electricity, roads, and family planning services- to name a few- to a target group of poor farmers.

IDA has similarly extended its povertyoriented assistance to the cities through the funding of integrated urban development projects. Though an increasing amount of the resources is being channelled into these comprehensive new-style' projects, IDA has continued its traditional style of lending in sectors such as power, industry and transportation. In developing these projects, IDA has made a deliberate effort over the years to assure that the benefits reach the lowest income groups within the poorest countries where life is at the margin of subsistence.

The resources of the Association are replenished every three years. The fifth replenishment totalled SSUS7.7 billion to cover commitments over the three-year period ending 30 June 1980. Since IDA resources will be fully committed by that date, additional resources are required to cover lending commitments for the following three years. Following intensive negotiations on a sixth replenishment which commenced in mid- 1978 and were concluded last December, donor member countries decided, having regard to the needs of the poorest countries, that they should continue to provide for a real increase in IDA 's lending resources.

The traditional donors of the IDA agreed, subject to parliamentary approval in the various countries concerned, to provide an amount for the sixth replenishment equivalent to SUS12 billion. In addition, a number of countries intend to contribute resources to IDA for the first time. These countries are Argentina, Brazil, Greece, Mexico, Portugal, Romania and Venezuela. It is pleasing that some of these countries who still borrow funds from the World Bank have decided to assist the poorest developing countries by contributing to the Association in this way.

Australia's share of $US229.2m is equivalent to $A203.53m. This represents a share of 1.91 per cent of the SUS12 billion target for donors and is equivalent to Australia's percentage share in the fifth replenishment. In absolute terms, our contribution of $A203.53m represents a very substantial increase of over 50 per cent on the amount of $A133.76m which Australia provided under the fifth replenishment. The amount is fixed at the exchange rate applying on 5 October 1979. Thus our obligation is not subject to adjustment due to fluctuations in exchange rates.

Australia again has the option of paying its contribution either in cash or by lodging nonnegotiable non-interest bearing promissory notes encashable on demand as and when funds are actually required by IDA for loan disbursements. In accordance with past practice and in line with the practices of most other members of IDA we propose to lodge promissory notes. This will spread the impact on the budget over about 10 years. Small encashments are expected to be made in 1981-82 with the bulk of the encashments taking place in each of the following five to six years.

During the discussions on the level of the sixth replenishment it was agreed that essentially the same voting power arrangements which were made under the fifth replenishment should continue to apply. Accordingly, although contributions to replenishments as opposed to the original subscriptions to the IDA do not carry voting rights, a small proportion of donors' contributions is counted as a subscription. This is designed to ensure that the relative voting power of" each of the developed member countries of IDA can continue broadly to correspond to its relative share of total resources contributed by these countries. Complex calculations undertaken by the staff of IDA indicate that, included in the total figure which Australia will make available under the sixth replenishment, an amount of $A307,758.60 will take the form of an additional subscription with voting rights. The balance will represent an additional contribution. This distinction is provided for in clause 4 of the Bill. 1 should also mention that the agreement covering the sixth replenishment will not become effective until the instruments of commitment representing approximately 80 per cent of the total replenishment are deposited by donors. IDA is hopeful that this requirement will be met by 30 June 1 980, thereby assuring the continuity of its operations.

As honourable senators will know, Australia has always been a strong supporter of the IDA which is a highly effective channel for the disbursement of multilateral aid to the poorest countries throughout the world. In this context, the IDA has a most important role to play in continuing to foster economic and social development in the Asian and Pacific region which is of immediate interest to Australia. Since the inception of IDA about two-thirds of all IDA credits have gone to these countries. It is government policy to give high priority to the Asian and Pacific region in its foreign policies and to cooperate fully with multilateral agencies which are involved in the region. Continued Australian support for IDA is therefore in Australia's national interest. This Bill provides an opportunity for honourable senators once again to demonstrate their bi-partisan support for the IDA as an efficient and effective development finance institution and our willingness to provide the poorest developing countries with highly concessional assistance through this organisation. I commend the Bill to honourable senators.

Debate (on motion by Senator Georges) adjourned.

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