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Wednesday, 7 September 1983
Page: 456

Mr HURFORD (Minister for Housing and Construction and Minister Assisting the Treasurer)(11.14) —I move:

That the Bill be now read a second time.

The purpose of this Bill is to seek parliamentary approval for Australia to take up its entitlement to subscribe to additional shares in the capital stock of the Asian Development Bank. Honourable members will be aware that the Asian Development Bank is a regional development finance institution. It was established in 1966, with its headquarters in Manila, for the purpose of lending funds, promoting investment and providing technical assistance to developing member countries to foster economic growth and co-operation in the Asian and Pacific regions. Essentially the bank harnesses the financial strength and technical expertise of its developed member countries for the benefit of developing member countries. Capital subscriptions provide a pool of funds for lending and a basis for the Bank to borrow further funds in world financial markets in larger amounts and on better terms than are available to developing countries.

In addition to its ordinary lending operations, the Bank provides loans on highly concessional terms to poorer developing member countries. These are funded from direct contributions by developed member countries to the Asian Development Fund within the bank. To the end of December 1982, the Bank had lent about $US11.5 billion to its developing member countries for projects covering all the major sectors of economic development from major infrastructure developments in the transport, communications, industry and energy sectors to projects in agriculture, education, water supply and urban development. In 1982, the Bank approved loans totalling $US1,731m, of which $US546m was on highly concessional terms to poorer developing member countries.

Australia's contributions to the Asian Development Bank as at 31 December 1982 comprised: Firstly, paid-in capital totalling $US107m; and secondly, contributions to the Asian Development Fund totalling $US151m. In addition, as at 31 December 1982 Australia had a contingent liability to the Bank in the form of callable capital of $US444m. The Bank has never called on such capital and conducts its operations in such a way as to ensure that that should not become necessary. The callable capital does, however, underpin the Bank's borrowing operations.

Following an examination of the adequacy of the Bank's capital base for its operations during the 1980s, the governors of the Asian Development Bank approved, in April 1983, a resolution increasing the authorised capital stock of the Bank by 105 per cent, equal in value to approximately $US9 billion. This should enable the Bank to increase the level of its lending to developing member countries in the region. Under the terms of that resolution, 5 per cent of the increase is to be in the form of paid-in shares. The remaining 95 per cent is in the form of callable capital. Australia voted in favour of the resolution authorising the capital increase. The text of the resolution, including the number of shares to which each member is entitled to subscribe, is attached to the explanatory memorandum to this legislation.

Members, including Australia, are entitled, but not obligated, to subscribe to this authorised increase. Australia's entitlement under the reso- lution is to an additional 52,433 shares, comprising 2,622 paid-in shares and 49,811 callable shares. At current exchange rates, this represents $A721m, of which the paid-in element amounts to some $A36m. It is envisaged that 40 per cent of the paid-in element would be paid in cash in five equal instalments of about $A2.9m a year from 1983-84 and that the remaining 60 per cent would be in the form of five promissory notes in equal amounts to be encashed over the years 1988 to 1992.

The Bill is similar in form to the Asian Development Bank (Additional Subscription) Act 1977, which provided for Australia's last capital injection to the Asian Development Bank. Essentially, the Bill empowers the Treasurer to enter an agreement with the Asian Development Bank for the purchase by Australia of its entitlement of additional paid-in and callable shares and to issue promissory notes to the Bank in payment. The Bill also appropriates the funds necessary to make payments under such agreement.

As honourable members are aware, Australia has been an active supporter of the Asian Development Bank. We have regarded it as an effective and efficient vehicle for regional co-operation and development. Honourable members will also be aware that this Government attaches particular priority to the needs of developing countries within our region. Accordingly, we believe it to be in Australia's interest to continue this policy of support for the Asian Development Bank by taking up in full the increase in the capital subscription to which it is entitled. I commend the Bill to honourable members.

Debate (on motion by Mr McVeigh) adjourned.